<PAGE>
UNITED STATES
Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended: October 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
0-3255
(Commission File Number)
JAYARK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-1864519
(State or other jurisdiction of incorporation) (IRS Employer Identification No)
Post Office Box 741528, Houston, Texas 77274
(Address of principal executive offices ) (Zip Code)
(713) 783-9184
(Registrant's telephone number, including area code)
(Former name, former address and fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
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 following dates:
Class Outstanding at 10/31/96
Common Stock $0.30 Par Value 9,221,199
<PAGE>
Item 1. Financial Statements.
Part I.
Item 1
JAYARK CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars Expressed In Thousands)
<TABLE>
<CAPTION>
10/31/96 4/30/96
(Unaudited) (Audited)
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $705,458 $533,676
Accounts Receivable - Less Allowance For 7,312,751 6,029,889
Doubtful Accounts of $749,490 in October
1996 and $808,427 in April 1996
Other Accounts Receivable 394,981 478,120
Federal and State Income Taxes Refundable 695,501 695,501
Inventories 8,044,575 8,654,377
Deferred Federal Income Taxes 295,798 295,798
Other Current Assets 283,201 303,436
------------ ------------
Total Current Assets 17,732,265 16,990,797
Non Current Assets
Property & Equipment, Less Accumulated 760,051 781,266
Depreciation and Amortization
Excess Cost Over Net Assets of Bus Acquired, 300,284 311,461
Less Accum Amortization of $432,364 in
October 1996 and $420,975 in April 1996
Deferred Federal Income Taxes 51,851 52,063
------------ ------------
Total Non Current Assets 1,112,186 1,144,790
------------ ------------
Total Assets $18,845,451 $18,135,587
============ ============
Liabilities
Current Liabilities
Notes Payable & Lines of Credit $8,995,671 $9,051,585
Notes Payable to Related Parties 1,000,000 500,000
Current Maturities of Long Term Debt 0 38,558
Accounts Payable 3,409,921 1,829,131
Accrued Salaries and Deferred Compensation 264,822 128,990
Commissions Payable 219,871 280,630
Accrual Related to LCL Investment 163,692 1,202,624
Other Current Liabilities 541,835 546,621
------------ ------------
Total Current Liabilities 14,575,812 13,578,139
Non Current Liabilities
Long Term Debt, Excluding Current Maturities 14,019 72,020
Subordinated Debentures 1,400,000 1,400,000
Other Long Term Liab, Related to LCL Investmt 0 500,000
------------ ------------
Total Non Current Liabilities 1,414,019 1,972,020
------------ ------------
Total Liabilities 16,009,831 15,550,159
Commitments
Stockholders' Equity
Common Stock of $.30 Par Value. Authorized 2,766,359 2,393,639
10,000,000 Shares; Issued 9,221,199 Shares
in 1996 and 7,978,799 Shares in 1995
Additional Paid-In Capital 8,066,122 7,966,730
Deficit (7,997,861) (7,774,941)
------------ ------------
Total Stockholders' Equity 2,834,620 2,585,428
------------ ------------
Total Liabilities & Stockholders' Equity $18,845,451 $18,135,587
============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
JAYARK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars Expressed in Thousands Except per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
10/31/96 10/31/95 10/31/96 10/31/95
<C> <C> <C> <C>
Net Revenues $16,252,180 $11,107,738 $29,025,580 $20,965,738
Costs & Expenses
Cost of Revenues 13,158,396 8,552,548 23,544,878 16,116,548
Selling, Gen & Admin 2,765,963 2,370,051 5,205,754 4,704,684
Interest 291,419 299,998 576,029 465,563
Other Income (19,116) (75,000) (78,549) (75,000)
------------ ------------ ------------ ------------
Total Costs & Expenses 16,196,662 11,147,597 29,248,112 21,211,795
------------ ------------ ------------ ------------
Net Income (Loss) ($55,518) ($39,859) ($222,532) ($246,057)
------------ ------------ ------------ ------------
Earnings (Loss) per Com Share $0.01 $0.00 ($0.03) ($0.03)
============ ============ ============ ============
Weighted Average Com Shares 8,802,563 7,978,799 8,390,681 7,690,756
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
JAYARK CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For The Three Months Ended
(Dollars Expressed in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
10/31/96 10/31/95
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) ($222,532) ($246,057)
Adjustments to Reconcile Earnings (Loss) to Cash
From Operating Activities:
Depreciation and Amortization of Property and Equip 103,170 131,000
Amortization of Excess of Cost Over Net Assets of 10,889 11,000
Businesses Acquired
Changes In Assets and Liabilities Net of Effects
From Acquisition of Subs:
(Incr) Decr In Deferred Fed Inc Tax Exp (Benefit) 212 0
(Incr) Decr In Accounts Receivable Net (1,200,035) (843,000)
(Incr) Decr In Inventories 609,802 (2,120,000)
(Incr) Decr In Other Current Assets 20,235 7,943
(Incr) Decr In Accounts Payable 1,580,790 1,916,000
(Incr) Decr In Federal & State Income Tax Payable 0 (550,000)
(Incr) Decr In Accr Salaries & Deferred Comp 135,832 (21,000)
(Incr) Decr In Commissions Payable (60,759) 0
(Incr) Decr In Other Liabilities (1,071,394) 720,000
------------ ------------
Net Cash Provided By (Used In) Operating Activities (93,790) (1,010,000)
------------ ------------
Cash Flows From Investing Activities:
Capital Expenditures for Property and Equipment (81,955) (103,000)
Invest In & Advances In Certain Assets Acquired 0 (999,000)
------------ ------------
Net Cash Provided By (Used In) Investing Activities (81,955) (1,102,000)
------------ ------------
Cash Flows From Financing Activities:
Payment of Notes Payable (55,914) 0
Payment of Long Term Debt (96,559) 0
Proceeds From Issuance of Notes Payable (500,000) 2,200,000
Proceeds From Issuance of Common Stock 0 0
------------ ------------
Net Cash Provided By (Used In) Financing Activities 347,527 2,200,000
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents 171,782 88,000
Cash & Equivalents at Beginning of Year 533,676 1,177,000
------------ ------------
Cash & Equivalents at End of Year $705,458 $1,265,000
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash Paid For:
Interest $303,470 $326,000
============ ============
Income Taxes 0 0
============ ============
Non-Cash Transactions:
Common Stock Issued in Connection With LCL Inv 472,112 1,157,000
============ ============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
(Unaudited)
1. The consolidated balance sheet of Jayark Corporation and subsidiaries (the
"Company"), as of October 31, 1996, and the related consolidated statements of
operations and cash flows for the periods ended October 31, 1996 and 1995 are
unaudited. The consolidated balance sheet as of April 30, 1996 has been derived
from audited financial statements. The consolidated financial statements should
be read in conjunction with the audited financial statements and footnotes for
the year ended April 30, 1996, included in the Company's report on Form 10-K.
2. The interim financial statements reflect all adjustments (consisting of
only normal and recurring accruals and adjustments) which are, in the opinion
of management, necessary to a fair statement of the results for the interim
periods presented. The Company's operating results for any particular interim
period may not be indicative of results for the full year.
3. Certain reclassifications have been made in the 1995 financial statements to
conform them to and make them consistent with the presentation used in the 1996
financial statements.
4. During the quarter ended October 1996, the Company issued 1,242,400 shares
of common stock at $472,112 in connection with the LCL transaction.
<PAGE>
Item 2.
Management's Discussion & Analysis of Results of Operations
Three Months Ended October 31, 1996 as compared to October 31, 1995
NET REVENUES
Consolidated Revenues of $16,252,000 represents an increase of
$5,145,000, or 46.3%, as compared to the same period in 1995. The
Audio Visual subsidiary's revenues increased $239,000, or 7.7%,
compared to last year due to the continued emphasis on increasing direct
sales as opposed to rental revenues, thus resulting in increased unit
sales at a lower gross profit margin as compared to rental gross profit.
The Household subsidiary's revenues increased $4,906,000, or 61.3%, as
compared to the same period last year. This significant increase is
primarily due to improved sales with the mass merchandisers. The
remaining increase is a result of the bulk sale of certain slow moving
inventory which was sold at a very low margin. Another contributing
factor was the decrease in returned goods.
COST OF REVENUES
Consolidated Cost of Revenues of $13,158,000 increased $4,606,000, or
53.9%, as compared to the same period last year. The Audio Visual
subsidiary's cost of revenues increased $218,000, or 8.5%, associated
with the increase in sales. The cost of revenues for the Household
subsidiary increased $4,388,000, or 73.3%, associated with the increase
in sales.
GROSS MARGIN
Consolidated Gross Margin of $3,094,000 was 19.0% of revenues, as
compared to 23.0% for the same period last year. The Audio Visual
subsidiary margin decreased by 0.6% as compared with the same period
last year. Thre Household subsidiary margin decreased by 5.6% due to a
very low margin obtained from the bulk sale of certain slow moving
inventory.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated Expenses of $2,766,000 increased $396,000 or 16.7% as
compared to the same period last year. The Audio Visual subsidiary
expenses increased $11,000 or 3.4% when compared to the same period last
year. Household subsidiary expenses increased $331,000 or 17.6%. This
increase was due to commissions on higher sales, bank service charges,
professional fees, and increased reserves for inventory and bad debts.
<PAGE>
An increase in corporate expenses of $47,000 or 27.9% accounted for the
balance of the change in expenses and was due to increased professional
fees.
INTEREST EXPENSE
Consolidated Interest Expense of $291,000 decreased $9,000, or 2.9% due
to a decreased payment on subordinated debt which was partially offset
by higher borrowings.
NET INCOME
Consolidated Net Income of $56,000 as compared to a net loss of($40,000)
during the same period last year occurred as a result of increased
revenues and improved operating results.
<PAGE>
Six Months Ended October 31, 1996 as compared to October 31, 1995
NET REVENUES
Consolidated Revenues of $29,026,000 represents an increase of
$8,060,000, or 38.4%, as compared to the same period in 1995. The
Audio Visual subsidiary's revenues increased $428,000, or 7.1%, compared
to last year due to the continued emphasis on increasing direct sales as
opposed to rental revenues, thus resulting in increased unit sales at a
lower gross profit margin as compared to rental gross profit. The
Household subsidiary's revenues increased $7,632,000, or 51.0%, as
compared to the same period last year. This significant increase is
primarily due to improved sales with the mass merchandisers. The
remaining increase is a result of the bulk sale of certain slow moving
inventory which was sold at a very low margin. The addition of new
customers and decrease in returned goods have added to the increase in
sales.
COST OF REVENUES
Consolidated Cost of Revenues of $23,545,000 increased $7,428,000, or
46.1%, as compared to the same period last year. The Audio Visual
subsidiary's cost of revenues increased $412,000, or 8.3%, associated
with the increase in sales. The cost of revenues for the Household
subsidiary increased $7,016,000, or 62.9%, associated with the increase
in sales.
GROSS MARGIN
Consolidated Gross Margin of $5,481,000 was 18.9% of revenues, as
compared to 23.1% for the same period last year. The Audio Visual
subsidiary margin decreased by 0.9% as compared with the same period
last year. Thre Household subsidiary margin decreased by 5.9% due to a
very low margin obtained from the bulk sale of certain slow moving
inventory.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated Expenses of $5,206,000 increased $501,000 or 10.7% as
compared to the same period last year. The Audio Visual subsidiary
expenses increased $14,000 or 2.1% when compared to the same period last
year. Household subsidiary expenses increased $460,000 or 12.5%. This
increase was due to commissions on higher sales, bank service charges,
warehousing costs, professional fees, and increased reserves for
inventory and bad debts. An increase in corporate expenses of $20,000
or 5.5% accounted for the balance of the change in expenses and was due
to increased professional fees.
<PAGE>
INTEREST EXPENSE
Consolidated Interest Expense of $576,000 increased $110,000, or 23.7%
due to increased levels of borrowings.
NET INCOME
Consolidated Net Losses of ($223,000) as compared to a net loss of
($246,000) during the same period last year occurred as a result of
increased revenues.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Working capital amounted to $3,136,000 at October 31, 1996, compared to
$3,413,000 at April 30, 1996. The decrease is principally due to the loss
during the period.
Net cash used in operating activities was $94,000 in 1996, compared to
$1,010,000 in 1995. The change was due principally to decreases in inventories
and accounts payable, and recognizing a future tax refund. This change was
offset by increases in accounts receivable, accrued liabilities and other
liabilities.
Net cash used in investing activities was $82,000 in 1996, compared to
$1,102,000 in 1995. The change was primarily due to writing off the investment
in certain assets of an acquired business.
Net cash provided by financing activities was $348,000 in 1996, compared to
$2,200,000 in 1995. The change was due to the issuance of notes payable.
In January of 1992, the Company renewed and extended a financing arrangement
with State Street Bank and Trust Company to make available a total of
$20,300,000 in combination of revolving lines of credit and term loans. Over
the course of the next several years, the financing arrangement was amended with
availability ranging from $13,000,000 to $16,325,000.
The current financing arrangement was further amended in April 1996. The loan
agreement was revised to reflect the renewal and extension of the maturity dates
of lines of credit to April 1997, to approve the repayment schedule of the
Company's subordinated convertible debentures, to reflect the payoff of the term
loans, and to make available a total of $11,500,000 maximum in revolving lines
of credit. Rosalco has a line of $10,000,000 and AVES has a line of $1,500,000,
with interest charged at prime plus 1 3/4% for Rosalco, and prime plus 1% for
AVES.
In September 1996, the current financing arrangement was further amended to
increase Rosalco's line of credit to $11,000,000. The $1,000,000 seasonal
overadvance is available through December 31, 1996, and thereafter the line of
credit reverts back to $10,000,000. In consideration for the seasonal advance,
certain related parties advanced an adiitional $500,000 to the Company in
September 1996, which was applied to Rosalco's outstanding line of credit. The
related party advances now totaling $1,000,000 are payable on demand and
interest is paid monthly at prime plus 2 1/2%.
A combination of funds available through line of credit sources, anticipated
cash flows from operations and existing cash balances is expected to provide
adequate funds to meet planned requirements for the coming year.
During August 1995, Jayark, LCL and Rosalco, a wholly-owned subsidiary of
Jayark, entered into a Reimbursement Agreement with certain related third
parties to provide to The CIT Group/Commercial Services, Inc. ("CIT"), the
primary lender to LCL, irrevocable standby letters of credit and cash in the
aggregate amount of $1,700,000 to serve as additional collateral against which
CIT would lend additional working capital to LCL pursuant to CIT's lending
arrangements with LCL.
In consideration for providing the additional collateral, the guarantors have
received shares of common stock of the Company in proportion to the amount of
additional collateral initially provided by them. Excluding the shares
attributable to Rosalco, the Company issued a total of 282,400 shares of its
common stock to the guarantors.
The arrangement with CIT for the additional financing secured by the additional
collateral expired on February 28, 1996. The arrangement indicated that on that
date, in the event that CIT shall have applied any of the additional collateral
to LCL's obligations to CIT, LCL would reimburse the guarantors for the
collateral so applied by CIT. In July 1996, CIT notified the parties that CIT
was applying the additional collateral to LCL's obligations.
As a result of the application of the collateral by CIT, the guarantors have
received shares of common stock of the Company. Excluding the shares
attributable to Rosalco, the Company issued a total of 960,000 shares of its
common stock to the guarantors.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None
(b) Report on Form 8-K - None
<PAGE>
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.
JAYARK CORPORATION
Registrant
/S/ David L. Koffman December 12, 1996
David L. Koffman, President
Chief Executive Officer
/S/ Robert C. Nolt December 12, 1996
Robert C. Nolt
Chief Financial Officer
<PAGE>
Financial Data Schedule
[ARTICLE] 5
[LEGEND]
[RESTATED]
[CIK] 0000053260
[NAME]
<MULIPLIER> 1000.0
[CURRENCY] USD
[FISCAL-YEAR-END] 04/30/97
[PERIOD-START] 05/01/96
[PERIOD-END] 10/31/96
[PERIOD-TYPE] 6-mos
[EXCHANGE-RATE]
[CASH] 705
[SECURITIES] 0
[RECEIVABLES] 8,457
[ALLOWANCES] (749)
[INVENTORY] 8,045
[CURRENT-ASSETS] 17,732
[PP&E] 2,136
[DEPRECIATION] (1,376)
[TOTAL-ASSETS] 18,844
[CURRENT-LIABILITIES] 14,596
[BONDS] 0
[COMMON] 2,766
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 18,844
[SALES] 29,026
[TOTAL-REVENUES] 29,026
[CGS] 23,545
[TOTAL-COSTS] 23,545
[OTHER-EXPENSES] 5,128
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 576
[INCOME-PRETAX] (223)
[INCOME-TAX] 0
[INCOME-CONTINUING] (223)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (223)
[EPS-PRIMARY] -0.03
[EPS-DILUTED] -0.03
