SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20509
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ................... to ................
Commission file number 0-26568
-------
USA Detergents, Inc.
--------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2935430
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1735 Jersey Avenue, North Brunswick, New Jersey 08902
-----------------------------------------------------
(Address of principal executive offices - Zip code)
(908) 828-1800
--------------
(Registrant's telephone number, including area code)
--------------------------
(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 by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was
required to file 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 practicable date.
Class of Stock No. of Shares Outstanding Date
- -------------- ------------------------- ----
Common 13,722,158 August 12, 1996
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
USA DETERGENTS, INC. AND SUBSIDIARIES
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
December 31, June 30,
1995 1996
----------- --------
Current assets:
Cash $ 61 $ 463
Accounts receivable, net of allowance for doubtful
accounts of $276 and $423, respectively 15,278 20,256
Inventories 8,448 14,953
Prepaid expenses and other current assets 2,989 5,056
Deferred taxes 630 738
-------- --------
Total current assets 27,406 41,466
Property and equipment - net 10,404 13,418
Restricted funds 275 275
Other assets 255 2,886
Note receivable 2,250 2,250
-------- --------
Total assets $40,590 $60,295
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,830 $10,733
Accrued expenses 3,942 2,655
Revolving credit line 6,983 5,480
Current portion of long-term debt 305 305
Current portion of capitalized lease obligations 32 16
Income tax payable 182 184
-------- --------
Total current liabilities 16,274 19,373
Long-term debt - net of current portion 1,806 1,653
Capital lease obligations - net of current portion 24 10
Deferred rent payable 1,204 1,321
Deferred taxes 990 1,063
-------- --------
Total liabilities 20,298 23,420
======== ========
Stockholders' equity:
Preferred stock-no par value; authorized 1,000,000
shares, none issued -- --
Common stock-$.01 par value; authorized
30,000,000 shares, issued and outstanding
13,392,372 and 13,722,158 shares, respectively 134 137
Additional paid-in capital 15,499 27,289
Retained earnings 4,659 9,449
-------- --------
Total stockholders' equity 20,292 36,875
-------- --------
Total liabilities and stockholders' equity $40,590 $60,295
======== ========
See Notes to Financial Statements.
2
<PAGE>
USA DETERGENTS, INC. AND SUBSIDIARIES
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
----------------- ---------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 25,652 $ 42,915 $ 48,907 $ 76,982
Cost of goods sold 18,375 28,351 35,204 50,876
-------- -------- -------- ---------
Gross profit 7,277 14,564 13,703 26,106
Selling, general and administrative 5,070 9,994 9,705 17,946
-------- -------- -------- ---------
Income from operations 2,207 4,570 3,998 8,160
Interest expense - net 234 153 422 320
-------- -------- -------- ---------
Earnings before income taxes 1,973 4,417 3,576 7,840
Income tax provision 37 1,714 68 3,049
-------- -------- -------- ---------
Net income $1,936 $2,703 $3,508 $4,791
======== ======== ======== =========
Net income per share $ 0.20 $ 0.36
======== =========
Weighted average shares outstanding 13,479 13,436
======== =========
Pro forma Income Statement Data:
Earnings before income taxes, as reported $1,973 $3,576
Pro forma income tax provision 781 1,416
-------- --------
Pro forma net income $1,192 $2,160
======== ========
Pro forma net income per share $ 0.10 $ 0.18
======== ========
Weighted average shares used in the calculation
of pro forma net income per share 11,915 11,915
======== ========
</TABLE>
See Notes to Financial Statements.
<PAGE>
USA DETERGENTS, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six months
ended June 30,
---------------------
1995 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,508 $4,791
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 471 626
Change in the provision for bad debts and sales allowances 17 147
Increase in deferred rent 16 117
Changes in operating assets and liabilities:
Increase in accounts receivable (4,695) (5,125)
(Increase)/decrease in inventories 2,321 6,505)
Increase in prepaid expenses and other current assets (209) (2,066)
Increase in other assets - (2,630)
Increase in accounts payable and accrued expenses 1,013 4,614
Increase/(decrease) in taxes payable (17) 1
Increase in deferred tax asset - (107)
Increase in deferred tax liability - 73
------- --------
Net cash provided by/(used in) operating activities 2,425 (6,064)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,310) (3,640)
-------- --------
Net cash used in investing activities (1,310) (3,640)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
S corporation distributions (3,892) -
Repayments of long-term debt (153) (152)
Net proceeds/(repayments) on revolving credit line 2,930 (1,503)
Capitalized lease repayments (31) (30)
Net proceeds from sale of common shares - 11,791
-------- --------
Net cash provided by/(used in) financing activities (1,146) 10,106
-------- --------
Net increase/(decrease) in cash (31) 402
Cash at beginning of period 77 61
-------- --------
Cash, June 30, $ 46 $ 463
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 434 $ 314
========= ========
Income taxes $ 84 $3,047
========= ========
</TABLE>
See Notes to Financial Statements.
<PAGE>
USA DETERGENTS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
For the Three and Six Months Ended June 30, 1996
1. BASIS OF PRESENTATION
The financial statements included herein should be read in conjunction
with the financial statements and notes thereto contained in the USA
Detergents, Inc. (the Company) Form 10-K filed with the Securities and Exchange
Commission on March 29, 1996. In the opinion of the management of the Company,
the accompanying unaudited financial statements contain all adjustments
necessary, consisting of only normal recurring accruals, to present fairly the
Company's financial position as of June 30, 1996, the results of operations for
the three and six month periods ended June 30, 1996 and 1995, respectivelty,
and cash flows for the six month periods ended June 30, 1996 and 1995,
respectively. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from the accompanying financial
statements. The results of operations for the three and six months ended June
30, 1996, are not necessarily indicative of the results of operations expected
for the year ending December 31, 1996.
2. RECAPITALIZATION AND PUBLIC OFFERING
On January 18, 1996, the Company declared a three-for-two stock split
effected in the form of a 50% stock dividend to holders of record of the
Company's Common Stock at the close of business on January 30, 1996 and paid
February 9, 1996. Shares outstanding and per share amounts have been
retroactively adjusted to reflect the three-for-two stock split.
On June 5, 1996, the Company completed its second public offering of
300,000 shares of Common Stock which provided net proceeds of approximately
$11,791,000.
3. INCOME TAXES
During the period prior to the Company's initial public offering in Ausust
1995, the Company elected to be treated as an S corporation under the
applicable sections of the Internal Revenue Code. Accordingly, there is no
provision for federal income taxes as such earnings and losses of the Company
flow through directly to the stockholders. In connection with the offering, the
Company terminated its S corporation election. The income tax provision
consists of state and local taxes in certain states for all periods presented,
and federal income taxes on earnings subsequent to the initial public offering.
4. NET INCOME PER SHARE AND PRO FORMA INFORMATION
Net income per share is based on the weighted average number of shares
outstanding during the periods presented. Pro forma net income per share is
computed by dividing pro forma net income by the weighted average number of
shares outstanding during the periods presented. In connection with the Initial
Public Offering of the Company's common stock, the Company changed its tax
status to a C corporation (Note 3) and is subject to federal and all applicable
state and local income taxes. Pro-forma information assumes the Company's
change in tax status for the periods presented. Common stock equivalents have
not been included in the computation of net income per share or pro forma net
income per share as the impact is not significant.
5
<PAGE>
USA DETERGENTS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (continued)
5. REVOLVING CREDIT LINE
The Company has a credit facility with a bank which was last amended on
February 13, 1996. The agreement, which expires November 1, 1996, provides for
a revolving credit line not to exceed the lesser of $15,000,000 or a borrowing
base, as defined. Interest on outstanding balances are computed at LIBOR plus
1.75% per annum (7.25% at June 30, 1996) on the first $5,000,000 of borrowings
(at the option of the borrower) and at the prime rate of the lender on the
balance (8.25% at June 30, 1996). At June 30, 1996, outstanding borrowings
against the revolving credit line were approximately $5,500,000.
The Company is required to maintain certain minimum financial ratios.
Borrowings under this agreement are collateralized by substantially all of
the assets of the Company.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
Net sales for the three months ended June 30, 1996 increased 67.3% to
$42.9 million from $25.7 million for the three months ended June 30, 1995. The
increase was primarily the result of an increase in unit sales of laundry
products, reflecting the addition of new customers and sales of additional
products to existing customers. The increase in net sales was facilitated by an
increase in the number of salespersons who joined the Company in the third and
fourth quarter of 1995.
Gross profit increased 100.1% to $14.6 million in the three months ended
June 30, 1996 from $7.3 million for the comparable period in 1995. Gross profit
increased as a percentage of net sales to 33.9% in the three months ended June
30, 1996 from 28.3% for the comparable period in 1995. The increase as a
percentage of net sales was primarily attributable to the installation, in
January 1995 and January 1996, of improved manufacturing equipment, which had a
positive impact on labor efficiency and reduced product over-fills, and an
increase as a percentage of net sales in unit sales of higher margin laundry
products.
Selling, general and administrative expenses increased 97.1% to $10.0
million in the three months ended June 30, 1996 from $5.1 million for the
comparable period in 1995. As a percentage of net sales, these expenses
increased to 23.3% in the three months ended June 30, 1996 from 19.8% for the
comparable period in 1995. The increase as a percentage of net sales was
primarily due to increases as a percentage of net sales of 1.8% in freight and
1.3% in slotting fees resulting from increased penetration into supermarkets.
Income from operations increased 107.1% to $4.6 million in the three
months ended June 30, 1996 from $2.2 million for the comparable period in 1995.
As a percentage of net sales, income from operations increased to 10.6% in the
three months ended June 30, 1996 from 8.6% for the comparable period in 1995.
Interest expense-net decreased to $153,000 in the three months ended June
30, 1996 from $234,000 for the comparable period in 1995, primarily as a result
of lower average outstanding balances.
Earnings before income taxes increased 123.9% to $4.4 million in the three
months ended June 30, 1996 from $2.0 million for the comparable period in 1995.
As a percentage of net sales, earnings before income taxes increased to 10.3%
in the three months ended June 30, 1996 from 7.7% for the comparable period in
1995.
7
<PAGE>
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net sales for the six months ended June 30, 1996 increased 57.4% to $77.0
million from $48.9 million for the six months ended June 30, 1995. The increase
was primarily the result of an increase in unit sales of laundry products,
reflecting the addition of new customers and sales of additional products to
existing customers. The increase in net sales was facilitated by an increase in
the number of salespersons who joined the Company in the third and fourth
quarter of 1995.
Gross profit increased 90.5% to $26.1 million in the six months ended June
30, 1996 from $13.7 million for the comparable period in 1995. Gross profit
increased as a percentage of net sales to 33.9% in the six months ended June
30, 1996 from 28.0% for the comparable period in 1995. The increase as a
percentage of net sales was primarily attributable to the installation, in
January 1995 and January 1996, of improved manufacturing equipment, which had a
positive impact on labor efficiency and reduced product over-fills, and an
increase as a percentage of net sales in unit sales of higher margin laundry
products.
Selling, general and administrative expenses increased 84.9% to $17.9
million in the six months ended June 30, 1996 from $9.7 million for the
comparable period in 1995. As a percentage of net sales, these expenses
increased to 23.3% in the six months ended June 30, 1996 from 19.8% for the
comparable period in 1995. The increase as a percentage of net sales was
primarily due to increases as a percentage of net sales of 1.2% in freight and
1.0% in slotting fees resulting from increased penetration into supermarkets.
Income from operations increased 104.1% to $8.2 million in the six months
ended June 30, 1996 from $4.0 million for the comparable period in 1995. As a
percentage of net sales, income from operations increased to 10.6% in the six
months ended June 30, 1996 from 8.2% for the comparable period in 1995.
Interest expense-net decreased to $320,000 in the six months ended June
30, 1996 from $422,000 for the comparable period in 1995, primarily as a result
of lower average outstanding balances.
Earnings before income taxes increased 119.2% to $7.8 million in the six
months ended June 30, 1996 from $3.6 million for the comparable period in 1995.
As a percentage of net sales, earnings before income taxes increased to 10.2%
in the six months ended June 30, 1996 from 7.3% for the comparable period in
1995.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
On August 11, 1995, the Company completed an initial public offering of
shares of its common stock, pursuant to which the Company sold 1,477,890 shares
of common stock (adjusted for the three-for-two stock split referred to below).
Net proceeds to the Company approximated $12.7 million. On January 18, 1996,
the Company declared a three-for-two stock split effected in the form of a 50%
stock dividend that was paid on February 9, 1996. On June 5, 1996, the Company
completed a second public offering of shares of its common stock, pursuant to
which the Company sold 300,000 shares. Net proceeds to the Company approximated
$11.7 million. The number of shares sold reflect the three-for-two stock split.
At June 30, 1996, the Company's working capital was $22.1 million compared
to $11.1 million at December 31, 1995. The increase in working capital is
primarily attributable to proceeds the Company received from the June, 1996,
second public offering. There were increases in accounts receivable, inventory,
and prepaid expenses, as well as a decrease in the current portion of
indebtedness under the Company's revolving credit line offset by an increase in
accounts payable and accrued expenses. At June 30, 1996, accounts receivable
was $20.3 million, an increase of $5.0 million from December 31, 1995, and at
June 30, 1996, inventory was $15.0 million, an increase of $6.5 million from
December 31, 1995. Both of these increases were primarily attributable to
increased sales volume in 1996. At June 30, 1996, prepaid expenses and other
current assets were $5.1 million, an increase of $2.1 million, primarily
attributable to increased slotting costs, which are amortized over a twelve
month period. These changes were partially offset by an increase in accounts
payable and accrued expenses from $8.8 million at December 31, 1995, to $13.4
million at June 30, 1996.
Net cash used in operating activities for the first six months of 1996 was
$6.1 million compared to net cash provided by operating activities of $2.4
million for the comparable period of 1995. This cash variance in operating
activities relates primarily to the increase in inventory, prepaid expenses and
other current assets, and other assets offset by cash provided from increases
in net income and accounts payable and accrued expenses. The Company has used
cash provided by operating activities to fund capital expenditures, operations
and S corporation stockholders distributions. The Company has made S
corporation stockholders distributions to its then existing stockholders equal
to approximately 80% of 1995 earnings before income taxes through August 9,
1995, which is the date the Company terminated its S corporation election.
Net cash used in investing activities for the six months ended June 30,
1996 was $3.6 million. Cash used in investing activities relates primarily to
the purchase of production equipment.
The Company has a line of credit under which it may borrow the lesser of
$15.0 million or a defined borrowing base ("Line of Credit"). Borrowings under
the Line of Credit bear interest at LIBOR plus 1.75% on the first $5.0 million
(7.25% at June 30, 1996) and at the prime rate of the lender bank on the
balance (8.25% at June 30, 1996). As of June 30, 1996, the Company had an
outstanding balance of approximately $5.5 million.
9
<PAGE>
The Company also has a loan facility of $2.75 million from the New Jersey
Economic Development Authority ("the EDA Loan"). As of June 30, 1996, the
Company had used approximately $2.5 million of the EDA Loan for purchases of
machinery and equipment and improvements to the Company's manufacturing
facility. The remainder is restricted for the duration of the EDA Loan. The EDA
Loan is payable in monthly installments of approximately $26,000 through
November 1, 2002. Interest on the EDA Loan is payable at a variable rate (3.35%
at June 30, 1996).
Capital expenditures for the six months ended June 30, 1996 and 1995 were
$3.6 million and $1.3 million, respectively. The Company anticipates that
capital expenditures in 1996 will be approximately $8.5 million, which includes
installation and deposits for new manufacturing equipment and costs allocated
to open a new manufacturing and distribution facility in the Midwest.
The Company believes its existing sources of liquidity, cash provided by
operations, development authority loans, the Line of Credit and the net
proceeds from the initial public offering will satisfy the Company's
anticipated working capital and capital expenditure requirements for the
foreseeable future.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Stockholders was held on May 7,
1996 (the "Annual Meeting").
(b) The following matters were voted upon and approved by the
Company's stockholders at the Annual Meeting:
(i) the election of eight directors to serve for the ensuing
year. The following nominees were elected as directors of the Company
(with the Company's stockholders having voted as set forth below):
---------------------- ----------------------- --------------------------
Nominee Votes For Withheld Authority
to Vote
---------------------- ----------------------- --------------------------
Frederick R. Adler 10,156,023 52,985
---------------------- ----------------------- --------------------------
Mark Antebi 10,156,023 52,985
---------------------- ----------------------- --------------------------
Daniel Bergman 10,156,023 52,985
---------------------- ----------------------- --------------------------
Joseph S. Cohen 10,156,023 52,985
---------------------- ----------------------- --------------------------
Uri Evan 10,156,023 52,985
---------------------- ----------------------- --------------------------
Frederick J. Horowitz 10,156,023 52,985
---------------------- ----------------------- --------------------------
Dr. Shlomo Kalish 10,156,023 52,985
---------------------- ----------------------- --------------------------
Richard A. Mandell 10,156,023 52,985
---------------------- ----------------------- --------------------------
(ii) The ratification of the appointment of Deloitte & Touche
LLP as the Company's independent certified public accountants for the
fiscal year ending December 31, 1996. The Company's stockholders
voted as follows: For: 10,122,766 Against: 1,800 Abstentions: 84,442
Broker non-votes: N/A.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during
the period covered by this Form 10-Q.
11
<PAGE>
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.
USA DETERGENTS, INC.
--------------------
(Registrant)
August 12, 1996 /s/ Uri Evan
-------------- --------------------
Date Uri Evan
Chairman and CEO
August 12, 1996 /s/ Harold J. Macsata
-------------- ---------------------
Date Harold J. Macsata
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
This schedule contains summary financial information extracted from
the Company's Form 10-Q for the quarterly period ended June 30, 1996, and is
qualified in its entirety by reference to such financial statements.
USA DETERGENTS, INC. AND SUBSIDIARIES
Appendix A to Item 601(c) of Regulation S-K
Six Months ended June 30, 1996
(in thousands except per share data)
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 463
<SECURITIES> 0
<RECEIVABLES> 20,769
<ALLOWANCES> 423
<INVENTORY> 14,953
<CURRENT-ASSETS> 41,466
<PP&E> 16,677
<DEPRECIATION> 3,259
<TOTAL-ASSETS> 60,295
<CURRENT-LIABILITIES> 19,373
<BONDS> 0
0
0
<COMMON> 137
<OTHER-SE> 36,738
<TOTAL-LIABILITY-AND-EQUITY> 60,295
<SALES> 76,982
<TOTAL-REVENUES> 76,982
<CGS> 50,876
<TOTAL-COSTS> 17,946
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 320
<INCOME-PRETAX> 7,840
<INCOME-TAX> 3,049
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,791
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0
</TABLE>
