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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 Quarterly Period Ended Commission File Number:
July 1, 2000 0-23234
FULL LINE DISTRIBUTORS, INC.
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(Exact name of registrant as specified in its charter)
Georgia 58-1724902
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Airport Drive, Ball Ground, Georgia 30107
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 479-1877
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Not applicable
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(Former name, former address and former fiscal year, if changed since last
report)
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 registrant's classes of
common stock, as of the latest practicable date:
Common Stock, without par value 4,210,001 shares
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Class Outstanding at August 3, 2000
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PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
FULL LINE DISTRIBUTORS, INC.
BALANCE SHEETS
(In thousands, except share information)
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<TABLE>
<CAPTION>
JULY 1, JANUARY 1,
ASSETS 2000 2000
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 573 $ 233
Accounts receivable, net 10,686 7,362
Inventories, net 23,214 23,202
Other current assets 1,970 1,693
------- --------
Total current assets 36,443 32,490
PROPERTY, PLANT AND EQUIPMENT - Net 3,543 3,803
OTHER ASSETS 132 129
------- --------
$40,118 $ 36,422
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,064 $ 6,090
Current portion of long-term debt 167 164
Accrued expenses 1,807 1,067
------- --------
Total current liabilities 9,038 7,321
LONG-TERM DEBT 16,160 15,108
OTHER LONG TERM LIABILITIES 624 404
STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares
Authorized; no shares issued
Common Stock, no par value; 25,000,000
Shares authorized; 4,206,251 and 4,202,501 shares
Issued and outstanding, respectively 10,830 10,827
Paid in capital 3,304 3,304
Retained earnings (accumulated deficit) 162 (542)
------- --------
Total stockholders' equity 14,296 13,589
------- --------
$40,118 $ 36,422
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</TABLE>
See notes to unaudited financial statements
2
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FULL LINE DISTRIBUTORS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
JULY 1, JULY 3, JULY 1, JULY 3,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
NET SALES $26,736 $27,277 $48,505 $47,732
COST OF GOODS SOLD 22,093 22,876 39,796 39,742
------- ------- ------- -------
Gross Profit 4,643 4,401 8,709 7,990
OPERATING EXPENSES 3,571 3,392 6,888 6,420
------- ------- ------- -------
OPERATING INCOME 1,072 1,009 1,821 1,570
OTHER EXPENSES, PRINCIPALLY INTEREST 325 247 637 483
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 747 762 1,184 1,087
INCOME TAX PROVISION 301 313 480 442
------- ------- ------- -------
NET INCOME $ 446 $ 449 $ 704 $ 645
======= ======= ======= =======
BASIC NET INCOME PER SHARE $ 0.11 $ 0.11 $ 0.17 $ 0.15
DILUTED NET INCOME PER SHARE $ 0.10 $ 0.10 $ 0.16 $ 0.15
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 4,206 4,200 4,205 4,200
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 4,291 4,302 4,290 4,293
</TABLE>
See notes to unaudited financial statements
3
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FULL LINE DISTRIBUTORS, INC.
STATEMENTS OF CASH FLOW (UNAUDITED)
(In thousands)
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
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JULY 1, JULY 3,
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 704 $ 645
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 322 281
Provision for doubtful accounts 138 148
Loss on disposal of fixed asset 22
Changes in assets and liabilities providing (using) cash:
Accounts receivable (3,462) (4,362)
Inventories (12) 2,050
Other (26) 11
Accounts payable 974 (2,173)
Accrued expenses 844 50
------- -------
Net cash used in operating activities (496) (3,350)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (222) (688)
Proceeds from sale of assets 1
------- -------
Net cash used in investing activities (222) (687)
FINANCING ACTIVITIES:
Borrowings under line of credit, net 1,131 4,488
Repayments of long-term borrowings (76) (15)
Proceeds from exercise of stock option 3
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Net cash provided by financing activities 1,058 4,473
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NET CHANGE IN CASH 340 436
CASH, BEGINNING OF PERIOD 233 407
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CASH, END OF PERIOD $ 573 $ 843
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</TABLE>
See notes to unaudited financial statements.
4
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FULL LINE DISTRIBUTORS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
QUARTERS ENDED JULY 1, 2000 AND JULY 3, 1999
1. ORGANIZATION AND BASIS OF PRESENTATION
Full Line Distributors, Inc. (The "Company") distributes and manufactures
sportswear principally for the imprinted garment industry. The Company
manufactures certain of its products and also purchases merchandise from
national sportswear manufacturers for distribution currently through six
distribution facilities across the United States. The Company's customers are
principally domestic retailers in the imprintable and decorable sportswear
industry. Accordingly, the Company operates in one business segment.
The accompanying unaudited financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information, the instructions for Form 10-Q, and Regulation S-X. These
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the year ended January 1, 2000.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) considered necessary for a fair presentation of interim
results have been included. The results of operations for the three and six
months ended July 1, 2000 are not necessarily indicative of the operating
results for the full year.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
July 1, January 1,
2000 2000
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<S> <C> <C>
Raw materials $ 801 $ 823
Work-in-process 584 506
Finished goods 23,515 23,351
Reserves (1,686) (1,478)
------- -------
$23,214 $23,202
======= =======
</TABLE>
3. LONG-TERM DEBT
The Company maintains a credit facility with a bank. At July 1, 2000 the
credit facility, as amended, (i) provided for maximum borrowings of $17 million
(subject to certain collateral restrictions based on eligible receivables,
inventories and fixed assets), (ii) expires on April 30, 2002 and (iii) bore
interest at the prime rate plus .25% or LIBOR plus 2.25% (subject to repricing
annually). The facility is secured by substantially all the Company's assets. As
of July 1, 2000, the Company had borrowings totaling $15.4 million outstanding
under the credit facility and availability to borrow $1.2 million.
4. FACILITY CLOSURE
During the second quarter of 2000, the Company closed its sewing facility
located in Ball Ground, Georgia. Closure costs included in operating expenses in
the accompanying statement of operations consisted of $29,000 of paid severance
costs for 39 employees, impairment charges of $101,160 to record equipment at
its net realizable value and other costs of $22,480. This equipment is held for
sale at July 1, 2000 and its new basis of $37,344 is included in the other
current assets in the accompanying balance sheet.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
components of the Company's statements of operations expressed as a percentage
of net sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ -----------------
JULY 1, JULY 3, JULY 1, JULY 3,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 82.6 83.9 82.0 83.3
----- ----- ----- -----
Gross profit 17.4 16.1 18.0 16.7
Operating expenses 13.4 12.4 14.2 13.5
----- ----- ----- -----
Operating income 4.0 3.7 3.8 3.2
Other expense principally interest 1.2 0.9 1.3 0.9
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Income before income taxes 2.8 2.8 2.5 2.3
Income tax provision 1.1 1.2 1.0 0.9
----- ----- ----- -----
Net income 1.7% 1.6% 1.5% 1.4%
===== ===== ===== =====
</TABLE>
Second Quarter of 2000 Compared to Second Quarter of 1999
The Company's net sales decreased $541,000, or 2.0%, to $26.7 million
in the second quarter of 2000 from $27.3 million in the second quarter of 1999.
The decrease in net sales was primarily due to the inability to replace sales of
discontinued products and lower selling prices of certain styles.
The Company's gross profit increased $242,000, or 5.5%, to $4.6 million
for the second quarter of 2000 from $4.4 million in the second quarter of 1999.
The gross profit margin increased to 17.4% for the second quarter of 2000
compared to 16.1% in the second quarter of 1999. The increase in gross profit
margin is the result of increased sales of higher margin manufactured product
combined with lower costs of goods sold due to improved purchasing procedures on
distribution products.
Operating expenses increased $179,000, or 5.3% to $3.6 million in the
second quarter of 2000 from $3.4 million in the second quarter of 1999. The
increase in operating expenses was due primarily to $153,000 of costs related to
the closing of the Ball Ground sewing facility in June 2000. See Note 4 of notes
to financial statements. As a percentage of net sales, operating expenses
increased to 13.4% in the second quarter of 2000 from 12.4% in the second
quarter of 1999.
As a result of the above factors, operating income increased $63,000 or
6.2%, to $1.1 million in the second quarter of 2000 from $1.0 million in the
second quarter of 1999. As a percentage of net sales, operating income increased
to 4.0% in the second quarter of 2000 from 3.7% in the second quarter of 1999.
Other expenses, which consist principally of interest expense,
increased $78,000, or 31.6%, to $325,000 in the second quarter of 2000 from
$247,000 in the second quarter of 1999. The increase was primarily due to higher
interest rates attributable to increases in the prime rate, and to increased
borrowings under the Company's line of credit, which resulted from financing
increased inventory and accounts receivable balances.
As a result of the above factors, income before income taxes decreased
$15,000, or 2.0% to $747,000 in the second quarter of 2000 from $762,000 in the
second quarter of 1999. Income before income taxes as a percentage of net sales
remained constant at 2.8%.
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The Company recorded an income tax provision of $301,000 in the second
quarter of 2000 compared to $313,000 in the second quarter of 1999. The
provision for both quarters approximates the statutory federal and state income
tax rates.
As a result of the above factors, net income decreased $3,000, or 0.6%,
to $446,000 ($.10 per diluted share) in the second quarter of 2000 from $449,000
($.10 per diluted share) in the second quarter of 1999. As a percentage of net
sales, net income increased to 1.7% in 2000 from 1.6% in 1999.
First Six Months of 2000 Compared to First Six Months of 1999
The Company's net sales increased $773,000, or 1.6%, to $48.5 million
in the first six months of 2000 from $47.7 million in the first six months of
1999. The increase in net sales is attributable to the favorable results
achieved by the Company's expanded sales force.
The Company's gross profit increased $719,000, or 9.0%, to $8.7 million
for the first six months of 2000 from $8.0 million in the first six months of
1999. Gross profit margin increased to 18.0% in the first six months of 2000
from 16.7% in the first six months of 1999. The increase in gross profit is
attributable to the increase in net sales over relatively constant cost of goods
sold. The increase in gross profit margin is due to increased sales of higher
margin manufactured product and lower costs of goods sold due to improved
purchasing procedures on distribution products.
Operating expenses increased $468,000, or 7.3%, to $6.9 million in the
first six months of 2000 from $6.4 million in the first six months of 1999. The
increase in operating expenses is due primarily to increased selling costs
associated with the national sales program and the Ball Ground facility closure.
As a percentage of net sales, operating expenses increased to 14.2% in the first
six months of 2000 from 13.5% in the first six months of 1999.
As a result of the above factors, operating income increased $251,000,
or 16.0%, to $1.8 million in the first six months of 2000 from $1.6 million in
the first six months of 1999. As a percentage of net sales, operating income
increased to 3.8% in the first six months of 2000 from 3.2% in the first six
months of 1999.
Other expenses, which consist principally of interest expense,
increased $154,000, or 31.9%, to $637,000 in the first six months of 2000 from
$483,000 in the first six months of 1999. The increase was primarily due to
higher interest rates attributable to increases in the prime rate, and to
increased borrowings under the Company's line of credit, which resulted from
financing increased inventory and accounts receivable balances. Other expense as
a percentage of net sales increased to 1.3% in the first six months of 2000 from
0.9% in the first six months of 1999.
As a result of the above factors, income before income taxes increased
$97,000, or 9.0% to $1.2 million in the first six months of 2000 compared to
$1.1 million in the first six months of 1999. Income before income taxes as a
percentage of net sales increased to 2.5% in the first six months of 2000 from
2.3% in the first six months of 1999.
The Company recorded an income tax provision of $480,000 in the first
six months of 2000 compared to $442,000 in the first six months of 1999. The
provision for both periods approximates the statutory federal and state income
tax rates.
As a result of the above factors, net income increased $59,000, or
9.1%, to $704,000 ($.16 per diluted share) in the first six months of 2000 from
$645,000 ($.15 per diluted share) in the first six months of 1999. As a
percentage of net sales, net income increased to 1.5% in the first six months of
2000 from 1.4% in the first six months of 1999.
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<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations was $496,000 for the first six months of
2000 compared to $3.4 million in the first six months of 1999. The net cash used
in operations in the first six months of 2000 was primarily to support increased
accounts receivable levels. The net cash used in operations in the first six
months of 1999 was primarily used to support increased accounts receivable
levels offset by decreased inventory levels.
The Company maintains a credit facility with a bank. At July 1, 2000
the credit facility, as amended, (i) provided for maximum borrowings of $17
million (subject to certain collateral restrictions based on eligible
receivables, inventories and fixed assets), (ii) expires on April 30, 2002 and
(iii) bore interest at the prime rate plus .25% or LIBOR plus 2.25% (subject to
repricing annually). The facility is secured by substantially all the Company's
assets. As of August 3, 2000, the Company had borrowings totaling $13.5 million
outstanding under the credit facility and availability to borrow $3.3 million.
The Company's ability to fund its working capital and capital
expenditure requirements, make interest payments and meet its other cash
requirements depends, among other things, on internally generated funds and the
continued availability of and compliance with the terms of its credit facility.
Management further believes that internally generated funds and funds available
from the Company's line of credit will be sufficient to meet the Company's
capital requirements and operating needs in fiscal 2000. However, if there is a
significant reduction of internally generated funds or the Company is unable to
meet the operating projections used in amending the credit facility, as amended,
the Company may require additional funds from outside financing sources. In such
event, there can be no assurance that the Company will be able to obtain such
funding as and when required or on acceptable terms.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor to encourage companies to provide prospective information so long as it
is identified as forward-looking and accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed. Forward-looking statements are related
to the plans and objectives of management for the future operations, economic
performance, of projections of revenues, income, earnings per share, capital
expenditures, dividends, capital structure, or other financial items. In the
preceding discussion and elsewhere in this report, statements containing words
such as "expect," "anticipate," "believe," "goal," "objective," or similar words
are intended to identify forward-looking statements. The Company undertakes no
obligation to update such forward-looking statements, and it wishes to identify
important factors that could cause actual results to differ materially from
those projected in the forward-looking statements contained in the following
discussion and elsewhere in this report. The risks and uncertainties that may
affect the operations, performance, development, and results of the Company's
business include but are not limited to the following: (1) heightened
competition, particularly intensified price competition; (2) general economic
and business conditions which are less favorable than expected; (3)
unanticipated changes in industry trends; and (4) other risks detailed herein
and from time to time in the Company's other reports.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters for Vote of Security Holders
On May 15, 2000, the Company held its 2000 Annual Meeting of Shareholders. At
the meeting, the following persons were elected to serve on the Company's Board
of Directors until the next annual meeting of shareholders and until their
successors are elected and have qualified: Isador E. Mitzner, J. David Keller,
Kenneth L. Bernhardt and Irwin Lowenstein. The number of votes cast for each
director and the number of shares withholding authority to vote in favor is set
forth below with respect to each division:
<TABLE>
<CAPTION>
For Withheld
--------- --------
<S> <C> <C>
Isador E. Mitzner 3,784,430 400
J. David Keller 3,784,430 400
Kenneth Bernhardt 3,784,430 400
Irwin Lowenstein 3,784,430 400
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27. Financial Data Schedule, (for SEC use only)
(b) Reports on Form 8-K. No report on Form 8-K was filed during
the quarter ended July 1, 2000.
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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.
FULL LINE DISTRIBUTORS, INC.
Dated: August 3, 2000 By: /s/ Isador E. Mitzner
---------------------------------
Isador E. Mitzner, Chairman
and Chief Executive Officer
Dated: August 3, 2000 By: /s/ Mickie Schneider
---------------------------------
Mickie Schneider
(acting principal financial and
accounting officer)
