UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 30, 1996
Commission file Number 0-22144
INBRAND CORPORATION
(Exact name of registrant as specified in its charter.)
Georgia 58-1113677
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1169 Canton Road, Marietta, GA 30066
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(770) 422-3036
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 practical
date:
As of May 17, 1996, 7,840,097 shares of the Registrant's
Common Stock were issued and outstanding.
<PAGE>
INBRAND CORPORATION
PART I. FINANCIAL INFORMATION
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission for interim financial information. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate
to make the information presented not misleading. These financial statements
should be read in conjunction with the Company's July 1, 1995 10-K filing.
In the opinion of management of the Company, all adjustments necessary to
present fairly the financial position of INBRAND Corporation as of the
captioned dates on said financial statements have been included. The results
of the period ended March 30, 1996 are not necessarily indicative of the
results for the full year.
<PAGE>
<TABLE>
INBRAND CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<CAPTION>
(Unaudited)
__________________ __________________
July 1, 1995 March 30, 1996
__________________ __________________
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Equivalents $ 0 $ 5,512
Receivables 8,862 22,438
Raw Materials Inventory 3,243 9,683
Finished Goods Inventory 2,866 9,774
Income Taxes Receivable 152 0
Deferred Income Taxes 616 616
Other 65 3,005
__________________ __________________
Total Current Assets 15,804 51,028
__________________ __________________
Property and Equipment, net 28,755 43,749
__________________ __________________
Intangible Assets 3,799 10,368
__________________ __________________
TOTAL ASSETS $48,358 $105,145
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Bank Overdraft $ 386 $ 1,823
Current Portion of Long-Term Debt 0 789
Current Portion of Capital Lease Obligations 0 646
Accounts Payable 4,043 18,049
Accrued Expenses 3,106 10,126
Accrued Compensation 911 527
Income Taxes Payable 0 1,081
__________________ __________________
Total Current Liabilities 8,446 33,041
__________________ __________________
LONG-TERM LIABILITIES
Long-Term Debt 4,062 27,222
Capital Lease Obligations 0 2,791
Deferred Income Taxes 1,890 2,096
Deferred Income 0 707
__________________ __________________
Total Long-Term Liabilities 5,952 32,816
__________________ __________________
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
PREFERRED STOCK-1,000 shares
authorized; none issued
COMMON STOCK-$.10 par value-
49,000 shares authorized; 7,799
shares issued as of July 1, 1995
and 7,840 shares issued as of
March 30, 1996 780 784
PAID-IN CAPITAL 16,394 17,137
RETAINED EARNINGS 16,786 21,398
Translation Adjustment 0 (31)
__________________ __________________
TOTAL STOCKHOLDERS' EQUITY 33,960 39,288
__________________ __________________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $48,358 $105,145
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
INBRAND CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in Thousands Except Per Share Amounts)
<CAPTION>
Three months ended Nine months ended
__________________ _________________
April 1, March 30, April 1, March 30,
1995 1996 1995 1996
______ ______ ______ ______
<S> <C> <C> <C> <C>
NET SALES $23,047 $40,490 $62,547 $93,475
COST OF SALES 15,457 29,263 41,620 67,508
______ ______ ______ ______
Gross Profit 7,590 11,227 20,927 25,967
______ ______ ______ ______
OPERATING EXPENSES
Sales, Marketing and
Distribution 2,940 5,120 8,123 11,995
General and administrative 1,123 2,180 3,386 4,700
______ ______ ______ ______
TOTAL OPERATING EXPENSES 4,063 7,300 11,509 16,695
______ ______ ______ ______
OPERATING INCOME 3,527 3,927 9,418 9,272
OTHER EXPENSE(INCOME) 17 468 (59) 1,056
______ ______ ______ ______
INCOME BEFORE INCOME TAXES 3,510 3,459 9,477 8,216
Income Tax Provision 1,418 1,482 3,828 3,604
______ ______ ______ ______
NET INCOME $2,092 $1,977 $5,649 $4,612
______ ______ ______ ______
PER SHARE DATA
NET INCOME PER SHARE $ .26 $ .25 $ .71 $ .59
WEIGHTED AVERAGE COMMON SHARES 7,870 7,840 7,938 7,840
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
INBRAND CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, In Thousands)
<CAPTION>
NINE MONTHS ENDED
______________________________
April 1, 1995 March 30, 1996
_____________ ______________
<S> <C> <C>
NET CASH FROM OPERATING ACTIVITIES:
Net Income $ 5,649 $ 4,612
Depreciation 1,281 2,853
Amortization 96 294
Deferred Income Taxes 25 102
Provision for Losses on Accounts Receivable 12 15
Inventory Valuation Reserve (104) (237)
Loss(Gain) on Sale of Equipment 33 0
Changes in Operating Assets and Liablities
Net of Effects from Purchase of Subsidiaries-
Decrease (Increase) in:
Receivables (1,450) (11,651)
Inventories (514) (6,122)
Income Taxes Receivable 0 25
Other 43 (2,600)
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 984 12,840
Income Taxes Payable (140) 1,180
Deferred Income 0 (188)
_______ _______
NET CASH PROVIDED BY OPERATING ACTIVITIES $5,915 $1,123
Cash Flow From Investing Activities
Payment to Acquire Property and Equipment (11,817) (8,443)
Payment for Purchase of Subsidiaries 0 (6,546)
Payment to Acquire Patent Rights 0 (16)
_______ _______
NET CASH USED BY INVESTING ACTIVITIES (11,817) (15,005)
Cash Flow From Financing Activities
Bank Overdraft 0 545
Proceeds From Borrowings Under Long-Term Debt 3,292 19,356
Principal Payments on Long-Term Debt (28) (428)
Principal Payments Under Capital Lease Obligations 0 (58)
Payments to Repurchase Stocks (2,150) 0
_______ _______
NET CASH PROVIDED(USED) BY FINANCING ACTIVITIES 1,114 19,415
_______ _______
EFFECT OF EXCHANGE RATE CHANGES ON CASH 0 (21)
_______ _______
NET INCREASE(DECREASE) IN CASH AND
CASH EQUIVALENTS (4,788) 5,512
CASH AND CASH EQUIVALENTS-beginning of year 5,127 0
_______ _______
CASH AND CASH EQUIVALENTS-end of period $ 339 $5,512
NONCASH INVESTING AND FINANCEING ACTIVITIES
Additions to Property and Equipment included
in Accounts Payable $58 $12
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF CASH FLOWS
Cash Paid for Interest, net of Amounts
Capitalized 0 $792
Cash paid for Income Taxes $3,536 $2,296
The company purchased all the assets of
Hygieia Healthcare Holding Limited and
certain assets of Celatose during the nine
month period ended March 30, 1996. In
conjunction with these purchases, the
company assumed liabilities as follows:
Fair Value of Assets Acquired $26,352
Cash Paid (6,546)
Common Stock issued (746)
_______
Liabilities Assumed $19,060
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
INBRAND CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 30, 1996
1. On July 26, 1995, the Company acquired Hygieia Healthcare Holdings
Limited and its subsidiaries. The Company acquired all of the capital
stock of Hygieia for approximately $6.3 million in cash and 41,442
shares of its common stock valued at $18.00 per share (or $746
thousand in the aggregate). In addition the Company assumed certain
liabilities of Hygieia in the amount of approximately $3.9 million.
Hygieia manufactures feminine hygiene products at its operating units
located in the United Kingdom and Canada. These products are marketed
primarily under retailer's private labels in Europe, Canada, and the
United States.
2. On February 9, 1996, the Company acquired certain of the assets of
Celatose SA and its affiliate JAG SA from the bankruptcy courts of
France. The Company acquired the assets of Celatose for $5.4 million
payable in three annual amounts beginning May, 1996 and ending May,
1998. The Company also assumed certain liabilities amounting to $3.8
million. The acquired companies manufacture disposable adult
incontinence products and disposable baby diapers at their operating
units located in France. These products are marketed throughout
Europe.
3. The acquisitions were accounted for using the purchase method of
accounting. The unaudited proforma results of operations listed below
reflect purchase price accounting adjustments assuming the acquisition
occurred as of the beginning of each period.
Three Months Ended Nine Months Ended
April 1, March 30, April 1, March 30,
1995 1996 1995 1996
________ ________ ________ ________
Revenue $54,185 $50,018 $157,447 $142,778
Net Income (Loss) $(1,003) $ 545 $ (2,436) $ (6,412)
Pro Forma Net Income Per Share $ (.13) $ .07 $ (.31) $ (.82)
<PAGE>
INBRAND CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
Results of Operations
Net sales increased 75.7% for the third quarter of fiscal 1996 compared with
the year-earlier period and for the nine month period increased 49.4%. This
gain was consistent with the growth the Company has acheived over the past
several quarters and was also due, in large part, to the acquisition of
Hygieia Healthcare Holdings Limited as discussed in note 1 to the Financial
Staements and to the purchase of Celatose as discussed in note 2 to the
Financial Statements.
Gross Profit as a percentage of net sales in the third quarter decreased
to 27.7% from 32.9% in the year-earlier period and for the nine month
period decreased from 33.5% to 27.8%. This decrease was due to lower gross
margins being acheived at the company's acquired operations as well as to
the cumulative effect of raw material price increases versus prior year
levels. While prices of some of the Company's raw materials moved downwards
during the third quarter, there is no trend which will allow the Company
to accurately project the future, short term movements in these prices.
As a percentage of net sales, operating expenses for the quarter increased
to 18.0% from 17.6% in the year-earlier period while on a nine month basis
they have declined to 17.9% from 18.4% in the year-earlier period. For
both the third quarter and the nine month period, the absolute level of
selling expenses continues to increase due to expansion of sales and
marketing programs as well as the impact of the acquired operations while
declining slightly as a percentage of sales. Administrative expense level
increases are due to the impact of the acquired operations.
As a percentage of net sales, net income in the third quarter was 4.9% down
from 9.1% in the year-earlier quarter. On a nine month basis, net income
as a percent of sales has declined from 9.0% in the year-earlier period
to 4.9%. This decline was due to lower gross margin levels as discussed
above, along with increases in interest expense due to debt incurred under
the Company's acqusition program.
Earnings per share for third quarter were $.25 compared to $.26 in the
year-earlier period. On a nine month basis, earnings per share were $.59
compared to $.71 in the year-earlier period. This decline was due to
lower net income levels. The issuance of new shares related to the
acquisition of Hygieia Healthcare Holdings LImited (see note 1 to the
Financial Statements) was more than offset by the impact of the Company's
share repurchases made in fiscal 1995. For fiscal 1995, the Company
repurchased 187,000 of its shares. There were no repurchases during the
current fiscal year.
<PAGE>
INBRAND CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
Cash generated from operating activities was $1.1 million for the nine months
ending March 30, 1996 compared to $5.9 million in the year-earlier period.
While the cumulative effect of net income and depreciation for the two
periods was substantially cash-neutral, working capital needs, primarily
associated with the company's acquisitions, required the use of $4.9 million
for the nine month period.
During the nine month period the Company increased its borrowings under its
$25 million unsecured line of credit by $19.4 million. These borrowings
were used to fund the Company's continued expansion program as well as in
the purchase of Hygieia Healthcare Holdings Limited (see note 1 to the
Financial Statements) and Celatose (see note 2 the the Financial Statements).
The Company intends to continue its expansion program during the current
fiscal year and has increased the availability of funds under its unsecured
credit line to $35 million. Management believes that the Company's capital
position, together with amounts generated from operations and additional
borrowings through the expanded credit facility will be sufficient to meet
the Company's cash needs for the future.
<PAGE>
INBRAND CORPORATION
PART II - OTHER INFORMATION
item #1 Legal Proceedings
The Registrant is a party to certain routine
litigation incidental to its business, none of
which, in the opinion of management, will have
a material effect on the Registrant's financial
position.
Item #6 Exhibits and Reports on Form 8-k
a. Exhibits
No Exhibits are filed with this form 10-q.
Computation of per share earnings is shown
on the Registrant's Statement of Operations.
b. Reports on Form 8-k
During the period of this report, the Company filed a report
on Form 8-K dated February 23, 1996 to report the acquisition
of Celatose SA. The Company has subsequently filed a report
on Form 8-K/A dated April 23, 1996, to supplement information
included in the original report.
<PAGE>
INBRAND CORPORATION
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.
INBRAND CORPORATION
Registrant
May 17, 1996 James R. Johnson
Date James R. Johnson
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Jun-29-1996
<PERIOD-START> Jul-02-1995
<PERIOD-END> Mar-30-1996
<CASH> 5512
<SECURITIES> 0
<RECEIVABLES> 22438
<ALLOWANCES> 0
<INVENTORY> 19457
<CURRENT-ASSETS> 51028
<PP&E> 60587
<DEPRECIATION> 16838
<TOTAL-ASSETS> 105145
<CURRENT-LIABILITIES> 33041
<BONDS> 32816
<COMMON> 784
0
0
<OTHER-SE> 38504
<TOTAL-LIABILITY-AND-EQUITY> 105145
<SALES> 62547
<TOTAL-REVENUES> 62547
<CGS> 41620
<TOTAL-COSTS> 41620
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (59)
<INCOME-PRETAX> 9477
<INCOME-TAX> 3828
<INCOME-CONTINUING> 5649
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5649
<EPS-PRIMARY> .71
<EPS-DILUTED> .71
</TABLE>
