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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED Commission File
APRIL 30, 1994 Number 1-5674
ANGELICA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSOURI 43-0905260
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
424 South Woods Mill Road
CHESTERFIELD, MISSOURI 63017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(314) 854-3800
----------------------------------------------------
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 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
---- ----
The number of shares outstanding of Registrant's Common Stock, par
value $1.00 per share, at May 31, 1994 was 9,100,690 shares.
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ANGELICA CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SUPPORTING SCHEDULES
FOR APRIL 30, 1994 FORM 10-Q QUARTERLY REPORT
Page Number Reference
---------------------
Quarterly Report
to
Form 10-Q Shareholders
--------- ----------------
PART I. FINANCIAL INFORMATION:
Consolidated Statements of Income -
First Quarter Ended April 30, 1994 and
May 1, 1993 3
Consolidated Balance Sheets -
April 30, 1994 and January 29, 1994 4
Consolidated Statements of Cash Flows -
First Quarter Ended April 30, 1994
and May 1, 1993 5
Notes to Consolidated Financial
Statements 2
Management's Discussion and Analysis
of Operations and Financial Condition 3-4
Exhibit A - Quarterly Report to
Shareholders 5
PART II. OTHER INFORMATION 6
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ANGELICA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED APRIL 30, 1994
(1) The accompanying consolidated condensed financial statements
are unaudited, and it is suggested that these consolidated
statements be read in conjunction with the fiscal 1994
Annual Report, including Notes to Financial Statements.
However, it is the opinion of the Company that all
adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results
during the interim period have been included.
(2) See Index to Financial Statements and Supporting Schedules
on page 1. Those pages of the Angelica Corporation and
Subsidiaries Quarterly Report to Shareholders for the
quarter ended April 30, 1994, listed in such index are
incorporated herein by reference. The pages of the
Quarterly Report to Shareholders which are not listed on the
index and therefore not incorporated herein by reference are
furnished for the information of the Commission but are not
to be deemed "filed" as a part of this report. The
Quarterly Report to Shareholders referred to herein is
located immediately following page 4 of this report.
(3) For purposes of the Consolidated Statements of Cash Flows,
the Company considers short-term, highly liquid investments
which are readily convertible into cash, as cash
equivalents.
Cash payments for income taxes were $1,016,000 and $676,000
in 1994 and 1993, respectively; and in these periods
interest payments were $705,000 and $588,000, respectively.
2
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ANGELICA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
QUARTER ENDED APRIL 30, 1994
Analysis of Operations
- - ----------------------
First Quarter Ended
---------------------
April 30, May 1,
1994 1993
--------- ------
Sales and Rental Service Revenues
- - ---------------------------------
Rental Services $ 61,041 $ 53,928
Manufacturing and Marketing 44,940 41,824
Retail Sales 16,255 13,214
Intersegment Sales (5,181) (4,871)
-------- --------
$117,055 $104,095
======== ========
Gross Profit
- - ------------
Rental Services $ 13,829 $ 12,425
Manufacturing and Marketing 9,302 8,902
Retail Sales 8,745 7,179
-------- --------
$ 31,876 $ 28,506
======== ========
Combined sales and rental service revenues were up 12.5 percent
for the first quarter ended April 30, 1994 over last year's first
quarter, and gross profit was up 11.8 percent. Revenues of the
Rental Services segment increased 13.2 percent in the first
quarter, due primarily to the acquisitions made late last year,
and gross profit increased 11.3 percent. The gross margin
reduction in this segment, due to the impact of competitive
pricing in the marketplace which remained severe on both new
business and contract renewals, was offset by good operating cost
control. First quarter sales of the Manufacturing and Marketing
segment increased 7.5 percent compared with the same quarter last
year, and gross profit increased 4.5 percent. The U.S. and United
Kingdom portions of this segment had moderate sales increases,
while the Canadian operation's sales decreased. In the
Manufacturing and Marketing segment also, gross margin reduction
was more than offset by good operating cost control. Life Retail
Stores had a 23 percent increase in sales, resulting from a 10.3
percent increase in same-store sales together with new volume from
acquisitions made since the first quarter of last year, the most
significant acquisition being a chain of 21 stores acquired at the
beginning of this first quarter.
Selling, general and administrative expenses increased $2,033,000
or 9.3 percent in the first quarter compared with the same period
last year. These expenses decreased as a percent of combined
sales and rental service revenues from 21.0 percent to 20.4
percent in the first quarter. Most of the dollar increase was the
result of acquisitions. The effective tax rate in the current
quarter was 38.5 percent versus 37.0 percent in the prior year.
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5
Financial Condition
- - -------------------
The Company had working capital of $156,455,000 and a current
ratio of 3.6 to 1 at April 30, 1994, down from $163,955,000 and
5.1 to 1 a year ago and $157,188,000 and 4.0 to 1 at the beginning
of the year largely due to higher short-term debt. The ratio of
long-term debt to debt-plus-equity was 27.3 percent at the close
of the first quarter, unchanged from the beginning of the year and
down from 29.2 percent a year ago.
Operating activities provided a total cash flow of $1,216,000 in
the first quarter compared with $1,923,000 in the first quarter
last year, with most of the difference being due to increased
requirements for working capital. Uses of cash flow included
$3,574,000 for acquisitions and $2,314,000 for capital
expenditures. Financing activities provided a net total of
$3,994,000 of cash flow, primarily the issuance of short-term debt
offset in part by the payment of dividends. No material change in
the Company's future aggregate cash requirements is foreseen at
the present time.
Based on the Company's cash generation from operations, as well as
its strong working capital position, current ratio and ratio of
long-term debt to total debt-plus-equity, Management believes that
internal funds available from operations plus external funds
available from the issuance of additional debt and/or equity as
needed in the future, will be sufficient for all planned operating
and capital requirements, including acquisitions.
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EXHIBIT A
ANGELICA
CORPORATION
May 19, 1994
Dear Shareholder:
We are pleased to report that the first quarter ended April 30, 1994 marked
the third consecutive quarter that earnings exceeded the comparable prior year
period. For the first quarter, combined sales and rental service revenues
were $117,055,000, up 12.5 percent from $104,095,000 in last year's first
quarter. Pretax income of $5,114,000 increased 28.1 percent compared with
$3,992,000 in last year's first quarter, and net income of $3,145,000 rose
25.0 percent from the $2,515,000 earned in the first quarter last year. Net
income was up somewhat less than pretax income on a percentage basis as a
result of last year's federal income tax law changes. Net income per share
was $.35 versus $.28 in the first quarter of last year, an increase of 25.0
percent.
All three of our business segments had improved results over the first quarter
of last year, with individual performances ranging from very good to
excellent. The largest percentage sales and earnings increase came from Life
Retail Stores, and the largest dollar earnings increase came from the Rental
Services segment. The Manufacturing and Marketing segment had an excellent
earnings increase but is still troubled by poor results in Canada. Overall
control of operating costs in the quarter was good as those expenses rose 9.3
percent while combined sales and rental service revenues were up by a larger
12.5 percent.
Revenues of the Rental Services segment increased 13.2 percent in the first
quarter with the vast majority of that increase coming from Colton,
California and Las Vegas acquisitions made late last year. Earnings of Rental
Services for the first quarter increased at a rate comparable to the revenue
increase. Good cost control in the first quarter helped offset the impact of
competitive pricing in the marketplace, which remained severe on both new
business and contract renewals. Hospitals continue to focus on reducing their
costs, and although this makes it difficult to get price increases in the near
term, it also is causing more hospitals to consider the closing of their on-
premise laundries. While such decisions have been slow in being made, we
continue to have conversations with numerous hospitals on this subject and
expect it to be a positive for our business for a long time to come. The
Rental Services segment should have a good year in fiscal 1995, but how good
depends upon the level of concern on the part of hospitals over potential
Congressional actions to control health care costs.
First quarter sales of the Manufacturing and Marketing businesses increased
7.5 percent compared with the same quarter last year despite a sales decline
in our Canadian operations. Earnings of this segment increased at a rate
significantly higher than the increase in sales. The Canadian operations
incurred a first quarter loss which was small, although larger than that
realized in the same quarter last year, largely due to the drop in revenue
from the previously-announced loss of our largest Canadian customer. The
manufacturing company in England had a good sales increase and a very small
loss, showing improvement from the first quarter last year. In the United
States, the Uniform Group had a moderate increase in sales and an excellent
increase in earnings. These earnings results were principally caused by the
sales increase as well as good control of operating expenses. Incoming
business from the hospitality markets (i.e.,
424 South Woods Mill Road, Chesterfield, Missouri 63017-3406
314-854-3800
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lodging, food service, travel and recreation) was well ahead of last year's
first quarter. Incoming business from the health care market was up modestly,
the first positive comparison in over a year, but it is clear that this market
continues to be affected by the general apprehension about moves to control
health care costs. During the first quarter, the Uniform Group successfully
introduced the most comprehensive computer system upgrade in its history,
which will allow faster shipment of orders and provide improved customer
service. As with any system implementation of this magnitude, some short-term
service disruptions occurred, but we believe they are now largely behind us,
and we are well on the way toward realizing the full benefits of these new
systems. For the remainder of this fiscal year, we expect the results of the
Manufacturing and Marketing segment will show continued improvement over the
prior year.
Life Retail Stores had an excellent first quarter with a 23.0 percent
increase in sales and an even better increase in earnings. The higher sales
volume resulted from a 10.3 percent increase in same-store sales together with
new volume from acquisitions made since the first quarter of last year, the
most significant acquisition being the 21 stores of Z&H Uniform acquired at
the very beginning of this first quarter. At the end of the quarter, Life was
operating 264 stores compared with 246 at the same time last year. Same-store
sales continue to show excellent increases as we benefit from increased demand
from customers and continued good management of merchandise in the stores,
better meeting the needs of those customers. It is important to note that the
first quarter of last year was a very good quarter for Life, which makes these
results even more impressive. We look forward to Life Retail Stores having
continued success throughout this fiscal year.
Our first quarter results were excellent compared with the first quarter of
last year, but we should not lose sight of the fact that the first quarter
last year was not very good. Although the comparisons become more difficult
as the year continues, we expect to have much improved results in fiscal 1995
compared with fiscal 1994. Our enthusiasm is moderated somewhat by the
continuing uncertainty of what effect possible new legislation will have on
the health care market. Nevertheless, the remainder of our business should do
very well, and that combined with what we presently believe can be realized
from the health care market should cause us to have a good year.
Looking into the future, we continue to believe that the fundamentals of all
of our businesses remain sound, and we are optimistic about long-term
performance. An increased emphasis on cost control in the health care
industry is a long-term positive for all three of our business segments, which
can show that their services and products save money for health care
institutions. The remainder of the economy having improved significantly, our
non-health care customers seem to be doing much better, and this is triggering
additional business from those market segments. With these issues in mind,
combined with the proactive steps each of our businesses has taken to improve
operations and control costs, we feel that future performance should be much
better than in the recent past.
Respectfully submitted,
/s/ LAWRENCE J. YOUNG
Lawrence J. Young
Chairman of the Board and President
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CONSOLIDATED STATEMENTS OF INCOME
Angelica Corporation and Subsidiaries
Unaudited
(Dollars in thousands, except per share amounts)
First Quarter Ended
------------------------------
April 30, 1994 May 1, 1993
-------------- -----------
Rental service revenues $ 61,041 $ 53,928
Net sales 56,014 50,167
-------- --------
117,055 104,095
-------- --------
Cost of rental services 47,212 41,503
Cost of goods sold 37,967 34,086
-------- --------
85,179 75,589
-------- --------
Gross profit 31,876 28,506
-------- --------
Selling, general and
administrative expenses 23,878 21,845
Interest expense 1,941 1,889
Other expense, net 943 780
-------- --------
26,762 24,514
-------- --------
Income before income taxes 5,114 3,992
Provision for income taxes 1,969 1,477
-------- --------
Net income $ 3,145 $ 2,515
======== ========
Net income per share * $ .35 $ .28
======== ========
Dividends per common share $ .235 $ .23
======== ========
<FN>
* Based upon weighted average number of common and common
equivalent shares outstanding of 9,102,170 and 9,074,284 for
fiscal periods of 1995 and 1994, respectively.
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CONSOLIDATED BALANCE SHEETS
Angelica Corporation and Subsidiaries
Unaudited
(Dollars in thousands)
April 30, 1994 January 29, 1994
-------------- ----------------
ASSETS
- - ------
Current Assets:
Cash and short-term investments $ 1,342 $ 2,020
Receivables, less reserves of $2,952 and $2,630 70,935 68,247
Inventories:
Raw material 25,695 26,425
Work in progress 7,048 7,535
Finished goods 74,171 70,610
-------- --------
106,914 104,570
Linens in service 33,002 31,099
Prepaid expenses 4,385 4,319
-------- --------
Total Current Assets 216,578 210,255
-------- --------
Property and Equipment 192,021 189,905
Less -- reserve for depreciation 98,512 95,937
-------- --------
93,509 93,968
-------- --------
Goodwill 7,375 5,833
Other acquired assets 10,373 8,726
Cash surrender value of life insurance 9,559 9,409
Miscellaneous 4,759 4,670
-------- --------
32,066 28,638
-------- --------
Total Assets $342,153 $332,861
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Current Liabilities:
Short-term debt $ 16,200 $ 9,900
Current maturities of long-term debt 2,568 2,568
Accounts payable 16,299 17,593
Accrued expenses 18,435 17,476
Income taxes 6,621 5,530
-------- --------
Total Current Liabilities 60,123 53,067
-------- --------
Long-Term Debt, less current maturities 72,245 72,255
Other Long-Term Obligations 16,943 15,546
Shareholders' Equity:
Preferred Stock:
Class A, Series 1, $1 stated value,
authorized 100,000 shares, outstanding:
128 shares -- --
Class B, authorized 2,500,000 shares,
none outstanding: -- --
Common stock, $1 par value, authorized 20,000,000
shares, issued: 9,452,314 and 9,447,614 9,452 9,448
Capital surplus 3,783 3,672
Retained earnings 191,341 190,301
Translation adjustment (2,170) (1,658)
Common Stock in treasury, at cost:
352,224 and 361,580 (9,564) (9,770)
-------- --------
192,842 191,993
-------- --------
Total Liabilities and Shareholders' Equity $342,153 $332,861
======== ========
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Angelica Corporation and Subsidiaries
Unaudited
(Dollars in thousands)
First Quarter Ended
-----------------------------
April 30, 1994 May 1, 1993
-------------- -----------
Cash flows from operating activities:
Net income $ 3,145 $ 2,515
Non-cash items included in net income:
Depreciation 3,266 3,185
Amortization of acquisition costs 846 876
Change in working capital components,
net of businesses acquired (5,467) (4,380)
Other, net (574) (273)
------- -------
Net cash provided by operating activities 1,216 1,923
------- -------
Cash flows from investing activities:
Expenditures for property and
equipment, net (2,314) (1,749)
Cost of businesses acquired (3,574) (127)
------- -------
Net cash used in investing activities (5,888) (1,876)
------- -------
Cash flows from financing activities:
Proceeds from issuance of
short-term debt 6,300 --
Dividends paid (2,139) (2,085)
Other, net (167) 408
------- -------
Net cash provided by
(used in) financing activities 3,994 (1,677)
------- -------
Net increase (decrease) in cash and
short-term investments (678) (1,630)
Cash and short-term investments at
beginning of period 2,020 2,746
------- -------
Cash and short-term investments at
end of period $ 1,342 $ 1,116
======= =======
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SUMMARY FINANCIAL POSITION DATA
Angelica Corporation and Subsidiaries
(In thousands, except ratios, shares and per share amounts)
(Unaudited) Year Ended January*
------------------- -----------------------------------------------
April 30, May 1,
1994 1993 1994 1993 1992 1991 1990
--------- ------ ---- ---- ---- ---- ----
Working capital $156,455 $163,955 $157,188 $161,129 $160,379 $134,964 $130,072
Current ratio 3.6 to 1 5.1 to 1 4.0 to 1 4.7 to 1 4.2 to 1 2.9 to 1 3.4 to 1
Long-term debt $72,245 $78,295 $72,255 $78,175 $80,506 $57,782 $50,588
Shareholders' equity $192,842 $189,927 $191,993 $189,209 $190,303 $175,684 $161,134
Percent long-term
debt to debt
and equity 27.3% 29.2% 27.3% 29.2% 29.7% 24.8% 23.9%
Equity per common
share $21.19 $20.94 $21.13 $20.88 $20.43 $18.92 $17.36
Common shares
outstanding 9,100,090 9,068,979 9,086,034 9,063,834 9,315,535 9,285,677 9,284,291
<FN>
* As reported in Company's Annual Report.
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PART II. OTHER INFORMATION
ANGELICA CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(b) Reports on Form 8-K - There were no reports on Form 8-K filed
for the first quarter ended April 30, 1994
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.
Angelica Corporation
--------------------
(Registrant)
Date: June 2, 1994 /s/ T. M. Armstrong
----------------------- -------------------------------
T. M. Armstrong
Senior Vice President -
Finance and Administration
Chief Financial Officer
(Principal Financial Officer)
/s/ L. Linden Mann
-------------------------------
L. Linden Mann
Controller
(Principal Accounting Officer)
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