UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] 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 1-4438
O'SULLIVAN CORPORATION
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-0463029
--------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1944 Valley Avenue, P.O.Box 3510, Winchester, Virginia 22601
--------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(703) 667-6666
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(Registrant's telephone number, including area code)
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.
Yes [X] No [ ]
At June 30, 1994 there were 16,484,871 shares of the registrant's
common stock outstanding.
PART I. FINANCIAL INFORMATION
O'SULLIVAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1994 1993
ASSETS ------------ ------------
Current Assets
Cash and cash equivalents $ 2,708,851 $ 3,099,636
Receivables 66,817,310 53,389,817
Inventories 39,972,596 42,514,692
Deferred income tax assets 2,076,524 2,076,524
Other current assets 1,940,388 1,879,516
------------ ------------
Total current assets $113,515,669 $102,960,185
------------ ------------
Property, Plant and Equipment $ 93,574,067 $ 93,847,484
------------ ------------
Intangibles $ 1,045,609 $ 1,017,266
------------ ------------
Other Assets $ 7,489,172 $ 7,050,771
------------ ------------
Total assets $215,624,517 $204,875,706
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 9,456,373 $ 8,483,977
Current portion of long-term debt 68,515 3,584,142
Accounts payable 21,993,226 24,011,203
Accrued expenses 15,726,959 11,528,330
------------ ------------
Total current liabilities $ 47,245,073 $ 47,607,652
------------ ------------
Long-Term Debt $ 45,605,201 $ 39,565,448
------------ ------------
Other Long-Term Liabilities $ 1,739,992 $ 1,691,753
------------ ------------
Deferred Income Taxes $ 7,252,233 $ 7,257,490
------------ ------------
Commitments and Contingencies $ - - $ - -
------------ ------------
Shareholders' Equity
Common stock, par value $1.00 per share;
authorized 30,000,000 shares $ 16,484,871 $ 16,484,948
Additional paid-in capital 9,963,876 9,964,574
Retained earnings 87,727,321 82,524,869
Cumulative translation adjustments (274,754) (101,732)
Unrecognized pension costs, net of
deferred tax effect (119,296) (119,296)
------------ ------------
Total shareholders' equity $113,782,018 $108,753,363
------------ ------------
Total liabilities and
shareholders' equity $215,624,517 $204,875,706
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
O'SULLIVAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For The Three Months Ended June 30,
-----------------------------------
1994 1993
------------ ------------
Net sales $101,453,713 $ 80,243,845
Cost of products sold 86,206,864 66,826,580
------------ ------------
Gross profit $ 15,246,849 $ 13,417,265
------------ ------------
Operating expenses
Selling and warehousing $ 4,124,927 $ 3,820,023
General and administrative 2,304,102 2,295,381
------------ ------------
$ 6,429,029 $ 6,115,404
------------ ------------
Income from operations $ 8,817,820 $ 7,301,861
------------ ------------
Other income (expense)
Interest expense $ (874,998) $ (603,948)
Other, net 85,348 73,152
------------ ------------
$ (789,650) $ (530,796)
------------ ------------
Income before income taxes $ 8,028,170 $ 6,771,065
Income taxes 3,128,952 2,489,034
------------ ------------
Net income $ 4,899,218 $ 4,282,031
============ ============
Net income per common share $ 0.30 $ 0.26
============ ============
Dividends per common share $ 0.07 $ 0.07
============ ============
Average common shares outstanding 16,484,888 16,485,131
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
O'SULLIVAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For The Six Months Ended June 30,
-----------------------------------
1994 1993
------------ ------------
Net sales $187,262,757 $151,091,844
Cost of products sold 160,795,310 127,969,685
------------ ------------
Gross profit $ 26,467,447 $ 23,122,159
------------ ------------
Operating expenses
Selling and warehousing $ 7,828,481 $ 7,478,379
General and administrative 4,834,025 4,463,666
------------ ------------
$ 12,662,506 $ 11,942,045
------------ ------------
Income from operations $ 13,804,941 $ 11,180,114
------------ ------------
Other income (expense)
Interest expense $ (1,619,209) $ (1,036,041)
Other, net 192,467 187,976
------------ ------------
$ (1,426,742) $ (848,065)
------------ ------------
Income before income taxes $ 12,378,199 $ 10,332,049
Income taxes 4,867,916 3,759,732
------------ ------------
Net income $ 7,510,283 $ 6,572,317
============ ============
Net income per common share $ 0.46 $ 0.40
============ ============
Dividends per common share $ 0.14 $ 0.14
============ ============
Average common shares outstanding 16,484,904 16,485,165
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
O'SULLIVAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30,
---------------------------------
1994 1993
Cash Flows From Operating Activities ------------ ------------
Net income $ 7,510,283 $ 6,572,317
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,050,703 5,614,758
Provision for doubtful accounts 335,973 131,430
Deferred income taxes - - (231,838)
Interest accrual on zero coupon notes 67,874 37,710
Change in operating assets and liabilities,
net of effect of acquisition of business:
Receivables (13,887,351) (16,588,897)
Inventories 2,442,701 (317,570)
Other current assets (529,525) 155,311
Accounts payable (1,949,899) 3,437,704
Accrued expenses 4,232,224 1,646,610
------------ ------------
Net cash provided by operating activities $ 4,272,983 $ 457,535
------------ ------------
Cash Flows From Investing Activities
Purchase of property, plant and equipment $ (5,770,130) $ (8,463,342)
Acquisition of intangible assets (203,354) (232,304)
Funds received upon redemption of
insurance contracts 236,135 - -
Additions to deferred engineering costs (655,437) - -
Acquisition of business, less cash and
cash equivalents acquired - - (1,153,643)
Payments received from non-operating
notes receivable 161,956 364,323
Other, net 423,183 (45,373)
------------ ------------
Net cash (used in) investing activities $ (5,807,647) $ (9,530,339)
------------ ------------
Cash Flows From Financing Activities
Changes in short-term debt $ 972,396 $ 4,523,295
Net change in line of credit borrowings 6,000,000 (18,000,000)
Proceeds from long-term debt - - 25,000,000
Repayment of long-term debt (3,519,907) (1,893,455)
Purchase of common stock (775) (1,814)
Cash dividends paid (2,307,835) (2,308,722)
------------ ------------
Net cash provided by financing activities $ 1,143,879 $ 7,319,304
------------ ------------
Decrease in cash and cash equivalents $ (390,785) $ (1,753,500)
Cash and cash equivalents at
beginning of period 3,099,636 3,545,943
------------ ------------
Cash and cash equivalents at
end of period $ 2,708,851 $ 1,792,443
============ ============
The accompanying notes are in integral part of the consolidated financial
statements.
O'SULLIVAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A. Basis of Financial Statement Preparation
The accompanying unaudited consolidated financial statements
include the accounts of O'Sullivan Corporation and its wholly-
owned subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation.
In the opinion of management of the Corporation, the unaudited
consolidated financial statements contain all material
adjustments necessary to fairly present the Corporation's
financial position as of June 30, 1994 and December 31, 1993 and
the results of its operations and cash flows for the three and
six months ended June 30, 1994 and 1993. Such adjustments
consist only of normal recurring items.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have not been included with these
statements. These statements should be read in conjunction with
the financial statements, notes and other disclosures thereto
included in the Corporation's 1993 Annual Report to Stockholders
and Form 10-K.
The results of operations for the three and six months ended June
30, 1994 are not necessarily indicative of the operating results
for the full year.
Note B. Receivables
Receivables at June 30, 1994 and December 31, 1993 include
accumulated work in process and amounts due from automotive
customers and suppliers for funds advanced by O'Sullivan
Corporation and its subsidiaries to support mold and tooling
activities. These amounts were $6,674,093 at June 30, 1994 and
$8,688,543 at December 31, 1993.
Receivables are presented net of an allowance for doubtful
accounts of $1,350,353 at June 30, 1994 and $1,133,793 at
December 31, 1993.
Note C. Inventories
At June 30, 1994 and December 31, 1993 inventories were composed
of the following:
June 30, December 31,
1994 1993
------------ ------------
Finished goods $ 11,990,120 $ 12,878,160
Work in process 6,210,233 6,398,783
Raw materials 17,442,942 19,068,449
Supplies 4,329,301 4,169,300
------------ ------------
$ 39,972,596 $ 42,514,692
============ ============
Slow-moving inventories at June 30, 1994 and December 31, 1993
amounted to $493,822 and $640,539, respectively, less a reserve
at June 30, 1994 and December 31, 1993 of $306,320. Slow-moving
inventories is an estimate of inventory held in excess of one
year's requirements, based on historical sales volumes.
Note D. Property, Plant and Equipment
At June 30, 1994 and December 31, 1993 property, plant and
equipment were composed of the following:
June 30, December 31,
1994 1993
------------ ------------
Land $ 2,071,164 $ 2,053,067
Buildings 49,301,722 49,134,149
Machinery and equipment 107,691,832 102,382,300
Transportation equipment 3,533,556 3,510,243
------------ ------------
$162,598,274 $157,079,759
Less accumulated
depreciation 69,024,207 63,232,275
------------ ------------
$ 93,574,067 $ 93,847,484
============ ============
Note E. Accrued Expenses
At June 30, 1994 and December 31, 1993 accrued expenses were
comprised of the following:
June 30, December 31,
1994 1993
------------ ------------
Accrued compensation $ 4,461,974 $ 3,748,107
Employee benefits 3,639,629 3,330,086
Dividends payable 1,152,193 1,153,497
Other accrued expenses 6,473,163 3,296,640
------------ ------------
$ 15,726,959 $ 11,528,330
============ ============
Note F. Debt
Short-Term Debt
Short-term debt at June 30, 1994 consisted of a revolving credit
facility ("revolving loan") with a financial institution in the
amount not to exceed $15,000,000 which expires March 3, 1996 and
shall be automatically renewed for one year periods thereafter,
unless terminated by either party as provided for in the loan
agreement. The maximum principal amount at any time outstanding
of the revolving loan is equal to the "Borrowing Base" at such
time. At any date of determination thereof, the borrowing base
is an amount equal to the lesser of: (i) the revolving credit
facility amount; or (ii) the sum of: (a) 80% of the net amount of
eligible accounts receivable outstanding at such time; plus (b)
the lesser of (A) $5,500,000 during the period commencing on
November 1 in each year and ending on March 31 in the following
year, and $4,500,000 at all other times in each year or (B) the
sum of (x) the lesser of (1) 45% of the value of eligible
inventory at such date consisting of raw materials or (2) the
maximum inventory of raw materials, plus (y) the lesser of (1)
$100,000 or (2) 45% of the value of eligible inventory at such
date consisting of work-in-process inventory, plus (z) the lesser
of (1) 55% of the value of borrower's eligible inventory at such
date consisting of finished goods or (2) the maximum inventory
borrowing base value of such eligible inventory of finished
goods; minus (c) with respect to any letter of credit obligations
outstanding at such date, the sum of (A) the product of (1) the
face amount of any documentary letter of credit obligation, times
(2) 100% less the applicable percentage advance rate for the
eligible inventory whose purchase is being supported by the
documentary letter of credit obligation, plus (B) 100% of the
face amount of all other letter of credit obligations outstanding
at such date; minus (d) any amounts which lender may pay pursuant
to any of the loan documents for the account of borrower.
Interest is payable monthly at a fluctuating rate equal to prime
plus 1.25%, but at no time shall the rate be less than 6%. The
rate of June 30, 1994 was 8.5%. In addition, underutilization
and letter of credit fees are payable monthly. Total loan
availability at June 30, 1994 was $12,821,084. At June 30, 1994
$9,456,373 was borrowed on this note.
Melnor Inc. and its subsidiary have established lock box accounts
to which all account debtors shall directly remit all payments on
accounts and in which Melnor Inc. and its subsidiary will
immediately deposit all cash payments made for inventory or other
cash payments constituting proceeds of collateral. For as long
as no default or event of default exists, Melnor Inc.'s
subsidiary, Melnor Canada Ltd. shall be permitted to receive all
payments or other remittances of its accounts and other proceeds
of its collateral deposited in the lock box account. If a
default or event of default exists, the lender may direct that
all payments or other remittances deposited in the Melnor Canada
Ltd. lock box be remitted to the lender. All amounts held or
deposited in or payments made to the Melnor Inc. lock box
account, and all funds deposited in the Melnor Canada Ltd. lock
box account, after being directed by lender are the sole and
exclusive property of the lender and shall be applied to the loan
balance. Any amounts contained in the lock box accounts or
otherwise received by the lender in excess of the loan obligation
then due and payable shall be the property of Melnor Inc. and its
subsidiary and shall promptly be paid over by the lender. The
loan is collateralized by substantially all assets of Melnor Inc.
and its subsidiary. The loan security agreement provides, among
other things, for certain reporting and collateral requirements
and for certain financial covenants in regard to Melnor Inc. and
its subsidiary, such as maintenance of a certain level of net
worth; current ratio; earnings; and cash flow coverage. Negative
covenants provide, among other things, limitations on
encumbrances, indebtedness, merger or other acquisition, disposal
of property, compensation plans, dividend or other distributions
and lease obligations.
Short-term debt at December 31, 1993 consisted of a revolving
credit facility ("revolving loan") with a finance company in an
aggregate amount not to exceed $20,000,000 which was due to
expire November 24, 1994. The aggregate amount of the revolving
loan cannot exceed the lesser of (i) the Current Asset Base minus
the Letter of Credit Reserve and (ii) the Total Seasonal
Revolving Loan Facility of $20,000,000 during the period of
February 1 through July 31 of each year and the Total Permanent
Revolving Loan Facility of $11,000,000 during the period of
August 1 through January 31 of the succeeding calendar year. The
Current Asset Base equals 85% of the face amount of eligible
accounts receivable plus 55% of eligible inventory for Melnor
Inc. and its subsidiary. Eligible inventory cannot exceed
$6,500,000 between August 1 and January 31 of the succeeding
calendar year and $7,500,000 between February 1 and July 31 of
each year. The Letter of Credit Reserve equals the sum of 45% of
the face amount of letters of credit issued for purchase of
inventory and 100% of the face amount of all other letters of
credit outstanding. Interest is payable monthly at a fluctuating
rate equal to prime plus 1.5%. The rate at and December 31, 1993
was 7.5%. In addition, underutilization and letter of credit
fees are payable monthly. Total loan availability at December
31, 1993 amounted to $9,000,000. At December 31, 1993 $8,843,977
was borrowed.
Long-Term Debt
7.05% Senior Notes dated May 27,
1993, payable to various insurance
companies. The notes bear an
interest rate of 7.05% payable
semiannually on the first day of
May and November, commencing
November 1, 1993. Interest is due
on any overdue principal, premium
amount and interest installment at
the rate of 8.05% per annum until
paid. Principal payments of the
lesser of (a) $5,000,000 or (b) the
principal amounts of the notes then
outstanding are due on May 1 of
each year, commencing May 1, 1996,
and ending May 1, 1999. Prepayment
of the notes may be done at any
time prior to the scheduled payment
dates with a prepayment premium.
The entire remaining principal
amount of the notes shall become
due and payable on May 1, 2000.
The note agreement provides, among
other things, for certain financial
covenants in regard to the
Corporation, such as consolidated
net worth requirements, interest
charge coverage ratios and
limitations on liens and additional
debt. Negative covenants provide
June 30, December 31,
1994 1993
------------ ------------
for, among other things,
limitations on indebtedness;
mergers, consolidations and sale of
assets; and dividends and other
distributions. The Corporation is
in compliance with
these covenants. $ 25,000,000 $ 25,000,000
Line of credit notes payable to
First Union National Bank of
Virginia. The Corporation has a
$35,000,000 unsecured line of
credit to support general corporate
activities. The note agreement
provides for certain financial
covenants in regard to the
Corporation. The Corporation is in
compliance with those covenants.
Borrowings against the line of
credit are at or below prevailing
prime interest rates, (5.4% at
June 30, 1994 and 6.0% at December
31, 1993). The line of
credit matures June 30, 1997. 19,000,000 13,000,000
7.5% promissory note payable from
Melnor Inc. to a finance company
due in monthly payments of $41,000
plus interest at a fluctuating rate
equal to 1.5% per annum in excess
of the prime rate (7.5% at December
31, 1993) with the outstanding
balance payable in full on November
24, 1994, collateralized by all
assets of Melnor Inc. and its
subsidiary. The loan was provided
under the same security agreement
as the revolving loan as of
December 31, 1993 described in the
Short-Term Debt section and was
subject to the same covenants and
items as the revolving loan. - - 508,000
7.0% senior subordinated note
payable from Melnor Inc. to an
insurance company due November 24,
1994 with interest payable at the
prime rate plus 1.0% (7.0% at
December 31, 1993) on November 24,
1993, May 24, 1994 and November 24,
1994. Interest payments were
guaranteed by O'Sullivan
Corporation. The note purchase
agreement provided, among other
June 30, December 31,
1994 1993
------------ ------------
things, restrictions on
indebtedness and liens, capital
expenditures and various financial
covenants. - - 2,695,000
7.0% senior subordinated note
payable from Melnor Inc. to an
affiliate of Melnor Industries,
Inc. due December 24, 1994 with
interest payable at the prime rate
plus 1.0% (7.0% at December 31,
1993) on June 24, 1994 and December
24, 1994. Interest payments were
guaranteed by O'Sullivan
Corporation. - - 305,000
Unsecured non-interest bearing
promissory note payable from Melnor
Inc. to Melnor Industries, Inc.
discounted at 9.0% due on November
24, 1996. 1,301,032 1,243,747
Non-interest bearing obligation
payable to Melnor Industries, Inc.,
discounted at 9.0%. Payment is
contingent upon Melnor Industries,
Inc. satisfying its obligation
under the New Jersey Environmental
Cleanup Responsibility Act and the
release by the State of the escrow
fund of $300,000 established to
fund environmental cleanup
activities. 241,555 230,966
Notes payable from Melnor Inc. to
equipment finance companies due in
monthly payments totaling $906
including interest at rates from
11.7% to 15.5%. 12,544 17,052
Capital lease obligations 118,585 149,825
------------ ------------
$ 45,673,716 $ 43,149,590
Less current maturities 68,515 3,584,142
------------ ------------
$ 45,605,201 $ 39,565,448
============ ============
Note G. Business Combination
On April 1, 1993 the Corporation acquired all of the outstanding
stock of Capitol Plastics of Ohio, Inc. for $1,000,000. Capitol
Plastics is engaged in the business of custom injection molding.
The transaction has been accounted for as a purchase and the
accounts and transactions of the acquired business have been
included in the consolidated financial statements from the date
of acquisition.
Unaudited pro forma consolidated net sales, net income and net
income per common share, assuming the acquisition had occurred as
of the beginning of 1993, would have been approximately as
follows:
Pro forma net sales $157,800,000
Pro forma net income $ 6,622,000
Pro forma net income per common share $ 0.40
Note H. Supplemental Cash Flow Information
Supplemental Disclosure of Cash Flow Information
For the Six Months Ended June 30,
---------------------------------
1994 1993
---------- ----------
Cash payments for interest
net of interest capitalized $1,385,677 $ 691,033
========== ==========
Cash payment for income taxes $4,457,918 $4,459,964
========== ==========
Supplemental Schedule of Noncash Investment Activities
The Corporation's 1993 business acquisition involved the
following:
Fair value of assets acquired, other
than cash and cash equivalents $ 8,173,416
Liabilities assumed (7,019,773)
-----------
Cash payments made $ 1,153,643
===========
O'SULLIVAN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
O'Sullivan Corporation currently operates in two principal business
segments. The primary activity of the Company is the manufacture of
calendered and molded plastics products for the automotive and specialty
plastics manufacturing industries. This activity includes designing,
engineering, compounding, laminating, printing, painting and assembling a
variety of plastics products for sale to manufacturers and distributors.
On April 1, 1993 the Company acquired Capitol Plastics of Ohio, Inc.
Capitol Plastics is a custom injection molding manufacturing operation with
one plant located in Bowling Green, Ohio. Capitol Plastics of Ohio, Inc.,
which is a wholly-owned subsidiary of O'Sullivan Corporation, is part of
the plastics products operations segment of the Company. On November 24,
1992 O'Sullivan Corporation acquired substantially all of the assets of
Melnor Industries, Inc. and its wholly-owned Canadian subsidiary, Melnor
Manufacturing Ltd. With this acquisition, O'Sullivan Corporation entered
the consumer products manufacturing, marketing and distribution business
which represents its second business operations segment. The new Company,
which is a wholly-owned subsidiary of O'Sullivan Corporation, is now called
Melnor Inc. and has as its wholly-owned subsidiary, Melnor Canada Ltd. The
principal source of income for the Company is from sales of those products
produced by each business segment to manufacturers, distributors and retail
outlets.
Consolidated sales revenue increased to $101.5 and $187.3 million
during the second quarter and six months ended June 30, 1994 compared to
$80.2 and $151.1 million for the same periods last year, up 26.4% and 23.9%
respectively. The consumer products segment of the business contributed
$16.9 and $29.6 million in sales revenues for the quarter and six months
ended June 30, 1994 compared to $13.3 and $26.9 million for the same
periods last year, up 27.1% and 9.8% respectively. Consumer products sales
increases experienced during the second quarter were significantly
influenced by the slow sales of lawn and garden watering products in the
first quarter. Customer orders that were previously placed on hold due to
the prolonged winter weather throughout the United States were released as
weather conditions improved. Sales revenues for the primary plastics
products segment of the Company increased to $84.6 and $157.7 million for
the quarter and six months ended June 30, 1994 compared to $66.9 and $124.2
million for the same periods last year, up 26.2% and 27.0% respectively.
Core business sales, discounting the effects of the newly acquired
subsidiaries Melnor Inc. and Capitol Plastics of Ohio, Inc., increased
$15.7 and $23.4 million for the quarter and six months ended June 30, 1994,
up 25.8% and 19.8% respectively, when compared to the same periods last
year. Sales of automotive products produced by the Company accounted for
the majority of sales increases experienced during the quarter by the
plastics products segment of the business as domestic automobile and truck
sales were up due to increased consumer demand.
Consolidated net income for the quarter and six months ended June 30,
1994 was $4.9 and $7.5 million compared to $4.3 and $6.6 million for the
same period last year, up 14.4% and 14.3% respectively. As with the first
quarter of 1994, net income did not increase at the same rate as sales,
primarily due to an increase in the cost of products sold in the plastics
products business segment and an unfavorable increase in the corporate tax
rate compared to the same periods last year. Costs of products sold
represented 86.0% and 87.2% of each sales dollar in the plastics products
business segment for the quarter and six months ended June 30, 1994
compared to 84.0% and 85.9% respectively for the same periods last year.
During the first and second quarters of 1994, costs of products sold
increased due to unfavorable material and labor utilization associated with
products produced by the Huron, Ohio and Winchester, Virginia injection
molding facilities which experienced significantly increased demand while
simultaneously launching new manufacturing programs for their automotive
customer base.
Consolidated operating expenses for the quarter and six months ended
June 30, 1994 were $6.4 and $12.7 million compared to $6.1 and $11.9
million for the same periods last year, up 5.1% and 6.0% respectively.
Selling and warehousing expenses were $4.1 and $7.8 million for the quarter
and six months ended June 30, 1994 compared to $3.8 and $7.5 million for
the same periods last year, up 8.0% and 4.7% respectively. Selling and
warehousing expenses represented 4.1% and 4.2% of each sales dollar for the
quarter and six months ended June 30, 1994 compared to 4.8% and 4.9% for
the same periods last year for the combined consumer products and primary
plastics products business segments of the Company. General and
administrative expenses for the quarter and six months ended June 30, 1994
were $2.3 and $4.8 million compared to $2.3 and $4.5 million for the same
periods last year, up 0.4% and 8.3% respectively. General and
administrative expenses represented 2.3% and 2.6% of each sales dollar
compared to 2.9% and 3.0% for the quarter and six months ended June 30,
1994 and 1993 respectively.
Non-operating expenses increased $259 thousand and $579 thousand during
the quarter and six months ended June 30, 1994 compared to the same periods
last year due to increased interest expense on the Company's short and
long-term debt obligations.
Total consolidated debt decreased and increased $(1.4) million and $3.5
million compared to March 31, 1994 and December 31, 1993 respectively. As
of June 30, 1994 the consumer products segment, Melnor Inc., had short and
long-term debt obligations of $11.0 million, representing 20.0% of the
total debt of the Company. During the first quarter of 1994 the Company
successfully completed negotiations with a financial institution for the
debt restructuring of Melnor Inc. The new debt structure consists of a
revolving credit facility substantially the same as before with standard
negative operating covenants. This debt is secured by the assets of Melnor
Inc. and does not represent any liability to the parent company. During
the month of June 1994 the Company renegotiated its $25.0 million unsecured
line of credit with its principal bank, First Union National Bank of
Virginia. The new unsecured line is now $35.0 million and has a maturity
date of June 30, 1997. The purpose of increasing this line of credit was
to insure adequate capital for corporate liquidity, finance growth in
trading assets, and to finance capital expenditures and/or acquisitions.
With the current debt structure and lines of credit that are available, the
Company believes that working capital requirements for the short and long-
term are adequately provided for.
The Company's financial position and liquidity continue to remain
strong at June 30, 1994 with shareholder's equity at 52.8% of total assets.
Current assets compared to current liabilities were 2.4 to 1.0. Total debt
to equity of the Company was 48.4% and net worth was $113.8 million, up
5.5% from the same period last year.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 O'Sullivan Corporation Amended and Restated Articles of
Incorporation, including the Articles of Amendment, dated
April 30, 1985, filed with the State Corporation Commission
of Virginia on May 6, 1985, adopted by stockholders of
O'Sullivan Corporation at the annual meeting held April 30,
1985. (Incorporated by reference to the March 31,1985,
Quarterly Report on Form 10-Q of the Company.)
3.2 O'Sullivan Corporation Bylaws as amended to January 29, 1985.
(Incorporated by reference to the March 31, 1985, Quarterly
Report on Form 10-Q of the Company.)
3.3 O'Sullivan Corporation Amended and Restated Articles of
Incorporation dated April 25, 1989, filed with the State
Corporation Commission of Virginia on May 5, 1989, adopted by
stockholders of O'Sullivan Corporation at the annual meeting
held April 25, 1989. (Incorporated by reference to the March
31, 1989 Quarterly Report on Form 10-Q of the Company.)
99.3 1985 Incentive Stock Option Plan, Amended and Restated as of
July 27, 1993, (Incorporated by reference to the Annual
Report on Form 10-K for the year ended December 31, 1993.)
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter ended June 30, 1994.
S I G N A T U R E S
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.
O'SULLIVAN CORPORATION
/s/ Anthony A. Barone
---------------------------
Anthony A. Barone
Vice President, Secretary
and Chief Financial Officer
/s/ C. Bryant Nickerson
---------------------------
C. Bryant Nickerson
Treasurer and
Chief Accounting Officer
August 9, 1994
