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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
April 29, 1995 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 June 2, 1995 was 9,140,814 shares.
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<TABLE>
ANGELICA CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SUPPORTING SCHEDULES
FOR APRIL 29, 1995 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 -
First Quarter Ended April 29, 1995 and
April 30, 1994 3
Consolidated Balance Sheets -
April 29, 1995 and January 28, 1995 4
Consolidated Statements of Cash Flows -
First Quarter Ended April 29, 1995
and April 30, 1994 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
</TABLE>
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ANGELICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED APRIL 29, 1995
(1) The accompanying consolidated condensed financial statements
are unaudited, and it is suggested that these consolidated
statements be read in conjunction with the fiscal 1995 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 April 29, 1995, 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 $323,000 and $1,016,000 in
the 1995 and 1994 periods, respectively; and in these periods
interest payments were $950,000 and $705,000, respectively.
2
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<TABLE>
ANGELICA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
QUARTER ENDED APRIL 29, 1995
<CAPTION>
Analysis of Operations
- ----------------------
First Quarter Ended
----------------------------
April 29, April 30,
1995 1994
--------- ---------
<S> <C> <C>
Sales and Rental Service Revenues
- ---------------------------------
Rental Services $ 64,904 $ 61,041
Manufacturing and Marketing 47,102 44,940
Retail Sales 16,883 16,255
Intersegment Sales (5,062) (5,181)
------- -------
$ 123,827 $ 117,055
======= =======
Gross Profit
- ------------
Rental Services $ 13,702 $ 13,829
Manufacturing and Marketing 10,379 9,302
Retail Sales 9,214 8,745
------- -------
$ 33,295 $ 31,876
======= =======
</TABLE>
Combined sales and rental service revenues were up 5.8 percent for
the first quarter ended April 29, 1995 over last year's first
quarter, and gross profit was up 4.5 percent. Revenues of the
Rental Services segment increased 6.3 percent in the first quarter,
with nearly all the increase being the result of acquisitions made
last year. Continued cost control efforts were not sufficient to
overcome lower margins due to price reductions over the past two
years, resulting in a first quarter gross profit reduction of 1.0
percent for this segment. First quarter sales of the Manufacturing
and Marketing segment increased 4.8 percent compared with the same
quarter last year, and gross profit increased 11.6 percent. The
U.S. and United Kingdom portions of this segment had modest sales
increases, while the Canadian operation's sales decreased. All
three divisions of this segment had better operating results. Life
Retail Stores had a 3.9 percent increase in sales, resulting from
a 2.7 percent increase in same-store sales together with new volume
from acquisitions made since the first quarter of last year.
Selling, general and administrative expenses increased $709,000 or
3.0 percent in the first quarter compared with the same period last
year. These expenses decreased as a percent of combined sales and
rental service revenues from 20.4 percent to 19.9 percent in the
first quarter. Interest expense and other expense, net, reflects
increased costs associated with acquisitions made last year.
3
<PAGE> 5
Financial Condition
- -------------------
The Company had working capital of $154,215,000 and a current ratio
of 3.2 to 1 at April 29, 1995, down from $156,455,000 and 3.6 to 1
a year ago and compared with $150,734,000 and 3.2 to 1 at the
beginning of the year. The ratio of long-term debt to debt-plus-
equity was 25.9 percent at the close of the first quarter, down
from 26.2 percent at the beginning of the year and 27.3 percent a
year ago.
Operating activities provided a total cash flow of $3,576,000 in
the first quarter compared with $1,216,000 in the first quarter
last year, with most of the difference being due to decreased
requirements for working capital. Investing activities used
$2,176,000 of cash flow, primarily for capital expenditures. The
payment of dividends was the principal use of financing activities
cash flow. No material change in the Company's future aggregate
cash requirements is foreseen at the present time.
Following the close of the quarter, the Company completed a private
placement financing of $30,000,000 with four insurance companies.
The interest rate on the 10-year financing was 8.225 percent, and
all short-term debt incurred over the last two years to help
finance acquisitions has been repaid.
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 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
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EXHIBIT A
ANGELICA CORPORATION
May 18, 1995
Dear Shareholder:
We are pleased to report to you that the first quarter ended April
29, 1995 was the seventh consecutive quarter that earnings exceeded
the comparable prior year period. Combined sales and rental
service revenues for the first quarter were $123,827,000, up 5.8
percent from $117,055,000 in last year's first quarter. Excluding
acquisitions made since the first quarter of last year, combined
sales and revenues increased by only a modest 1.0 percent. Pretax
income of $5,590,000 was up 9.3 percent compared with $5,114,000 in
last year's first quarter, and net income of $3,438,000 also rose
9.3 percent from the $3,145,000 earned in the first quarter last
year. Net income per share was $.38 versus $.35 in the first
quarter of last year, an increase of 8.6 percent.
Improved first quarter earnings in the Manufacturing and Marketing
segment and Life Retail Stores were partially offset by lower
earnings in the Rental Services segment and increased costs
associated with acquisitions made last year. Overall control of
operating costs continued to be good in the quarter, with those
expenses rising 3.0 percent while combined sales and rental service
revenues rose by a larger 5.8 percent.
First quarter revenues of the Rental Services segment increased 6.3
percent, with nearly all of that increase coming from the Buffalo,
New York and Houston, Texas acquisitions made during last year.
The cumulative effect of price reductions over the past two years
caused a reduction in margins resulting in a decrease in first
quarter earnings for this segment. Based on our current estimates,
this should be the worst quarter of the year for the Rental
Services segment, and we continue to expect to achieve a slight
earnings increase for the full year. The continuing emphasis on
cost reduction by our health care customers is negatively affecting
operating results, but as we go forward, we believe this cost-
reduction focus will provide more opportunities for revenue and
earnings improvement. Our laundry services, together with reusable
textiles and uniforms, offer hospitals opportunities for
significant cost reductions over the methods and procedures being
used today. We have noted that many more hospitals with on-premise
laundries and hospital co-ops are contacting us for information on
how our contract services can save them money. We continue to
emphasize our cost reduction capabilities to the health care
community, and expect improved results over the remainder of this
year as well as for many years to come.
Sales of the Manufacturing and Marketing businesses in the first
quarter increased 4.8 percent compared with the same quarter last
year, with almost all of that increase coming from the Marlin
Manufacturing Company acquisition made in the third quarter last
year. Excluding acquisitions, sales increases in the U.S. and
England were largely offset by lower sales in Canada. All three
divisions of the Manufacturing and Marketing segment had better
operating results. In the United States, the Uniform Group had a
modest increase in sales and an excellent increase in earnings.
This earnings increase was a result of a slight improvement in
margins, due to a change in sales mix, combined with operating
costs increasing at a rate less than the sales increase. Incoming
business during the first quarter was down slightly overall, with
the largest decline coming from the health care market. Increases
in business from outpatient clinics and nursing homes were offset
by declines in business from acute care hospitals, which constitute
the largest customer group in the health care market segments on
which we call. We believe the decline in this portion of the
health care market is being caused by the rapid pace of hospital
consolidations, combined with numerous cost reduction actions they
are taking. During the remainder of this year, we expect to see
business from the health care market improve as compared with the
first quarter. Both the Canadian operations and the U.K.
operations had improved results in the first quarter due to better
margins combined with good cost
424 South Woods Mill Road, Chesterfield, Missouri 63017-3406
314-854-3800
<PAGE> 7
control. We expect both of these operations to continue to improve
as the year progresses. We were pleased with the higher earnings of
the Manufacturing and Marketing segment for the first quarter, and
we expect this segment will show continued improvement over the
remainder of this year.
First quarter sales of Life Retail Stores increased 3.9 percent,
with a little over half of that increase coming from acquisitions
made since the first quarter of last year. Earnings increased at
a significantly more rapid rate than the sales increase. Although
the same-store sales increase did not achieve the near double-digit
rates that were common last year, we nevertheless had a 2.7 percent
increase compared with last year's first quarter. Sales of
uniforms to employees of acute care hospitals continued to rise as
many of these hospitals no longer are purchasing uniforms for their
employees. At the end of the quarter, Life was operating 267
stores compared with 264 at the same time last year. During the
first quarter, Life purchased two stores and opened one new store.
Life Retail Stores had a very good first quarter, and we look
forward to this segment having continued success throughout this
fiscal year.
Following the close of the quarter, we completed a private
placement financing of $30,000,000 with four insurance companies.
The interest rate on the 10-year financing was 8.225 percent, and
we have repaid all of our short-term bank loans incurred over the
last two years to help finance acquisitions.
On an overall basis, we believe our first quarter performance was
good, but not great. Results were essentially as we expected them
to be as we entered the new year. The continuing changes taking
place in the health care market will moderate our opportunity for
significant growth in the near term, but we do expect to see
growth. We continue to believe that the fundamentals of all of our
businesses remain sound, and we are optimistic about our long-term
performance. For the remainder of this current year, we presently
believe we will experience good increases in earnings.
Respectfully submitted,
/s/ Lawrence J. Young
Lawrence J. Young
Chairman of the Board and President
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<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Angelica Corporation and Subsidiaries
Unaudited
(Dollars in thousands, except per share amounts)
<CAPTION>
First Quarter Ended
----------------------------------
April 29, 1995 April 30, 1994
-------------- --------------
<S> <C> <C>
Rental service revenues $ 64,904 $ 61,041
Net sales 58,923 56,014
------- -------
123,827 117,055
------- -------
Cost of rental services 51,202 47,212
Cost of goods sold 39,330 37,967
------- -------
90,532 85,179
------- -------
Gross profit 33,295 31,876
------- -------
Selling, general and
administrative expenses 24,587 23,878
Interest expense 2,095 1,941
Other expense, net 1,023 943
------- -------
27,705 26,762
------- -------
Income before income taxes 5,590 5,114
Provision for income taxes 2,152 1,969
------- -------
Net income $ 3,438 $ 3,145
======= =======
Net income per share<F*> $ .38 $ .35
======= =======
Dividends per common share $ .235 $ .235
======= =======
<FN>
<F*> Based upon weighted average number of common and common
equivalent shares outstanding of 9,133,733 and 9,102,170 for
fiscal periods of 1996 and 1995, respectively.
</TABLE>
<PAGE> 9
<TABLE>
CONSOLIDATED BALANCE SHEETS
Angelica Corporation and Subsidiaries
Unaudited
(Dollars in thousands)
<CAPTION>
April 29, 1995 January 28, 1995
-------------- ----------------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and short-term investments $ 2,374 $ 2,211
Receivables, less reserves of $3,190 and $2,699 70,284 69,071
Inventories:
Raw material 26,482 26,222
Work in progress 7,290 6,163
Finished goods 74,735 73,442
------- -------
108,507 105,827
Linens in service 37,969 37,609
Prepaid expenses 5,399 5,199
------- -------
Total Current Assets 224,533 219,917
------- -------
Property and Equipment 203,930 202,879
Less -- reserve for depreciation 107,698 105,229
------- -------
96,232 97,650
------- -------
Goodwill 7,178 7,261
Other acquired assets 12,301 13,252
Cash surrender value of life insurance 11,092 10,917
Miscellaneous 4,653 4,551
------- -------
35,224 35,981
------- -------
Total Assets $ 355,989 $ 353,548
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Short-term debt $ 21,400 $ 21,100
Current maturities of long-term debt 2,568 2,568
Accounts payable 17,190 20,043
Accrued expenses 22,137 20,189
Income taxes 7,023 5,283
------- -------
Total Current Liabilities 70,318 69,183
------- -------
Long-Term Debt, less current maturities 69,560 69,683
Other Long-Term Obligations 17,427 18,022
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: 9,471,538 and 9,470,538 9,472 9,471
Capital surplus 4,200 4,179
Retained earnings 196,149 194,849
Translation adjustment (1,936) (2,290)
Common Stock in treasury, at cost: 337,351 and 351,626 (9,201) (9,549)
------- -------
198,684 196,660
------- -------
Total Liabilities and Shareholders' Equity $ 355,989 $ 353,548
======= =======
</TABLE>
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<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Angelica Corporation and Subsidiaries
Unaudited
(Dollars in thousands)
<CAPTION>
First Quarter Ended
----------------------------------
April 29, 1995 April 30, 1994
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 3,438 $ 3,145
Non-cash items included in net income:
Depreciation 3,456 3,266
Amortization of acquisition costs 1,074 846
Change in working capital components,
net of businesses acquired (3,520) (5,467)
Other, net (872) (574)
------ ------
Net cash provided by operating activities 3,576 1,216
------ ------
Cash Flows from Investing Activities
Expenditures for property and equipment, net (2,017) (2,314)
Cost of businesses acquired (159) (3,574)
------ ------
Net cash used in investing activities (2,176) (5,888)
------ ------
Cash Flows from Financing Activities
Proceeds from issuance of short-term debt 300 6,300
Dividends paid (2,147) (2,139)
Other, net 610 (167)
------ ------
Net cash provided by (used in) financing activities (1,237) 3,994
------ ------
Net increase (decrease) in cash and
short-term investments 163 (678)
Balance at beginning of year 2,211 2,020
------ ------
Balance at end of period $ 2,374 $ 1,342
====== ======
</TABLE>
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<TABLE>
SUMMARY FINANCIAL POSITION DATA
Angelica Corporation and Subsidiaries
(In thousands, except ratios, shares and per share amounts)
<CAPTION>
(Unaudited) Year Ended January<F*>
-------------------- ---------------------------------------------------
April 29, April 30,
1995 1994 1995 1994 1993 1992 1991
--------- --------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital $154,215 $156,455 $150,734 $157,188 $161,129 $160,379 $134,964
Current ratio 3.2 to 1 3.6 to 1 3.2 to 1 4.0 to 1 4.7 to 1 4.2 to 1 2.9 to 1
Long-term debt $69,560 $72,245 $69,683 $72,255 $78,175 $80,506 $57,782
Shareholders' equity $198,684 $192,842 $196,660 $191,993 $189,209 $190,303 $175,684
Percent long-term debt to
debt and equity 25.9% 27.3% 26.2% 27.3% 29.2% 29.7% 24.8%
Equity per common share $21.75 $21.19 $21.57 $21.13 $20.88 $20.43 $18.92
Common shares outstanding 9,134,187 9,100,090 9,118,912 9,086,034 9,063,834 9,315,535 9,285,677
<FN>
<F*>As reported in Company's Annual Report.
</TABLE>
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PART II. OTHER INFORMATION
ANGELICA CORPORATION AND SUBSIDIARIES
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
first quarter ended April 29, 1995
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: June 5, 1995 /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)
6
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for period ended April 29, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-27-1996
<PERIOD-START> JAN-29-1995
<PERIOD-END> APR-29-1995
<CASH> 2,374
<SECURITIES> 0
<RECEIVABLES> 73,474
<ALLOWANCES> (3,190)
<INVENTORY> 146,476
<CURRENT-ASSETS> 224,533
<PP&E> 203,930
<DEPRECIATION> (107,698)
<TOTAL-ASSETS> 355,989
<CURRENT-LIABILITIES> 70,318
<BONDS> 69,560
<COMMON> 9,472
0
0
<OTHER-SE> 189,212
<TOTAL-LIABILITY-AND-EQUITY> 355,989
<SALES> 58,923
<TOTAL-REVENUES> 123,827
<CGS> 39,330
<TOTAL-COSTS> 90,532
<OTHER-EXPENSES> 25,197
<LOSS-PROVISION> 413
<INTEREST-EXPENSE> 2,095
<INCOME-PRETAX> 5,590
<INCOME-TAX> 2,152
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,438
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
