1 of 11 pages
Index to Exhibits is on Page 10
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 December 31, 1995 Commission File #0-12567
_______________________________________________________________________
_______________________________________________________________________
GUEST SUPPLY, INC.
(Exact name of registrant as specified in its charter)
State of New Jersey 22-2320483
(State or other jurisdiction of (Identification number)
incorporation or organization)
720 U.S. Highway One 08902
North Brunswick, New Jersey (Zip Code)
(Address of principal executive offices)
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
December 31, 1995 was 6,146,335 shares.<PAGE>
Page 2
Part 1
GUEST SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1995 1995*
----------- ----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $225,000 $1,825,000
Accounts receivable 26,083,000 28,663,000
Inventories 31,234,000 28,269,000
Deferred income taxes 1,410,000 1,434,000
Prepaid expenses and other
current assets 1,365,000 916,000
_-------------------------------------------------------------------
Total current assets 60,317,000 61,107,000
Equipment and leasehold improvements 28,963,000 28,507,000
Other assets 95,000 97,000
Excess of cost over net
assets acquired 5,804,000 5,896,000
- --------------------------------------------------------------------
$95,179,000 $95,607,000
====================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $22,637,000 $31,226,000
Current maturities of long-term debt 3,894,000 2,406,000
- ---------------------------------------------------------------------
Total current liabilities 26,531,000 33,632,000
=====================================================================
Long-term debt 26,813,000 20,990,000
Deferred income taxes 1,784,000 1,876,000
- ---------------------------------------------------------------------
Total long-term liabilities 28,597,000 22,866,000
=====================================================================
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
6,146,335 shares at December 31, 1995 and
6,146,335 at September 30, 1995 542,000 542,000
Additional paid-in capital 34,922,000 34,922,000
Retained earnings 4,721,000 3,778,000
Cumulative foreign currency
translation adjustments (134,000) (133,000)
- ---------------------------------------------------------------------
Total shareholders' equity 40,051,000 39,109,000
- ---------------------------------------------------------------------
$95,179,000 $95,607,000
=====================================================================
* From audited financial statements.
The accompanying notes are an integral part of these consolidated
condensed financial statements.<PAGE>
Page 3
GUEST SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
December 31,
1995 1994
----------- -----------
Sales $41,714,000 $32,763,000
Cost of sales 32,219,000 24,923,000
- ----------------------------------------------------------------
Gross profit 9,495,000 7,840,000
Selling, general &
administrative expenses 7,525,000 6,423,000
- ----------------------------------------------------------------
Operating income 1,970,000 1,417,000
Interest expense, net 420,000 229,000
- ----------------------------------------------------------------
Income before income taxes 1,550,000 1,188,000
Income tax expense 607,000 386,000
- ----------------------------------------------------------------
Net income $943,000 $802,000
================================================================
Earnings per common share $0.13 $0.11
================================================================
Weighted average shares outstanding 7,480,000 7,134,000
================================================================
The accompanying notes are an integral part of these consolidated
condensed financial statements.<PAGE>
Page 4
GUEST SUPPLY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
December 31,
1995 1994
-------- --------
Cash flows from operating activities:
Net income $943,000 $802,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 794,000 678,000
Provision for losses on
accounts receivable 75,000 95,000
Deferred income tax expense (68,000) 248,000
Changes in assets and liabilities:
Decrease in accounts receivable 2,505,000 1,260,000
Increase in inventories (2,965,000) (1,155,000)
Increase in prepaid expenses and
other current assets (449,000) (178,000)
Decrease in other assets 2,000 2,000
Decrease in accounts payable and
accrued expenses (8,589,000) (29,000)
Foreign currency translation
adjustments (1,000) (24,000)
- ----------------------------------------------------------------------
Net cash provided by (used in)
operating activities (7,753,000) 1,699,000
- ----------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (1,158,000) (3,395,000)
- ---------------------------------------------------------------------
Net cash used in
investing activities (1,158,000) (3,395,000)
- ---------------------------------------------------------------------
Cash flows from financing activities:
Net (payments) borrowings on
revolving credit agreement (2,455,000) 2,390,000
Repayment of long-term debt (734,000) (294,000)
Proceeds from issuance of
long-term debt 10,500,000
Proceeds from issuance of common stock 1,000
- ---------------------------------------------------------------------
Net cash provided by financing
activities 7,311,000 2,097,000
- ---------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents (1,600,000) 401,000
Cash and cash equivalents at
beginning of period 1,825,000 1,782,000
- ---------------------------------------------------------------------
Cash and cash equivalents at end
of period $225,000 $2,183,000
=====================================================================
The accompanying notes are an integral part of these consolidated
condensed financial statements.<PAGE>
Page 5
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, 1995 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.
On September 18, 1995, the Board of Directors of the Company declared a
three-for-two stock split to be paid in the form of a 50% stock dividend.
The additional 2,048,739 shares of common stock were issued on October 24,
1995 to the shareholders of record on October 3, 1995. Distribution of
fractional shares was paid in cash based on the closing price on the record
date. The par value of the new shares issued totaled $205,000 which was
transferred from additional paid-in-capital to common stock.
Note 3: Revolving Credit Facility
On October 31, 1995, the Company entered into a credit facility with two
banks for a seven-year $10,500,000 term loan and a two-year $22,000,000
revolving credit facility. The term loan is payable in equal monthly
installments of $125,000 which will commence in December, 1995 and bears
interest at a rate equal to 7.0% per annum. The revolving credit loans
under the credit facility bear interest at a rate equal to LIBOR plus 1.0%
the bank's prime rate or a fixed rate, as selected by the Company. The
proceeds under this credit facility were used to repay the outstanding
balance under the existing revolving credit facility and for future working
capital needs. At the time of this agreement, the Company had existing
term loans totaling $7,500,000 which remained outstanding. These loans,
which are payable in equal monthly installments, mature in February, 1999.
All of the Company's loans with the banks are secured by substantially all
of its assets and are subject to certain financial covenants.
<PAGE>
Page 6
GUEST SUPPLY, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three months ended December 31, 1995 vs. Three months ended December 31, 1994
- -----------------------------------------------------------------------------
Sales for the three months ended December 31, 1995 increased by $8,951,000
or 27.3% to $41,714,000 from $32,763,000 for the three months ended
December 31, 1994. Revenues generated from our hotel customers increased
$6,327,000 or 22.7% to $34,196,000. 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 $7,518,000 for the
three months ended December 31, 1995 compared to $4,894,000 for the three
months ended December 31, 1994. The increase of $2,624,000 or 53.6% was
due to increased sales to existing customers.
Gross profit for the three months ended December 31, 1995 was $9,495,000 or
22.8% of sales compared to $7,840,000 or 23.9% of sales for the three
months ended December 31, 1994.
The decrease in gross profit as a percentage of sales was due primarily to
inefficiencies experienced at the Company's manufacturing facility which
were a result of delays in completing the Company's plant expansion
project and subsequent material flow problems. Although the plant
expansion is now essentially complete, the improvements that are being made
in the material storage and planning systems will not be fully implemented
until the latter part of the second quarter of fiscal 1996. 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. In 1995, the cost of pulp,
cotton, tallow and plastic resins increased. This resulted in the Company
experiencing cost increases in cartons, bottles, textiles, paper and soap
base. While most of these cost increases were passed through to the
Company's customers, these cost increases had a slight impact on the
financial results of the Company.
Interest expense was $420,000 for the three months ended December 31, 1995
compared to $229,000 for the three months ended December 31, 1994. The
increase in interest of $191,000 or 83.4% can be attributed to an increase
in borrowings for the funding of the Company's capital expansion program.
Selling, general and administrative expenses were $7,525,000 or 18.0% of
sales for the three months ended December 31, 1995 compared to $6,423,000
or 19.6% of sales for the three months ended December 31, 1994. The
increase of $1,102,000 or 17.2% 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 39.2% for the three months ended
December 31, 1995 compared with 32.5% for the three months ended December
31, 1994. This increase is the result of a reduction in the utilization of
net operating loss carryforwards available for the three months ended
December 31, 1995.<PAGE>
Page 7
GUEST SUPPLY, INC. AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources at December 31, 1995
- -----------------------------------------------------------------------
At December 31, 1995, the Company had $33,786,000 of working capital
compared to $27,475,000 at September 30, 1995. This increase is primarily
the result of an increase in long-term borrowings which was necessary to
reduce trade payables to agreed upon payment terms.
On October 31, 1995, the Company entered into a credit facility with two
banks for a seven-year $10,500,000 term loan and a two-year $22,000,000
revolving credit facility. The term loan is payable in equal monthly
installments of $125,000 which commenced in December, 1995 and bears
interest at a rate equal to 7.0% per annum. The revolving credit loans
under the credit facility bear interest at a rate equal to LIBOR plus 1.0%
the bank's prime rate or a fixed rate, as selected by the Company. The
proceeds under this credit facility were used to repay the outstanding
balance under the existing revolving credit facility and for future working
capital needs. At the time of this agreement, the Company had existing
term loans totaling $7,500,000 which remained outstanding. The loans,
which are payable in equal monthly installments, mature in February, 1999.
All of the Company's loans with the banks are secured by substantially all
of its assets and are subject to certain financial covenants.
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.
During 1995, the cost of pulp, cotton, tallow and plastic resins increased.
This resulted in the Company experiencing cost increases in cartons,
bottles, textiles, paper and soap base. While most of these cost increases
were passed through to the Company's customers, these cost increases had a
slight impact on the financial results of the Company.<PAGE>
Page 8
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 three month period
ended December 31, 1995.<PAGE>
Page 9
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: 2/12/96 By: s/Clifford W. Stanley
--------- --------------------------------
Clifford W. Stanley
President & Chief Executive Officer
Dated: 2/12/96 By: s/Paul T. Xenis
--------- ----------------------------------
Paul T. Xenis
Vice President, Finance <PAGE>
Page 10
INDEX TO EXHIBITS
Exhibit No. Description Page
- -------------- -------------------------------------- --------
27 Financial Data Schedule 11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 225000
<SECURITIES> 0
<RECEIVABLES> 26083000
<ALLOWANCES> 699000
<INVENTORY> 31234000
<CURRENT-ASSETS> 60317000
<PP&E> 45352000
<DEPRECIATION> 16389000
<TOTAL-ASSETS> 95179000
<CURRENT-LIABILITIES> 26531000
<BONDS> 0
0
0
<COMMON> 542000
<OTHER-SE> 39509000
<TOTAL-LIABILITY-AND-EQUITY> 95179000
<SALES> 41714000
<TOTAL-REVENUES> 41714000
<CGS> 32219000
<TOTAL-COSTS> 32219000
<OTHER-EXPENSES> 75250000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 420000
<INCOME-PRETAX> 1550000
<INCOME-TAX> 607000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 743000
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
