FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1995
Commission File Number 0-14827
NATIONAL SANITARY SUPPLY COMPANY
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1079482
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(State or other jurisdiction of (IRS Employer Identification
incorporation of organization) No.)
2900 Chemed Center, 255 E. 5th St., Cincinnati, OH 45202-4729
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(Address of principal executive offices) (Zip code)
(513) 762-6500
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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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Amount Date
- ----- ------ ----
Common Stock 6,080,624 Shares July 31, 1995
$1 Par Value
Page 1 of 10
<PAGE>
NATIONAL SANITARY SUPPLY COMPANY
Index
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information: --------
Item 1. Financial Statements:
Consolidated Balance Sheet--
June 30, 1995 and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Income--
Three and six months ended
June 30, 1995 and 1994. . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows--
Six months ended
June 30, 1995 and 1994. . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial
Statements. . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . 7
Part II. Other Information:
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 9
</TABLE>
Page 2 of 10
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
NATIONAL SANITARY SUPPLY COMPANY
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
(thousands, except share data) 1995 1994
- ----------------------------------- ---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,640 $ 1,713
Accounts receivable, less allowances
(1995- $1,665; 1994- $1,428) 40,690 41,655
Inventories 29,157 28,344
Deferred income taxes 2,045 1,831
Prepaid expenses and other current assets 1,634 1,527
---------- -----------
Total current assets 75,166 75,070
Properties and equipment, at cost, less
accumulated depreciation 21,858 21,851
Goodwill, less accumulated amortization 26,252 26,650
Other assets 919 501
---------- -----------
Total assets $ 124,195 $ 124,072
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,935 $ 21,538
Accrued liabilities 13,807 12,552
Loans payable to Chemed Corporation 8,573 13,721
Current portion of notes to Chemed Corporation 1,000 1,000
---------- -----------
Total current liabilities 47,315 48,811
Notes to Chemed Corporation 16,000 16,000
Deferred income taxes 464 441
Other noncurrent liabilities 1,136 1,259
---------- -----------
Total liabilities 64,915 66,511
---------- -----------
Stockholders' equity:
Preferred stock - 1,000,000 shares authorized,
$1 par value (none issued) - -
Common stock - 7,000,000 shares authorized,
$1 par value (issued: 1995- 6,505,088 shares;
1994- 6,396,756 shares) 6,506 6,397
Paid-in capital 26,344 25,312
Retained earnings 30,036 28,695
Treasury stock, at cost (1995- 431,962
shares; 1994- 373,783 shares) (3,606) (2,843)
---------- -----------
Total stockholders' equity 59,280 57,561
---------- -----------
Total liabilities and stockholders' equity $ 124,195 $ 124,072
========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
Page 3 of 10
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NATIONAL SANITARY SUPPLY COMPANY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
(thousands, except per share data) 1995 1994 1995 1994
- ---------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $ 85,571 $ 76,975 $ 166,364 $ 148,435
Cost of sales 58,942 52,860 114,273 102,059
---------- ---------- ---------- ----------
Gross profit 26,629 24,115 52,091 46,376
---------- ---------- ---------- ----------
Expenses and other income:
Operating expenses 23,535 21,459 46,796 42,015
Amortization of goodwill 218 219 436 437
Chemed Corporation interest 625 600 1,287 1,145
Other income, net (120) (82) (167) (199)
---------- ---------- ---------- ----------
Total expenses and other income 24,258 22,196 48,352 43,398
---------- ---------- ---------- ----------
Income before income taxes 2,371 1,919 3,739 2,978
Income taxes 1,001 815 1,610 1,300
---------- ---------- ---------- ----------
Net income $ 1,370 $ 1,104 $ 2,129 $ 1,678
========== ========== ========== ==========
Earnings per share $ 0.23 $ 0.19 $ 0.35 $ 0.28
========== ========== ========== ==========
Cash dividends paid per share $ 0.065 $ 0.060 $ 0.130 $ 0.120
========== ========== ========== ==========
Average shares outstanding 6,073 5,961 6,062 5,949
========== ========== ========== ==========
The accompanying notes are an integral part of the financial statements.
</TABLE>
Page 4 of 10
<PAGE>
NATIONAL SANITARY SUPPLY COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
(thousands of dollars) 1995 1994
- ---------------------------------------------- --------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,129 $ 1,678
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,704 1,584
Amortization of goodwill and deferred
charges 602 656
Deferred income tax provision (176) (263)
Provision for losses on accounts
receivable 522 393
Changes in operating assets and
liabilities, excluding amounts acquired
in business combinations:
(Increase)/decrease in accounts receivable 443 (1,112)
(Increase)/decrease in inventories (813) 1,855
Increase in other assets (304) (332)
Increase in accounts payable 2,397 1,760
Increase/(decrease) in other liabilities 1,155 (1,315)
--------- ---------
Net cash provided by operating activities 7,659 4,904
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Business combinations (52) (434)
Capital expenditures (1,770) (5,154)
Other 58 152
--------- ---------
Net cash used for investing activities (1,764) (5,436)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from/(payments on) loans payable to
Chemed Corporation (5,148) 2,892
Principal payments on other long-term debt (23) (22)
Dividends paid (788) (714)
Proceeds from/(purchase of) common stock (9) 375
--------- ---------
Net cash provided by/(used for) financing
activities (5,968) 2,531
Increase/(decrease) in cash and cash equivalents (73) 1,999
Cash and cash equivalents at beginning of period 1,713 1,110
--------- ---------
Cash and cash equivalents at end of period $ 1,640 $ 3,109
========= =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
Page 5 of 10
<PAGE>
NATIONAL SANITARY SUPPLY COMPANY
Notes to Consolidated Financial Statements
(unaudited)
NOTE A. The accompanying unaudited financial statements have been prepared in
accordance with Rule 10-01 of SEC Regulation S-X. Consequently, they do not
include all the disclosures required under generally accepted accounting
principles for complete financial statements. However, in the opinion of the
management of National Sanitary Supply Company ("National"), the financial
statements presented herein contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position, the
results of operations and cash flows of National and its subsidiaries for the
periods indicated. For additional information concerning the accounting
policies of National, refer to the consolidated financial statements included
in the 1994 Annual Report on Form 10-K filed with the SEC on March 28, 1995.
NOTE B. Cash equivalents include highly liquid investments with maturities of
three months or less when purchased.
NOTE C. Earnings per common share are computed on the basis of the weighted
average number of shares of common stock outstanding during the respective
periods. The dilution that would result from shares issuable under National's
1986, 1988 and 1995 Stock Incentive Plans is not material.
Page 6 of 10
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Results of Operations
- ---------------------
National Sanitary Supply Company's sales for the second quarter ended June 30,
1995 were $85,571,000, an 11% increase over sales of $76,975,000 in the second
quarter of 1994. Net income for the second quarter of 1995 was $1,370,000, a
24% increase over net income of $1,104,000 in the prior-year second quarter.
Earnings per share of $.23 for the second quarter of 1995 increased 21% over
earnings per share of $.19 in the comparable prior-year quarter.
Most locations throughout the National system experienced volume increases
resulting from enhanced sales and marketing efforts such as a new full-line
product catalog and focused promotional programs. Price increases also helped
fuel sales growth during the second quarter. The gross profit margin for the
second quarter 1995 decreased .2% point reflecting the impact of cost increases
which National has not yet passed on to its customers.
Operating expenses as a percentage of sales in the second quarter of 1995
decreased .4% point primarily reflecting the impact of relatively small
increases in most fixed expenses such as facility cost and administrative
personnel cost.
For the six months ended June 30, 1995, National sales of $166,364,000
increased 12% over sales of $148,435,000 in the comparable period of 1994. Net
income for the first half of 1995 was $2,129,000, a 27% increase over the prior
year first half net income of $1,678,000. Earnings per share were $.35 for the
first six months of 1995 compared with $.28 for the first six months of 1994.
The sales improvement for the first half of 1995 reflects increased sales at
most locations aided by improved pricing primarily in the plastic and paper
product categories. The gross profit margin for the first six months of 1995 was
relatively unchanged.
Operating expenses as a percentage of sales for the first half of 1995 declined
.2% point reflecting the continued emphasis on cost containment.
The effective tax rate declined from 43.7% during the first half of 1994 to
43.1% during the first half of 1995, primarily due to higher profits in states
with lower tax rates and spreading the same year-to-year level of non
tax-deductible goodwill over more income.
Looking ahead, management is optimistic about National's sales and profit
growth for the remainder of the year.
Liquidity and capital resources
- -------------------------------
The increase in accounts payable at June 30, 1995 compared with December 31,
1994 primarily reflects the timing of certain inventory purchases and scheduled
payments.
Management believes that National's cash flow from operations and other sources
of liquidity are sufficient for its needs.
Page 7 of 10
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
(a) National Sanitary Supply held its annual meeting of stockholders on
May 15, 1995.
(b) The names of directors elected at this annual meeting are as follows:
Edward L. Hutton W. Dwight Jackson
Paul C. Voet Charles O. Lane
Robert B. Garber Sandra E. Laney
Arthur J. Bennert, Jr. Kevin J. McNamara
James A. Cunningham Timothy S. O'Toole
Naomi C. Dallob D. Walter Robbins, Jr.
Charles H. Erhart, Jr. Gary H. Sander
Neal Gilliatt Jerome E. Schnee
Will J. Hoekman Kenneth F. Vuylsteke
Thomas C. Hutton
(c) The stockholders then ratified the selection by the Board of Directors of
Price Waterhouse LLP as independent accountants for the Company and its
consolidated subsidiaries for the year 1995: 5,577,880 votes were cast in
favor of the proposal, 6,000 votes were cast against it, 1,612 votes
abstained, and zero (0) were broker non-votes.
The stockholders then adopted a resolution ratifying the approval and
adoption of the 1995 Stock Incentive Plan by the Board of Directors:
5,535,442 votes were cast in favor of the resolution, 20,064 votes were
cast against it, 700 votes abstained and 29,286 were broker non-votes.
With respect to the election of directors, the number of votes cast for
each nominee was as follows:
<TABLE>
<CAPTION>
Votes Votes
Votes For Against Withheld
_________ _______ ________
<S> <C> <C> <C>
Edward L. Hutton 5,584,480 1,012 10
Paul C. Voet 5,584,490 1,002 -0-
Robert B. Garber 5,583,990 1,502 500
Arthur J. Bennert, Jr. 5,584,490 1,002 -0-
James A. Cunningham 5,584,280 1,212 210
Naomi C. Dallob 5,584,490 1,002 -0-
Charles H. Erhart, Jr. 5,583,790 1,702 700
Neal Gilliatt 5,584,290 1,202 200
Will J. Hoekman 5,584,490 1,002 -0-
Thomas C. Hutton 5,584,290 1,202 200
W. Dwight Jackson 5,584,239 1,253 251
Charles O. Lane 5,583,990 1,502 500
Sandra E. Laney 5,584,280 1,212 210
Kevin J. McNamara 5,584,490 1,002 -0-
Timothy S. O'Toole 5,584,490 1,002 -0-
D. Walter Robbins, Jr. 5,584,280 1,212 210
Gary H. Sander 5,584,490 1,002 -0-
Jerome E. Schnee 5,584,290 1,202 200
Kenneth F. Vuylsteke 5,584,490 1,002 -0-
</TABLE>
Page 8 of 10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
<TABLE>
<CAPTION>
SK 601
Exhibit No. Ref. No. Description Page No.
- ----------- -------- ----------- --------
<C> <C> <S> <S>
1 (11) Statement re: E-1
Computation of
Earnings Per Share
2 (27) Financial Data Schedule E-2
</TABLE>
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
National Sanitary Supply Company
--------------------------------
(Registrant)
Date August 11, 1995 By /s/Paul C. Voet
------------------ ----------------------------------
Paul C. Voet
President and
Chief Executive Officer
Date August 11, 1995 By /s/Gary H. Sander
------------------ ----------------------------------
Gary H. Sander
Vice President,
Treasurer and
Chief Financial Officer
Page 9 of 10
<PAGE>
EXHIBIT 11
NATIONAL SANITARY SUPPLY COMPANY
<F1>
COMPUTATION OF EARNINGS PER SHARE (a)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(thousands, except per share data) June 30, June 30,
- ---------------------------------- -------------------- -------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Computation of Earnings Per Common
and Common Equivalent Share
Net Income $ 1,370 $ 1,104 $ 2,129 $ 1,678
======= ======= ======= =======
Average Number of Shares of
Common Stock Outstanding 6,073 5,961 6,062 5,949
Incremental Effect of
Unexercised Stock Options 75 104 81 106
------- ------- ------- -------
Average Number of Shares of
Common Stock and Common Stock
Equivalents Outstanding 6,148 6,065 6,143 6,055
======= ======= ======= =======
Earnings per Common and Common
Equivalent Share $ 0.22 $ 0.18 $ 0.35 $ 0.28
======= ======= ======= =======
Computation of Earnings Per Common
Share Assuming Full Dilution
Net Income $ 1,370 $ 1,104 $ 2,129 $ 1,678
======= ======= ======= =======
Average Number of Shares of
Common Stock Outstanding 6,073 5,961 6,062 5,949
Incremental Effect of
Unexercised Stock Options 76 111 82 109
------- ------- ------- -------
Average Number of Shares of
Common Stock Assuming
Full Dilution 6,149 6,072 6,144 6,058
======= ======= ======= =======
Earnings Per Common Share
Assuming Full Dilution $ 0.22 $ 0.18 $ 0.35 $ 0.28
======= ======= ======= =======
(a) This calculation is submitted in accordance with the Securities Exchange Act of
1934. Because the incremental effect of unexercised stock options results in dilution
of less than 3%, the per share data presented in the consolidated statement of income
excludes the impact of common stock equivalents.
</TABLE>
E-1
Page 10 Of 10
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q FOR THE
QUARTER ENDED JUNE 30, 1995 FOR NATIONAL SANITARY SUPPLY COMPANY AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000793500
<NAME> NATIONAL SANITARY SUPPLY CO
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,640
<SECURITIES> 0
<RECEIVABLES> 37,550
<ALLOWANCES> (1,665)
<INVENTORY> 29,157
<CURRENT-ASSETS> 75,166
<PP&E> 41,949
<DEPRECIATION> (20,091)
<TOTAL-ASSETS> 124,195
<CURRENT-LIABILITIES> 47,315
<BONDS> 16,000
<COMMON> 6,506
0
0
<OTHER-SE> 52,774
<TOTAL-LIABILITY-AND-EQUITY> 124,195
<SALES> 166,364
<TOTAL-REVENUES> 166,364
<CGS> 114,273
<TOTAL-COSTS> 114,273
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 522
<INTEREST-EXPENSE> 1,287
<INCOME-PRETAX> 3,739
<INCOME-TAX> 1,610
<INCOME-CONTINUING> 2,129
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,129
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
