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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:
September 30, 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 ,222,501 shares
-------------------------------- --------------------------------
Class Outstanding at November 10, 2000
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PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
FULL LINE DISTRIBUTORS, INC.
BALANCE SHEETS
(In thousands, except share information)
<TABLE>
<CAPTION>
SEPTEMBER 30, JANUARY 1,
ASSETS 2000 2000
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 645 $ 233
Accounts receivable, net 10,014 7,362
Inventories, net 22,735 23,202
Other current assets 2,115 1,693
-------- --------
Total current assets 35,509 32,490
PROPERTY, PLANT AND EQUIPMENT - Net 3,463 3,803
OTHER ASSETS 147 129
-------- --------
$ 39,119 $ 36,422
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,946 $ 6,090
Current portion of long-term debt 174 164
Accrued expenses 1,423 1,067
-------- --------
Total current liabilities 11,543 7,321
LONG-TERM DEBT 12,371 15,108
OTHER LONG TERM LIABILITIES 556 404
STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares
Authorized; no shares issued
Common Stock, no par value; 25,000,000
Shares authorized; 4,222,501 and 4,202,501 shares
Issued and outstanding, respectively 10,843 10,827
Paid in capital 3,304 3,304
Retained earnings (accumulated deficit) 502 (542)
-------- --------
Total stockholders' equity 14,649 13,589
-------- --------
$ 39,119 $ 36,422
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</TABLE>
See notes to unaudited financial statements
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FULL LINE DISTRIBUTORS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- ---------------------------
September 30, October 2, September 30, October 2,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
NET SALES $ 25,092 $ 25,988 $ 73,597 $ 73,720
COST OF GOODS SOLD 21,083 21,968 60,880 61,710
-------- -------- -------- --------
Gross Profit 4,009 4,020 12,717 12,010
OPERATING EXPENSES 3,149 3,150 10,037 9,571
-------- -------- -------- --------
OPERATING INCOME 860 870 2,680 2,439
OTHER EXPENSES, PRINCIPALLY
INTEREST 313 247 948 730
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 547 623 1,732 1,709
INCOME TAX PROVISION 207 161 687 602
-------- -------- -------- --------
NET INCOME $ 340 $ 462 $ 1,045 $ 1,107
-------- ======== ======== ========
NET INCOME PER SHARE
Basic $ 0.08 $ 0.11 $ 0.25 $ 0.26
Diluted $ 0.08 $ 0.11 $ 0.24 $ 0.26
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 4,215 4,200 4,213 4,200
Diluted 4,280 4,275 4,286 4,288
</TABLE>
See notes to unaudited financial statements
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FULL LINE DISTRIBUTORS, INC.
STATEMENTS OF CASH FLOW (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
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SEPTEMBER 30, OCTOBER 2,
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,045 $ 1,107
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 449 430
Provision for doubtful accounts 213 156
Loss on disposal of fixed asset 23
Changes in assets and liabilities providing (using) cash:
Accounts receivable (2,865) (5,071)
Inventories 467 (229)
Accounts payable 3,856 (650)
Accrued expenses 460 (96)
Other (258) 303
-------- --------
Net cash provided by (used in) operating activities 3,390 (4,050)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (268) (1,120)
Proceeds from sale of assets 1
-------- --------
Net cash used in investing activities (268) (1,119)
FINANCING ACTIVITIES:
(Repayments) borrowings under line of credit, net (2,612) 5,411
Repayments of long-term debt (114) (34)
Proceeds from the exercise of stock options 16 417
-------- --------
Net cash (used in) provided by financing activities (2,710) 5,794
-------- --------
NET CHANGE IN CASH 412 625
CASH, BEGINNING OF PERIOD 233 407
-------- --------
CASH, END OF PERIOD $ 645 $ 1,032
</TABLE>
See notes to unaudited financial statements.
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FULL LINE DISTRIBUTORS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
QUARTERS ENDED SEPTEMBER 30, 2000 AND OCTOBER 2, 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 nine months ended September 30, 2000 are not necessarily indicative of the
operating results for the full year.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, January 1,
2000 2000
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<S> <C> <C>
Raw materials $ 702 $ 823
Work-in-process 670 506
Finished goods 23,022 23,351
Reserves (1,659) (1,478)
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$ 22,735 $ 23,202
========= =========
</TABLE>
3. LONG-TERM DEBT
Long-term debt consists principally of a credit facility with a bank.
At September 30, 2000 the credit facility, as amended, (i) provides for maximum
borrowings of $17.0 million (subject to certain collateral restrictions based on
eligible receivables, inventories and fixed assets), (ii) expires on April 30,
2002 and (iii) bears 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 September 30, 2000, the Company had borrowings
totaling $11.7 million outstanding under the credit facility and availability to
borrow $5.0 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 consist 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. As a result,
the Company had accrued $20,000 for unpaid closure costs as of June 30, 2000.
The Company made payments totaling $6,000 during third quarter 2000, resulting
in a remaining liability of $14,000 as of September 30, 2000. The equipment is
held for sale at September 30, 2000 and its adjusted basis of $36,039 is
included in the other current assets in the accompanying balance sheet.
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5. LITIGATION
The Company is a party to various lawsuits in the ordinary course of
doing business. The Company intends to defend these matters vigorously.
Management is currently in the process of attempting to settle one of these
lawsuits, however, no settlement has been reached to date. The outcome of these
matters cannot presently be determined. Accordingly, no provision for any loss
that may result for the resolution of these matters has been made in the
accompanying financial statement.
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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 NINE MONTHS ENDED
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SEPTEMBER 30, OCTOBER 2, SEPTEMBER 30, OCTOBER 2,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 84.0 84.5 82.7 83.7
-------- -------- -------- --------
Gross profit 16.0 15.5 17.3 16.3
Operating expenses 12.6 12.1 13.6 13.0
-------- -------- -------- --------
Operating income 3.4 3.4 3.7 3.3
Other expense principally interest 1.3 1.0 1.3 1.0
-------- -------- -------- --------
Income before income taxes 2.1 2.4 2.4 2.3
Income tax provision 0.8 0.6 0.9 0.8
-------- -------- -------- --------
Net income 1.3% 1.8% 1.5% 1.5%
======== ======== ======== ========
</TABLE>
Third Quarter of 2000 Compared to Third Quarter of 1999
The Company's net sales decreased $896,000, or 3.4%, to $25.1 million
in the third quarter of 2000 (the "2000 Quarter") from $26.0 million in the
third quarter of 1999 (the "1999 Quarter"). 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 remained constant at $4.0 million for the
third quarters of 2000 and 1999. The gross profit margin increased to 16% for
the 2000 Quarter compared to 15.5% in the 1999 Quarter. The increase in gross
profit margin is the result of increased sales of higher margin manufactured
products combined with lower costs of goods sold due to improved purchasing
procedures on distribution products.
Operating expenses remained constant at $3.2 million for the third
quarters of 2000 and 1999. As a percentage of net sales, operating expenses
increased to 12.6% in the 2000 Quarter from 12.1% in the 1999 Quarter.
As a result of the above factors, operating income decreased $10,000,
or 1.1%, to $860,000 in the 2000 Quarter from $870,000 in the 1999 Quarter. As a
percentage of net sales, operating income remained constant at 3.4%.
Other expenses, which consist principally of interest expense,
increased $66,000, or 26.7%, to $313,000 in the 2000 Quarter from $247,000 in
the 1999 Quarter. The increase was primarily due to higher interest rates
attributable to increases in the borrowing rate. Other expenses, as a percentage
of net sales, increased to 1.3% in the 2000 Quarter from 1.0% in the 1999
Quarter.
As a result of the above factors, income before income taxes decreased
$76,000, or 12.2%, to $547,000 in the 2000 Quarter from $623,000 in the 1999
Quarter. Income before income taxes as a percentage of net sales decreased to
2.1% in 2000 Quarter from 2.4% in the 1999 Quarter.
The Company recorded an income tax provision of $207,000 in the 2000
Quarter compared to $161,000 in the 1999 Quarter. The provision for both
quarters approximates the statutory federal and state income tax rates.
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As a result of the above factors, net income decreased $122,000, or
26.4%, to $340,000 ($.08 per diluted share) in the 2000 Quarter from $462,000
($.11 per diluted share) in the 1999 Quarter. As a percentage of net sales, net
income decreased to 1.3% in the 2000 Quarter from 1.8% in the 1999 Quarter.
First Nine Months of 2000 Compared to First Nine Months of 1999
The Company's net sales decreased $123,000, or 0.2%, to $73.6 million
in the first nine months of 2000 ( the "2000 Period") from $73.7 million in the
first nine months of 1999 (the "1999 Period). 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 $707,000, or 5.9%, to $12.7
million for the 2000 Period from $12.0 million in the 1999 Period. Gross profit
margin increased to 17.3% in the 2000 Period from 16.3% in the 1999 Period. The
increase in gross profit and gross profit margin is attributable 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 $466,000, or 4.9%, to $10.0 million in the
2000 Period from $9.6 million in the 1999 Period. 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 13.6% in the 2000 Period from 13.0%
in the 1999 Period.
As a result of the above factors, operating income increased $241,000,
or 9.9%, to $2.7 million in the 2000 Period from $2.4 million in the 1999
Period. As a percentage of net sales, operating income increased to 3.7% in the
2000 Period from 3.3% in the 1999 Period.
Other expenses, which consist principally of interest expense,
increased $218,000, or 29.9%, to $948,000 in the 2000 Period from $730,000 in
the 1999 Period. The increase was primarily due to higher interest rates
attributable to increases in the borrowing rate, and due to increased borrowings
under the Company's line of credit during the 2000 Period compared to the 1999
Period, which resulted from financing increased inventory balances during the
2000 Period compared to the 1999 Period. Other expense as a percentage of net
sales increased to 1.3% in the 2000 Period from 1.0% in the 1999 Period.
Income before income taxes remained constant at $1.7 million for the
first nine months of both 2000 and 1999. Income before income taxes as a
percentage of net sales increased to 2.4% in the 2000 Period from 2.3% in the
1999 Period.
The Company recorded an income tax provision of $687,000 in the 2000
Period compared to $602,000 in the 1999 Period. The provision for both periods
approximates the statutory federal and state income tax rates.
As a result of the above factors, net income decreased $62,000, or
5.6%, to $1.0 million ($.24 per diluted share) in the 2000 Period from $1.1
million ($.26 per diluted share) in the 1999 Period. As a percentage of net
sales, net income remained constant at 1.5%.
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LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations was $3.4 million for the 2000 Period
compared to net cash used in operations of ($4.1) million in the 1999 Period.
The net cash generated in operations in the 2000 Period was primarily due to the
Company's net income combined with increases in accounts payable and accrued
expenses offset by an increase in accounts receivable. The net cash used in
operations in the 1999 Period was primarily used to support increased accounts
receivable levels offset by decreased inventory levels.
The Company maintains a credit facility with a bank. At September 30,
2000 the credit facility, as amended, (i) provides for maximum borrowings of
$17.0 million (subject to certain collateral restrictions based on eligible
receivables, inventories and fixed assets), (ii) expires on April 30, 2002 and
(iii) bears 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 October 23, 2000, the Company had borrowings totaling $10.2
million outstanding under the credit facility and availability to borrow $6.4
million.
Over the next twelve months the Company plans to spend approximately
$930,000 for capital expenditures, including the purchase of a warehouse locator
system for each of the six distribution sites, warehouse racking for some of the
locations, a new telephone system, and to fund the redesign and construction of
the showrooms.
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 for the next twelve months. 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.
The Company is a party to various lawsuits in the ordinary course of
doing business. The Company intends to vigorously defend these matters, although
there can be no assurance as to the ultimate outcome. Management is currently in
settlement negotiations with respect to one lawsuit. There can be no assurance
that a favorable settlement can be reached, nor can there be any assurance that
a settlement or ultimate judgment, as the case may be, will not have a material
adverse effect on the Company's results of operations.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
No response is required to this item.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K. No report on Form 8-K was filed during
the quarter ended September 30, 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.
<TABLE>
<S> <C>
Dated: November 10, 2000 By: /s/ Isador E. Mitzner
----------------------------------------------------
Isador E. Mitzner, Chairman
and Chief Executive Officer
Dated: November 10, 2000 By: /s/ Mickie Schneider
----------------------------------------------------
Mickie Schneider
(acting principal financial and accounting officer)
</TABLE>
