<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended Commission File
July 30, 1994 Number 1-5674
ANGELICA CORPORATION
(Exact name of Registrant as specified in its charter)
MISSOURI 43-0905260
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
424 South Woods Mill Road
CHESTERFIELD, MISSOURI 63017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(314) 854-3800
----------------------------------------------------
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 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
--- ---
The number of shares outstanding of Registrant's Common Stock, par
value $1.00 per share, at August 29, 1994 was 9,101,590 shares.
===============================================================================
<PAGE> 2
<TABLE>
ANGELICA CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SUPPORTING SCHEDULES
FOR JULY 30, 1994 FORM 10-Q QUARTERLY REPORT
<CAPTION>
Page Number Reference
---------------------
Quarterly Report
to
Form 10-Q Shareholders
--------- ----------------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Consolidated Statements of Income -
Second Quarter and First Half Ended
July 30, 1994 and July 31, 1993 3
Consolidated Balance Sheets -
July 30, 1994 and January 29, 1994 4
Consolidated Statements of Cash Flows -
First Half Ended July 30, 1994
and July 31, 1993 5
Notes to Consolidated Financial
Statements 2
Management's Discussion and Analysis
of Operations and Financial Condition 3-4
Exhibit A - Quarterly Report to
Shareholders 5
PART II. OTHER INFORMATION 6-7
</TABLE>
<PAGE> 3
ANGELICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JULY 30, 1994
(1) The accompanying consolidated condensed financial statements are
unaudited, and it is suggested that these consolidated
statements be read in conjunction with the fiscal 1994 Annual
Report, including Notes to Financial Statements. However, it is
the opinion of the Company that all adjustments, consisting only
of normal recurring adjustments, necessary for a fair statement
of the results during the interim period have been included.
(2) See Index to Financial Statements and Supporting Schedules on
page 1. Those pages of the Angelica Corporation and
Subsidiaries Quarterly Report to Shareholders for the quarter
ended July 30, 1994, listed in such index are incorporated
herein by reference. The pages of the Quarterly Report to
Shareholders which are not listed on the index and therefore not
incorporated herein by reference are furnished for the
information of the Commission but are not to be deemed "filed"
as a part of this report. The Quarterly Report to Shareholders
referred to herein is located immediately following page 4 of
this report.
(3) For purposes of the Consolidated Statements of Cash Flows, the
Company considers short-term, highly liquid investments which
are readily convertible into cash, as cash equivalents.
Cash payments for income taxes were $5,652,000 and $2,966,000 in
the first half of fiscal 1995 and 1994, respectively; and in
these periods interest payments were $3,861,000 and $3,675,000,
respectively.
2
<PAGE> 4
<TABLE>
ANGELICA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
QUARTER ENDED JULY 30, 1994
<CAPTION>
Analysis of Operations
- - ----------------------
Second Quarter Ended First Half Ended
-------------------- ----------------
July 30, 1994 July 31, 1993 July 30, 1994 July 31, 1993
------------- ------------- ------------- -------------
Sales and Rental Service Revenues
- - ---------------------------------
<S> <C> <C> <C> <C>
Rental Services $ 59,515 $ 51,764 $120,556 $105,692
Manufacturing and Marketing 46,685 43,675 91,625 85,499
Retail Sales 16,174 13,322 32,429 26,536
Intersegment Sales (4,182) (4,742) (9,363) (9,613)
-------- -------- -------- --------
$118,192 $104,019 $235,247 $208,114
======== ======== ======== ========
<CAPTION>
Gross Profit
- - ------------
Rental Services $ 12,058 $ 10,442 $ 25,887 $ 22,867
Manufacturing and Marketing 10,365 10,085 19,667 18,987
Retail Sales 8,642 7,121 17,387 14,300
-------- -------- -------- --------
$ 31,065 $ 27,648 $ 62,941 $ 56,154
======== ======== ======== ========
</TABLE>
In the second quarter ended July 30, 1994 combined sales and rental service
revenues were up 13.6 percent compared with the prior year second quarter.
For the first half of this year, combined sales and rental service revenues
were up 13.0 percent. Revenues of the Rental Services segment increased
15.0 percent in the second quarter, with most of the increase being the
result of acquisitions made last year, and gross profit increased 15.5
percent. Good cost control continues to offset the impact of competitive
pricing in the marketplace. Second quarter sales of the Manufacturing and
Marketing segment increased 6.9 percent compared with the same quarter last
year, and gross profit increased 2.8 percent. The Uniform Group, the U.S.
portion of this segment, had a good sales increase, while the Canadian
operation's sales decreased. The Uniform Group's gross margins were lower
due to competitive pressures and greater shipments to lower margin fast food
chains. Good control of operating expenses offset the lower margins,
however. For the second quarter, Life Retail Stores had an excellent 21.4
percent increase in sales, resulting from an 8.9 percent increase in same-
store sales together with new volume from acquisitions made since last year.
Selling, general and administrative expenses increased $1,842,000 or 8.7
percent in the second quarter compared with the same period last year.
These expenses decreased as a percent of combined sales and rental service
revenues from 20.3 percent to 19.4 percent in the second quarter. Most of
the dollar increase was the result of acquisitions. The effective tax rate
in the current periods was 38.5 percent versus 37.0 percent in the prior
year periods.
3
<PAGE> 5
Financial Condition
- - -------------------
The Company had working capital of $156,528,000 and a current ratio
of 3.8 to 1 at July 30, 1994, down from $164,520,000 and 5.2 to 1 a
year ago and from $157,188,000 and 4.0 to 1 at the beginning of the
year as a result of higher short-term debt. The ratio of long-term
debt to debt-plus-equity was 26.8 percent at the close of the second
quarter, down slightly from a year ago and at the beginning of this
fiscal year.
Operating activities provided a total cash flow of $8,885,000 in the
first half compared with $6,498,000 in the first half last year, with
most of the difference being due to higher net income this year.
Uses of cash flow included $5,686,000 for capital expenditures and
$3,574,000 for acquisitions. Financing activities provided a net use
of $58,000, primarily the issuance of short-term debt offset by the
repayment of long-term debt and the payment of dividends. No
material change in the Company's future aggregate cash requirements
is foreseen at the present time.
Based on the Company's cash generation from operations as well as its
strong working capital position, current ratio and ratio of long-term
debt to total debt-plus-equity, Management believes that internal
funds available from operations plus external funds available from
the issuance of additional debt and/or equity as needed in the
future, will be sufficient for all planned operating and capital
requirements, including acquisitions.
4
<PAGE> 6
EXHIBIT A
ANGELICA
CORPORATION
August 18, 1994
Dear Shareholder:
We are pleased to report that the second quarter ended July 30, 1994 marked
the fourth consecutive quarter that earnings exceeded the comparable prior
year period. Combined sales and rental service revenues for the second
quarter were $118,192,000, up 13.6% from $104,019,000 in last year's second
quarter. Pretax income of $5,177,000 increased 38.8% compared with $3,731,000
in the prior year, and net income of $3,184,000 increased 35.5% from
$2,350,000 in the second quarter of last year. The percentage increase in net
income was less than the percentage increase in pretax income due to last
year's federal income tax law changes. Net income per share was $.35 versus
$.26 in the second quarter of last year, an increase of 34.6%.
Combined sales and rental service revenues for the first half of this year
increased 13.0% to $235,247,000, versus $208,114,000 in last year's first
half. Income before income taxes was $10,291,000, which compared with
$7,723,000 in the first six months of last year, an increase of 33.3%. Net
income rose 30.1% to $6,329,000, versus $4,865,000 in the same period last
year. In the first half of this year, earnings per share were $.70, an
increase of 29.6% from last year's $.54.
As was the case in the first quarter of this year, all three of our business
segments had improved results compared with the prior year period. For the
second quarter, Life Retail Stores had the largest percentage sales and
earnings increases, while the largest dollar increases came from the Rental
Services segment. The Manufacturing and Marketing segment had a moderate
earnings increase, but most importantly, each of the three operations that
make up that segment -- namely, the Uniform Group here in the United States,
the Canadian operations and Angelica International in England -- showed
improvement in operating results compared with the second quarter last year.
Overall emphasis on control of operating costs continued to produce good
results in the second quarter, as selling, general and administrative expenses
increased 8.7%, while combined sales and rental service revenues rose by a
larger 13.6%.
Revenues of the Rental Services segment increased 15.0% in the second quarter,
with most of that increase being the result of acquisitions made last year.
Second quarter earnings of Rental Services increased at a rate quite a bit
better than the rate of revenue increase. Competitive pricing in the
marketplace remains severe on new business and contract renewals, but cost
control is helping to offset these pressures. The fact that hospitals are
focusing on reducing their costs presents many good opportunities for our
Rental Services segment as we are able to show hospitals that our services are
the best, low-cost alternative. Rental Services should have a good year in
fiscal 1995, but we do not expect the improvement in the second half to be as
strong as it has been in the first half because of prior year comparisons
becoming more difficult.
Sales of the Manufacturing and Marketing businesses in the second quarter
increased 6.9% compared with the same quarter last year, even though they
included a sizable percentage decline in sales of the Canadian operations.
Manufacturing and Marketing earnings rose at a somewhat greater rate than the
rate of sales increase. Both the Canadian and English businesses operated at
essentially a breakeven for the second quarter, which compared with modest
losses in the same period last year. In these two operations, the improvement
over last year was the result of improved gross margins and excellent control
of operating expenses, the latter being particularly true in the Canadian
operations where operating expenses decreased significantly. The Uniform
Group in the United States had a good increase in sales
424 South Woods Mill Road, Chesterfield, Missouri 63017-3406
314-854-3800
<PAGE> 7
but only a small increase in earnings, as gross margins were lower due
to competitive pressures and a change in sales mix. Operating
expenses grew at a rate less than the rate of increase in sales, but
the drop in gross margin largely offset the good cost control.
Incoming business from the hospitality markets (i.e., lodging, food
service, travel and recreation) was well ahead of last year's second
quarter. Incoming business from the health care market was
essentially flat for the second quarter, in contrast to a modest
increase seen in the first quarter of this year. The largest increase
in second quarter shipments was to fast food chains, where gross
margins are quite a bit lower than the overall average of the Uniform
Group. At the end of the second quarter, the Uniform Group
reorganized its sales organization in order to emphasize more sales
calls on health care institutions and to reduce the cost of managing
the sales organization. For the remainder of this fiscal year, we
expect the results of the Manufacturing and Marketing segment will
show continued improvement over the prior year.
For the second quarter, Life Retail Stores had an excellent 21.4%
increase in sales and a significantly better increase in earnings.
Sales were up due to an 8.9% increase in same-store sales plus new
volume from acquisitions made since the first quarter of last year.
Added to a 10.3% increase in the first quarter, same-store sales were
up 9.6% for the first half of this year. Life was operating 263
stores at the end of the second quarter, compared with 247 at the
same time last year. We believe that the Life Stores segment is
benefiting from a new trend where many hospitals are no longer
providing their employees with uniforms, and those employees are
coming to our retail stores to fill their needs. In addition,
benefits are continuing to be realized from improved merchandising
systems which allow our buyers to have the right merchandise in our
stores when the customers need it. We look forward to Life Retail
Stores having continued success throughout this fiscal year, but
probably not at the very impressive rate of improved results seen in
the first half of this year.
Our second quarter and first half results were excellent compared
with the comparable periods last year, but we should note that
results for those periods last year were not very good. Although the
comparisons become more difficult as the year continues, we expect
that third and fourth quarter results will show improvement over the
comparable prior year periods. However, we do not expect the rate of
improvement in the third and fourth quarters to be as high as the
rate of improvement in the first half of this year. Both the Rental
Services and the Manufacturing and Marketing segments must continue
strong emphasis on cost control as gross margins stay under pressure.
We continue to be somewhat concerned about the level of incoming
health care business at the Uniform Group, where apprehension over
potential Congressional action in the health care area is still a
problem. However, it is clear that some of that slowness is being
made up in the Life Retail chain where employees are now buying their
uniforms at retail.
The fundamentals of our businesses remain sound, both in the near
term and the long term. While the challenges of the marketplace seem
tougher, we feel we are doing a better job of meeting those
challenges. Despite mixed forecasts about the future economy, we
continue to believe that our businesses are well positioned in the
markets we serve to continue to produce improved results.
Respectfully submitted,
/s/ LAWRENCE J. YOUNG
Lawrence J. Young
Chairman of the Board and President
<PAGE> 8
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Angelica Corporation and Subsidiaries
Unaudited
(Dollars in thousands, except per share amounts)
<CAPTION>
Second Quarter Ended First Half Ended
----------------------------- -------------------------------
July 30, 1994 July 31, 1993 July 30, 1994 July 31, 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Rental service revenues $ 59,515 $ 51,764 $120,556 $105,692
Net sales 58,677 52,255 114,691 102,422
-------- -------- -------- --------
118,192 104,019 235,247 208,114
-------- -------- -------- --------
Cost of rental services 47,457 41,322 94,669 82,825
Cost of goods sold 39,670 35,049 77,637 69,135
-------- -------- -------- --------
87,127 76,371 172,306 151,960
-------- -------- -------- --------
Gross profit 31,065 27,648 62,941 56,154
-------- -------- -------- --------
Selling, general and
administrative expenses 22,919 21,077 46,797 42,922
Interest expense 1,964 1,892 3,905 3,781
Other expense, net 1,005 948 1,948 1,728
-------- -------- -------- --------
25,888 23,917 52,650 48,431
-------- -------- -------- --------
Income before income taxes 5,177 3,731 10,291 7,723
Provision for income taxes 1,993 1,381 3,962 2,858
-------- -------- -------- --------
Net income $ 3,184 $ 2,350 $ 6,329 $ 4,865
======== ======== ======== ========
Net income per share* $ .35 $ .26 $ .70 $ .54
======== ======== ======== ========
Dividends per common share $ .235 $ .23 $ .47 $ .46
======== ======== ======== ========
<FN>
*Based upon weighted average number of common and common equivalent shares outstanding of 9,105,302
and 9,077,617 for fiscal periods of 1995 and 1994, respectively.
</TABLE>
<PAGE> 9
<TABLE>
CONSOLIDATED BALANCE SHEETS
Angelica Corporation and Subsidiaries
Unaudited
(Dollars in thousands)
<CAPTION>
July 30, 1994 January 29,1994
------------- ---------------
<S> <C> <C>
ASSETS
- - ------
Current Assets:
Cash and short-term investments $ 1,587 $ 2,020
Receivables, less reserves of $3,380 and $2,630 71,272 68,247
Inventories:
Raw material 23,170 26,425
Work in progress 6,724 7,535
Finished goods 72,573 70,610
-------- --------
102,467 104,570
Linens in service 33,366 31,099
Prepaid expenses 4,051 4,319
-------- --------
Total Current Assets 212,743 210,255
-------- --------
Property and Equipment 194,844 189,905
Less -- reserve for depreciation 101,068 95,937
-------- --------
93,776 93,968
-------- --------
Goodwill 7,247 5,833
Other Acquired Assets 9,632 8,726
Cash Surrender Value of Life Insurance 9,709 9,409
Miscellaneous 4,797 4,670
-------- --------
31,385 28,638
-------- --------
Total Assets $337,904 $332,861
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Current Liabilities:
Short-term debt $ 15,500 $ 9,900
Current maturities of long-term debt 2,568 2,568
Accounts payable 13,419 17,593
Accrued expenses 18,629 17,476
Income taxes 6,099 5,530
-------- --------
Total Current Liabilities 56,215 53,067
-------- --------
Long-Term Debt, less current maturities 70,970 72,255
Other Long-Term Obligations 16,770 15,546
Shareholders' Equity:
Preferred Stock:
Class A, Series 1, $1 stated value,
authorized 100,000 shares, outstanding: 128 shares -- --
Class B, authorized 2,500,000 shares, outstanding:
none -- --
Common stock, $1 par value, authorized 20,000,000
shares, issued: 9,453,214 and 9,447,614 9,453 9,448
Capital surplus 3,803 3,672
Retained earnings 192,387 190,301
Translation adjustment (2,145) (1,658)
Common Stock in treasury, at cost: 351,624 and 361,580 (9,549) (9,770)
-------- --------
193,949 191,993
-------- --------
Total Liabilities and Shareholders' Equity $337,904 $332,861
======== ========
</TABLE>
<PAGE> 10
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Angelica Corporation and Subsidiaries
Unaudited
(Dollars in thousands)
<CAPTION>
First Half Ended
-----------------------------
July 30, 1994 July 31, 1993
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,329 $ 4,865
Non-cash items included in net income:
Depreciation 6,371 6,245
Amortization of acquisition costs 1,715 1,745
Change in working capital components,
net of businesses acquired (4,595) (5,672)
Other, net (935) (685)
------- -------
Net cash provided by operating activities 8,885 6,498
------- -------
Cash flows from investing activities:
Expenditures for property and equipment, net (5,686) (3,575)
Cost of businesses acquired (3,574) (209)
------- -------
Net cash used in investing activities (9,260) (3,784)
------- -------
Cash flows from financing activities:
Proceeds from issuance of short-term debt 5,600 2,000
Long-term debt repayments (1,285) (1,328)
Dividends paid (4,277) (4,174)
Other, net (96) 409
------- -------
Net cash used in financing activities (58) (3,093)
------- -------
Net increase (decrease) in cash and
short-term investments (433) (379)
Balance at beginning of year 2,020 2,746
------- -------
Balance at end of period $ 1,587 $ 2,367
======= =======
</TABLE>
<PAGE> 11
<TABLE>
SUMMARY FINANCIAL POSITION DATA
Angelica Corporation and Subsidiaries
(Dollars in thousands, except ratios, shares and per share amounts)
<CAPTION>
(Unaudited) Year Ended January*
-------------------- --------------------------------------------------
July 30, July 31,
1994 1993 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital $156,528 $164,520 $157,188 $161,129 $160,379 $134,964 $130,072
Current ratio 3.8 to 1 5.2 to 1 4.0 to 1 4.7 to 1 4.2 to 1 2.9 to 1 3.4 to 1
Long-term debt $70,970 $76,978 $72,255 $78,175 $80,506 $57,782 $50,588
Shareholders' equity $193,949 $190,178 $191,993 $189,209 $190,303 $175,684 $161,134
Percent long-term debt to
debt and equity 26.8% 28.8% 27.3% 29.2% 29.7% 24.8% 23.9%
Equity per common share $21.31 $20.94 $21.13 $20.88 $20.43 $18.92 $17.36
Common shares outstanding 9,101,590 9,082,411 9,086,034 9,063,834 9,315,535 9,285,677 9,284,291
<FN>
* As reported in Company's Annual Report.
</TABLE>
<PAGE> 12
PART II. OTHER INFORMATION
Item 4. Results of Votes of Security Holders
- - ---------------------------------------------
The Annual Shareholders Meeting was held on May 24, 1994. Items
on the agenda other than the election of Directors were 1) the
Angelica Corporation 1994 Performance Plan and 2) the proposal to
approve the material terms of the criteria to be used in the grant
of performance awards and performance-based restricted stock
awards under the Angelica Corporation 1994 Performance Plan.
The 1994 Performance Plan provides for the grant of Incentive
Stock Options, Nonqualified Stock Options, Restricted Stock and
Performance Awards to employees of the Company.
Approval of the material terms of the criteria to be used in the
grant of performance awards and performance-based restricted stock
awards under the Angelica Corporation 1994 Performance Plan was
necessary for the compensation payable pursuant to performance awards
and performance-based restricted stock awards to be performance-based
under Section 162(m) of the Internal Revenue Code of 1986 (as
amended) (the "Code") and the regulations promulgated thereunder and,
thus, fully deductible under the Code when taxable to the
participant.
<TABLE>
ANGELICA CORPORATION 1994 PERFORMANCE PLAN:
<CAPTION>
Votes: For Against Abstain Broker Non-Vote
--- ------- ------- ---------------
<S> <C> <C> <C> <C>
4,192,596 971,552 323,371 1,250,262
</TABLE>
<TABLE>
MATERIAL TERMS OF THE CRITERIA TO BE USED IN THE GRANT OF
PERFORMANCE AWARDS AND PERFORMANCE-BASED RESTRICTED STOCK AWARDS
UNDER THE ANGELICA CORPORATION 1994 PERFORMANCE PLAN:
<CAPTION>
Votes: For Against Abstain Broker Non-Vote
--- ------- ------- ---------------
<S> <C> <C> <C> <C>
4,059,176 1,093,461 334,782 1,250,262
</TABLE>
<TABLE>
NOMINEES FOR DIRECTORS:
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Leslie F. Loewe 6,650,526 87,156
Elliot H. Stein 6,648,739 88,943
William P. Stiritz 6,677,647 60,035
Martin Sneider 6,699,339 38,343
</TABLE>
6
<PAGE> 13
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(b) Reports on Form 8-K - There were no reports on Form 8-K filed
for the second quarter ended July 30, 1994.
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.
Angelica Corporation
--------------------
(Registrant)
Date: August 31, 1994 /s/ T. M. ARMSTRONG
------------------------------
T. M. Armstrong
Senior Vice President -
Finance and Administration
Chief Financial Officer
(Principal Financial Officer)
/s/ L. LINDEN MANN
------------------------------
L. Linden Mann
Controller
(Principal Accounting Officer)
