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 December 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 February 10, 1997, 11,760,123 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 December 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 December 28, 1996
(Unaudited)
__________________ __________________
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 1,554 $ 1,853
Receivables 27,082 36,249
Raw Materials Inventory 7,850 8,901
Finished Goods Inventory 10,353 12,235
Income Taxes Receivable 67 -
Deferred Income Taxes 792 792
Other 869 1,614
________ ________
Total Current Assets 48,567 61,644
________ ________
Property and Equipment, net 46,457 55,492
Intangible Assets 9,716 11,280
Other Assets 880 1,181
________ ________
TOTAL ASSETS $105,620 $129,597
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank Overdraft $ 554 $ 2,402
Current Portion of Long-Term Debt 1,515 1,347
Current Portion of Capital Lease
Obligations 638 671
Accounts Payable 17,445 23,827
Accrued Expenses 7,152 8,549
Accrued Restructuring Expenses 1,642 1,619
Accrued Rebates 1,264 1,500
Income Taxes Payable - 499
________ ________
Total Current Liabilities 30,210 40,414
________ ________
LONG-TERM LIABILITIES
Long-Term Debt 28,866 37,280
Capital Lease Obligations 2,429 2,059
Deferred Income Taxes 3,054 3,054
Other 1,061 1,127
________ ________
Total Long-Term Liabilities 35,410 43,520
________ ________
MINORITY INTEREST - 397
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
PREFERRED STOCK-1,000 shares
authorized; none issued
COMMON STOCK-$.10 par value-
49,000 shares authorized; 11,760 and
7,840 shares issued at December 28,
1996 and June 29, 1996, respectively 784 1,176
PAID-IN CAPITAL 17,137 16,745
RETAINED EARNINGS 22,254 27,531
Translation Adjustment (175) (186)
________ ________
TOTAL STOCKHOLDERS' EQUITY 40,000 45,266
________ ________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $105,620 $129,597
<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 Twenty-six weeks ended
__________________________ ___________________________
December 30, December 28, December 30, December 28,
1995 1996 1995 1996
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
NET SALES $27,032 $57,937 $52,984 $112,354
COST OF SALES 19,395 41,857 38,242 80,508
_______ _______ _______ ________
Gross Profit 7,637 16,080 14,742 31,846
_______ _______ _______ ________
OPERATING EXPENSES
Sales, marketing and
distribution 3,564 8,203 6,880 15,252
General and adminis-
trative 1,300 3,633 2,570 6,943
______ _______ _______ _______
TOTAL OPERATING EXPENSES 4,864 11,836 9,450 22,195
_______ _______ _______ _______
OPERATING INCOME 2,773 4,244 5,292 9,651
OTHER INCOME (EXPENSE)
Interest expense (328) (899) (535) (1,688)
Minority interest - (66) - (154)
Other income - 31 - 31
_______ _______ _______ _______
INCOME BEFORE
INCOME TAXES 2,445 3,310 4,757 7,840
INCOME TAX PROVISION 1,124 1,170 2,122 2,563
_______ _______ _______ _______
NET INCOME $ 1,321 $ 2,140 $ 2,635 $ 5,277
PER SHARE DATA:
EARNINGS PER SHARE $ .11 $ .18 $ .22 $ .45
WEIGHTED AVERAGE
COMMON SHARES 11,760 11,760 11,760 11,760
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
INBRAND CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
Twenty-six weeks ended
______________________________
December 30, December 28,
1995 1996
_____________ _____________
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,533 $ 2,339
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire Property and Equipment (5,679) (10,004)
Costs for purhase of subsidiary (6,489) (307)
Other (16) (44)
_______ _______
NET CASH USED BY INVESTING ACTIVITIES (12,184 ) (10,355)
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Bank Overdraft (460) 451
Proceeds From borrowings Under Long-Term Debt 10,448 8,761
Principal payments on Long-Term Debt (428) (557)
Principal payments under Capital Lease
Obligations - (356)
_______ _______
NET CASH PROVIDED BY FINANCING ACTIVITIES 9,560 8,299
_______ _______
EFFECT OF EXCHANGE RATE CHANGES ON CASH 91 16
_______ _______
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS - 299
CASH AND CASH EQUIVALENTS-beginning of period - 1,554
_______ _______
CASH AND CASH EQUIVALENTS-end of period $ - $ 1,853
NONCASH INVESTING AND FINANCING ACTIVITIES
Liabilities assumed in acquisition of business $9,877 $9,340
Issuance of Common Stock in acquisition of
business $ 747 $ -
Additions to Property and Equipment included
in Accounts Payable $ 50 $ -
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
INBRAND CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
December 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 32.7% for the twenty-six
week period ended December 28, 1996 (versus 47.9% for the fiscal year
ended June 29, 1996 and 44.6% for the twenty-six week period ended
December 30, 1995) is less than the expected statutory rate primarily
due to a tax holiday granted to certain INBRAND Europe operations.
3. On October 25, 1996 the Company declared a 3 for 2 stock split for all
shareholders of record on November 8, 1996. The split resulted in the
issuance of 3,920,026 new shares bringing the total outstanding shares to
11,760,123. All per share amounts have been restated to reflect the
effects of the split.
4. In January 1997 INBRAND Europe negotiated and executed an unsecured
revolving multi-currency credit facility with a European financial
institution in the amount of $15 million. The terms, conditions,
requirements, restrictions and financial covenants of this facility are
substantially the same as those of the $35 million credit facility with
the Company's primary U.S. lender. The Company has guaranteed this debt on
behalf of its INBRAND Europe subsidiary.
<PAGE>
INBRAND CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS
Results of Operations
Net sales increased 214.3% for the second quarter of fiscal 1997 compared with
the year-earlier period and 212.1% year-to-date compared to the prior year-to-
date 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 second quarter decreased
to 27.8% from 28.2% in the year-earlier period. Gross Profit percent year-
to-date increased to 28.3% for fiscal 1997 form 27.8% for fiscal 1996. The
decrease in the second quarter was primarily a result of lower European gross
margins, which are at lower levels than in North America, the impact of
which more than offset the benefit of favorable raw material costs. The
increase year-to-date was due to higher gross margins from North American
operations as a result of manufacturing efficiencies and more favorable raw
material costs partially offset by lower European gross margins from acquired
businesses. 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 and second quarters, 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 second quarter
increased to 20.4% from 18.0% in the year-earlier period and year-to-date
increased to 19.8% for fiscal 1997 from 17.8% for fiscal 1996. For the
fiscal 1997 second quarter and year-to-date the absolute level of selling
expenses continued to increase due to expansion of sales and marketing
activities as well as due to the impact of the acquired operations. They
also increased 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. Additionally, operating expenses at
INBRAND UK, while at similar absolute levels, were proportionately higher as
a percentage of sales during the period.
As a percentage of net sales, net income in the second quarter was 3.7% down
from 4.9% in the year-earlier quarter and year-to-date 1997 was 4.7% down
from 5.0% in the prior year-to-date period. This decrease was due to lower
gross margin levels discussed above coupled with 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 second quarter were $.18 compared to $.11 in the
year-earlier period. Earnings per share year-to-date were $.45 for fiscal
1997 compared to $.22 for fiscal 1996. 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 $2.3 million for the twenty-six
weeks ended December 28, 1996 compared to $2.5 million in the year-earlier
period. While the cumulative effect of net income and depreciation for the
current period generated $8.8 million of cash flow ($4.2 million more than
in the year-earlier period), working capital needs, primarily associated with
the Company's acquisitions, required the use of $6.5 million for the twenty-
six week period.
During the twenty-six week period the Company increased its borrowings under
its U.S. $35 million unsecured line of credit by $8.8 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, increasing
it to $35 million. Additionally, in Janurary 1997 INBRAND Europe negotiated
and executed a $15 million unsecured foreign currency based revolving credit
facility with a European bank to support the working capital needs of INBRAND
Europe and its subsidiaries. The Company guaranteed repayment of this debt
on behalf of its INBRAND Europe subsidiary. Management believes that the
Company's capital position, together with amounts generated from operations
and additional borrowings through the credit facilities 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 #2 Changes in Securities
On October 25, 1996 the Board of Directors of the Company
declared a 3 for 2 stock split to be effected in the form
of a 50% stock dividend. The stock dividend had a record
date of November 8, 1996 and was distributed to stockholders
on November 22, 1996. As a result of the stock split
3,920,026 new common shares were issued bringing total out-
standing common shares to 11,760,123.
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
February 10, 1997
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> DEC-28-1996
<CASH> 1,853
<SECURITIES> 0
<RECEIVABLES> 36,249
<ALLOWANCES> 756
<INVENTORY> 21,136
<CURRENT-ASSETS> 61,644
<PP&E> 76,027
<DEPRECIATION> 20,535
<TOTAL-ASSETS> 129,597
<CURRENT-LIABILITIES> 40,414
<BONDS> 0
<COMMON> 1,176
0
0
<OTHER-SE> 44,090
<TOTAL-LIABILITY-AND-EQUITY> 129,597
<SALES> 112,354
<TOTAL-REVENUES> 112,354
<CGS> 80,508
<TOTAL-COSTS> 80,508
<OTHER-EXPENSES> 22,318
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,688
<INCOME-PRETAX> 7,840
<INCOME-TAX> 2,563
<INCOME-CONTINUING> 5,277
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,277
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
