<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________________ to ___________________
Commission file number 1-11955
================================================================================
GUEST SUPPLY, INC.
(Exact name of registrant as specified in its charter)
State of New Jersey 22-2320483
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (Identification number)
or organization)
4301 U.S. Highway One, Monmouth Junction, New Jersey 08852-0902
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
609-514-9696
- --------------------------------------------------------------------------------
(Registrants telephone number and area code)
- --------------------------------------------------------------------------------
(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 required
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. [X] Yes [_] No
The number of shares of common stock, without par value, outstanding as of March
31, 2000 was 6,580,251 shares.
<PAGE>
Page 2
Part 1
Guest Supply Inc. Guest Supply, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
- --------------------------------------------------------------------------------
Dollars in Thousands
except stated value
March 31, 2000 October 1, 1999
---------------- ---------------
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 2,484 $ 2,200
Accounts receivable, net 47,357 43,471
Inventories:
Raw materials 6,538 7,126
Finished goods 45,105 46,811
Deferred income taxes 1,731 1,626
Prepaid expenses and other current assets 3,827 2,228
- -------------------------------------------------------------------------------
Total current assets 107,042 103,462
Property and equipment, net 33,744 33,593
Other assets 3,790 2,387
Excess of cost over net assets acquired, net 21,187 21,815
- -------------------------------------------------------------------------------
$ 165,763 $ 161,257
===============================================================================
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued expenses $ 45,690 $ 50,111
Current maturities of long-term debt 1,299 1,111
- -------------------------------------------------------------------------------
Total current liabilities 46,989 51,222
===============================================================================
Long-term debt 46,972 39,789
Note payable to related party 5,000 5,000
Deferred income taxes 5,839 5,779
- -------------------------------------------------------------------------------
Total long-term liabilities 57,811 50,568
===============================================================================
Commitments and contingencies
Shareholders' equity:
Preferred stock - without par value; authorized
1,000,000 shares, outstanding none
Common stock - without par value; stated value
$0.10; authorized 20,000,000 shares, issued
6,671,638 shares 594 594
Additional paid-in capital 40,425 39,247
Retained earnings 21,175 20,559
Treasury stock - 91,387 shares at March 31, 2000
and 95,178 shares at October 1, 1999, at cost (1,315) (1,091)
Accumulated other comprehensive income 84 158
- -------------------------------------------------------------------------------
Total shareholders' equity 60,963 59,467
- -------------------------------------------------------------------------------
$ 165,763 $ 161,257
===============================================================================
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
Page 3
Guest Supply, Inc. and Subsidiaries
Consolidated Condensed Statements of Income
and Comprehensive Income
================================================================================
Dollars in Thousands
except per share amounts
(Unaudited)
<TABLE>
<CAPTION>
26 Weeks 27 Weeks 13 Weeks 13 Weeks
Ended Ended Ended Ended
Mar. 31, 2000 April 2, 1999 Mar. 31, 2000 April 2, 1999
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $162,778 $ 127,543 $ 82,687 $ 64,625
Cost of sales 127,534 101,717 64,916 51,304
- ---------------------------------------------------------------------------------------------------------------
Gross profit 35,244 25,826 17,771 13,321
Selling, general and administrative
expenses 27,955 22,032 14,428 11,336
- ---------------------------------------------------------------------------------------------------------------
Operating income 7,289 3,794 3,343 1,985
Interest and other income 16 13 9 7
Interest expense 1,841 1,051 967 549
- ---------------------------------------------------------------------------------------------------------------
Income before income taxes 5,464 2,756 2,385 1,443
Income tax expense 2,162 1,175 905 626
- ---------------------------------------------------------------------------------------------------------------
Net income $ 3,302 $ 1,581 $ 1,480 $ 817
===============================================================================================================
Earnings per common share:
Basic $ 0.51 $ 0.25 $ 0.23 $ 0.13
===============================================================================================================
Diluted $ 0.46 $ 0.23 $ 0.21 $ 0.12
===============================================================================================================
Comprehensive income:
Net income $ 3,302 $ 1,581 $ 1,480 $ 817
Other comprehensive income - foreign
currency translation adjustment (74) 170 (56) 67
- ---------------------------------------------------------------------------------------------------------------
Comprehensive income $ 3,228 $ 1,751 $ 1,424 $ 884
===============================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
Page 4
Guest Supply, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
================================================================================
Dollars in Thousands
(Unaudited)
<TABLE>
<CAPTION>
26 Weeks 27 Weeks
Ended Ended
March 31, 2000 April 2, 1999
------------------------- ------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,302 $ 1,581
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,933 2,366
Provision for losses on accounts receivable 334 281
Deferred income taxes (45) 81
Changes in assets and liabilities:
Increase in accounts receivable (4,220) (1,909)
Decrease (increase) in inventories 2,294 (286)
(Increase) decrease in prepaid expenses
and other current assets (130) 655
Decrease (increase) in other assets 32 (1,098)
Decrease in accounts payable and accrued expenses (4,421) (601)
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 79 1,070
- -----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (2,456) (1,769)
(Increase) decrease in other assets (1,726) 68
- -----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (4,182) (1,701)
- -----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from revolving credit agreement 45,582 34,574
Repayment on revolving credit agreement (37,656) (31,700)
Repayment of long-term debt (555) -
Proceeds from the exercise of stock options and warrants 916 454
Purchase of treasury stock (3,826) (2,582)
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 4,461 746
Foreign currency translation adjustments (74) 170
- -----------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 284 285
Cash and cash equivalents at beginning of period 2,200 2,558
- -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 2,484 $ 2,843
=================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
Page 5
Guest Supply Inc.
Notes to the Consolidated Condensed Financial Statements
================================================================================
Dollars in Thousands
except per share amounts
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 October 1, 1999 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. Certain 1999 amounts have been
reclassified to conform to the 2000 presentation.
Note 2: Earnings Per Common Share
Earnings per share is calculated as follows:
<TABLE>
<CAPTION>
26 Weeks 27 Weeks 13 Weeks 13 Weeks
Ended Ended Ended Ended
Mar. 31, 2000 April 2, 1999 Mar. 31, 2000 April 2, 1999
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic EPS:
Net income $ 3,302 $ 1,581 $ 1,480 $ 817
=====================================================================================================================
Weighted average common shares
outstanding 6,482,000 6,380,000 6,546,000 6,378,000
=====================================================================================================================
Basic EPS $ 0.51 $ 0.25 $ 0.23 $ 0.13
=====================================================================================================================
Diluted EPS:
Net income $ 3,302 $ 1,581 $ 1,480 $ 817
Effects of convertible promissory
note 79 - 40 -
- ---------------------------------------------------------------------------------------------------------------------
Adjusted net income $ 3,381 $ 1,581 $ 1,520 $ 817
=====================================================================================================================
Weighted average common shares
outstanding 6,482,000 6,380,000 6,546,000 6,378,000
Effects of dulutive stock options
and warrants 457,000 427,000 427,000 410,000
Effects of convertible promissory
note 377,000 - 377,000 -
- ---------------------------------------------------------------------------------------------------------------------
Weighted average common shares
outstanding assuming dilution 7,316,000 6,807,000 7,350,000 6,788,000
=====================================================================================================================
Diluted EPS $ 0.46 $ 0.23 $ 0.21 $ 0.12
=====================================================================================================================
</TABLE>
<PAGE>
Page 6
Guest Supply Inc.
Notes to the Consolidated Condensed Financial Statements
================================================================================
Dollars in Thousands
continued
Note 3: Business Segments
The Company has two reportable segments (Lodging Supply and Manufacturing).
The Lodging Supply segment includes sales to hotel customers of cleaning
chemicals, room accessories, paper products, personal care amenities, linens,
appliances, fixtures, and miscellaneous housekeeping supplies. The Manufacturing
segment includes sales to retailers, consumer products companies and
intercompany sales of personal care amenities. The reportable segments are
strategic businesses that offer different products and services and accordingly
are managed separately. The accounting policies of the segments are the same of
those described in the summary of significant accounting policies in the annual
report. Intersegment sales are accounted for at prices that approximate arms
length transactions, and have generally been at or below cost. Sales by
geographic area are determined based on the location of the Company's
operations. The Company evaluates performance based on operating income (loss)
of the respective business segment.
Summarized segment information is as follows:
<TABLE>
<CAPTION>
Lodging Supply Manufacturing Total Segments
==============================================================================================================
<S> <C> <C> <C>
26 Weeks Ended March 31, 2000
Sales to external customers $ 151,042 $ 11,736 $ 162,778
Intersegment sales - 5,643 5,643
- --------------------------------------------------------------------------------------------------------------
Total sales 151,042 17,379 168,421
Operating income (loss) 7,916 (627) 7,289
27 Weeks Ended April 2, 1999
Sales to external customers $ 114,310 $ 13,233 $ 127,543
Intersegment sales - 5,603 5,603
- --------------------------------------------------------------------------------------------------------------
Total sales 114,310 18,836 133,146
Operating income (loss) 5,276 (1,482) 3,794
13 Weeks Ended March 31, 2000
Sales to external customers $ 77,528 $ 5,159 $ 82,687
Intersegment sales - 2,671 2,671
- --------------------------------------------------------------------------------------------------------------
Total sales 77,528 7,830 85,358
Operating income (loss) 4,125 (782) 3,343
13 Weeks Ended April 2, 1999
Sales to external customers $ 59,352 $ 5,273 $ 64,625
Intersegment sales - 2,939 2,939
- --------------------------------------------------------------------------------------------------------------
Total sales 59,352 8,212 67,564
Operating income (loss) 2,786 (801) 1,985
</TABLE>
<PAGE>
Page 7
Notes to the Consolidated Condensed Financial Statements
- --------------------------------------------------------------------------------
Dollars in Thousands
continued
Note 4: Acquisition
On April 23, 1999, the Company acquired all of the outstanding shares of
Kapadia Enterprises, Inc., d/b/a Nasco Supply Company and MacDonald Contract
Sales, Inc. (Collectively "Nasco"), a distributor of textile products to the
lodging industry for approximately $24,493 including transaction costs of $738.
Total consideration paid included cash of $17,755, a convertible promissory note
of $5,000, issuance of 45,198 shares of common stock valued at $500 and other
liabilities assumed of $500. The acquisition was funded principally through
borrowings under the Company"s revolving credit agreement. The acquisition has
been accounted for as a purchase and the results of Nasco"s operations have been
included in the consolidated financial statements since the date of acquisition.
Note 5: Long-Term Debt
At March 31, 2000 and October 1, 1999, the Company's long-term debt consisted
of the following:
- -----------------------------------------------------------------------------
March 31, 2000 October 1, 1999
- -----------------------------------------------------------------------------
Revolving credit agreement $ 23,826 $ 15,900
Senior notes 24,445 25,000
- -----------------------------------------------------------------------------
$ 48,271 $ 40,900
=============================================================================
Note 6: Other
On January 14, 2000, concurrent with the execution of a service agreement to
provide e-procurement services, the Company purchased 93,633 shares of common
stock in GoCo-op, Inc., and was issued a warrant to purchase $500 of common
stock, subject to certain conditions, at a price to be determined by the per
share offering price of GoCo-op's common stock which may be sold, in an initial
public offering, for $1,250 in cash. Under the terms of the agreement, GoCo-op
will provide the Company with an Internet based procurement system, which will
be trademarked and operated as guestsupply.com.
<PAGE>
Page 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Dollars in Thousands
Twenty-six weeks ended March 31, 2000 vs. Twenty-seven Weeks ended April 2, 1999
- --------------------------------------------------------------------------------
Sales for the twenty-six weeks ended March 31, 2000 increased by 27.6% or
$35,235 to $162,778 from $127,543 for the twenty-seven weeks ended April 2,
1999. Revenues from lodging supply segment customers increased $36,732 or 32.1%
to $151,042. Excluding the impact of the Nasco acquisition, and the extra week
during last year, sales rose 13.5% over the prior year. The increase in sales in
lodging supply is due primarily to the addition of new customers, the sale of
additional products to existing customers and the continued expansion of the
Company's product line. New customers were added by the direct sales force in
existing territories and by new salespeople and territories that were
established.
Lodging customers were also added through new or expanded agreements with
hotel management companies and hotel corporations.
Sales of additional products to existing lodging customers were achieved by
the direct sales force at individual properties and by national account managers
at hotel corporations. This increased penetration at existing accounts can be
attributed to sales management, sales training, territory realignment and the
use of the Company's catalog.
Sales to manufacturing segment customers were $11,736 for the twenty-six weeks
ended March 31, 2000 compared to $13,233 for the twenty-seven weeks ended April
2, 1999. The decrease of $1,497 or 11.3% was primarily due to a non-recurring
sales program for a contract customer.
Gross profit for the twenty-six weeks ended March 31, 2000 was $35,244 or
21.7% of sales compared to $25,826 or 20.2% for the twenty-seven weeks ended
April 2, 1999. The increase in gross profit as a percentage of sales was
primarily due to efficiency improvements in the manufacturing segment and a
favorable sales mix in the lodging segment. This increase was partially offset
by a decrease in gross profit percent in lodging textile sales, arising
primarily from the Nasco acquisition, which have a lower margin than other
product categories sold to hotels.
Selling, general and administrative expenses were $27,955 or 17.2% of sales
for the twenty-six weeks ended March 31, 2000 compared to $22,032 or 17.3% for
the twenty-seven weeks ended April 2, 1999. The increase of $5,923 was due
primarily to increased customer rebates, payroll, sales commissions, and
delivery expenses associated with the Company's lodging sales growth and
increased operating expenses and amortization of goodwill associated with the
Nasco acquisition.
Operating income increased $3,495 or 92.1% to $7,289 for the twenty-six weeks
ended March 31, 2000. Operating income in the lodging supply segment increased
50.0% to $7,916 in 2000 compared with $5,276 in 1999 due principally to higher
sales volume and reduced incremental selling, general and administrative costs.
The operating loss in manufacturing was reduced by $855 to a loss of $ 627 in
2000 from a loss of $1,482 in 1999 due principally to improved manufacturing
efficiencies.
Net interest expense was $1,825 for the twenty-six weeks ended March 31, 2000
compared to $1,038 for the twenty-seven weeks ended April 2, 1999. The increase
was the result of an increase in borrowings to finance the acquisition of Nasco.
The effective tax rate decreased to 39.6% in fiscal 2000 from 42.6% in fiscal
1999. In fiscal 1999 the Company had a higher tax rate due to an increase in its
valuation reserve related to deferred tax assets and an increase in state income
taxes.
Overall, net income for fiscal 2000 increased 108.9% to $3,302 or $.46 per
diluted share compared to $1,581 or $0.23 per diluted share in 1999.
<PAGE>
Page 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Dollars in Thousands
continued
Thirteen weeks ended March 31, 2000 vs. Thirteen Weeks ended April 2, 1999
- --------------------------------------------------------------------------
Sales for the thirteen weeks ended March 31, 2000 increased by 28.0% or
$18,062 to $82,687 from $64,625 for the thirteen weeks ended April 2, 1999.
Revenues from lodging supply segment customers increased $18,176 or 30.6% to
$77,528. Excluding the impact of the Nasco acquisition, sales rose 9.6% over the
prior year. The increase in sales in lodging supply is due primarily to the
addition of new customers, the sale of additional products to existing customers
and the continued expansion of the Company's product line. New customers were
added by the direct sales force in existing territories and by new salespeople
and territories that were established during fiscal 1999. The Company believes
the reduced rate of revenue growth in the second fiscal quarter was in part
caused by hotels over purchasing in the first quarter. The hotels brought in
additional supplies in anticipation of Y2K related delivery problems and
increased occupancies for millennium celebrations. When occupancy rates did not
increase in January, and in many instances declined, hotels curtailed supply
purchases while using their excess inventory.
Lodging customers were also added through new or expanded agreements with hotel
management companies and hotel corporations.
Sales of additional products to existing lodging customers were achieved by
the direct sales force at individual properties and by national account managers
at hotel corporations. This increased penetration at existing accounts can be
attributed to sales management, sales training, territory realignment and the
use of the Company's catalog.
Sales to manufacturing segment customers were $5,159 in fiscal 2000 compared
to $5,273 in fiscal 1999. The slight decrease of $114 or 2.2% was primarily due
to a non-recurring national sales program for a customer in the prior year.
Gross profit for the thirteen weeks ended March 31, 2000 was $17,771 or 21.5%
of sales compared to $13,321 or 20.6% for the thirteen weeks ended April 2,
1999. The increase in gross profit as a percentage of sales was primarily due to
efficiency improvements in the manufacturing segment. Gross profit percent in
lodging supply increased slightly as a result of a favorable sales mix offset by
the effects of the Nasco acquisition, which have a lower margin than other
product categories sold to hotels.
Selling, general and administrative expenses were $14,428 or 17.4% of sales
for the thirteen weeks ended March 31, 2000 compared to $11,336 or 17.5% for the
comparable prior year period. The increase of $3,092 was due primarily to
increased customer rebates, payroll, sales commissions, and delivery expenses
associated with the Company's lodging sales growth and increased operating
expenses and amortization of goodwill associated with the Nasco acquisition.
Operating income increased $1,358 or 68.4% to $3,343 for the thirteen weeks
ended March 31, 2000 from $1,985 last year. Operating income in the lodging
supply segment increased 48.1% to $4,125 in fiscal 2000 compared with $2,786 in
fiscal 1999 due principally to higher sales volume and reduced incremental
selling, general and administrative costs and a slightly improved gross margin.
The manufacturing segment generated operating losses of $782 for the thirteen
weeks ended March 31, 2000, a decrease of $19 from the $801 operating loss
generated during the thirteen weeks ended April 2, 1999 due principally to
improved manufacturing efficiencies.
Net interest expense was $958 for the thirteen weeks ended March 31, 2000
compared to $542 for the thirteen weeks ended April 2, 1999. The increase was
due to an increase in borrowings to finance the acquisition of Nasco.
The effective tax rate decreased to 37.9% in fiscal 2000 from 43.4% in fiscal
1999. In fiscal 1999, the Company had a higher tax rate due to an increase in
its valuation reserve related to deferred tax assets and an increase in state
taxes.
Overall, net income for fiscal 2000 increased 81.2% to $1,480 or $.21 per
diluted share compared to $817 or $0.12 per diluted share in fiscal 1999.
<PAGE>
Page 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Dollars in Thousands
continued
Liquidity and Capital Resources
- -------------------------------
The Company had $60,053 of working capital at March 31, 2000 compared to
$52,240 at October 1, 1999. The increase of $7,813 is primarily due to an
increase in accounts receivable and a reduction in accounts payable and accrued
expenses and was funded from operations.
Net cash flows from operating activities decreased to $79 for the twenty-six
weeks ended March 31, 2000, compared with net cash provided by operating
activities of $1,070 for the twenty-seven weeks ended April 2, 1999. The
decrease was primarily due to an increase in accounts receivable and a reduction
in accounts payable and accrued expenses which was partially offset by higher
net earnings, depreciation and amortization during the twenty-six weeks ended
March 31, 2000.
Net cash flows used in investing activities, for the twenty-six weeks ended
March 31, 2000 totaled $4,182, compared with $1,701 for the twenty-seven weeks
ended April 2, 1999. Capital expenditures for the twenty-six weeks ended March
31, 2000 were $2,456 versus $1,769 in 1999. For the twenty-six weeks ended March
31, 2000, capital expenditures for the lodging supply and manufacturing segments
amounted to $1,009 and $1,447, respectively. Capital expenditures in fiscal 2000
of approximately $4,500 are expected. Other investing activities during the
twenty-six weeks ended March 31, 2000 included $1,250 incurred in connection
with the Company's investment in GoCo-op, Inc.
Net cash flows provided by financing activities totaled $4,461 compared with
$746 in 1999. Borrowings during the twenty-six weeks ended March 31, 2000
increased primarily due to capital expenditures and other long-term investments
of $4,182 and the purchase of $3,826 of treasury stock under the Company's stock
repurchase program.
The Company believes that the amount available under the revolving credit
agreement 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.
Recently Issued Accounting Standards
- ------------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for hedging
activities and derivative instruments, including certain derivative instruments
embedded in other contracts. SFAS 133, as amended, is effective for the Company
commencing in the first quarter of fiscal 2001. The Company is reviewing the
potential impact, if any, of SFAS 133 on its consolidated results of operations
and financial position.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements",
("SAB 101"). SAB 101 summarizes certain views of the staff in applying generally
accepted accounting principles to revenue recognition in financial statements
and the presentation of certain items in the income statement. SAB 101 is
effective for the Company commencing in the first quarter of fiscal 2001. The
Company is reviewing the potential impact, if any, of SAB 101 on its
consolidated results of operations and financial position.
Other
- -----
At March 31, 2000, the financial liabilities of the Company exposed to changes
in interest rates consist mainly of $23,826 in variable rate borrowings
outstanding under the revolver. The Company has entered into an interest rate
collar agreement with a notional amount of $11,000. Under the terms of the
agreement, the Company would be reimbursed the interest difference in the event
that
<PAGE>
Page 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Dollars in Thousands
continued
the three-month LIBOR rate exceeds 9.7% or would pay the interest difference if
the three-month LIBOR rate falls below 4.75%.
Assuming that a hypothetical increase of 1% in interest rates and debt levels
were to remain constant, interest expense would increase $238 per year. Included
in long-term debt is also $24,445 of fixed rate debt, which is not subject to
interest rate risk.
Cautionary Statement
- --------------------
This quarterly report on Form 10-Q may contain forward-looking information
about the Company. The Company is hereby setting forth statements identifying
important factors that may cause the Company's actual results to differ
materially from those set forth in any forward-looking statements made by the
Company. Some of the most significant factors include an unanticipated downturn
in the lodging industry resulting in lower demand for the Company's products,
the unanticipated loss or decline in sales to a major customer, failure to
secure new business, unforeseen inefficiencies at the Company's manufacturing
facility and difficulties in implementing its e-commerce initiative.
Accordingly, there can be no assurances that any anticipated future results
would be achieved.
<PAGE>
Page 12
GUEST SUPPLY, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 6: Exhibits and Reports on Form 8-K
- -----------------------------------------
a) Exhibits
No. 27 Financial Data Schedule
b) Reports on Form 8-K
None
<PAGE>
Page 13
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: May 15, 2000 By:/s/Clifford W. Stanley
--------------------- -----------------------------------
Clifford W. Stanley
President & Chief Executive Officer
Dated: May 15, 2000 By:/s/Paul T. Xenis
--------------------- -----------------------------------
Paul T. Xenis
Vice President, Finance
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 2,484
<SECURITIES> 0
<RECEIVABLES> 47,357
<ALLOWANCES> 0
<INVENTORY> 51,643
<CURRENT-ASSETS> 107,042
<PP&E> 60,236
<DEPRECIATION> (26,492)
<TOTAL-ASSETS> 165,763
<CURRENT-LIABILITIES> 46,989
<BONDS> 0
0
0
<COMMON> 594
<OTHER-SE> 60,369
<TOTAL-LIABILITY-AND-EQUITY> 165,763
<SALES> 162,778
<TOTAL-REVENUES> 162,778
<CGS> 127,534
<TOTAL-COSTS> 127,534
<OTHER-EXPENSES> 27,955
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,825
<INCOME-PRETAX> 5,464
<INCOME-TAX> 2,162
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,302
<EPS-BASIC> .51
<EPS-DILUTED> .46
</TABLE>
