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 March 31, 1996
Commission File Number 0-14827
NATIONAL SANITARY SUPPLY COMPANY
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(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 45202-4790
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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 6,136,323 Shares April 30, 1996
$1 Par Value
Page 1 of 9
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NATIONAL SANITARY SUPPLY COMPANY
Index
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information: --------
Item 1. Financial Statements:
Consolidated Balance Sheet--
March 31, 1996 and
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Income--
Three months ended
March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows--
Three months ended
March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . 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
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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) 1996 1995
- ----------------------------------- ---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,979 $ 1,491
Accounts receivable, less allowances
(1996- $1,382; 1995- $1,458) 37,758 42,083
Inventories 24,619 28,285
Deferred income taxes 2,165 2,305
Prepaid expenses and other current assets 1,449 1,074
---------- ----------
Total current assets 67,970 75,238
Properties and equipment, at cost, less
accumulated depreciation 21,382 21,453
Goodwill, less accumulated amortization 26,253 25,795
Other assets 1,103 753
---------- ----------
Total assets $ 116,708 $ 123,239
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,245 $ 21,950
Accrued liabilities 13,148 14,574
Loans payable to Chemed Corporation 2,561 6,989
Current portion of notes to Chemed Corporation 1,000 1,000
---------- ----------
Total current liabilities 36,954 44,513
Notes to Chemed Corporation 15,000 15,000
Deferred income taxes 671 506
Other noncurrent liabilities 1,409 1,353
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Total liabilities 54,034 61,372
---------- ----------
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: 1996- 6,601,918 shares;
1995- 6,554,543 shares) 6,601 6,555
Paid-in capital 27,245 26,763
Retained earnings 32,860 32,487
Treasury stock, at cost (1996- 463,986
shares; 1995- 456,263 shares) (4,032) (3,938)
---------- ----------
Total stockholders' equity 62,674 61,867
---------- ----------
Total liabilities and stockholders' equity $ 116,708 $ 123,239
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 3 of 9
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NATIONAL SANITARY SUPPLY COMPANY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
(thousands, except per share data) 1996 1995
- ---------------------------------- --------- ---------
<S> <C> <C>
Sales $ 77,277 $ 80,793
Cost of sales 52,412 55,331
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Gross profit 24,865 25,462
--------- ---------
Expenses and other income:
Operating expenses 22,759 23,261
Amortization of goodwill 222 218
Chemed Corporation interest 430 662
Other income, net (54) (47)
--------- ---------
Total expenses and other income 23,357 24,094
--------- ---------
Income before income taxes 1,508 1,368
Income taxes 676 609
--------- ---------
Net income $ 832 $ 759
========= =========
Earnings per share $ 0.14 $ 0.13
========= =========
Cash dividends paid per share $ 0.075 $ 0.065
========= =========
Average shares outstanding 6,123 6,050
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 4 of 9
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NATIONAL SANITARY SUPPLY COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
(thousands of dollars) 1996 1995
- ---------------------------------------------- ---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 832 $ 759
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 829 845
Amortization of goodwill and deferred
charges 331 293
Deferred income tax provision (88) (81)
Provision for uncollectible accounts
receivable 163 271
Changes in operating assets and
liabilities, excluding amounts acquired
in business combinations:
Decrease in accounts receivable 4,162 189
Decrease in inventories 3,666 641
(Increase)/decrease in other assets (287) 54
Increase/(decrease) in accounts payable (1,705) 435
Increase/(decrease) in other liabilities (1,689) 643
--------- ---------
Net cash provided by operating activities 6,214 4,049
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Business combinations (10) (52)
Capital expenditures (793) (855)
Other 36 33
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Net cash used by investing activities (767) (874)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from payable to Chemed Corporation (4,428) (2,479)
Principal payments on other long-term debt (12) (11)
Dividends paid (459) (394)
Proceeds from/(purchase of) common stock (60) (110)
--------- ---------
Net cash used by financing activities (4,959) (2,994)
Increase/(decrease)in cash 488 181
Cash at beginning of period 1,491 1,713
--------- ---------
Cash at end of period $ 1,979 $ 1,894
========= =========
</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 1995 Annual Report on Form 10-K filed with the SEC on March 28, 1996.
NOTE B. 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
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 reported net income for the first quarter ended
March 31, 1996 of $832,000, a 10% increase over net income of $759,000 reported
in the prior-year first quarter. Earnings per share of $.14 in the first
quarter of 1996 increased 8% over earnings per share of $.13 reported in the
comparable prior-year quarter. Sales of $77,277,000 for the first quarter of
1996 were 4% below sales of $80,793,000 in the first quarter of 1995. The sales
decline reflects the previously announced loss of a large fast-food customer
during the first quarter of 1996. Earnings growth benefited from the combi-
nation of an increase in the core sanitary maintenance business, especially in
the western operations; lower operating expenses; and a significant increase in
cash flow due to a reduction in working capital.
National's first quarter 1996 gross profit margin of 32.2% increased from 31.5%
in the first quarter of 1995 primarily due to the loss of the low-margin sales
to the large fast-food customer.
Operating expenses decreased 2% during the first quarter of 1996 compared with
the prior year reflecting the loss of the large fast-food account as well as new
programs to control expenses.
The decrease in interest expense from Chemed Corporation ("Chemed") from
$662,000 in the first quarter of 1995 to $430,000 in the first quarter of 1996
reflects lower short-term interest rates and a reduction in Chemed debt. From
March 31, 1995 to March 31, 1996 Chemed debt decreased $9,681,000.
The effective tax rate increased from 44.5% during the first quarter of 1995 to
44.8% during the first quarter of 1996, primarily due to higher profits in
states with higher tax rates.
Liquidity and capital resources
- -------------------------------
The decrease in accounts receivable, inventories, and accounts payable reflects
the loss of the large fast-food account. The cash flow from these accounts was
used primarily to repay loans payable to Chemed which decreased $4,428,000 from
$6,989,000 at December 31, 1995 to $2,561,000 at March 31, 1996.
Management believes that the company's cash flow from operations and other
sources of liquidity are sufficient for its needs.
Page 7 of 9
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibits
--------
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 March 31, 1996.
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 May 15, 1996 By /s/Paul C. Voet
------------------ ----------------------------------
Paul C. Voet
President and
Chief Executive Officer
Date May 15, 1996 By /s/Gary H. Sander
------------------ ----------------------------------
Gary H. Sander
Vice President,
Treasurer and
Chief Financial Officer
Page 8 of 9
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EXHIBIT 11
NATIONAL SANITARY SUPPLY COMPANY
COMPUTATION OF EARNINGS PER SHARE (a)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
(thousands, except per share data) March 31,
- ---------------------------------- ----------------------
1996 1995
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<S> <C> <C>
Computation of Earnings Per Common
and Common Equivalent Share
Net Income $ 832 $ 759
======= =======
Average Number of Shares of
Common Stock Outstanding 6,123 6,050
Incremental Effect of
Unexercised Stock Options 65 87
------- -------
Average Number of Shares of
Common Stock and Common Stock
Equivalents Outstanding 6,188 6,137
======= =======
Earnings per Common and Common
Equivalent Share $ 0.13 $ 0.12
======= =======
Computation of Earnings Per Common
Share Assuming Full Dilution
Net Income $ 832 $ 759
======= =======
Average Number of Shares of
Common Stock Outstanding 6,123 6,050
Incremental Effect of
Unexercised Stock Options 100 88
------- -------
Average Number of Shares of
Common Stock assuming
Full Dilution 6,223 6,138
======= =======
Earnings Per Common Share
Assuming Full Dilution $ 0.13 $ 0.12
======= =======
(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 THE 10-K FOR
THE YEAR ENDED MARCH 31, 1996 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
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,979
<SECURITIES> 0
<RECEIVABLES> 35,107
<ALLOWANCES> (1,382)
<INVENTORY> 24,619
<CURRENT-ASSETS> 67,970
<PP&E> 43,012
<DEPRECIATION> (21,630)
<TOTAL-ASSETS> 116,708
<CURRENT-LIABILITIES> 36,954
<BONDS> 16,000
6,601
0
<COMMON> 0
<OTHER-SE> 56,073
<TOTAL-LIABILITY-AND-EQUITY> 116,708
<SALES> 77,277
<TOTAL-REVENUES> 77,277
<CGS> 52,412
<TOTAL-COSTS> 52,412
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 166
<INTEREST-EXPENSE> 534
<INCOME-PRETAX> 1,508
<INCOME-TAX> 676
<INCOME-CONTINUING> 832
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 832
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
