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 September 28, 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 November 12, 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 June 29, 1996 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 September 28, 1996 are not necessarily indicative of the
results for the full year.
<PAGE>
<TABLE>
INBRAND CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
June 29, 1996 September 28, 1996
(Unaudited)
__________________ __________________
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 1,554 $ -
Receivables 27,082 33,896
Raw Materials Inventory 7,850 8,208
Finished Goods Inventory 10,353 10,520
Income Taxes Receivable 67 8
Deferred Income Taxes 792 792
Other 869 1,615
________ ________
Total Current Assets 48,567 55,039
________ ________
Property and Equipment, net 46,457 53,033
Intangible Assets 9,716 11,079
Other Assets 880 892
________ ________
TOTAL ASSETS $105,620 $120,043
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank Overdraft $ 554 $ 4,733
Current Portion of Long-Term Debt 1,515 1,178
Current Portion of Capital Lease
Obligations 638 613
Accounts Payable 17,445 24,839
Accrued Expenses 7,152 5,326
Accrued Restructuring Expenses 1,642 1,642
Accrued Rebates 1,264 1,650
Income Taxes Payable - 1,326
________ ________
Total Current Liabilities 30,210 41,307
________ ________
LONG-TERM LIABILITIES
Long-Term Debt 28,866 29,203
Capital Lease Obligations 2,429 2,200
Deferred Income Taxes 3,054 3,054
Other 1,061 839
________ ________
Total Long-Term Liabilities 35,410 35,296
________ ________
MINORITY INTEREST - 331
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
PREFERRED STOCK-1,000 shares
authorized; none issued
COMMON STOCK-$.10 par value-
49,000 shares authorized; 7,840
shares issued 784 784
PAID-IN CAPITAL 17,137 17,137
RETAINED EARNINGS 22,254 25,391
Translation Adjustment (175) (203)
________ ________
TOTAL STOCKHOLDERS' EQUITY 40,000 43,109
________ ________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $105,620 $120,043
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
INBRAND CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Thirteen weeks ended
_____________________________
September 30, September 28,
1995 1996
_____________ _____________
<S> <C> <C>
NET SALES $25,952 $54,417
COST OF SALES 18,847 38,651
_______ _______
Gross Profit 7,105 15,766
_______ _______
OPERATING EXPENSES
Sales, marketing and distribution 3,316 7,049
General and administrative 1,270 3,310
_______ _______
TOTAL OPERATING EXPENSES 4,586 10,359
_______ _______
OPERATING INCOME 2,519 5,407
OTHER EXPENSE
Interest expense (207) (789)
Minority interest - (88)
_______ _______
INCOME BEFORE INCOME TAXES 2,312 4,530
INCOME TAX PROVISION 998 1,393
_______ _______
NET INCOME $ 1,314 $ 3,137
PER SHARE DATA:
EARNINGS PER SHARE $ .17 $ .40
WEIGHTED AVERAGE COMMON SHARES 7,834 7,840
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
INBRAND CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
Thirteen weeks ended
______________________________
September 30, September 28,
1995 1996
_____________ _____________
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,066 $ 1,290
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire Property and Equipment (2,333) (5,818)
Payments for purchase of subsidiary (6,390) (162)
Other (16) (23)
_______ _______
NET CASH USED BY INVESTING ACTIVITIES (8,739) (6,003)
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Bank Overdraft 267 3,626
Proceeds From borrowings Under Long-Term Debt 7,746 1,590
Principal payments on Long-Term Debt (428) (1,771)
Principal payments under Capital Lease
Obligations - (267)
_______ _______
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,585 3,178
_______ _______
EFFECT OF EXCHANGE RATE CHANGES ON CASH 88 (19)
_______ _______
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS - (1,554)
CASH AND CASH EQUIVALENTS-beginning of period - 1,554
_______ _______
CASH AND CASH EQUIVALENTS-end of period $ - $ -
NONCASH INVESTING AND FINANCING ACTIVITIES
Additions to Property and Equipment included
in Accounts Payable $30 -
Acquisition costs included in Accounts Payable $242 -
Liabilities assumed in acquisition of business $9,877 $9,340
Issuance of Common Stock in acquisition of
business $747 -
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
INBRAND CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
September 28, 1996
1. Effective July 1, 1996 the Company, through its subsidiary, INBRAND Europe
B.V. (INBRAND Europe), acquired Julian T. Holding B.V., a Dutch company
(JTH), upon execution of a definitive contribution agreement. Under
the terms of the agreement, in exchange for all of the outstanding shares
of JTH, the sole shareholder of JTH became a 4.95% shareholder of INBRAND
Europe in a business transaction valued at approximately $1,300,000
accounted for as a purchase. Prior to this transaction, the management
of JTH had assumed management positions at INBRAND France, also a
subsidiary of INBRAND Europe, as part of INBRAND's plan to restructure
the former Celatose operations acquired by INBRAND France during fiscal
1996. Certain fair values of JTH assets have not yet been finalized. As
a result, estimates of these fair values have been used in consolidating
JTH. These ultimate differences, if any, of the actual fair values from
the estimates used are not expected to be material.
2. The effective consolidated income tax rate of 30.8% (versus 47.9% for the
fiscal year ended June 29, 1996 and 43.2% for the thirteen week period
ended September 30, 1995) is less than the expected statutory rate
primarily due to a tax holiday granted to certain INBRAND Europe
operations.
<PAGE>
INBRAND CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
Results of Operations
Net sales increased 209.7% for the first quarter of fiscal 1997 compared with
the year-earlier period. This increase was consistent with the North
American growth the Company has achieved over the past several quarters and
was also due, in large part, to the acquired European operations and INBRAND
UK maturing as part of the consolidated group.
Gross Profit as a percentage of net sales in the first quarter increased
to 29.0% from 27.4% in the year-earlier period. This increase was due to
higher gross margins from North American operations as a result of manufactur-
ing efficiencies and more favorable raw material costs. This was partially
offset by European gross margins from acquired businesses, which are at lower
levels than in North America. As a result of the Company's raw material
supply contract costs of certain raw materials have been stabilized moreso
than in prior periods. While general price levels of the Company's raw
materials were relatively stable during the first 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 19.1% from 17.7% in the year-earlier period. For the first quarter the
absolute level of selling expenses continued to increase due to expansion of
sales and marketing programs as well as due to the impact of the acquired
operations while increasing slightly as a percentage of sales. Administrative
expense level increases are due to the impact of the acquired operations as
well as from internal growth in North America.
As a percentage of net sales, net income in the first quarter was 5.8% up
from 5.1% in the year-earlier quarter. This increase was due to higher gross
margin levels discussed above net of increases in operating expenses along
with increases in interest expense due to debt incurred as a result of the
Company's acquisition program.
Earnings per share for first quarter were $.40 compared to $.17 in the
year-earlier period. This increase was due to higher net income levels on
relatively unchanged levels of shares outstanding.
<PAGE>
INBRAND CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
Cash generated from operating activities was $1.3 million for the thirteen
weeks ended September 28, 1996 compared to $1.1 million in the year-earlier
period. While the cumulative effect of net income and depreciation for the
current period generated $4.6 million of cash flow ($2.4 million more than
in the year-earlier period), working capital needs, primarily associated with
the Company's acquisitions, required the use of $3.3 million for the thirteen
week period.
During the thirteen week period the Company increased its borrowings under its
$35 million unsecured line of credit by $1.6 million. These borrowings
were used to fund the Company's continued expansion program and for general
working capital needs.
The Company intends to continue its expansion program during the current
fiscal year and has renewed its unsecured revolving credit line of $35
million. Additionally, management is currently negotiating a $15 million
unsecured foreign currency based revolving credit facility in Europe to
support the working capital needs of INBRAND Europe and its subsidiaries.
Management believes that the Company's capital position, together with
amounts generated from operations and additional borrowings through the
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 Consolidated Statements of Income.
b. Reports on Form 8-K
Form 8-K dated July 31, 1996 announcing the acquisition
of the capital stock of Julian T. Holding, B.V.
<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
November 12, 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> 3-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> SEP-28-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 33,896
<ALLOWANCES> 830
<INVENTORY> 18,728
<CURRENT-ASSETS> 55,039
<PP&E> 71,268
<DEPRECIATION> 18,235
<TOTAL-ASSETS> 120,043
<CURRENT-LIABILITIES> 41,307
<BONDS> 0
<COMMON> 784
0
0
<OTHER-SE> 42,325
<TOTAL-LIABILITY-AND-EQUITY> 120,043
<SALES> 54,417
<TOTAL-REVENUES> 54,417
<CGS> 38,651
<TOTAL-COSTS> 38,651
<OTHER-EXPENSES> 10,447
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 789
<INCOME-PRETAX> 4,530
<INCOME-TAX> 1,393
<INCOME-CONTINUING> 3,137
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,137
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
