SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES
EXCHANGE ACT OF 1943
For the transition period from to
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Commission file number 000-23121
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U.S.A. Floral Products, Inc.
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Delaware 52-2030697
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(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
1025 Thomas Jefferson Street, N.W., Suite 600 West Washington, DC 20007
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (202) 333-0800
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Former name, former address and former fiscal year,
if changed since last report.
Indicate by check 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 No X
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the registrant's Common Stock, par value
$.001 per share (which is the only outstanding class of the registrant's common
stock) was 9,594,050 shares at November 18, 1997.
U.S.A. FLORAL PRODUCTS, INC.
----------------------------
INDEX
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PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements: The Registrant 1
Balance Sheet at September 30, 1997 1
Statement of Operations for the Three Months Ended
September 30, 1997 and for the Period from
Inception (April 22, 1997) to September 30, 1997 2
Notes to Financial Statements 5
Financial Statements: Predecessor Companies 7
The Roy Houff Company
---------------------
Balance Sheet as of September 30, 1997 10
Statement of Operations for the Three and Nine
Months Ended September 30, 1996 and 1997 11
Statement of Cash Flows for the Nine Months
Ended September 30, 1996 and 1997 13
CFX, Inc.
---------
Balance Sheet as of September 30, 1997 15
Statement of Operations for the Three and Nine
Months Ended September 30, 1996 and 1997 16
Statement of Cash Flows for the Nine Months
Ended September 30, 1996 and 1997 18
Bay State Florist Supply, Inc.
-----------------------------
Balance Sheet as of September 30, 1997 20
Statement of Operations for the Three and Nine
Months Ended September 30, 1996 and 1997 21
Statement of Cash Flows for the Nine Months
Ended September 30, 1996 and 1997 23
Flower Trading Corporation
--------------------------
Condensed Balance Sheet as of September 30, 1997 25
PAGE
Statement of Operations for the Three and Nine
Months Ended September 30, 1996 and 1997 26
Statement of Cash Flows for the Nine Months
Ended September 30, 1996 and 1997 28
United Wholesale Florists, Inc.
-------------------------------
Condensed Balance Sheet as of September 30, 1997 30
Condensed Statement of Operations for the Three
Months Ended September 30, 1996 and 1997 31
Condensed Statement of Cash Flows for the Three Months
Ended September 30, 1996 and 1997 33
American Florist Supply, Inc.
-----------------------------
Balance Sheet as of September 30, 1997 35
Statement of Operations for the Three and Nine
Months Ended September 30, 1996 and 1997 36
Statement of Cash Flows for the Nine Months
Ended September 30, 1996 and 1997 38
Monterey Bay Bouquet, Inc.
--------------------------
Condensed Balance Sheet as of September 30, 1997 40
Condensed Statement of Operations for the Three and Nine
Months Ended September 30, 1996 and 1997 41
Condensed Statement of Cash Flows for the Nine Months
Ended September 30, 1996 and 1997 43
Alpine Gem Flower Shippers, Inc.
--------------------------------
Condensed Balance Sheet as of September 30, 1997 45
Condensed Statement of Operations for the Three and Nine
Months Ended September 30, 1996 and 1997 46
Condensed Statement of Cash Flows for the Nine Months
Ended September 30, 1996 and 1997 48
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 50
Signatures
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. Financial Statements
U.S.A. FLORAL PRODUCTS, INC.
BALANCE SHEET
(unaudited)
AS OF SEPTEMBER 30, 1997
(in thousands)
USA
Floral Pro Forma
Products, Inc. Combined
-------------- ----------
ASSETS
Cash and cash equivalents...................... $ 78 $ 26,800
Accounts receivable, net....................... 17,252
Inventories.................................... 5,798
Due from related parties....................... 369
Due from stockholders.......................... 6
Prepaid expenses and other..................... 2,214 1,737
------ --------
Total current assets........................ 2,292 51,962
Property and equipment, net.................... 9,537
Due from related parties....................... 10
Deferred taxes................................. 195
Goodwill, net.................................. 44,065
Other assets................................... 1,161
------ --------
Total assets................................ $2,292 $106,930
====== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt................................ $ 2,257
Notes payable to stockholders.................. 19
Accounts payable and accrued expenses.......... $2,000 12,620
Due to related parties......................... 292
Income taxes payable........................... 1,375
------ --------
Total current liabilities................... 2,000 16,563
Long-term debt................................. 3,796
Other.......................................... 546
------ --------
Total liabilities........................... 2,000 20,905
Stockholders' equity:
Common stock, $.001 par, 100,000,000 shares
authorized, 2,400,000 issued................. 2 10
Additional paid-in capital.................... 400 86,125
Retained earnings............................. (110) (110)
Total stockholders' equity.................. 292 86,025
------ --------
Total liabilities and stockholders' equity.. $2,292 $106,930
====== ========
The accompanying notes are an integarl part of these financial statements.
1
U.S.A. FLORAL PRODUCTS, INC.
STATEMENT OF OPERATIONS
(unaudited)
(in thousands, except share amounts)
USA Floral Pro Forma Combined
--------------------------------- ----------------------------------------------------
April 22
Three Months Ended (inception)- Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
------------------ ------------- ------------------------ ---------------------------
1997 1997 1996 1997 1996 1997
------------------ ------------- ----------- ----------- -------------- -----------
Net sales............................. $ 35,362 $ 36,480 $ 132,631 $ 139,495
Cost of sales......................... 25,024 25,687 95,147 99,324
---------- ---------- ---------- ----------
Gross margin....................... 10,338 10,793 37,484 40,171
Selling, general and administrative... $ 80 $110 9,920 10,077 31,572 32,167
Goodwill amortization................. 272 272 817 817
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from operations...... (80) (110) 146 444 5,095 7,187
Other (income) expense:
Interest expense..................... 131 143 439 483
Interest income...................... (102) (75) (263) (237)
Other, net........................... (104) (120) (540) (374)
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes..... (80) (110) 221 496 5,459 7,315
Provision for income taxes............ 197 307 2,510 3,253
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)..................... $(80) $(110) $ 24 $ 189 $ 2,949 $ 4,062
========== ========== ========== ========== ========== ==========
Net income per share.................. $0.00 $0.02 $0.38 $0.52
========== ========== ========== ==========
Shares used in computing pro
forma net income per share (1)...... 7,738,819 7,738,819 7,738,819 7,738,819
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
2
U.S.A. FLORAL PRODUCTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
(unaudited)
Common Stock Additional Total
-------------------- Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
--------- --------- ---------- ----------- -------------
Balance, April 1997................. - $ - $ - $ - $ -
Stock issued...................... 2,400,000 2 400 402
Net loss for period April 22
(inception) to September 30, 1997. (110) (110)
--------- ------ ------- ------- ---------
Balance, September 30, 1997......... 2,400,000 $ 2 $ 400 $ (110) $ 292
========= ====== ======= ======= =========
The accompanying notes are an integral part of these financial statements.
3
U.S.A. FLORAL PRODUCTS, INC.
STATEMENT OF CASH FLOWS
(in thousands)
April 22
(inception)-
September 30,
1997
-------------
(unaudited)
Cash flows from operating activities:
Net loss................................................... $ (110)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Change in operating assets and liabilities:
(Increase) in deferred offering costs.................... (2,214)
Increase in Accrued expenses............................. 2,000
-------
Net cash used in operating activities................. (324)
Cash flows from financing activities:
Issuance of common stock................................... 402
-------
Net cash provided by financing activities............. 402
Net increase (decrease) in cash and cash equivalents........ 78
Cash and cash equivalents--beginning of period.............. -
-------
Cash and cash equivalents--end of period.................... $ 78
=======
The accompanying notes are an integral part of these financial statements.
4
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands)
NOTE 1--GENERAL
USA Floral Products, Inc. ("USA Floral") was founded in April 1997 to create a
national consolidator and operator of floral products distribution businesses.
On October 10, 1997 USA Floral commenced an initial public offering of common
stock (the "Offering"). At that same time , USA Floral acquired the Founding
Companies using cash and Common Stock (the "Acquisitions"). The closing of the
Acquisitions and the Offering occurred on October 16, 1997.
For financial statement purposes, USA Floral has been identified as the
accounting acquirer. Accordingly, the historical financial statements represent
those of USA Floral prior to the Acquisitions and the Offering. The
Acquisitions were accounted for using the purchase method of accounting.
The pro forma financial information for the three months and nine months ended
September 30, 1996 and September 30, 1997, includes the results of USA Floral
combined with the Founding Companies as if the Acquisitions had occurred on
January 1 of each respective period. This pro forma combined financial
information includes the effects of (a) the Acquisitions, (b) the Offering, (c)
establishment of liability for S Corporation distributions to be paid in
connection with the merger and to reflect normal S Corporation distributions
which occurred subsequent to September 30, 1997 (d) certain reductions in
salaries, bonuses and benefits to the former owners of the Founding Companies
which they agreed would take effect as of the Acquisitions (e) amortization of
goodwill resulting from the Acquisitions (f) the interest expense, depreciation,
rental expense and real estate tax expense on real estate purchased from and
distributed to certain stockholders of the Founding Companies.
The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what USA
Floral's financial position or results of operations would actually have been if
such transactions in fact had occurred on those dates and are not necessarily
representative of USA Floral's financial position or results of operations for
any future period. Since the Founding Companies were not under common control or
management, historical combined results may not be comparable to, or indicative
of, future performance.
The regulations for unaudited interim financial statements such as those in
this report allow certain information and footnotes required by generally
accepted accounting principles for year end financial statements to be excluded.
The Company believes all adjustments necessary for a fair presentation of these
interim statements have been included and are of a normal and recurring nature.
These interim statements should be read in conjunction with the financial
statements and related notes included in the Company's Registration Statement on
Form S-1 (File No. 39969) (the "Registration Statement").
NOTE 2--ACQUISITION OF FOUNDING COMPANIES
The following table sets forth the consideration paid (a) in cash and (b) in
shares of Common Stock to the common stockholders of each of the Founding
Companies, the allocation of the Consideration to net assets acquired and
resulting goodwill. For purposes of computing the estimated purchase price for
accounting purposes, the value of shares is based upon the initial public
offering price of $13. The total Purchase Consideration does not reflect:
(i) certain S Corporation distributions totaling $4,596 constituting
substantially all of the undistributed earnings of the Founding Companies that
are S Corporations to their stockholders and tax payments on current earnings of
such Founding Companies ("S Corporation Distributions"), (ii) the assumption of
an estimated tax liability of approximately $0.5 million of one of the Founding
Companies or (iii) contingent consideration related to earn out
5
arrangements included in the definitive agreements for American Florist and
Monterey Bay. These arrangements provide for the Company to pay additional
Consideration of up to $0.5 million in cash and shares of common stock with an
aggregate value of $5.4 million, based on 1997 earnings before interest and
taxes.
The purchase price has been allocated to the Company's historical assets and
liabilities based on their respective carrying values, with the exception of
acquired property at certain of the entities, as these carrying values are
deemed to represent fair market value of these assets and liabilities. The fair
market value of the properties acquired was determined via an independent
valuation by a third party. Additionally, adjustments have been made for S
Corporation distributions subsequent to September 30, 1997, debt assumed as
part of property purchased and the establishment of deferred income tax
liabilities and assets assumed in the transactions for purposes of determining
the excess of the purchase price over the net assets acquired. The Company does
not anticipate that the final allocation of purchase price will differ
significantly from that presented.
6
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(in thousands, except share amounts)
Shares of Values Net
Common of Total Assets
Cash Stock Shares Consideration Acquired Goodwill
------- --------- ------- ------------- -------- --------
Roy Houff........................ $11,000 $11,000 $ 4,678 $ 6,322
CFX, Inc......................... 5,790 250,000 $ 3,250 9,040 1,213 7,827
Bay State........................ 6,000 495,550 6,442 12,442 4,399 8,043
Flower Trading................... 5,900 160,000 2,080 7,980 1,434 6,546
United Wholesale Florists, Inc... 4,773 268,500 3,491 8,264 2,348 5,916
American Florist Supply, Inc..... 4,800 4,800 580 4,220
Monterey Bay..................... 2,500 2,500 679 1,821
Alpine Gem....................... 1,600 160,000 2,080 3,680 810 2,870
------- --------- ------- ------- ------- --------
Total......................... $42,363 1,334,050 $17,343 $59,706 $16,141 $43,565
======= ========= ======= ======= ======= ========
NOTE 3--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There were no significant changes in the accounting policies of the Company
during the periods presented. For a description of these policies, refer to the
Notes to Financial Statements of USA Floral and each of the Founding Companies
included in the Registration Statement.
7
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands)
NOTE 4--CREDIT FACILITY
In October 1997, the Company entered into an agreement with a syndicate of
lenders for whom Bankers Trust (BT) is agent, pursuant to which the lenders will
provide the Company a $100.0 million Credit Facility. Amounts outstanding under
the Credit Facility are to bear interest, at the Company's option, at BT's base
rate plus and applicable margin of up to 0.625% or a eurodollar rate plus an
applicable margin of up to 1.875%.
The Credit Facility will be used to fund acquisitions, capital expenditures
and working capital requirements. Under the terms of the Credit Facility the
Company is required to comply with various affirmative and negative covenants
including restrictions on mergers, acquisitions, dispositions and similar
transactions within certain parameters, sale-leaseback transactions, lease
payments, dividends, voluntary prepayments and amendments of other debt,
transactions with affiliates, investments, creation of liens, capital
expenditures and material amendments of organization documents, as well as
various financial covenants customary for transaction of this type, including
ratios of total debt to cash flow and cash flow to fixed charges.
NOTE 5--CAPITAL STOCK
On October 10, 1997 USA Floral sold 5,750,000 shares of Common Stock to the
public at $13.00 per share (the Offering). The net proceeds to USA Floral from
the Offering (after deducting underwriting commissions and offering expenses)
were approximately $63,582,500. Of this amount, $42,363,000 was used to pay the
cash portion of the purchase prices of the Founding Companies. An additional $4
million was paid for S-corporation distributions for CFX.
NOTE 6--EARNINGS PER SHARE
For historical periods through September 30, 1997, USA Floral's results of
operations compared to its Common Stock result in earnings per share amounts
that are not meaningful. As a result, historical earnings per share for these
periods have not been presented.
The computation of pro forma net income per share for the three months and
nine months ended September 30, 1997 is based on 7,738,819 shares of Common
Stock outstanding, which is calculated as follows:
Shares issued upon formation of USA Floral................................ 2,400,000
Shares issued in consideration for Acquisitions of Founding Companies..... 1,334,050
Shares sold pursuant to the Offering...................................... 5,750,000
Shares related to the dilution attributable to options granted............ 48,077
----------
Subtotal.............................................................. 9,532,127
Less shares sold in the offering that were not used for the cash portion
of the Acquisitions...................................................... (1,793,308)
----------
7,738,819
==========
8
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands)
NOTE 7--INCOME TAXES
Prior to the Acquisitions, certain Founding Companies' stockholders were taxed
under the provisions of Subchapter S of the Internal Revenue Code. Under these
provisions, the Stockholders paid income taxes on their proportionate share of
such Founding Company's earnings. Because the stockholders were taxed directly,
the Founding Company paid no federal income tax and only certain state income
taxes. Upon consummation of the Aquisitions, the Founding Companies will begin
to pay federal corporate and state corporate income taxes.
The Company intends to file a consolidated federal income tax return which
includes the operations of the Founding Companies for periods subsequent to the
acquisition date. The Founding Companies will each file a "short period"
federal income tax return through their respective acquisition dates.
The provision for income taxes included in the pro forma statements of
operation for the three months and nine months ended September 30, 1996 and 1997
is an estimate of the federal and state taxes that would have been applicable to
the Company had the Acquisitions occurred at the Beginning of each respective
period. The tax rates indicated by these provisions differ from statutory rates
primarily because amortization of goodwill related to the Acquisitions is not
deductible for tax purposes.
NOTE 8--COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal proceedings that have arisen in the
ordinary course of business. The Company does not believe that any of these
proceedings will have a material adverse effect on the financial position or
results of operations of the Company.
NOTE 9--NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 128, Earnings per Share ("SFAS No. 128"). For the
Company, SFAS No. 128 will be effective for the year ended December 31, 1997.
SFAS No. 128 simplifies the standards required under current accounting rules
for computing earnings per share and replaces the presentation of primary
earnings per share and fully diluted earnings per share with a presentation of
basic earnings per share ("basic EPS") and diluted earnings per share ("diluted
EPS"). Basic EPS excludes dilution and is determined by dividing income
available to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted EPS reflects the potential dilution that
could occur if securities and other contracts to issue common stock were
exercised or converted into common stock. Diluted EPS is computed similarly to
fully diluted earnings per share under current accounting rules. The
implementation of SFAS No. 128 is not expected to have a materiel effect on the
Company's earnings per share as determined under current accounting rules.
9
THE ROY HOUFF COMPANY
BALANCE SHEET
(in thousands, except share amounts)
December 31, September 30,
1996 1997
-------------- -------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 210
Accounts receivable, net......................................... 3,604 $3,186
Inventory........................................................ 1,118 1,315
Prepaid expenses and other current assets........................ 211 239
Advances to stockholder.......................................... 88
------ ------
Total current assets........................................... 5,231 4,740
Property and equipment, net....................................... 2,045 1,776
------ ------
Total assets................................................... $7,276 $6,516
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Bank line of credit.............................................. $ 400 $ 200
Notes payable--current........................................... 120 120
Accounts payable................................................. 3,519 2,896
Accrued expenses................................................. 657 495
Due to related parties........................................... 124 16
------ ------
Total current liabilities...................................... 4,820 3,727
Notes payable, net of current maturities.......................... 450 360
Commitments and contingencies
Stockholder's equity:
Common stock, no par value; 10,000 shares authorized; 50 shares
issued and outstanding.......................................... 425 425
Retained earnings................................................ 1,581 2,004
------ ------
Total stockholder's equity..................................... 2,006 2,429
------ ------
Total liabilities and stockholder's equity..................... $7,276 $6,516
====== ======
The accompanying notes are an integral part of these financial statements.
10
THE ROY HOUFF COMPANY
STATEMENT OF OPERATIONS
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------- ------------------
1996 1997 1996 1997
------- ------- -------- --------
(unaudited)
Net sales................................................ $7,903 $7,364 $30,068 $27,774
Cost of sales............................................ 5,146 4,799 19,839 18,003
------ ------ ------- -------
Gross margin.......................................... 2,757 2,565 10,229 9,771
Selling, general and administrative expenses............. 2,945 2,635 9,478 8,559
------ ------ ------- -------
Operating income...................................... (188) (70) 751 1,212
Other (income) expense:
Interest expense........................................ 24 18 82 58
Interest income......................................... (17) (3) (29) (13)
Other, net.............................................. (44) (50) (194) (97)
------ ------ ------- -------
Income before provision for income taxes................. (151) (35) 892 1,264
Provision for income taxes...............................
------ ------ ------- -------
Net income............................................... $ (151) $ (35) $ 892 $ 1,264
====== ====== ======= =======
Unaudited pro forma information:
Pro forma net income before provision for income taxes.. $ (151) $ (35) $ 892 $ 1,264
Provision for income taxes.............................. (60) (14) 357 506
------ ------ ------- -------
Pro forma income......................................... $ (91) $ (21) $ 535 $ 758
====== ====== ======= =======
The accompanying notes are an integral part of these financial statements.
11
THE ROY HOUFF COMPANY
STATEMENT OF STOCKHOLDER'S EQUITY
(in thousands, except share amounts)
Common Stock Total
---------------- Retained Stockholders'
Shares Amount Earnings Equity
------ ------ -------- ------------
Balance at December 31, 1996............... 50 $425 $1,581 $2,006
Net income (unaudited).................... 1,264 1,264
Dividends paid (unaudited)................ (841) (841)
------ ------ ------ ------
Balance at September 30, 1997 (unaudited).. 50 $425 $2,004 $2,429
====== ====== ====== ======
The accompanying notes are an integral part of these financial statements.
12
THE ROY HOUFF COMPANY
STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
-----------------
1996 1997
------- -------
(unaudited)
Cash flows from operating activities:
Net income................................................... $ 892 $ 1,264
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................... 392 361
Loss on disposal of fixed assets............................ 102
Change in operating assets and liabilities:
Accounts receivable........................................ 532 417
Inventory.................................................. (78) (29)
Prepaid expenses and other current assets.................. (131) (196)
Due to affiliate........................................... (108) 12
Accounts payable and accrued expenses...................... (250) (784)
------ -------
Net cash provided by operating activities............... 1,249 1,147
Cash flows from investing activities:
Purchases of property and equipment.......................... (465) (202)
Proceeds from disposal of property and equipment............. 8
------ -------
Net cash used in investing activities................... (465) (194)
Cash flows from financing activities:
Repayments to stockholder.................................... 312 88
Borrowings (repayments) under line of credit agreement, net.. (667) (320)
Proceeds from notes payable.................................. 183
Payments of notes payable.................................... (90)
Stockholder dividends........................................ (629) (841)
------ -------
Net cash used in financing activities................... (801) (1,163)
Net increase (decrease) in cash and cash equivalents.......... (17) (210)
Cash and cash equivalents--beginning of period................ 67 210
------ -------
Cash and cash equivalents--end of period...................... $ 50 $ 0
====== =======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest..................... $ 82 $ 58
Cash paid during the period for income taxes................. $ 13 $ 13
The accompanying notes are an integral part of these financial statements.
13
THE ROY HOUFF COMPANY
NOTES TO FINANCIAL STATMENTS
(unaudited)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1977, The Roy Houff Company ("Houff") is a distributor of
perishable floral products and floral-related hardgoods, operating from seven
locations in Illinois, Virginia and Arizona. Houff purchases floral products
from importers, brokers and shippers and sells them to retail florists and mass
marketers.
Note 2--BASIS OF PRESENTATION
On October 16, 1997, Houff merged with a wholly-owned subsidiary of U.S.A.
Floral Products, Inc. Houff is a predecessor company to U.S.A. Floral Products,
Inc.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles. The interim financial
information, while unaudited, reflects all normal recurring adjustments which
are, in the opinion of management necessary for a fair presentation of the
interim financial statements. The results of operations for interim periods are
not necessarily indicative of the results to be expected for a full year. These
financial statements should be read in conjunction with the audited financial
statements and the notes thereto included in the U.S.A. Floral Products, Inc.
Form S-1 Registration Statement.
14
CFX, INC.
BALANCE SHEET
(in thousands, except share amounts)
December 31, September 30,
1996 1997
------------ --------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents.......................................... $1,385 $ 723
Accounts receivable, net........................................... 3,242 3,611
Due from related parties........................................... 397 770
Prepaid expenses and other current assets.......................... 78 110
Advances to growers................................................ 145 553
------ ------
Total current assets............................................. 5,247 5,767
Property and equipment, net......................................... 402 411
Other assets:
Due from related parties........................................... 10
Cash surrender value--life insurance............................... 207 207
Deposits........................................................... 13 151
Advances to stockholders........................................... 428 602
Advances to growers................................................ 175
Other.............................................................. 2 2
------ ------
Total assets..................................................... $6,474 $7,150
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit..................................................... $ 1 $ 1
Current maturities of notes payable................................ 16 21
Accounts payable................................................... 548 141
Accrued expenses................................................... 1,835 1,617
Due to related party growers....................................... 316
------ ------
Total current liabilities........................................ 2,716 1,780
Notes payable, net of current maturities............................ 21 7
Commitments and contingencies
Stockholders' equity:
Common stock $5.00 par value; 1,000 shares authorized; 600 shares
issued and outstanding............................................ 3 3
Additional paid-in capital......................................... 57 57
Retained earnings.................................................. 3,677 5,303
------ ------
Total stockholders' equity....................................... 3,737 5,363
------ ------
Total liabilities and stockholders' equity....................... $6,474 $7,150
====== ======
The accompanying notes are an integral part of these financial statements.
15
CFX, INC.
STATEMENT OF OPERATIONS
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1997 1996 1997
------ ------ ------- -------
(unaudited)
Net sales (includes sales to related parties of $2,420,
$3,121 and $3,859)..................................... $7,110 $7,118 $27,695 $29,972
Cost of sales (includes purchases from related parties
of $9,081, $9,644 and $12,263)......................... 5,465 5,463 21,496 23,222
------ ------ ------- -------
Gross margin.......................................... 1,645 1,655 6,199 6,750
Selling, general and administrative expenses............. 1,742 1,553 6,991 5,210
------ ------ ------- -------
Operating income (loss)............................... (97) 102 (792) 1,540
Other (income) expense:
Interest income (net)................................... (27) (22) (78) (55)
Other, net.............................................. (1) (5) (94) (31)
------ ------ ------- -------
Net income (loss)..................................... $ (69) $ 129 $ (620) $ 1,626
====== ====== ======= =======
Unaudited pro forma information:
Pro forma net income (loss) before provision (benefit)
for income taxes....................................... $ (69) $ 129 $ (620) $ 1,626
Provision (benefit) for income taxes.................... (28) 52 (248) 650
------ ------ ------- -------
Pro forma income (loss)................................. $ (41) $ 77 $ (372) $ 976
====== ====== ======= =======
The accompanying notes are an integral part of these financial statements.
16
CFX, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
Common Stock Additional Total
-------------- Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
------ ------ ---------- -------- -------------
Balance at December 31, 1996... 600 $3 $57 $3,677 $3,737
Net income (unaudited)....... 1,626 1,626
--- -- --- ------ ------
Balance at September 30, 1997
(unaudited).................. 600 $3 $57 $5,303 $5,363
=== == === ====== ======
The accompanying notes are an integral part of these financial statements.
17
CFX, INC.
STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
-----------------
1996 1997
------- ------
(unaudited)
Cash flows from operating activities:
Net income (loss)...................................................... $ (620) $1,626
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization......................................... 168 141
Unrealized/realized loss (gain) on marketable trading securities...... (89)
Gain on disposal of property, plant and equipment..................... (1)
Proceeds on sale of marketable trading securities..................... 966
Changes in operating assets and liabilities:
Accounts receivable.................................................. (252) (369)
Prepaid expenses and other current assets............................ 26 (32)
Other assets......................................................... (127) (138)
Accounts payable and accrued expenses................................ 2,772 (625)
Due from/to related parties.......................................... (1,121) (699)
------- ------
Net cash provided by operating activities......................... 1,722 (96)
Cash flows from investing activities:
Advances to growers.................................................... (358) (233)
Decrease in certificate of deposit..................................... (164) (150)
Advances to stockholders............................................... (174)
Repayments from stockholders........................................... 673
------- ------
Net cash provided by (used in) investing activities............... 151 557
Cash flows from financing activities:
Repayments of long-term debt........................................... 255 (9)
Stockholder dividends.................................................. (146)
------- ------
Net cash provided by (used in) financing activities............... 109 (9)
Net increase (decrease) in cash and cash equivalents.................... 1,982 (662)
Cash and cash equivalents--beginning of period.......................... 105 1,385
------- ------
Cash and cash equivalents--end of period................................ $ 2,087 $ 723
======= ======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest............................... $ 1 $ 13
The accompanying notes are an integral part of these financial statements.
18
CFX, INC.
NOTES TO FINANCIAL STATMENTS
(unaudited)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1974, CFX, Inc. ("CFX") is an importer and distributor of
perishable floral products operating from one location in Florida. CFX imports
flowers from farms located primarily in Columbia and Ecuador, and distributes
them throughout the United States to wholesale distributors and mass market
retailers.
Note 2--BASIS OF PRESENTATION
On October 16, 1997, CFX sold substantially all of its assets and liabilities
to U.S.A. Floral Products, Inc. CFX is a predecessor company to U.S.A. Floral
Products, Inc.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles. The interim financial
information, while unaudited, reflects all normal recurring adjustments which
are, in the opinion of management necessary for a fair presentation of the
interim financial statements. The results of operations for interim periods are
not necessarily indicative of the results to be expected for a full year. These
financial statements should be read in conjunction with the audited financial
statements and the notes thereto included in the U.S.A. Floral Products, Inc.
Form S-1 Registration Statement.
19
BAY STATE FLORIST SUPPLY, INC.
BALANCE SHEET
(in thousands, except share amounts)
December 31, September 30,
1996 1997
------------- --------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents......................................... $ 791 $ 651
Accounts receivable, net.......................................... 3,413 3,421
Inventory......................................................... 1,701 2,072
Due from related parties.......................................... 559
Prepaid expenses and other current assets......................... 165 353
------ ------
Total current assets............................................ 6,629 6,497
Property and equipment, net........................................ 1,505 1,578
Cash surrender value--life insurance............................... 364 364
Other assets....................................................... 13 13
------ ------
Total assets.................................................... $8,511 $8,452
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank.............................................. $ 200 $ 212
Current maturities of long-term debt.............................. 50 69
Accounts payable.................................................. 1,701 1,776
Accrued expenses.................................................. 336 323
------ ------
Total current liabilities....................................... 2,287 2,380
Note payable, net of current maturities............................ 358 433
Commitments and contingencies (Note 6)
Other long-term liabilities........................................ 400 400
Stockholders' equity:
Common stock $0.01 par value; 500,000 shares authorized; 461,840
shares issued and outstanding.................................... 5 5
Additional paid-in capital........................................ 376 376
Retained earnings................................................. 5,561 5,334
Less: Treasury stock.............................................. (476) (476)
------ ------
Total stockholders' equity...................................... 5,466 5,239
------ ------
Total liabilities and stockholders' equity...................... $8,511 $8,452
====== ======
The accompanying notes are an integral part of these financial statements.
20
BAY STATE FLORIST SUPPLY, INC.
STATEMENT OF OPERATIONS
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
1996 1997 1996 1997
--------- --------- -------- --------
(unaudited)
Net sales................................................ $6,133 $5,998 $22,545 $22,373
Cost of sales............................................ 4,054 3,977 15,333 15,057
------ ------ ------- -------
Gross margin.......................................... 2,079 2,021 7,212 7,316
Selling, general and administrative expenses............. 2,159 1,996 6,666 6,552
------ ------ ------- -------
Operating income......................................... (80) 25 546 764
Other (income) expense:
Interest expense........................................ 8 11 25 36
Interest income......................................... (10) (14) (30) (37)
Other, net.............................................. (45) (38) (178) (128)
------ ------ ------- -------
Income before income taxes.............................. (33) 66 729 893
Provision for income taxes............................... (2) 10 59 80
------ ------ ------- -------
Net income............................................... $ (31) $ 56 $ 670 $ 813
====== ====== ======= =======
Unaudited pro forma information:
Pro forma net income before provision for income taxes.. $ (33) $ 66 $ 729 $ 893
Provision for income taxes.............................. (13) 26 292 357
------ ------ ------- -------
Pro forma income (see Note 2)........................... $ (20) $ 40 $ 437 $ 536
====== ====== ======= =======
The accompanying notes are an integral part of these financial statements.
21
BAY STATE FLORIST SUPPLY, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
Common Stock Additional Total
--------------- Paid-in Retained Treasury Stockholders'
Shares Amount Capital Earnings Stock Equity
------- ------ ---------- --------- --------- --------------
Balance at December 31, 1996... 461,840 $ 5 $ 376 $ 5,561 $(476) $ 5,466
Net income (unaudited)....... 813 813
Dividends paid (unaudited)... (1,040) (1,040)
------- ---- -------- ------- ----- -------
Balance at September 30, 1997
(unaudited).................. 461,840 $ 5 $ 376 $ 5,334 $(476) $ 5,239
======= ==== ======== ======= ===== =======
The accompanying notes are an integral part of these financial statements.
22
BAY STATE FLORIST SUPPLY, INC.
STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
-----------------
1996 1997
----- -----
(unaudited)
Cash flows from operating activities:
Net income................................................... $ 670 $ 813
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation................................................ 167 100
Change in operating assets and liabilities:
Accounts receivable........................................ 56 353
Inventory.................................................. (988) (370)
Prepaid expenses and other current assets.................. 89 (203)
Accounts payable and accrued expenses...................... 583 77
----- -------
Due from/to related parties................................
Net cash provided by (used in) operating activities..... 577 770
Cash flows from investing activities:
Purchases of property and equipment.......................... (248) (173)
Repayments from related parties.............................. 198
Advances to related parties.................................. (36)
Cash surrender value of life insurance.......................
----- -------
Net cash used in investing activities................... (284) 25
Cash flows from financing activities:
Proceeds from issuance of long-term debt..................... 106
Payments of long-term debt................................... (41)
Issuance of common stock.....................................
Purchase of treasury stock...................................
Stockholder dividends........................................ (526) (1,040)
----- -------
Net cash used in financing activities................... (567) (934)
Net increase (decrease) in cash and cash equivalents.......... (274) (140)
Cash and cash equivalents--beginning of period................ 795 791
----- -------
Cash and cash equivalents--end of period...................... $ 521 $ 651
===== =======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest..................... $ 25 $ 36
The accompanying notes are an integral part of these financial statements.
23
BAY STATE FLORIST SUPPLY, INC.
NOTES TO FINANCIAL STATMENTS
(unaudited)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1952, Bay State Florist Supply, Inc. ("Bay State") is a wholesale
distributor of perishable floral products and floral-related hardgoods,
operating from six locations in Massachusetts, New York, New Hampshire,
Connecticut and Rhode Island.
Note 2--BASIS OF PRESENTATION
On October 16, 1997, Bay State sold substantially all of its assets and
liabilities to U.S.A. Floral Products, Inc. Bay State is a predecessor company
to U.S.A. Floral Products, Inc.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles. The interim
financial information, while unaudited, reflects all normal recurring
adjustments which are, in the opinion of management necessary for a fair
presentation of the interim financial statements. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
a full year. These financial statements should be read in conjunction with the
audited financial statements and the notes thereto included in the U.S.A. Floral
Products, Inc. Form S-1 Registration Statement.
24
FLOWER TRADING CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except share amounts)
December 31, September 30,
1996 1997
------------ --------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 70 $1,007
Accounts receivable, net.......................................... 2,747 2,157
Officers, employees and related party receivables................. 38
Other receivables................................................. 10 74
Inventory......................................................... 52 41
Prepaid expenses and other current assets......................... 171 131
------ ------
Total current assets............................................ 3,088 3,410
Property and equipment, net........................................ 330 360
Cash surrender value--life insurance............................... 44 44
Deferred income taxes.............................................. 79 90
Other assets....................................................... 110 61
------ ------
Total assets.................................................... $3,651 $3,965
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit............................................... $ 200
Notes payable--current............................................ 112 $ 104
Trade accounts payable............................................ 669 724
Trade accounts payable due to affiliates.......................... 532 292
Other accounts payable and accrued expenses....................... 277 265
Income taxes payable.............................................. 302
------ ------
Total current liabilities....................................... 1,790 1,687
Notes payable, net of current maturities........................... 391 313
Deferred income taxes.............................................. 31
------ ------
Total liabilities............................................... 2,181 2,031
Commitments and contingencies
Stockholders' equity:
Common stock, $1.00 par value; 150,000 shares authorized, issued
and outstanding.................................................. 150 150
Additional paid-in capital........................................ 328 328
Retained earnings................................................. 992 1,456
------ ------
Total stockholders' equity...................................... 1,470 1,934
------ ------
Total liabilities and stockholders' equity...................... $3,651 $3,965
====== ======
The accompanying notes are an integral part of these consolidated financial
statements.
25
FLOWER TRADING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1997 1996 1997
------ ------ ------- -------
(unaudited)
Net sales.................................................... $3,858 $3,841 $15,163 $16,838
Cost of sales (including purchases from affiliated farms of
$2,612, $4,451, $3,921 for the years ended December 31,
1994, 1995 and 1996 and $1,779 and $2,259 for the six
months ended June 30, 1996 and 1997, respectively)......... 2,926 2,892 11,854 13,031
------ ------ ------- -------
Gross profit......................................... 932 949 3,309 3,807
Selling, general and administrative expenses................. 882 953 2,826 2,889
------ ------ ------- -------
Operating income..................................... 50 (4) 483 918
Other (income) expense:
Interest expense........................................... 11 5 46
Interest income............................................ (3) (10) (5) (14)
Write off of investment....................................
Other, net................................................. (20) 29 (26) 36
------ ------ ------- -------
Income before provision for income taxes..................... 73 (34) 509 850
Provision for income taxes................................... 32 47 215 386
------ ------ ------- -------
Net income................................................... $ 41 $ (81) $ 294 $ 464
====== ====== ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
26
FLOWER TRADING CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
Common Stock Additional Total
--------------- Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
------- ------ ---------- -------- -------------
Balance at December 31, 1996... 160,000 $150 $328 $ 992 $1,470
Net income (unaudited)....... 464 464
------- ---- ---- ------ ------
Balance at September 30, 1997
(unaudited).................. 160,000 $150 $328 $1,456 $1,934
======= ==== ==== ====== ======
The accompanying notes are an integral part of these consolidated financial
statements.
27
FLOWER TRADING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
-----------------
1996 1997
------- ------
(unaudited)
Cash flows from operating activities:
Net income................................................... $ 294 $ 464
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................... 140 115
Loss on investment..........................................
Loss on disposal of fixed assets............................
Change in operating assets and liabilities:
Accounts receivable........................................ 240 526
Inventory.................................................. 7 11
Prepaid expenses and other current assets.................. (9) 50
Accounts payable........................................... (338) (185)
Accrued expenses........................................... 16 (12)
Income taxes payable....................................... (9) 302
Deferred taxes asset and other assets...................... 21 20
------- ------
Net cash (used) provided by operating activities........ 362 1,291
Cash flows from investing activities:
Purchase of investment.......................................
Purchases of property and equipment.......................... (60) (106)
Proceeds from disposal of property and equipment.............
Cash surrender value of life insurance.......................
Advances to related parties.................................. 21 38
------- ------
Net cash used in investing activities................... (39) (68)
Cash flows from financing activities:
Proceeds from issuance of long-term debt..................... 1,100
Repayments of long-term debt................................. (40) (78)
Distribution to stockholders for investment in subsidiary.... (1,295)
Borrowings (repayments) under line of credit agreement, net.. (208)
------ ------
Net cash (used) provided by in financing activities..... (235) (286)
Net increase (decrease) in cash and cash equivalents.......... 88 937
Cash and cash equivalents--beginning of period................ 126 70
------- ------
Cash and cash equivalents--end of period...................... $ 214 $1,007
======= ======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest..................... $ 5 $ 45
Cash paid during the period for income taxes................. $ 139 $ 49
The accompanying notes are an integral part of these consolidated financial
statements.
28
FLOWER TRADING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATMENTS
(unaudited)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1977, Flower Trading Corporation ("Flower Trading") is an importer
and distributor of perishable floral products which are imported from farms
located primarily in Columbia and Ecuador and distributed to wholesale florists
throughout the United States.
Note 2--BASIS OF PRESENTATION
On October 16, 1997, Flower Trading sold substantially all of its assets and
liabilities to U.S.A. Floral Products, Inc. Flower Trading is a predecessor
company to U.S.A. Floral Products, Inc.
The accompanying unaudited combined financial statements have been prepared in
accordance with generally accepted accounting principles. The interim financial
information, while unaudited, reflects all normal recurring adjustments which
are, in the opinion of management necessary for a fair presentation of the
interim financial statements. The results of operations for interim periods are
not necessarily indicative of the results to be expected for a full year. These
financial statements should be read in conjunction with the audited financial
statements and the notes thereto included in the U.S.A. Floral Products, Inc.
Form S-1 Registration Statement.
29
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
COMBINED BALANCE SHEET
(in thousands, except share amounts)
June 30, September 30,
1997 1997
-------- --------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents............................ $ 625 $ 409
Accounts receivable, net............................. 1,186 1,203
Inventory............................................ 1,963 2,119
Advances to affiliates............................... 1,240 748
Advances to stockholders............................. 389 347
Prepaid expenses and other current assets............ 127 157
------ ------
Total current assets............................... 5,530 4,983
Property and equipment, net........................... 1,886 1,901
Advances to affiliates................................
Advances to stockholders..............................
Goodwill.............................................. 222 219
Deferred income taxes.................................
Other assets.......................................... 114 149
------ ------
Total assets....................................... $7,752 $7,252
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit....................................... $1,683 $1,450
Current maturities of long-term debt................. 104 46
Current maturities of notes payable to stockholders.. 558 550
Current obligations under capital leases............. 200
Accounts payable..................................... 2,179 2,052
Accrued expenses and other current liabilities....... 211 86
Income taxes payable................................. 210 210
------ ------
Total current liabilities.......................... 5,145 4,394
Long-term debt........................................ 62 90
Obligations under capital leases...................... 294 538
Notes payable to stockholders.........................
Other liabilities..................................... 61 55
Commitments and contingencies
Stockholders' equity:
Common stock......................................... 11 11
Retained earnings.................................... 2,179 2,164
------ ------
Total stockholders' equity......................... 2,190 2,175
------ ------
Total liabilities and stockholders' equity......... $7,752 $7,252
====== ======
The accompanying notes are an integral part of these financial statements.
30
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
COMBINED STATEMENT OF OPERATIONS
(in thousands)
Three Months Ended
September 30,
------------------
1996 1997
------ ------
(unaudited)
Net sales................................................ $3,860 $4,213
Cost of sales............................................ 2,532 2,760
------ ------
Gross margin........................................... 1,328 1,453
Selling, general and administrative expenses............. 1,296 1,434
------ ------
Operating income....................................... 32 19
Other (income) expense:
Interest expense........................................ 47 57
Interest income......................................... (33) (21)
Other, net.............................................. 14 (2)
------ ------
Income before income taxes............................... 4 (15)
------ ------
Provision for income taxes...............................
Net income (loss)....................................... $ 4 $ (15)
====== ======
Unaudited pro forma information:
Pro forma net income before provision for income taxes.. $ 4 $ (15)
Provision for income taxes.............................. 2 (6)
------ ------
Pro forma income (see Note 2)............................ $ 2 $ (9)
====== ======
The accompanying notes are an integral part of these financial statements.
31
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
Common Stock Total
---------------------- Retained Stockholders'
Shares Amount Earnings Equity
------------ -------- ----------- ------------
Balance at June 30, 1997................... 2,000 $11 $2,179 $2,190
Net loss (unaudited)...................... (15) (15)
----- --- ------ ------
Balance at September 30, 1997 (unaudited).. 2,000 $11 $2,164 $2,175
===== === ====== ======
The accompanying notes are an integral part of these financial statements.
32
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
COMBINED STATEMENT OF CASH FLOWS
(in thousands)
Three Months Ended
September 30,
--------------------
1996 1997
---- ----
(unaudited)
Cash flows from operating activities:
Net income......................................................................... $ 4 $ (15)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization..................................................... 107 103
Deferred income taxes............................................................. 3
Change in operating assets and liabilities:
Accounts receivable.............................................................. (57) (16)
Inventory........................................................................ (260) (156)
Prepaid expenses and other current assets........................................ 23 (29)
Accounts payable and accrued expenses............................................ 292 (253)
Changes in other assets.......................................................... (8) (42)
Changes in other liabilities...................................................... (8) (6)
----- -----
Net cash provided by operating activities....................................... 96 (414)
Cash flows from investing activities:
Purchases of property and equipment................................................ (10)
Advances to stockholders........................................................... (43) 42
Advances to affiliates............................................................. 3 492
----- -----
Net cash used in investing activities........................................... (40) 524
Cash flows from financing activities:
Net borrowings on line of credit................................................... (21) (233)
Principal payments on capital lease obligations.................................... (70) (55)
Repayments on long-term debt....................................................... (53) (30)
Repayments of notes payable to stockholders........................................ (66) (8)
----- -----
Net cash used in financing activities............................................ (210) (326)
----- -----
Net increase (decrease) in cash and cash equivalents............................... (154) (216)
Cash and cash equivalents--beginning of period..................................... 434 625
----- -----
Cash and cash equivalents--end of period............................................ $ 280 $ 409
===== =====
Supplemental disclosure of cash flow information:
Cash paid during the period for interest........................................... $ 40 $ 56
Supplemental disclosure of non-cash transactions:
Acquisition of vehicles under capital leases....................................... $ 99
The accompanying notes are an integral part of these financial statements.
33
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
NOTES TO COMBINED FINANCIAL STATMENTS
(unaudited)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1947, United Wholesale Florists, Inc. and United Wholesale Florists
of America, Inc. (together "United Wholesale") compose a wholesale distributor
of perishable floral products and floral-related hardgoods, operating from 13
locations in Arkansas, Alabama, Mississippi, Oklahoma, Tennessee and Texas. The
Company purchases floral products from domestic growers, importers, brokers and
shippers and sells them to retail florists and mass marketers.
The accompanying combined financial statements include the accounts of United
Wholesale Florists, Inc. and United Florists of America, Inc. which are
affiliated through common ownership and management. All intercompany
transactions have been eliminated in these financial statements.
Note 2--BASIS OF PRESENTATION
On October 16, 1997, United Wholesale sold substantially all of its assets and
liabilities to U.S.A. Floral Products, Inc. United Wholesale is a predecessor
company to U.S.A. Floral Products, Inc.
The accompanying unaudited combined financial statements have been prepared in
accordance with generally accepted accounting principles. The interim financial
information, while unaudited, reflects all normal recurring adjustments which
are, in the opinion of management necessary for a fair presentation of the
interim financial statements. The results of operations for interim periods are
not necessarily indicative of the results to be expected for a full year. These
financial statements should be read in conjunction with the audited financial
statements and the notes thereto included in the U.S.A. Floral Products, Inc.
Form S-1 Registration Statement.
34
AMERICAN FLORIST SUPPLY, INC.
BALANCE SHEET
(in thousands, except share amounts)
December 31, September 30,
1996 1997
------------ --------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 4 $ 510
Accounts receivable, net........................................... 1,460 1,225
Inventory.......................................................... 65 111
Notes receivable--stockholder...................................... 231 6
Receivable from affiliate.......................................... 31
Prepaid expenses and other current assets.......................... 30 35
------ ------
Total current assets............................................. 1,790 1,918
Property and equipment, net......................................... 278 197
Goodwill and intangibles, net....................................... 298 281
Restricted investments.............................................. 26 27
Other assets........................................................ 46 43
------ ------
Total assets..................................................... $2,438 $2,466
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Line of credit..................................................... $ 302
Accounts payable................................................... 709 $ 567
Accrued expenses................................................... 147 156
Income taxes payable............................................... 29
------ ------
Total current liabilities........................................ 1,187 723
Long-term debt...................................................... 598 598
Other long-term liabilities......................................... 25 25
Commitments and contingencies (Note 11)
Stockholder's equity:
Common stock, no par value; 5,000 shares authorized; 1,000 shares
issued and outstanding............................................ 400 400
Retained earnings.................................................. 228 720
------ ------
Total stockholder's equity....................................... 628 1,120
------ ------
Total liabilities and stockholder's equity....................... $2,438 $2,466
====== ======
The accompanying notes are an integral part of these financial statements.
35
AMERICAN FLORIST SUPPLY, INC.
STATEMENT OF OPERATIONS
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1997 1996 1997
------ ------ ------ ------
(unaudited)
Net sales................................................ $2,315 $2,481 $8,759 $9,563
Cost of sales............................................ 1,670 1,742 6,128 6,535
------ ------ ------ ------
Gross margin.......................................... 645 739 2,631 3,028
Selling, general and administrative expenses............. 644 696 2,065 2,275
------ ------ ------ ------
Operating income...................................... 1 43 566 753
Other (income) expense:
Interest expense........................................ 10 30 25
Interest income......................................... (1) (4) (4) (12)
Other, net.............................................. (4) (33) (47) (87)
------ ------ ------ ------
Income before income taxes............................ (4) 80 587 827
Provision for income taxes............................... 30 36
------ ------ ------ ------
Net income............................................... $ (4) $ 80 $ 557 $ 791
====== ====== ====== ======
Unaudited pro forma information:
Pro forma net income before provision for income taxes.. $ (4) $ 80 $ 587 $ 827
Provision for income taxes.............................. (2) 32 235 331
------ ------ ------ ------
Pro forma income (see Note 2)........................... $ (2) $ 48 $ 352 $ 496
====== ====== ====== ======
The accompanying notes are an integral part of these financial statements.
36
AMERICAN FLORIST SUPPLY, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
(in thousands, except share amounts)
Common Stock Total
---------------- Retained Stockholders'
Shares Amount Earnings Equity
------ -------- -------- -----------
Balance at December 31, 1996............... 1,000 $400 $228 $628
Net income (unaudited).................... 791 791
Dividends paid (unaudited)................ (299) (299)
----- ---- ----- ------
Balance at September 30, 1997 (unaudited).. 1,000 $400 $720 $1,120
===== ==== ===== ======
The accompanying notes are an integral part of these financial statements.
37
AMERICAN FLORIST SUPPLY, INC.
STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
-------------------
1996 1997
------- -------
(unaudited)
Cash flows from operating activities:
Net income................................................... $ 557 $ 791
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................... 83 62
Loss on disposal of fixed assets............................ 6
Changes in operating assets and liabilities:
Accounts receivable........................................ 184 266
Inventory.................................................. (36) (45)
Prepaid expenses and other assets.......................... (2) 9
Due from related parties................................... (195) 225
Accounts payable and accrued expenses...................... 217 (96)
Income taxes payable....................................... (37)
------ -------
Net cash provided by operating activities............... 808 1,181
Cash flows from investing activities:
Purchases of property and equipment.......................... (38) (55)
------ -------
Net cash used in investing activities................... (38) (55)
Cash flows from financing activities:
Proceeds from issuance of long-term debt..................... 797 1,777
Repayments on note payable................................... (874) (2,098)
Stockholder dividends........................................ (695) (299)
----- -------
Net cash used in financing activities................... (772) (620)
Net increase in cash and cash equivalents..................... (2) 506
Cash and cash equivalents--beginning of period................ 3 4
----- -------
Cash and cash equivalents--end of period...................... $ 1 $ 510
===== =======
Supplemental disclosure of cash flow information:
Cash paid during the period for interest..................... $ 30 $ 31
Cash paid during the period for taxes........................ $ 15 $ 29
The accompanying notes are an integral part of these financial statements.
38
AMERICAN FLORIST SUPPLY, INC.
NOTES TO FINANCIAL STATMENTS
(unaudited)
NOTE 1--BUSINESS ORGANIZATION
American Florist Supply, Inc. ("American Florist") is a wholesale distributor
of perishable floral products and floral-related hardgoods, operating from one
location in Massachusetts. The Company floral products from domestic growers,
brokers and importers and sells them to retail florists and mass marketers in
Maine, Massachusetts, Vermont and New Hampshire. The Company was incorporated on
April 11, 1994, as a result of the acquisition of certain assets and liabilities
of the distribution business of Johnson's Roses, Inc.
Note 2--BASIS OF PRESENTATION
On October 16, 1997 American Florist sold substantially all of its assets and
liabilities to U.S.A. Floral Products, Inc. American Florist is a predecessor
company to U.S.A. Floral Products, Inc.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles. The interim financial
information, while unaudited, reflects all normal recurring adjustments which
are, in the opinion of management necessary for a fair presentation of the
interim financial statements. The results of operations for interim periods are
not necessarily indicative of the results to be expected for a full year. These
financial statements should be read in conjunction with the audited financial
statements and the notes thereto included in the U.S.A. Floral Products, Inc.
Form S-1 Registration Statement.
39
MONTEREY BAY BOUQUET, INC. AND
BAY AREA BOUQUET, INC.
COMBINED BALANCE SHEET
(in thousands, except share amounts)
December 31, September 30,
1996 1997
------------ --------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 19 $ 260
Accounts receivable................................................ 909 945
Inventory.......................................................... 126 181
Prepaid expenses and other current assets.......................... 9 69
------ -------
Total current assets............................................. 1,063 1,455
Property and equipment, net......................................... 144 168
Other assets:
Cash surrender value--life insurance............................... 73 90
Intangibles........................................................ 41 80
Advances to stockholders........................................... 49
------ -------
Total assets..................................................... $1,321 $1,842
====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Credit line payable................................................ $ 49
Current maturities of long-term debt............................... 6 $ 34
Accounts payable................................................... 783 597
Accrued expenses................................................... 167 35
Notes payable to officers and stockholders......................... 10
Income taxes payable............................................... 12 363
------ -------
Total current liabilities........................................ 1,027 1,029
Long-term debt, net of current maturities........................... 24 29
Growers contract--related party..................................... 41 35
Other long-term liabilities.........................................
------ -------
Total liabilities................................................ 1,092 1,093
Commitments and contingencies
Stockholders' equity:
Common stock, Monterey Bay Bouquet, Inc., no par value; 1,000,000
shares authorized; 102,502 shares issued and outstanding.......... 78 78
Common stock, Bay Area Bouquet, Inc., no par value; 1,000 shares
authorized; 100 shares issued and outstanding..................... 25 25
Retained earnings.................................................. 126 646
------ -------
Total stockholders' equity....................................... 229 749
------ -------
Total liabilities and stockholders' equity....................... $1,321 $1,842
====== =======
The accompanying notes are an integral part of these combined financial
statements.
40
MONTEREY BAY BOUQUET, INC. AND
BAY AREA BOUQUET, INC.
COMBINED STATEMENT OF OPERATIONS
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1997 1996 1997
------ ------ ------ ------
(unaudited)
Net sales..................................... $1,970 $2,911 $6,797 $9,714
Cost of sales................................. 1,685 2,320 5,851 7,895
------ ------ ------ ------
Gross margin............................... 285 591 946 1,819
Selling, general and administrative expenses.. 264 333 760 896
------ ------ ------ ------
Operating income........................... 21 258 186 923
Other (income) expense:
Interest expense............................. 1 4 6 12
Other, net................................... (4) (2) (13) (6)
------ ------ ------ ------
Income before provision for income taxes...... 24 256 193 917
Provision for income taxes.................... 9 103 78 397
------ ------ ------ ------
Net income.................................... $ 15 $ 153 $ 115 $ 520
====== ====== ====== ======
The accompanying notes are an integral part of these combined financial
statements.
41
MONTEREY BAY BOUQUET, INC. AND
BAY AREA BOUQUET, INC.
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
Common Stock Total
---------------------- Retained Stockholders'
Shares Amount Earnings Equity
------------ -------- --------- ------------
Balance at December 31, 1996............... 102,602 $103 $126 $229
Net income (unaudited).................... 520 520
------- ---- ---- ----
Balance at September 30, 1997 (unaudited).. 102,602 $103 $646 $749
======= ==== ==== ====
The accompanying notes are an integral part of these combined financial
statements.
42
MONTEREY BAY BOUQUET, INC. AND
BAY AREA BOUQUET, INC.
COMBINED STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
------------------
1996 1997
------- -------
(unaudited)
Cash flows from operating activities:
Net income................................................... $ 115 $ 520
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 2 49
Change in operating assets and liabilities:
Accounts receivable....................................... (229) (36)
Inventory................................................. (56) (55)
Prepaid expenses and other current assets................. (58)
Income taxes payable...................................... 351
Accounts payable and accrued expenses..................... 345 (323)
Grower contract........................................... (20) 8
----- -----
Net cash provided by operating activities................ 157 456
Cash flows from investing activities:
Purchases of property and equipment.......................... (18) (70)
Cash surrender value of life insurance....................... (23) (18)
Increase in officer receivable............................... (4) (10)
Increase in intangibles...................................... (43)
----- -----
Net cash used in investing activities.................... (45) (141)
Cash flows from financing activities:
Advances to stockholder...................................... (50)
Net borrowings (repayments) on line of credit................ (51) (49)
Proceeds from issuance of long-term debt..................... 38
Repayments of long-term debt................................. (16) (13)
Proceeds from stockholder loans.............................. 28
----- -----
Net cash (used in) financing activities.................. (39) (74)
Net increase (decrease) in cash and cash equivalents.......... 73 241
Cash and cash equivalents--beginning of period................ 34 19
----- -----
Cash and cash equivalents--end of period...................... $ 107 $ 260
===== =====
Supplemental disclosure of cash flow information:
Cash paid during the period for interest..................... $ 6 $ 12
Cash paid during the period for income taxes................. $ 3 $ 99
The accompanying notes are an integral part of these combined financial
statements.
43
MONTEREY BAY BOUQUET, INC. AND
BAY AREA BOUQUETS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(unaudited)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1993, Monterey Bay Bouquet, Inc. and Bay Area Bouquets, Inc.
(together "Monterey Bay") is a manufacturer of fresh cut flower bouquets,
operating from one location in California. Monterey Bay purchases flowers from
importers and domestic growers and distributes them to a supermarket and a
discount retailer, each of which has locations throughout the southwestern
United States. The flower bouquets produced by Monterey Bay consist primarily of
specialty California-grown flowers.
The balance sheets and operating results for Monterey Bay Bouquet, Inc. and
Bay Area Bouquets, Inc. have been combined, as both companies have common
ownership and management. All intercompany sales and balances between the two
companies have been eliminated from these financial statements.
Note 2--BASIS OF PRESENTATION
On October 16, 1997, Monterey Bay sold substantially all of its assets and
liabilities to U.S.A. Floral Products, Inc. Monterey Bay Bouquet, Inc. and Bay
Area Bouquets, Inc. are predecessor companies to U.S.A. Floral Products, Inc.
The accompanying unaudited combined financial statements have been prepared in
accordance with generally accepted accounting principles. The interim financial
information, while unaudited, reflects all normal recurring adjustments which
are, in the opinion of management necessary for a fair presentation of the
interim financial statements. The results of operations for interim periods are
not necessarily indicative of the results to be expected for a full year. These
financial statements should be read in conjunction with the audited financial
statements and the notes thereto included in the U.S.A. Floral Products, Inc.
Form S-1 Registration Statement.
44
ALPINE GEM FLOWER SHIPPERS, INC.
BALANCE SHEET
(in thousands, except share amounts)
December 31, September 30,
1996 1997
------------- --------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents..................................... $ 1 $ 277
Accounts receivable........................................... 1,215 1,504
Prepaid expenses and other current assets..................... 18 16
------ ------
Total current assets........................................ 1,234 1,797
Property and equipment, net.................................... 26 23
------ ------
Total assets................................................ $1,260 $1,820
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................. $ 469 $ 627
Commissions payable........................................... 168 218
Accrued expenses.............................................. 14 15
------ ------
Total liabilities........................................... 651 860
Commitments and contingencies
Stockholders' equity:
Common stock, no par value; 50,000 shares authorized; 20,000
shares issued and outstanding................................ 727 727
Retained earnings (deficit)................................... (118) 233
------ ------
Total stockholders' equity.................................. 609 960
------ ------
Total liabilities and stockholders' equity.................. $1,260 $1,820
====== ======
The accompanying notes are an integral part of these financial statements.
45
ALPINE GEM FLOWER SHIPPERS, INC.
STATEMENT OF OPERATIONS
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------
1996 1997 1996 1997
------ ------ ------ ------
(unaudited)
Net sales................................................ $2,213 $2,554 $7,192 $8,151
Cost of sales............................................ 1,663 1,831 5,503 6,090
------ ------ ------ ------
Gross margin.......................................... 550 723 1,689 2,061
Selling, general and administrative expenses............. 441 480 1,243 1,382
------ ------ ------ ------
Operating income...................................... 109 243 446 679
Other (income) expense:
Interest expense........................................ (31) (17)
Interest income......................................... (11)
Other, net.............................................. (19) 1 (28)
------ ------ ------ ------
Net income............................................... $ 120 $ 262 $ 476 $ 724
====== ====== ====== ======
Unaudited pro forma information:
Pro forma net income before provision for income taxes.. $ 120 $ 262 $ 476 $ 724
Provision for income taxes.............................. 48 105 190 290
------ ------ ------ ------
Pro forma income (see Note 2)........................... $ 72 $ 157 $ 286 $ 434
====== ====== ====== ======
The accompanying notes are an integral part of these financial statements.
46
ALPINE GEM FLOWER SHIPPERS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
Common Stock Total
---------------------- Retained Stockholders'
Shares Amount Earnings Equity
------------ -------- -------- -------------
Balance at December 31, 1996............... 20,000 $727 $(118) $ 609
Net income (unaudited).................... 724 724
Dividends paid (unaudited)................ (373) (373)
------ ---- ----- -----
Balance at September 30, 1997 (unaudited).. 20,000 $727 $ 233 $ 960
====== ==== ===== =====
The accompanying notes are an integral part of these financial statements.
47
ALPINE GEM FLOWER SHIPPERS, INC.
STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
------------------
1996 1997
-------- -------
(unaudited)
Cash flows from operating activities:
Net income................................................... $ 476 $ 724
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation................................................ 20 8
Change in operating assets and liabilities:
Accounts receivable........................................ (82) (289)
Prepaid expenses and other current assets.................. (20) 2
Accounts payable and accrued expenses...................... 224 209
----- -----
Net cash provided by operating activities............... 618 654
Cash flows from investing activities:
----- -----
Purchases of property and equipment.......................... (36) (5)
----- -----
Net cash used in investing activities................... (36) (5)
Cash flows from financing activities:
Proceeds from short-term loan from stockholders..............
Stockholder dividends........................................ (252) (373)
----- -----
Net cash (used in) provided by financing activities..... (252) (373)
Net increase (decrease) in cash and cash equivalents.......... 330 276
Cash and cash equivalents--beginning of period................ 162 1
----- -----
Cash and cash equivalents--end of period...................... $ 492 $ 277
===== =====
The accompanying notes are an integral part of these financial statements.
48
ALPINE GEM FLOWER SHIPPERS, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1978, Alpine Gem Flower Shippers, Inc. ("Alpine Gem") is a broker
and shipper of perishable floral products, operating from one location in
Montana and one in California. The Company distributes flowers primarily to
wholesalers throughout the United States.
Note 2--BASIS OF PRESENTATION
On October 16, 1997, Alpine Gem sold substantially all of its assets and
liabilities to U.S.A. Floral Products, Inc. Alpine Gem is a predecessor company
to U.S.A. Floral Products, Inc.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles. The interim financial
information, while unaudited, reflects all normal recurring adjustments which
are, in the opinion of management necessary for a fair presentation of the
interim financial statements. The results of operations for interim periods are
not necessarily indicative of the results to be expected for a full year. These
financial statements should be read in conjunction with the audited financial
statements and the notes thereto included in the U.S.A. Floral Products, Inc.
Form S-1 Registration Statement.
49
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Pro Forma Combined Results of Operations
- ----------------------------------------
U.S.A. Floral Products, Inc.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Net Sales. Net sales increased to $139.5 million in the nine months ended
September 30, 1997 from $132.6 million in the nine months ended September 30,
1996, an increase of $6.9 million, or 5.2%. This increase was primarily driven
by CFX and Flower Trading, which accounted for $4.0 million of the increase as
a result of increased sales volume, higher prices for certain products, and a
fuel surcharge fee related to airline shipments that was added to customer
invoices, and a $2.9 million increase at Monterey Bay as a result of increases
in volume primarily due to additional promotional activities. These increases
were partially offset by a decrease at Houff as a result of the closing of its
wholesale distribution facility in Atlanta, Georgia in October 1996.
Cost of Sales. Cost of sales increased to $99.3 million in the nine months
ended September 30, 1997 from $95.1 million in the nine months ended September
30, 1996, an increase of $4.2 million, or 4.4%, primarily as a result of the
increased sales. As a percentage of net sales, cost of sales decreased to
71.2% in the nine months ended September 30, 1997 from 71.8% in the nine
months ended September 30, 1996. The decrease in costs of sales as a
percentage of sales is primarily a result of the Founding Companies obtaining
more favorable prices, partially due to increased volume purchasing, better
inventory management and reduced freight costs.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $32.2 million in the nine months ended September 30,
1997 from $31.6 million in the nine months ended September 30, 1996, an
increase of $0.6 million, or 1.9%. The increase was primarily a result of
increased personnel costs to support the increase in sales. As a percentage of
net sales, selling, general and administrative expenses decreased to 23.0% in
the nine months ended September 30, 1997 from 23.8% in the nine months ended
September 30, 1996 primarily as a result of spreading fixed costs over
increased sales.
Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996
Net Sales. Net sales increased to $36.5 million in the three months ended
September 30, 1997 from $35.4 million for the three months ended September 30,
1996, an increase of $1.1 million or 3.2%. This increase was primarily driven by
Monterey Bay Bouquet which accounted for $0.9 million of the increase as the
result of increased sales volume primarily due to promotional activities. This
increase was partially offset by a decrease at Houff primarily as a result of
the closing of its Atlanta facility in October 1996, which accounted for $0.5
million of sales in the three months ended September 30, 1996, and increases at
other companies.
Cost of Sales. Cost of sales increased to $25.7 million in the three months
ended September 30, 1997 from $25.0 million in the three months ended September
30, 1996, an increase of $0.7 million or 2.6%, primarily as a result of
increased sales. As a percentage of sales, cost of sales decreased to 70.4% in
the three months ended September 30, 1997 from 70.8% in the three months ended
September 30, 1996, primarily as a result of the Founding Companies obtaining
more favorable prices, partially due to increased volume purchasing, better
inventory management and freight costs, and margin improvement due to
promotional activities.
Selling, General and Administrative. Selling general and administrative
expenses increased to $10.3 million in the three months ended September 30, 1997
from $10.2 million for the three months ended September 30, 1996, an increase of
$0.2 million or 1.5%. The increase resulted primarily from increased personnel
costs to support the increase in sales. As a percentage of sales, selling,
general and administrative expenses decreased to 28.4% in the three months ended
September 30, 1997 from 28.8% in the three months ended September 30, 1996
primarily as a result of spreading fixed costs over increased sales.
Predecessor Companies
- ----------------------
The Roy Houff Company
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996
Net Sales. Net sales decreased to $27.8 million in the nine months ended
September 30, 1997 from $30.1 million in the nine months ended September 30,
1996, a decrease of $2.3 million or 7.6%. This decrease primarily resulted from
the closing of Houff's wholesale distribution facility in Atlanta, Georgia in
October 1996, which accounted for $2.5 million in net sales in the nine months
ended September 30, 1996, as well as decreased sales at the Oak Park, Illinois
facility partially offset by increased sales in other locations.
Cost of Sales. Cost of sales, which consists of perishable and hardgood
products and in-bound freight costs, decreased to $18.0 million in nine months
ended September 30, 1997 from $19.8 million in the nine months ended September
30, 1996, a decrease of $1.8 million, or 9.3%. As a percentage of net sales,
costs of sales decreased to 64.8% in the nine months ended September 30, 1997
from 66.0% in the nine months ended September 30, 1996. This decrease resulted
primarily from a reduction in lower margin sales associated with the Atlanta,
Georgia facility and the shipping business and management's ability to obtain
more favorable pricing.
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $8.6 million in the nine months ended September 30, 1997
from $9.5 million in the nine months ended September 30, 1996, a decrease of
$0.9 million, or 9.7%. As a percentage of net sales, selling, general and
administrative expenses decreased to 30.8% in the nine months ended September
30, 1997 from 31.5% in the nine months ended September 30, 1996. This decrease
resulted from the closing of Houff's wholesale distribution facility in Atlanta,
Georgia in October 1996.
Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996
Net Sales. Net sales decreased to $7.4 million in the three months ended
September 30, 1997 from $7.9 million in the three months ended September 30,
1996, a decrease of $0.5 million, or 6.8%. This decrease primarily resulted
from the closing of Houff's wholesale distribution facility in Atlanta, Georgia
in October 1996, which accounted for $0.5 million in net sales in the three
months ended September 30, 1996, and sales declines in another branch, partially
offset by increases in other locations.
Cost of Sales. Cost of sales decreased to $4.8 million in the three
months ended September 30, 1997 from $5.1 million in the three months ended
September 30, 1996, a decrease of $0.3 million, or 6.7%. As a percentage of net
sales, costs of sales increased to 65.2% in the three months ended September 30,
1997 from 65.1% in the three months ended September 30, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $2.6 million in the three months ended September 30, 1997
from $2.9 million in the three months ended September 30, 1996, a decrease of
$0.3 million, or 10.5%. As a percentage of net sales, selling, general and
administrative expenses decreased to 35.8% in the three months ended September
30, 1997 from 37.3% in the three months ended September 30, 1996. This decrease
resulted from the closing of Houff's wholesale distribution facility in Atlanta,
Georgia in October 1996.
CFX, Inc.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996
50
Net Sales. Net sales increased to $30.0 million in the nine months ended
September 30, 1997 from $27.7 million in the nine months ended September 30,
1996, an increase of $2.3 million, or 8.2%. This increase resulted primarily
from obtaining higher prices for certain products and a fuel surcharge fee
related to airline shipments that was added to customer invoices.
Cost of Sales. Cost of sales, which consists primarily of payment for fresh
cut flowers, increased to $23.2 million in the nine months ended September 30,
1997 from $21.5 million in the nine months ended September 30, 1996, an increase
of $1.7 million, or 8.0%, primarily as a result of the increase in sales and the
imposition of a fuel surcharge related to airline shipments that was imposed by
airlines beginning in April 1996. As a percentage of net sales, costs of sales
decreased to 77.5% in the nine months ended September 30, 1997 from 77.6% in the
nine months ended September 30, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $5.2 million in the nine months ended September 30, 1997
from $7.0 million in the nine months ended September 30, 1996, a decrease of
$1.8 million, or 25.5%. This decrease resulted from decreased compensation to
employee-stockholders, partially offset by increases in personnel costs. As a
percentage of net sales, selling, general and administrative expenses decreased
to 17.4% in the nine months ended September 30, 1997 from 25.2% in the nine
months ended September 30, 1996.
Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996
Net Sales. Net sales were $7.1 million in the three months ended September
30, 1997 and in the three months ended September 30, 1996, due to a reduction of
flower production in South America during July and August.
Cost of Sales. Cost of sales was $5.5 million in the three months ended
September 30, 1997 and in the three months ended September 30, 1996. As a
percentage of net sales, costs of sales decreased to 76.7% in the three months
ended September 30, 1997 from 76.9% in the three months ended September 30,
1996.
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $1.6 million in the three months ended September 30, 1997
from $1.7 million in the three months ended September 30, 1996, a decrease of
$0.2 million, or 10.8%. As a percentage of net sales, selling, general and
administrative expenses decreased to 21.8% in the three months ended September
30, 1997 from 24.5% in the three months ended September 30, 1996.
Bay State Florist Supply, Inc.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996
Net Sales. Net sales decreased to $22.4 million in the nine months ended
September 30, 1997 from $22.5 million in the nine months ended September 30,
1996, a decrease of $0.2 million, or 0.8%, due to a reduction in sales to a
supermarket chain in the nine months ended September 30, 1997. The supermarket
chain, which accounted for $0.7 million of net sales in the nine months ended
September 30, 1997 and $2.3 million of net sales in the nine months ended
September 30, 1996, was acquired in late 1996 by another supermarket chain which
operates its own wholesale distribution facility. The reduction in sales to this
customer was offset by increased sales to existing customers and sales to new
customers, including new supermarket customers.
Cost of Sales. Cost of sales, which consists of the cost of perishable and
hardgood products and in-bound freight costs, decreased to $15.1 million in the
nine months ended September 30, 1997 from $15.3 million in the nine months ended
September 30, 1996, a decrease of $0.3 million, or 1.8%. As a percentage of net
sales, cost of sales decreased to 67.3% in the nine months ended September 30,
1997 from 68.0% in the nine months ended September 30, 1996. This decrease
primarily resulted from management's ability to obtain more favorable prices and
better inventory management.
51
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $6.6 million in the nine months ended September 30, 1997
from $6.7 million in the nine months ended September 30, 1996, a decrease of
$0.1 million, or 1.7%. As a percentage of net sales, selling, general and
administrative expenses decreased to 29.3% in the nine months ended September
30, 1997 from 29.6% in the nine months ended September 30, 1996.
Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996
Net Sales. Net sales were $6.0 million in the three months ended September
30, 1997 and $6.1 million in the three months ended September 30, 1996, a
decrease of $0.1 million or 2.2%, due to a reduction in sales to a supermarket
chain in the three months ended September 30, 1997. The supermarket chain,
which accounted for $0.1 million of net sales in the three months ended
September 30, 1997 and $0.6 million of net sales in the three months ended
September 30, 1996, was acquired in late 1996 by another supermarket chain which
operates its own wholesale distribution facility. The reduction in sales to this
customer was offset by increased sales to existing customers and sales to new
customers, including new supermarket customers.
Cost of Sales. Cost of sales decreased to $4.0 million in the three months
ended September 30, 1997 from $4.1 million in the three months ended September
30, 1996, a decrease of $0.1 million, or 1.9%. As a percentage of net sales,
cost of sales increased to 66.3% in the three months ended September 30, 1997
from 66.1% in the three months ended September 30, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $2.0 million in the three months ended September 30, 1997
from $2.2 million in the three months ended September
30, 1996, a decrease of $0.2 million, or 7.5%. As a percentage of net sales,
selling, general and administrative expenses decreased to 33.3% in the three
months ended September 30, 1997 from 35.2% in the three months ended September
30, 1996. This decrease primarily resulted from expenses associated with
servicing the supermarket customer.
Flower Trading Corporation
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996
Net Sales. Net sales increased to $16.8 million in the nine months ended
September 30, 1997 from $15.2 million in the nine months ended September 30,
1996, an increase of $1.7 million, or 11.0%. The increase resulted primarily
from an increased volume of sales, increased revenues at Valentine's Day and a
fuel surcharge fee that was added to customer invoices.
Cost of Sales. Cost of sales, which primarily consists of the cost of
purchasing fresh cut flowers, increased to $13.0 million in the nine months
ended September 30, 1997 from $11.9 million in the nine months ended September
30, 1996, an increase of $1.2 million, or 9.9%. The increase resulted from the
imposition of a fuel surcharge related to airline shipments that was imposed by
airlines beginning in April 1996, and increases in direct purchase costs, sales
commission and freight costs associated with the increased sales. As a
percentage of net sales, cost of sales decreased to 77.4% in the nine months
ended September 30, 1997 from 78.2% in the nine months ended September 30, 1996,
due to management's efforts to obtain more favorable prices.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $2.9 million in the nine months ended September 30, 1997
from $2.8 million in the nine months ended September 30, 1996, an increase of
$0.1 million, or 2.2%. As a percentage of net sales, selling, general and
administrative expenses decreased to 17.1% in the nine months ended September
30, 1997 from 18.6% in the nine months ended September 30, 1996. This decrease
resulted primarily from spreading fixed costs over increased sales.
Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996
52
Net Sales. Net sales decreased to $3.8 million in the three months ended
September 30, 1997 from $3.9 million in the three months ended September 30,
1996, a decrease of $.02 million, or 0.4%, due to a reduction in flower
production in South America during the summer months.
Cost of Sales. Cost of sales, which primarily consists of the cost of
purchasing fresh cut flowers, was $2.9 million in the three months ended
September 30, 1997 and the three months ended September 30, 1996. As a
percentage of net sales, cost of sales decreased to 75.3% in the three months
ended September 30, 1997 from 75.8% in the three months ended September 30,
1996, due to management's efforts to obtain more favorable prices.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $1.0 million in the three months ended September 30, 1997
from $0.9 million in the three months ended September 30, 1996, an increase of
$0.1 million, or 8.0%. As a percentage of net sales, selling, general and
administrative expenses increased to 24.8% in the three months ended September
30, 1997 from 22.9% in the three months ended September 30, 1996. This decrease
resulted primarily from increased personnel-related costs.
United Wholesale Florists, Inc. and United Wholesale Florists of America,
Inc.
Three Months Ended September 30, 1997 Compared To Three Months Ended September
30, 1996
Net Sales. Net sales increased to $4.2 million in the three months ended
September 30, 1997 from $3.9 million in the year ended September 30, 1996, an
increase of $0.4 million, or 9.1%, as a result of increased sales at United
Wholesale's Mississippi facilities due to reduced competition.
Cost of Sales. Cost of sales increased to $2.8 million in the three months
ended September 30, 1997 from $2.5 million in the three months ended September
30, 1996, an increase of $0.2 million, or 9.0%, primarily as a result of
increased sales. As a percentage of net sales, cost of sales decreased to 65.5%
in the three months ended September 30, 1997 from 65.6% in the three months
ended September 30, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $1.4 million in the three months ended September 30, 1997
from $1.3 million in the three months ended September 30, 1996, an increase of
$0.1 million, or 10.6%. As a percentage of net sales, selling, general and
administrative expenses increased to 34.0% in the three months ended September
30, 1997 from 33.6% in the three months ended September 30, 1996.
American Florist Supply, Inc.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996
Net Sales. Net sales increased to $9.6 million in the nine months ended
September 30, 1997 from $8.8 million in the nine months ended September 30,
1996, an increase of $0.8 million, or 9.2%. This increase resulted from
increased sales to existing customers and sales to new customers.
Cost of Sales. Cost of sales, which consists of the cost of perishable and
hardgood products and in-bound freight costs, increased to $6.5 million in the
nine months ended September 30, 1997 from $6.1 million in the nine months ended
September 30, 1996, an increase of $0.4 million, or 6.6%, primarily as a result
of increased sales. As a percentage of net sales, cost of sales decreased to
68.3% in the nine months ended September 30, 1997 from 70.0% in the nine months
ended September 30, 1996, due to management's ability to obtain more favorable
prices, improved inventory management and reduced freight costs.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $2.3 million in the nine months ended September 30, 1997
from $2.1 million in the nine months ended September 30, 1996, an increase of
$0.2 million, or 10.2%. As a percentage of net sales, selling, general and
administrative expenses increased to 23.8% in the nine months ended September
30, 1997 from 23.6% in the nine months ended September 30, 1996, primarily as a
result of additional personnel costs.
Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996
53
Net Sales. Net sales increased to $2.5 million in the three months ended
September 30, 1997 from $2.3 million in the three months ended September 30,
1996, an increase of $0.2 million, or 7.2%. This increase resulted from
increased sales to existing customers and sales to new customers.
Cost of Sales. Cost of sales was $1.7 million in the three months ended
September 30, 1997 and the three months ended September 30, 1996. As a
percentage of net sales, cost of sales decreased to 70.2% in the three months
ended September 30, 1997 from 72.1% in the three months ended September 30,
1996, due to management's ability to obtain more favorable prices, improved
inventory management and reduced costs.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $0.7 million in the three months ended September 30, 1997
from $0.6 million in the three months ended September 30, 1996, an increase of
$0.1 million, or 8.1%. As a percentage of net sales, selling, general and
administrative expenses increased to 28.1% in the three months ended September
30, 1997 from 27.8% in the three months ended September 30, 1996, primarily as a
result of additional personnel costs.
Monterey Bay Bouquet, Inc. and Bay Area Bouquets, Inc.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996
Net Sales. Net sales increased to $9.7 million in the nine months ended
September 30, 1997 from $6.8 million in the nine months ended September 30,
1996, an increase of $2.9 million, or 42.9%. The increase reflected an increased
volume of sales.
Cost of Sales. Cost of sales, which primarily consists of fresh cut flowers,
production, labor and distribution costs, increased to $7.9 million in the nine
months ended September 30, 1997 from $5.9 million in the nine months ended
September 30, 1996, an increase of $2.0 million, or 34.9%, primarily as a result
of the increased sales. As a percentage of net sales, cost of sales decreased to
81.3% in the nine months ended September 30, 1997 from 86.1% in the nine months
ended September 30, 1996. This decrease resulted primarily from better prices
obtained through higher volume purchases of both perishable products and
packaging materials.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $0.9 million in the nine months ended September 30, 1997
from $0.8 million in the nine months ended September 30, 1996, an increase of
$0.1 million, or 17.9%. The increase was attributable to increased sales. As a
percentage of net sales, selling, general and administrative expenses decreased
to 9.2% in the nine months ended September 30, 1997 from 11.2% in the nine
months ended September 30, 1996.
Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996
Net Sales. Net sales increased to $2.9 million in the three months ended
September 30, 1997 from $2.0 million in the three months ended September 30,
1996, an increase of $1.0 million, or 47.8%. The increase reflected an increased
volume of sales.
Cost of Sales. Cost of sales increased to $2.3 million in the three months
ended September 30, 1997 from $1.7 million in the three months ended September
30, 1996, an increase of $0.6 million, or 38%, primarily as a result of the
increased sales. As a percentage of net sales, cost of sales decreased to 79.7%
in the three months ended September 30, 1997 from 85.5% in the three months
ended September 30, 1996. This decrease resulted primarily from better prices
obtained through higher volume purchases of both perishable products and
packaging materials.
Selling, General and Administrative. Selling, general and administrative
expenses was $0.3 million in the three months ended September 30, 1997 and
September 30, 1996. As a percentage of net sales, selling, general and
administrative expenses decreased to 11.4% in the three months ended September
30, 1997 from 13.4% in the three months ended September 30, 1996.
54
Alpine Gem Flower Shippers, Inc.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996
Net Sales. Net sales increased to $8.2 million in the nine months ended
September 30, 1997 from $7.2 million in the nine months ended September 30,
1996, an increase of $1.0 million, or 13.3%, primarily from sales resulting from
improved promotion of goods and marketing of additional varieties of products.
Cost of Sales. Cost of sales, which primarily consists of the cost of fresh
cut flowers, increased to $6.1 million in the nine months ended September 30,
1997 from $5.5 million in the nine months ended September 30, 1996, an increase
of $0.6 million, or 10.7%, primarily as a result of increased sales. As a
percentage of net sales, cost of sales decreased to 74.7% in the nine months
ended September 30, 1997 from 76.5% in the nine months ended September 30, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $1.4 million in the nine months ended September 30, 1997
from $1.2 million in the nine months ended September 30, 1996, an increase of
$0.1 million, or 11.2%, primarily as a result of increased sales, marketing and
lease expenses. As a percentage of net sales, selling, general and
administrative expenses decreased to 17.0% in the nine months ended September
30, 1997 from 17.3% the nine months ended September 30, 1996.
Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996
Net Sales. Net sales increased to $2.6 million in the three months ended
September 30, 1997 from $2.2 million in the three months ended September 30,
1996, an increase of $0.3 million, or 15.4%, primarily from sales resulting from
improved promotion of goods and marketing of additional varieties of products.
Cost of Sales. Cost of sales increased to $1.8 million in the three months
ended September 30, 1997 from $1.7 million in the three months ended September
30, 1996, an increase of $0.2 million, or 10.1%, primarily as a result of
increased sales. As a percentage of net sales, cost of sales decreased to 71.7%
in the three months ended September 30, 1997 from 75.1% in the three months
ended September 30, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $0.5 million in the three months ended September 30, 1997
from $0.4 million in the three months ended September 30, 1996, an increase of
approximately $40,000, or 8.8%, primarily as a result of increased
sales and marketing expenses. As a percentage of net sales, selling, general
and administrative expenses decreased to 18.8% in the three months ended
September 30, 1997 from 19.9% the three months ended September 30, 1996.
55
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
The Company is not a party to any material legal proceedings.
Item 2. Changes in Securities
None
Item 3. Defaults under Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
56
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S.A. FLORAL PRODUCTS, INC.
Date: November 24, 1997 By: /s/ Raymond C. Anderson
------------------------------------
Raymond C. Anderson, Vice President and
Chief Financial Officer
57