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 September 30, 1995
Commission File Number 0-14827
NATIONAL SANITARY SUPPLY COMPANY
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1079482
- ------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation of organization) No.)
2900 Chemed Center, 255 E. 5th St., Cincinnati, OH 45202-4729
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(513) 762-6500
- ------------------------------------------------------------------------------
(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 6,089,861 Shares October 31, 1995
$1 Par Value
Page 1 of 9
<PAGE>
NATIONAL SANITARY SUPPLY COMPANY
Index
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information: --------
Item 1. Financial Statements:
Consolidated Balance Sheet--
September 30, 1995 and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Income--
Three and nine months ended
September 30, 1995 and 1994 . . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows--
Nine months ended
September 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 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 8
</TABLE>
Page 2 of 9
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
NATIONAL SANITARY SUPPLY COMPANY
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
(thousands, except share data) 1995 1994
- ----------------------------------- ------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,797 $ 1,713
Accounts receivable, less allowances
(1995- $1,624; 1994- $1,428) 42,013 41,655
Inventories 29,057 28,344
Deferred income taxes 2,027 1,831
Prepaid expenses and other current assets 1,492 1,527
----------- -----------
Total current assets 76,386 75,070
Properties and equipment, at cost, less
accumulated depreciation 21,630 21,851
Goodwill, less accumulated amortization 26,034 26,650
Other assets 825 501
----------- -----------
Total assets $ 124,875 $ 124,072
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,058 $ 21,538
Accrued liabilities 14,150 12,552
Loans payable to Chemed Corporation 7,454 13,721
Current portion of notes to Chemed Corporation 1,000 1,000
----------- -----------
Total current liabilities 46,662 48,811
Notes to Chemed Corporation 16,000 16,000
Deferred income taxes 407 441
Other noncurrent liabilities 945 1,259
----------- -----------
Total liabilities 64,014 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- 6,520,225 shares;
1994- 6,396,756 shares) 6,521 6,397
Paid-in capital 26,467 25,312
Retained earnings 31,557 28,695
Treasury stock, at cost (1995- 437,776
shares; 1994- 373,783 shares) (3,684) (2,843)
----------- -----------
Total stockholders' equity 60,861 57,561
----------- -----------
Total liabilities and stockholders' equity $ 124,875 $ 124,072
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 3 of 9
<PAGE>
NATIONAL SANITARY SUPPLY COMPANY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
(thousands, except per share data) 1995 1994 1995 1994
- ---------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $ 89,396 $ 81,232 $ 255,760 $ 229,667
Cost of sales 61,691 55,972 175,964 158,031
---------- ---------- ---------- ----------
Gross profit 27,705 25,260 79,796 71,636
---------- ---------- ---------- ----------
Expenses and other income:
Operating expenses 23,688 21,857 70,484 63,872
Amortization of goodwill 217 219 653 656
Chemed Corporation interest 508 618 1,709 1,763
Other income, net (68) (186) (149) (385)
---------- ---------- ---------- ----------
Total expenses and other income 24,345 22,508 72,697 65,906
---------- ---------- ---------- ----------
Income before income taxes 3,360 2,752 7,099 5,730
Income taxes 1,383 1,098 2,993 2,398
---------- ---------- ---------- ----------
Net income $ 1,977 $ 1,654 $ 4,106 $ 3,332
========== ========== ========== ==========
Earnings per share $ 0.33 $ 0.28 $ 0.68 $ 0.56
========== ========== ========== ==========
Cash dividends paid per share $ 0.075 $ 0.065 $ 0.205 $ 0.185
========== ========== ========== ==========
Average shares outstanding 6,079 5,982 6,068 5,960
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 4 of 9
<PAGE>
NATIONAL SANITARY SUPPLY COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
(thousands of dollars) 1995 1994
- ---------------------------------------------- --------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,106 $ 3,332
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,662 2,375
Amortization of goodwill and deferred
charges 904 782
Deferred income tax provision (214) (268)
Provision for losses on accounts
receivable 811 651
Changes in operating assets and
liabilities, excluding amounts acquired
in business combinations:
Increase in accounts receivable (1,169) (4,488)
(Increase)/decrease in inventories (713) 532
Increase in other assets (153) (171)
Increase in accounts payable 2,520 3,548
Increase in other liabilities 1,319 281
--------- ---------
Net cash provided by operating activities 10,073 6,574
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Business combinations (52) (645)
Capital expenditures (2,550) (5,605)
Other 109 64
--------- ---------
Net cash used for investing activities (2,493) (6,186)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from/(payments on) loans payable to
Chemed Corporation (6,267) 1,052
Principal payments on other long-term debt (36) (34)
Dividends paid (1,244) (1,103)
Proceeds from common stock 51 401
--------- ---------
Net cash provided by/(used for) financing
activities (7,496) 316
Increase in cash and cash equivalents 84 704
Cash and cash equivalents at beginning of period 1,713 1,110
--------- ---------
Cash and cash equivalents at end of period $ 1,797 $ 1,814
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 5 of 9
<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 9
<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 third quarter ended September
30, 1995 were $89,396,000, a 10% increase over sales of $81,232,000 in the third
quarter of 1994. Net income for the third quarter of 1995 was $1,977,000, a 20%
increase over net income of $1,654,000 in the prior-year third quarter. Earnings
per share of $.33 for the third quarter of 1995 increased 18% over earnings per
share of $.28 in the comparable prior-year quarter.
The third quarter sales increase reflects improved product pricing and strong
sales gains at most locations throughout the National system despite one less
billing day. Sales continued to benefit from ongoing investments in sales
training programs, targeted marketing promotions, and new promotional literature
along with programs to manage product pricing. The gross profit margin for the
third quarter 1995 decreased .1% point, as a percentage of sales.
Operating expenses as a percentage of sales in the third quarter of 1995
decreased .4% point primarily reflecting the impact of relatively small
increases in many fixed expenses such as administrative personnel cost.
The effective tax rate for the third quarter of 1995 was 41.2%, 1.3% points over
the third quarter rate for 1994 of 39.9%. Higher state income taxes primarily
account for the increase.
For the nine months ended September 30, 1995, National sales of $255,760,000
increased 11% over sales of $229,667,000 in the comparable period of 1994. Net
income for the first nine months of 1995 was $4,106,000, a 23% increase over the
prior-year nine months net income of $3,332,000. Earnings per share of $.68 for
the first nine months of 1995 increased 21% above earnings per share of $.56 for
the first nine months of 1994.
The sales improvement for the first nine months of 1995 reflects increased sales
at most locations aided by improved product pricing. The gross profit margin for
the first nine months of 1995 was unchanged.
Operating expenses as a percentage of sales for the first nine months of 1995
declined .2% point reflecting the continued emphasis on cost containment.
The effective tax rate increased from 41.8% during the first nine months of 1994
to 42.2% during the first nine months of 1995, primarily due to higher state
income taxes.
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 September 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 9<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 September 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 11/13/95 By /s/Paul C. Voet
------------------ ----------------------------------
Paul C. Voet
President and
Chief Executive Officer
Date 11/13/95 By /s/Gary H. Sander
------------------ ----------------------------------
Gary H. Sander
Vice President,
Treasurer and
Chief Financial Officer
Page 8 of 9
<PAGE>
EXHIBIT 11
NATIONAL SANITARY SUPPLY COMPANY
COMPUTATION OF EARNINGS PER SHARE (a)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(thousands, except per share data) September 30, September 30,
- ---------------------------------- -------------------- -------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Computation of Earnings Per Common
and Common Equivalent Share
Net Income $ 1,977 $ 1,654 $ 4,106 $ 3,332
======= ======= ======= =======
Average Number of Shares of
Common Stock Outstanding 6,079 5,982 6,068 5,960
Incremental Effect of
Unexercised Stock Options 81 94 81 102
------- ------- ------- -------
Average Number of Shares of
Common Stock and Common Stock
Equivalents Outstanding 6,160 6,076 6,149 6,062
======= ======= ======= =======
Earnings per Common and Common
Equivalent Share $ 0.32 $ 0.27 $ 0.67 $ 0.55
======= ======= ======= =======
Computation of Earnings Per Common
Share Assuming Full Dilution
Net Income $ 1,977 $ 1,654 $ 4,106 $ 3,332
======= ======= ======= =======
Average Number of Shares of
Common Stock Outstanding 6,079 5,982 6,068 5,960
Incremental Effect of
Unexercised Stock Options 116 114 102 105
------- ------- ------- -------
Average Number of Shares of
Common Stock Assuming
Full Dilution 6,195 6,096 6,170 6,065
======= ======= ======= =======
Earnings Per Common Share
Assuming Full Dilution $ 0.32 $ 0.27 $ 0.67 $ 0.55
======= ======= ======= =======
(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 9 of 9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q FOR THE
QUARTER ENDED SEPTEMBER 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,797
<SECURITIES> 0
<RECEIVABLES> 38,780
<ALLOWANCES> (1,624)
<INVENTORY> 29,057
<CURRENT-ASSETS> 76,387
<PP&E> 42,033
<DEPRECIATION> (20,403)
<TOTAL-ASSETS> 124,876
<CURRENT-LIABILITIES> 46,663
<BONDS> 16,000
<COMMON> 6,521
0
0
<OTHER-SE> 54,340
<TOTAL-LIABILITY-AND-EQUITY> 124,876
<SALES> 255,760
<TOTAL-REVENUES> 255,760
<CGS> 175,964
<TOTAL-COSTS> 175,964
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 811
<INTEREST-EXPENSE> 1,743
<INCOME-PRETAX> 7,099
<INCOME-TAX> 2,993
<INCOME-CONTINUING> 4,106
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,106
<EPS-PRIMARY> .68
<EPS-DILUTED> .68
</TABLE>
