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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
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[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period ended June 30, 1996
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 0-18347
SULLIVAN DENTAL PRODUCTS, INC.
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(Exact name of registrant as specified in its charter)
WISCONSIN 36-3070444
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10920 West Lincoln Avenue, West Allis, Wisconsin 53227
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(Address of principal executive offices) (Zip Code)
(414)321-8881
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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 twelve (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 ninety (90) days.
Yes X No
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As of August 1, 1996, 9,306,747 shares of common stock, $.01 par value, were
outstanding.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
Net sales for the three months ended June 30, 1996 ("Current Quarter") were
$58,497,000, an increase of $6,969,000, or 13.5%, over the three months ended
June 30, 1995 ("Prior Quarter"). The $6,969,000 increase in net sales was
substantially due to increased unit sales and, to a lesser extent, price
increases. The growth in unit sales was generated largely by increased
penetration in existing markets.
Sales of dental supplies comprised 67.8% of net sales in the second quarter of
1996 versus 69.4% during the same period in 1995. Sales of dental equipment
constituted 25.7% of net sales in the Current Quarter versus 24.0% in the Prior
Quarter. The balance of sales in each period consisted of repair service and
parts. The change in product mix is largely due to the opening of 4 new
equipment sales and service centers in the last 12 months which, when adjusting
for the closing of one center, brings the total number of equipment sales and
service centers to 46 nationwide.
Gross profit rose $2,270,000, or 12.9%, in the Current Quarter compared to the
Prior Quarter, primarily as the result of increased sales. Gross Profit as a
Percentage of net sales decreased from 34.2% to 34.0%.
Operating expenses rose $1,716,000, or 11.3%, to $16,882,000, in the second
quarter of 1996 compared to $15,166,000 in the second quarter of 1995 and
decreased as a percentage of net sales to 28.9% from 29.4% over the same period
last year. Of this increase in operating expenses, $877,000 resulted from
increased salaries and commissions due to higher sales creating higher
commissions and salaries paid to new sales trainees and support staff and
$540,000 due to increases in health and general insurance premiums.
Operating income in the Current Quarter increased from the Prior Quarter by
$555,000 to $3,011,000, due to the factors identified above. Interest expense
rose by $56,000 to $60,000 due to use of the bank credit lines. The weighted
average interest rate for the Current Quarter was 6.6%.
Net income per share for primary and fully diluted shares rose to $.20 per share
during the second quarter of 1996 compared to $.17 per share for the
corresponding period in 1995. Net income increased $282,000 in the second three
months of 1996 as compared to such period in 1995, due to higher sales.
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SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Net sales for the six months ended June 30, 1996 ("Current Period") were
$112,957,000, an increase of $9,436,000, or 9.1% over the six months ended June
30, 1995 ("Prior Period"). The $9,436,000 increase in net sales was
substantially due to increased unit sales and, to a lesser extent, price
increases. The growth in unit sales was generated largely by increased
penetration in existing markets.
Sales of dental supplies comprised 69.1% of net sales in the first half of 1996
versus 70.7% during the same period in 1995. Sales of dental equipment
constituted 24.1% of net sales in the Current Period versus 22.4% in the Prior
Period.
Gross profit rose $3,114,000, or 8.8%, in the first half of 1996, compared to
the same period last year, primarily as a result of increased sales. Gross
profit as a percentage of sales decreased from 34.2% to 34.1%.
Operating expenses for the Current Period rose $2,747,000, or 9.0%, compared to
the Prior Period and decreased as a percentage of net sales to 29.5% from 29.6%
over the same period last year. Of this increase in operating expenses,
$1,429,000 resulted from increased salaries and commissions due to higher sales
creating higher commissions and salaries paid to new sales trainees and support
staff.
Operating income in the Current Period increased from the Prior Period by
$367,000 to $5,170,000 due to the factors identified above. Interest expense
increased by $200,000 to $206,000. The weighted average interest rate for the
Current Period was 6.6%.
Net income per share for primary and fully diluted shares increased to $.35 per
share from $.33 per share during the Current Period compared to the Prior
Period. Net income increased by $69,000, or 2.2%, in the first half of 1996 as
compared to the same period last year, primarily due to increased sales.
LIQUIDITY AND CAPITAL RESOURCES
The Company had no short-term investments at June 30, 1996 or at year-end 1995.
The Company, pursuant to a stock repurchase plan which authorized the purchase
of up to 500,000 shares, has to date repurchased 280,000 shares of its common
stock from the public at various prices with an average price of approximately
$9.00 per share, which repurchases total $2,538,750.
Inventories decreased $5,151,000 due to reduced purchasing in the first and
second quarter of 1996.
Working capital at June 30, 1996 was $49,002,000, an increase of $1,974,000 over
December 31, 1995 reflecting net income of $3,229,000 reduced by dividends of
$902,000 and the purchase of treasury stock of $308,000.
Cash and cash equivalents as of June 30, 1996 decreased by $143,000 from
December 31, 1995. Net cash provided by operating activities for the six months
ended June 30, 1996 was $9,717,000 primarily as a result of
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net income adjusted for depreciation and bad debts and decreases in inventory
and accounts receivable offset by decreases in accounts payable. Cash was used
for equipment purchases ($1,003,000), to reduce notes payable to banks
($8,175,000), to pay dividends ($452,000) and to repurchase stock ($308,000).
Other assets, net of amortization, as of June 30, 1996 decreased $238,000 to
$9,284,000 compared to $9,522,000 at December 31, 1995. The decrease is due to
amortization of goodwill ($182,000), the reduction of goodwill for the revaluing
of the acquisition of Inglis Dental Supply, Inc. ($128,000) and offset by the
purchase of customer lists ($65,000).
The Company expects that the $23,000,000 available lines of credit, of which
$1,725,000 was borrowed as of June 30, 1996, together with internally generated
funds from its operations, will be sufficient to meet its currently foreseeable
short-term and long-term liquidity and capital needs.
On June 20, 1996, the Company declared a cash dividend of $.05 cents per share
paid on July 19, 1996 to shareholders of record on July 10, 1996.
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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.
SULLIVAN DENTAL PRODUCTS, INC.
(Registrant)
By /S/ Timothy J. Sullivan
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Dated: August 16, 1996 TIMOTHY J. SULLIVAN, Vice President
and Principal Financial Officer
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