<PAGE> 1
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:
April 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 registrants classes of
common stock, as of the latest practicable date:
Common Stock, without par value 4,206,251 shares
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Class Outstanding at May 8, 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>
APRIL 1, JANUARY 1,
ASSETS 2000 2000
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 749 $ 233
Accounts receivable, net 10,781 7,362
Inventories 27,656 23,202
Other current assets 2,123 1,693
-------- --------
Total current assets 41,309 32,490
PROPERTY, PLANT AND EQUIPMENT - Net 3,780 3,803
OTHER ASSETS 132 129
-------- --------
$ 45,221 $ 36,422
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,486 $ 6,090
Current portion of long-term debt 167 164
Accrued expenses 1,318 1,067
-------- --------
Total current liabilities 13,971 7,321
LONG-TERM DEBT 16,770 15,108
OTHER LONG TERM LIABILITIES 630 404
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 10,830 10,827
Paid in capital 3,304 3,304
Accumulated deficit (284) (542)
-------- --------
Total stockholders' equity 13,850 13,589
-------- --------
$ 45,221 $ 36,422
======== ========
</TABLE>
See notes to unaudited financial statements
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FULL LINE DISTRIBUTORS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share information)
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<TABLE>
<CAPTION>
Quarter Ended
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April 1, April 3,
2000 1999
<S> <C> <C>
NET SALES $21,769 $20,455
COST OF GOODS SOLD 17,703 16,866
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Gross Profit 4,066 3,589
OPERATING EXPENSES 3,317 3,029
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OPERATING INCOME 749 560
OTHER EXPENSE, PRINCIPALLY INTEREST 312 235
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INCOME BEFORE INCOME TAXES 437 325
INCOME TAX PROVISION 179 128
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NET INCOME $ 258 $ 197
======= =======
BASIC NET INCOME PER SHARE $ 0.06 $ 0.05
DILUTED NET INCOME PER SHARE $ 0.06 $ 0.05
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 4,204 4,200
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 4,289 4,294
</TABLE>
See notes to unaudited financial statements
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<PAGE> 4
FULL LINE DISTRIBUTORS, INC.
STATEMENTS OF CASH FLOW (UNAUDITED)
(IN THOUSANDS)
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<TABLE>
<CAPTION>
QUARTER ENDED
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APRIL 1, APRIL 3,
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 258 $ 197
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 158 149
Provision for doubtful accounts 59 63
Loss on disposal of fixed asset 3
Changes in assets and liabilities providing (using) cash:
Accounts receivable (3,478) (2,677)
Inventories (4,454) 22
Other (210) (61)
Accounts payable 6,396 (138)
Accrued expenses 251 9
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Net cash used in operating activities (1,017) (2,436)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (136) (355)
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Net cash used in investing activities (136) (355)
FINANCING ACTIVITIES:
Borrowings under line of credit, net 1,702 2,963
Repayments of long-term borrowings (36) (7)
Proceeds from exercise of stock option 3
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Net cash provided by financing activities 1,669 2,956
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NET CHANGE IN CASH 516 165
CASH, BEGINNING OF PERIOD 233 407
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CASH, END OF PERIOD $ 749 $ 572
======= =======
</TABLE>
See notes to unaudited financial statements.
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<PAGE> 5
FULL LINE DISTRIBUTORS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
QUARTERS ENDED APRIL 1, 2000 AND APRIL 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 months ended
April 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>
April 1, January 1,
2000 2000
<S> <C> <C>
Raw materials $ 672 $ 823
Work-in-process 559 506
Finished goods 28,283 23,351
Reserves (1,858) (1,478)
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$ 27,656 $ 23,202
======== ========
</TABLE>
3. LONG-TERM DEBT
The Company maintains a credit facility with a bank. At April 1, 2000
the credit facility, as amended, (i) provides 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 2.5% (reduced to
prime rate or LIBOR plus 2.25% in April 2000 and subject to repricing annually).
The facility is secured by substantially all the Company's assets. As of April
1, 2000, the Company had borrowings totaling $15.9 million outstanding under the
credit facility and availability to borrow $836,000.
4. STOCK OPTIONS
During the first quarter of 2000, certain employees of the Company were
granted options to purchase a total of 15,000 shares of common stock. The
options were granted at or above the fair market value of the stock at the time
of grant.
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<PAGE> 6
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>
QUARTER ENDED
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APRIL 1, APRIL 3,
2000 1999
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 81.3 82.5
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Gross profit 18.7 17.5
Operating expenses 15.3 14.8
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Operating income 3.4 2.7
Other income (expense) principally interest (1.4) (1.1)
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Income before income taxes 2.0 1.6
Income tax provision (0.8) (0.6)
===== =====
Net income 1.2% 1.0%
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</TABLE>
First Quarter of 2000 Compared to First Quarter of 1999
The Company's net sales increased approximately $1.3 million, or 6.4%,
to $21.8 million in the first quarter of 2000 from $20.5 million in the first
quarter of 1999. The increase in net sales was attributable to the favorable
results achieved by the Company's expanded sales force. The sales increases
included a 19.9% increase in Company manufactured products and a 3.0% increase
in distribution products.
The Company's gross profit increased approximately $476,000, or 13.3%,
to $4.1 million for the first quarter of 2000 from $3.6 million in the first
quarter of 1999. As a percentage of net sales, the gross profit margin increased
to 18.7% for the first quarter of 2000 compared to 17.6% in the first quarter of
1999. The increase in gross profit dollars was the result of the increase in
sales and gross profit margin. The increase in gross profit margin is the result
of the increase in manufactured product sales and better prices due to improved
purchasing procedures on distribution products.
Operating expenses increased approximately $288,000, or 9.5% to $3.3
million in the first quarter of 2000 from $3.0 million in the first quarter of
1999. The increase in operating expenses was due primarily to increased selling
costs associated with the national sales force and to increased distribution
labor and facility costs. As a percentage of net sales, operating expenses
increased to 15.3% in the first quarter of 2000 from 14.8% in the first quarter
of 1999.
As a result of the increase in net sales and gross profit, operating
income increased approximately $189,000 or 33.8%, to $749,000 in the first
quarter of 2000 from $560,000 in the first quarter of 1999. As a percentage of
net sales, operating income increased to 3.4% in the first quarter of 2000 from
2.7% in the first quarter of 1999.
Other income (expense) which consists principally of interest expense
increased approximately $77,000, or 32.8%, to $312,000 in the first quarter of
2000 from $235,000 in the first quarter of 1999. The increase was primarily due
to higher interest rates due 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.
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<PAGE> 7
Income before income taxes increased approximately $112,000, or 34.5%
to $437,000 in the first quarter of 2000 from $325,000 in the first quarter of
1999. Income before income taxes as a percentage of net sales increased to 2.0%
in 2000 from 1.6% in 1999.
The Company recorded an income tax provision of $179,000 in the first
quarter of 2000 compared to $128,000 in the first quarter of 1999. The provision
for both years approximates the statutory federal and state income tax rates.
As a result of the above factors, net income increased $61,000, or
31.0%, to $258,000 in the first quarter of 2000 from $197,000 in the first
quarter of 1999. As a percentage of net sales, net income increased to 1.2% in
2000 from 1.0% in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations was approximately $1.0 million for the
first quarter of 2000 compared to approximately $2.4 million in the first
quarter of 1999. The net cash used in operations in the first quarter of 2000
was primarily used to support increased accounts receivable and inventory
levels. The net cash used in operations in the first quarter of 1999 was
primarily used to support increased accounts receivable levels associated with
the increase in sales.
The Company maintains a credit facility with a bank. At April 1, 2000
the credit facility, as amended, (i) provides 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 2.5% (reduced to
prime rate or LIBOR plus 2.25% in April 2000 and subject to repricing annually).
The facility is secured by substantially all the Company's assets. As of May 8,
2000, the Company had borrowings totaling $15.2 million outstanding under the
credit facility and availability to borrow $1.7.
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
following 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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<PAGE> 8
PART II. OTHER INFORMATION
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 April 1, 2000.
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<PAGE> 9
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: May 9, 2000 By: /s/ Isador E. Mitzner
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Isador E. Mitzner, Chairman
and Chief Executive Officer
Dated: May 9, 2000 By: /s/ John F. Hankinson
----------------------------------------
John F. Hankinson
Chief Financial Officer
(acting principal financial and
accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FULL LINE DISTRIBUTORS, INC. FOR THE THREE MONTHS ENDED
APRIL 1, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-START> JAN-02-2000
<PERIOD-END> APR-01-2000
<CASH> 749
<SECURITIES> 0
<RECEIVABLES> 12,421
<ALLOWANCES> 1,640
<INVENTORY> 27,656
<CURRENT-ASSETS> 41,309
<PP&E> 7,364
<DEPRECIATION> 3,584
<TOTAL-ASSETS> 45,221
<CURRENT-LIABILITIES> 13,971
<BONDS> 16,770
0
0
<COMMON> 10,830
<OTHER-SE> 3,020
<TOTAL-LIABILITY-AND-EQUITY> 45,221
<SALES> 21,769
<TOTAL-REVENUES> 21,769
<CGS> 17,703
<TOTAL-COSTS> 17,703
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 59
<INTEREST-EXPENSE> 312
<INCOME-PRETAX> 437
<INCOME-TAX> 179
<INCOME-CONTINUING> 258
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 258
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.06
</TABLE>
