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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 June 30, 1995 Commission File #0-12567
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GUEST SUPPLY, INC.
(Exact name of registrant as specified in its charter)
State of New Jersey
(State or other jurisdiction of incorporation or organization)
720 U.S. Highway One
North Brunswick, New Jersey
(Address of principal executive offices)
22-2320483
(Identification number)
08902
(Zip Code)
Registrants telephone number and area code 908-246-3011
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 of common stock, without par value, outstanding as of June
30, 1995 was 4,073,896 shares.
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PART 1
GUEST SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, September 30,
1995 1994*
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ASSETS:
Current assets:
Cash and cash equivalents $ 1,540,000 $ 1,782,000
Accounts Receivable 25,005,000 19,250,000
Inventory:
Finished goods 17,438,000 15,976,000
Work in progress 8,282,000 6,156,000
Deferred income taxes 1,910,000 1,999,000
Prepaid expenses and other current assets 1,282,000 733,000
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Total current assets 55,457,000 45,896,000
Equipment and leasehold improvements, net 27,069,000 20,986,000
Other assets 79,000 84,000
Excess of cost over net assets acquired, net 5,988,000 6,264,000
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$88,593,000 $73,230,000
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $29,983,000 $21,036,000
Current maturities of long-term debt 2,417,000 1,908,000
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Total current liabilities 32,400,000 22,944,000
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Long-term debt 17,508,000 14,642,000
Convertible subordinated note 400,000
Deferred income taxes 2,105,000 1,999,000
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Total long-term liabilities 19,613,000 17,041,000
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Commitments and contingencies
Shareholders' equity:
Preferred stock - without par value;
authorized 1,000,000 shares, outstanding none
Common stock - without par value;
authorized 10,000,000 shares,issued and outstanding
4,073,896 shares at June 30, 1995
and 4,029,767 at September 30, 1994 335,000 330,000
Additional paid-in capital 34,817,000 34,301,000
Retained earnings (deficit) 1,554,000 (1,312,000)
Cumulative foreign currency
translation adjustments (126,000) (74,000)
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Total shareholders' equity 36,580,000 33,245,000
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$88,593,000 $73,230,000
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* From audited financial statements.
The accompanying notes are an integral part
of these consolidated condensed financial statements.
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GUEST SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
NINE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
Sales $111,018,000 $80,404,000 $44,062,000 $31,014,000
Cost of sales 84,902,000 58,970,000 33,749,000 23,274,000
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Gross profit 26,116,000 21,434,000 10,313,000 7,740,000
SG&A 21,028,000 17,873,000 7,896,000 6,185,000
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Operating income 5,088,000 3,561,000 2,417,000 1,555,000
Interest expense, net 765,000 810,000 327,000 271,000
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Income before income taxes 4,323,000 2,751,000 2,090,000 1,284,000
Income tax expense 1,456,000 479,000 731,000 218,000
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Net income $ 2,867,000 $ 2,272,000 $ 1,359,000 $ 1,066,000
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Earnings per common share $0.60 $0.49 $0.28 $0.23
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Weighted average
shares outstanding 4,803,000 4,663,000 4,870,000 4,732,000
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The accompanying notes are an integral part
of these consolidated condensed financial statements.
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GUEST SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30,
------------------------
1995 1994
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Cash flows from operating activities:
Net income $2,867,000 $2,272,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,097,000 1,886,000
Provision for losses on accounts receivable 356,000 292,000
Deferred income taxes 195,000
Changes in assets and liabilities:
Increase in accounts receivable (5,755,000) (1,960,000)
Increase in inventory (3,944,000) (3,104,000)
Increase in prepaid expenses and
other current assets (549,000) (641,000)
(Increase) decrease in other assets 5,000 (3,000)
Increase in accounts payable and
accrued expenses 8,947,000 3,462,000
Foreign currency translation adjustments (52,000) 47,000
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Net cash provided by operating activities 4,167,000 2,251,000
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Cash flows from investing activities:
Capital expenditures (7,904,000) (4,657,000)
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Net cash used in investing activities (7,904,000) (4,657,000)
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Cash flows from financing activities:
Net borrowings (payments) on
revolving credit agreement 4,674,000 (2,527,000)
Proceeds from issuance of long-term debt 5,000,000
Repayment of long-term debt (1,699,000) (1,036,000)
Proceeds from issuance of common stock 520,000 331,000
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Net cash provided by financing activities 3,495,000 1,768,000
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Net decrease in cash and cash equivalents (242,000) (638,000)
Cash and cash equivalents at beginning of period 1,782,000 1,107,000
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Cash and cash equivalents at end of period $1,540,000 $469,000
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The accompanying notes are an integral part
of these consolidated condensed financial statements.
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GUEST SUPPLY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Basis of Presentation
The unaudited consolidated condensed financial statements have been prepared
from the books and records of Guest Supply, Inc. and subsidiaries (the Company)
in accordance with generally accepted accounting principles for interim
financial information. 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, all adjustments
(consisting only of normal and recurring adjustments) considered necessary for
a fair presentation have been included. It is suggested that the consolidated
condensed financial statements be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended
September 30, 1994 included in the Company's annual report on Form 10-K.
Interim results are not necessarily indicative of the results that may be
expected for the full year.
Note 2: Earnings Per Common Share
Earnings per common share is based on the weighted average number of common and
common equivalent shares outstanding during each period. When stock options
and warrants are dilutive, they are included as share equivalents using the
treasury stock method. Where the effect of the assumed exercise on net income
would be anti-dilutive, primary and fully diluted earnings per common share are
stated the same.
Note 3: Revolving Credit Facility
On July 17, 1995, the Company amended its credit facility, dated as of January
26, 1994. Under the amended agreement, the amount available to the Company was
increased to $18,000,000.
Note 4: Reclassification
Certain reclassifications have been made to the three and nine month periods
ended June 30, 1994 in order to conform with the current year presentation.
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GUEST SUPPLY, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine months ended June 30, 1995 vs. Nine months ended June 30, 1994
Sales for the nine months ended June 30, 1995 increased by $30,614,000 or 38.1%
from $80,404,000 for the nine months ended June 30, 1994. Revenues generated
from our hotel customers increased $24,770,000 or 34.6% to $96,252,000. This
increase is due to selling additional products to existing customers, the
addition of new customers and the introduction of new items to the Company's
product line.
Sales to consumer product companies and retailers were $14,766,000 for the nine
months ended June 30, 1995 compared to $8,922,000 for the nine months ended
June 30, 1994. The increase of $5,844,000 or 65.5% was due to increased sales
to existing customers.
Gross profit for the nine months ended June 30, 1995 was $26,116,000 or 23.5%
of sales compared to $21,434,000 or 26.6% of sales for the nine months ended
June 30, 1994. The decrease in gross profit as a percentage of sales was due
primarily to inefficiencies experienced at the Company's manufacturing facility
as a result of the ongoing plant expansion project. The addition of textiles
to the Company's product line also contributed to the decrease as a result of a
lower gross profit associated with these products when compared with the
Company's other products.
Interest expense was $765,000 for the nine months ended June 30, 1995 compared
to $810,000 for the nine months ended June 30, 1994. The decrease in interest
of $45,000 or 5.5% can be attributed to a decrease in borrowings needed to fund
our operations offset by an increase in borrowings for our capital expansion
program. Interest costs incurred on borrowings for our capital expansion
program are capitalized during the construction period to the cost of the
project.
Selling, general and administrative expenses were $21,028,000 or 18.9% of sales
for the nine months ended June 30, 1995 compared to $17,873,000 or 22.2% of
sales for the nine months ended June 30, 1994. The increase of $3,155,000 or
17.7% was due primarily to increased payroll and payroll related costs,
warehousing and delivery costs. The decrease in selling, general and
administrative costs as a percentage of sales was the result of increased sales
volume combined with the effects of the Company's cost containment program.
The effective income tax rate increased to 33.7% for the nine months ended June
30, 1995 compared with 17.4% for the nine months ended June 30, 1994. This
increase is primarily due to a decrease in net operating loss carryforwards
available for the nine months ended June 30, 1995.
Page 7
Three months ended June 30, 1995 vs. Three months ended June 30, 1994
Sales for the three months ended June 30, 1995 increased by $13,048,000 or
42.1% from $31,014,000 for the three months ended June 30, 1994. Revenues
generated from our hotel customers increased $10,574,000 or 37.6% to
$38,684,000. This increase is due to selling additional products to existing
customers, the addition of new customers and the introduction of new items to
the Company's product line.
Sales to consumer product companies and retailers were $5,378,000 for the three
months ended June 30, 1995 compared to $2.904.000 for the three months ended
June 30, 1994. The increase of $2,474,000 or 85.2% was due to increased sales
to existing customers.
Gross profit for the three months ended June 30, 1995 was $10,313,000 or 23.4%
of sales compared to $7,740,000 or 24.9% of sales for the three months ended
June 30, 1994. The decrease in gross profit as a percentage of sales was due
primarily to inefficiencies experienced at the Company's manufacturing facility
as a result of the ongoing plant expansion project. The addition of textiles
to the Company's product line also contributed to the decrease as a result of a
lower gross profit associated with these products when compared with the
Company's other products.
Selling, general and administrative expenses were $7,896,000 or 17.9% of sales
for the three months ended June 30, 1995 compared to $6,185,000 or 19.9% of
sales for the three months ended June 30, 1994. The increase of $1,711,000 or
27.6% was due primarily to increased payroll and payroll related costs,
warehousing and delivery costs. The decrease in selling, general and
administrative costs as a percentage of sales was the result of increased sales
volume combined with the effects of the Company's cost containment program.
Interest expense was $327,000 for the three months ended June 30, 1995 compared
to $271,000 for the three months ended June 30, 1994. The increase in interest
of $56,000 or 20.6% can be attributed to an increase in borrowings needed to
fund our operations and to an increase in borrowings for our capital expansion
program. Interest costs incurred on borrowings for our capital expansion
program are capitalized during the construction period to the cost of the
project.
The effective income tax rate increased to 35.0% for the three months ended
June 30, 1995 compared with 17.0% for the three months ended June 30, 1994.
This increase is primarily due to a decrease in net operating loss
carryforwards available for the three months ended June 30, 1995.
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GUEST SUPPLY, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources at June 30, 1995
At June 30, 1995, the Company had $23,057,000 of working capital compared to
$22,952,000 at September 30, 1994.
At June 30, 1995, net equipment and leasehold improvements increased by
$6,083,000. This increase is due to the ongoing expansion of the Company's
manufacturing facility. The Company believes that this expansion is necessary
to increase its production capability to accommodate the Company's projected
growth.
At June 30, 1995, the Company had a $14,500,000 three year revolving credit
facility with a bank which expires in January, 1997. The amount available
under the revolving credit facility is based upon agreed levels of eligible
accounts receivable. At June 30, 1995, $11,349,000 was outstanding under this
facility and the Company had unused availability of $3,151,000. A portion of
this facility bears interest at a rate equal to LIBOR plus an amount of either
1.25% or 1.50% and the remaining portion at the bank's prime rate. All of the
Company's loans from its bank are secured by substantially all of the
Company's assets and are subject to certain financial covenants.
On July 17, 1995, the Company amended its credit facility, dated as of January
26, 1994. Under the amended agreement, the amount available to the Company was
increased to $18,000,000.
The Company believes that the amount available under its revolving credit
facility together with the cash flow from operations will be sufficient to meet
the Company's short-term working capital requirements and identifiable
long-term capital needs. The Company also believes that, if necessary,
additional financing will be available to it on commercially reasonable terms.
Management believes the impact of inflation on the Company's business has been
minimal.
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GUEST SUPPLY, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
a) The exhibits filed as part of this report are listed on the index to the
exhibits.
b) No reports on Form 8-K have been filed during the nine month period ended
June 30, 1995.
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Page 10
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.
GUEST SUPPLY, INC.
Dated: 8/11/95 By: s/Clifford W. Stanley
------------------------------------
Clifford W. Stanley
President & Chief Executive Officer
Dated: 8/11/95 By: s/Paul T. Xenis
-------------------------------------
Paul T. Xenis
Vice President, Finance
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Page 11
INDEX TO EXHIBITS
Exhibit No. Description Page
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27 Financial Data Schedule 12
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 1540000
<SECURITIES> 0
<RECEIVABLES> 25983000
<ALLOWANCES> 978000
<INVENTORY> 25720000
<CURRENT-ASSETS> 55457000
<PP&E> 42145000
<DEPRECIATION> 15076000
<TOTAL-ASSETS> 88593000
<CURRENT-LIABILITIES> 32400000
<BONDS> 0
<COMMON> 335000
0
0
<OTHER-SE> 36245000
<TOTAL-LIABILITY-AND-EQUITY> 88593000
<SALES> 44062000
<TOTAL-REVENUES> 44062000
<CGS> 33749000
<TOTAL-COSTS> 33749000
<OTHER-EXPENSES> 7896000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 327000
<INCOME-PRETAX> 2090000
<INCOME-TAX> 731000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1359000
<EPS-PRIMARY> .28
<EPS-DILUTED> 0
</TABLE>
