UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended April 30, 2001
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________
Commission File No. 0-11399
-------
COYNE INTERNATIONAL ENTERPRISES CORP.
BLUE RIDGE TEXTILE MANUFACTURING, INC.
OHIO GARMENT RENTAL, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrants as specified in their respective charters)
New York 16-6040758
Georgia 58-2018333
Ohio 34-1261376
- ----------------------------------------- -------------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
140 Cortland Avenue, Syracuse, New York 13221
- ----------------------------------------- -------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (315) 475-1626
--------------
Securities Registered Pursuant to Section 12(b) of the Act: NONE
----
Securities Registered Pursuant to Section 12(g) of the Act: NONE
----
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES : X NO
1
TABLE OF CONTENTS
Page
----
PART I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheets ................................................................. 3
Consolidated Statements of Operations ....................................................... 5
Consolidated Statements of Cash Flows........................................................ 6
Notes to Consolidated Financial Statements................................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........ 16
PART II. Other Information
Item 1. Legal Proceedings............................................................................ 17
Item 2. Changes in Securities and Use of Proceeds.................................................... 17
Item 3. Defaults Upon Senior Securities.............................................................. 17
Item 4. Submission of Matters to a Vote of Security Holders.......................................... 17
Item 5. Other Information............................................................................ 17
Item 6. Exhibits and Reports on Form 8-K............................................................. 17
Signatures
2
Item 1. Financial Statements
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Balance Sheets
- ---------------------------------------------------------------------------------------------------------------------------------
April 30, October 31,
Assets 2001 2000
------ ------------------ ------------------
(unaudited)
Current Assets:
Cash and cash equivalents $ 923,756 $ 909,340
Accounts receivable, less allowance for doubtful accounts
of $467,000 in April and $341,000 in October 16,295,280 16,929,975
Inventories 9,266,458 12,725,141
Rental merchandise in service 33,166,256 32,712,967
Prepaid expenses and other assets 707,966 698,768
------------------ ------------------
Total current assets 60,359,716 63,976,191
Property, plant and equipment, at cost:
Land 2,432,180 2,432,180
Buildings and improvements 41,879,123 39,829,930
Machinery and equipment 41,986,828 42,729,434
Vehicles 11,820,652 11,420,295
Construction in process 1,258,113 1,505,965
------------------ ------------------
99,376,896 97,917,804
Less: Accumulated depreciation (56,815,483) (54,100,700)
------------------ ------------------
Total property, plant and equipment 42,561,413 43,817,104
Other assets:
Purchased routes and acquisition intangibles, net 16,813,482 17,239,942
Deferred financing costs, net 2,193,387 2,322,568
Deferred income taxes 4,893,623 3,724,623
Other 150,059 202,521
------------------ ------------------
Total other assets 24,050,551 23,489,654
------------------ ------------------
$ 126,971,680 $ 131,282,949
================== ==================
See notes to unaudited consolidated financial statements.
3
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Balance Sheets
================================================================================
April 30, October 31,
Liabilities and Shareholders' Equity (Deficit) 2001 2000
----------------------------------------------
----------------- ----------------
(unaudited)
Current Liabilities:
Current maturities of long-term obligations $ 3,243,076 $ 3,385,619
Accounts payable 9,026,365 8,934,685
Accrued expenses:
Salaries and employee benefits 3,276,206 4,714,396
Accrued interest 3,570,879 3,655,175
Other 3,996,215 2,268,201
Deferred income taxes 12,108,370 12,032,060
----------------- ----------------
Total current liabilities 35,221,111 34,990,136
Long-term obligations, net of current maturities 100,389,031 102,811,292
Other liabilities 2,050,817 2,170,095
----------------- ----------------
Total liabilities 137,660,959 139,971,523
----------------- ----------------
Shareholders' equity (deficit):
Preferred stock - 5% non-cumulative, non-voting, callable at par: Class
A - $100 par value; 30,000 shares authorized, 23,107
shares issued and outstanding 2,310,700 2,310,700
Class B - $500 par value; 5,000 shares authorized, 4,991
shares issued, 2,991 shares outstanding 2,495,500 2,495,500
Common stock - $.01 par value:
Class A - voting; 100,000 shares authorized, 2,923 shares
issued and outstanding 29 29
Class B - non-voting; 99,000 shares authorized, 74,030 shares
issued and outstanding 740 740
Additional paid-in capital 849,512 849,512
Retained earnings (deficit) (13,977,100) (12,212,139)
Accumulated other comprehensive loss (135,569)
----------------- ----------------
(8,456,188) (6,555,658)
Less:
Treasury stock, 2,000 shares of Class B preferred stock at cost (166,667) (166,667)
Shareholder receivables (2,066,424) (1,966,249)
----------------- ----------------
Total shareholders' equity (deficit) (10,689,279) (8,688,574)
----------------- ----------------
$ 126,971,680 $ 131,282,949
================= ================
See notes to unaudited consolidated financial statements.
4
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Statements of Operations and Retained Earnings (Deficit)
Three Months Ended Six Months Ended
April 30, April 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------- ------------- ------------- -------------
Unaudited Unaudited
Revenue:
Rental Operations 36,161,153 35,321,515 71,682,457 70,111,227
Direct Sales 2,142,832 2,226,473 4,765,031 4,575,769
------------ ------------ ------------ ------------
Total Revenue 38,303,985 37,547,988 76,447,488 74,686,996
------------ ------------ ------------ ------------
Operating Expenses:
Cost of rental operations 27,343,987 25,644,680 54,279,430 50,875,981
Cost of direct sales 1,331,971 1,322,079 2,968,992 2,898,121
Selling, general and administrative 6,511,352 6,178,302 12,919,902 12,038,189
Depreciation and amortization 1,551,639 1,561,836 3,109,711 3,095,921
------------ ------------ ------------ ------------
Total Operating Expenses 36,738,949 34,706,897 73,278,035 68,908,212
------------ ------------ ------------ ------------
Income from operations 1,565,036 2,841,091 3,169,453 5,778,784
Interest Expense 2,929,159 2,870,855 5,924,414 5,664,168
------------ ------------ ------------ ------------
Income (loss) before income taxes (1,364,123) (29,764) (2,754,961) 114,616
Income tax expense (489,000) 73,000 (990,000) 223,000
------------ ------------ ------------ ------------
Net Loss (875,123) (102,764) (1,764,961) (108,384)
============ ============ ============ ============
See notes to unaudited consolidated financial statements
5
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
Six Months
Ended April 30,
-----------------------------------
2001 2000
---------------- ---------------
(unaudited) (unaudited)
Cash flows from operating activities:
Net loss $ (1,764,961) $ (108,384)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation of property, plant and equipment 2,178,082 2,163,920
Amortization of capitalized leases 536,701 536,701
Amortization of acquisition intangibles 387,792 372,798
Amortization of deferred financing costs 172,434 176,040
Provision for deferred income taxes (1,092,690) 155,000
Changes in operating assets and operating liabilities:
Accounts receivable 634,695 (558,884)
Inventories 3,458,682 (2,955,214)
Rental merchandise in service (453,289) (943,936)
Prepaid expenses and other assets 43,264 388,755
Accounts payable, accrued expenses, and other liabilities 42,362 (206,055)
---------------- ---------------
Net cash provided by operating activities 4,143,072 (979,259)
---------------- ---------------
Cash flows from investing activities:
Purchase of property, plant and equipment (1,459,092) (1,994,322)
Acquisition of business, net of cash acquired 38,668 (251,506)
---------------- ---------------
Net cash used in investing activities (1,420,424) (2,245,828)
---------------- ---------------
Cash flows from financing activities:
Proceeds from long-term borrowings 20,259,269 21,247,993
Payments under long-term obligations (22,824,073) (17,942,278)
Increase in shareholder receivables (100,175) (20,144)
Deferred financing costs incurred (43,253) 0
---------------- ---------------
Net cash provided by (used in) financing activities (2,708,232) 3,285,571
---------------- ---------------
Net increase in cash 14,416 60,484
Cash and cash equivalents:
Beginning of period 909,340 213,407
---------------- ---------------
End of period $ 923,756 $ 273,891
================ ===============
Supplemental disclosure of cash flow information:
Interest paid $ 5,836,255 $ 5,479,597
Income taxes paid 51,732 11,734
See notes to unaudited consolidated financial statements.
6
Coyne International Enterprises Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements of Coyne International
Enterprises Corp. and Subsidiaries, (the Company), have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management,
quarterly results include all adjustments, (consisting of normal recurring
accruals), considered necessary for a fair presentation. For further
information, refer to the consolidated financial statements and notes included
in the Company's annual report on Form 10-K for the year ended October 31, 2000.
The Company uses a fifty-two/fifty-three week fiscal year ending on the last
Saturday of October, with quarterly interim periods of thirteen weeks. For
convenience, the dating of the accompanying financial statements, and notes,
herein, have been labeled as of and for the periods ending April 30, 2001,
October 31, 2000 and April 30, 2000 rather than the actual period-end dates.
Operating results for the three and six month period, ended April 30, 2001 are
not necessarily indicative of the results that may be expected for the year
ended October 31, 2001.
2. Long-term Obligations
At April 30, 2001 the Company was not in compliance with certain financial
covenants of the Company's existing credit facility, (the Agreement). Subsequent
to April 30, 2001 the Company obtained waivers of such non-compliance. In
addition, in June 2001, the Company amended certain terms and financial
covenants of the Agreement. Under the terms of the amendment the maximum credit
available under the Company's revolving credit facility has been decreased by
$8,198,000 to $30,000,000, subject to certain collateral limitations. In
addition, credit available under the capital expenditure facility has been
reduced to $4,942,000. As of April 30, 2001, after giving consideration to the
June 12 2001, amendment, the Company had approximately $2,883,000 available
under its revolving credit facility and $1,000,000 in the capital expenditure
facility.
3. Income Taxes
The Company's effective tax rate differs from the federal statutory rate of 34%
due to state taxes and certain expenses that are not deductible for tax
purposes. These non-deductible items include the amortization of certain
intangible assets and a portion of certain meals and entertainment expenses.
7
4. Derivative Instruments and Hedging Activities
The Company maintains an interest-rate risk-management strategy that uses
interest rate swaps to minimize significant, unanticipated earnings fluctuations
caused by interest-rate volatility. The Company's specific goals are (1) to
manage interest-rate sensitivity by modifying the repricing or maturity
characteristics of certain of its debt and (2) to lower, (where possible), the
cost of its borrowed funds. The Company uses interest-rate swaps to convert a
portion of its variable-rate debt to fixed rates. At April 30, 2001, the
notional amount of such debt was $4,915,600.
The Company adopted Statement of Financial Accounting Standards No. 133, (SFAS
133), Accounting for Derivative Instruments and Hedging Activities, on November
1, 2000. Under SFAS 133, the Company's existing interest rate swaps have been
designated as highly effective cash flow hedges. In accordance with the
transition provisions of SFAS 133, the Company recorded a net-of-tax
cumulative-effect-type adjustment of $9,934 in other comprehensive income to
recognize this cash flow hedge at fair value.
5. Reclassification
Certain amounts have been reclassified to conform with the fiscal 2001
presentation.
6. Comprehensive Income
The components of comprehensive income (loss) were as follows:
Six Months Six Months
ended ended
April 30, 2001 April 30, 2000
-------------- --------------
Net loss ($1,764,961) ($108,384)
Other comprehensive income (loss):
Changes in fair value of interest rate swap (145,502) 0
------------ -------------
Comprehensive loss ($1,910,463) ($108,384)
============= =============
8
Coyne International Enterprises Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
7. Consolidating Financial Statements
On June 26, 1998, the Company sold $75,000,000 of 11-1/4% Senior Subordinated
Notes due 2008, (the Notes). The Notes are jointly and severally guaranteed by
the following wholly-owned subsidiaries of the Company, (the Subsidiary
Guarantors): Blue Ridge Textile Manufacturing, Inc. and Ohio Garment Rental,
Inc. The following consolidating financial statements for the Company segregate
the financial information of Coyne International Enterprises Corp. (the Parent
Company) and the Subsidiary Guarantors.
9
Coyne International Enterprises Corp. And Subsidiaries
Consolidating Balance Sheets April 30, 2001
-------------------------------------------------------------------
Parent Subsidiary Consolidating Consolidated
Assets Company Guarantors Adjustments Totals
------ -------------- --------------- -------------- ----------------
Current Assets:
Cash and cash equivalents $ 1,149,233 $ (225,477) $ 923,756
Accounts receivable 14,459,640 1,835,640 16,295,280
Inventories 7,107,234 2,159,224 9,266,458
Rental merchandise in service 30,617,895 2,548,361 33,166,256
Prepaid expenses and other assets 8,581,423 76,815 (7,950,272) 707,966
--------------- --------------- -------------- ----------------
Total current assets 61,915,425 6,394,563 (7,950,272) 60,359,716
Property, plant and equipment, at cost: 90,469,262 8,907,634 99,376,896
Less: Accumulated depreciation (51,074,449) (5,741,034) (56,815,483)
-------------- --------------- -------------- ----------------
Total property, plant and equipment 39,751,508 3,166,600 0 42,561,413
Other assets:
Purchased routes and acquisition intangibles, net 16,547,738 265,744 16,813,482
Deferred financing costs, net 2,193,387 0 2,193,387
Deferred income taxes 4,893,623 0 4,893,623
Other 149,570 489 150,059
-------------- --------------- -------------- ----------------
Total other assets 23,784,318 266,233 0 24,050,551
-------------- --------------- -------------- ----------------
$ 125,094,556 $ 9,827,396 $ (7,950,272) $ 126,971,680
============== =============== ============== ================
Liabilities and Shareholders' Equity (Deficit)
----------------------------------------------
Current Liabilities:
Current maturities of long-term obligations $ 3,243,076 $ 3,243,076
Accounts payable 8,425,709 600,656 9,026,365
Accrued expenses:
Salaries and employee benefits 3,188,161 88,045 3,276,206
Accrued interest 3,570,879 0 3,570,879
Other 2,807,792 1,188,423 3,996,215
Deferred income taxes 12,108,370 0 12,108,370
-------------- ---------------- -------------- ----------------
Total current liabilities 33,343,987 1,877,124 0 35,221,111
Long-term obligations, net of current maturities 100,389,031 100,389,031
Other liabilities 2,050,817 1,979,802 (1,979,802) 2,050,817
--------------- --------------- -------------- ----------------
Total liabilities 135,783,835 3,856,926 (1,979,802) 137,660,959
--------------- --------------- -------------- ----------------
Shareholders' equity (deficit):
Preferred stock 4,806,200 4,806,200
Common stock 769 1,250,019 (1,250,019) 769
Additional paid-in capital 849,512 298,981 (298,981) 849,512
Retained earnings (deficit) (13,977,100) 4,421,470 (4,421,470) (13,977,100)
Accumulated other comprehensive loss (135,569) (135,569)
-------------- --------------- -------------- ----------------
(8,456,188) 5,970,470 (5,970,470) (8,456,188)
Less:
Treasury stock, 2,000 shares of Class B preferred
stock at cost (166,667) (166,667)
Shareholder receivables (2,066,424) (2,066,424)
-------------- --------------- -------------- ----------------
Total shareholders' equity (deficit) (10,689,279) 6,247,298 (6,247,298) (10,689,279)
-------------- --------------- -------------- ----------------
125,094,556 $ 9,827,396 $ (7,950,272) $ 126,971,680
============== =============== ============== ================
10
Coyne International Enterprises Corp. and Subsidiaries
Consolidating Balance Sheets October 31, 2000
--------------------------------------------------------------------
Parent Subsidiary Consolidating Consolidated
Assets Company Guarantors Adjustments Totals
------ -------------- --------------- --------------- -----------------
Current Assets:
Cash and cash equivalents $ 955,728 $ (46,388) $ 909,340
Accounts receivable 15,243,854 1,686,121 16,929,975
Inventories 9,487,201 3,237,940 12,725,141
Rental merchandise in service 30,643,937 2,069,030 32,712,967
Prepaid expenses and other assets 10,035,907 14,628 (9,351,767) 698,768
--------------- --------------- --------------- -----------------
Total current assets 66,366,627 6,961,331 (9,351,767) 63,976,191
Property, plant and equipment, at cost: 89,059,067 8,858,737 97,917,804
Less: Accumulated depreciation (48,572,337) (5,528,363) (54,100,700)
--------------- --------------- --------------- -----------------
Total property, plant and equipment 40,486,730 3,330,374 0 43,817,104
Other assets:
Purchased routes and acquisition intangibles, net 16,968,910 271,032 17,239,942
Deferred financing costs, net 2,322,568 0 2,322,568
Deferred income taxes 3,724,623 0 3,724,623
Other 202,521 0 202,521
--------------- --------------- --------------- -----------------
Total other assets 23,218,622 271,032 0 23,489,654
--------------- --------------- --------------- -----------------
$ 130,071,979 $ 10,562,737 $ (9,351,767) $ 131,282,949
=============== =============== =============== =================
Liabilities and Shareholders' Equity (Deficit)
---------------------------------------------
Current Liabilities:
Current maturities of long-term obligations $ 2,707,503 $ 678,116 $ 3,385,619
Accounts payable 8,934,685 8,934,685
Accrued expenses:
Salaries and employee benefits 4,635,123 79,273 4,714,396
Accrued interest 3,655,175 3,655,175
Other 1,814,620 453,581 2,268,201
Deferred income taxes 12,032,060 12,032,060
--------------- --------------- --------------- -----------------
Total current liabilities 33,779,166 1,210,970 0 34,990,136
Long-term obligations, net of current maturities 102,811,292 102,811,292
Other liabilities 2,170,095 3,242,883 (3,242,883) 2,170,095
--------------- --------------- --------------- -----------------
Total liabilities 138,760,553 4,453,853 (3,242,883) 139,971,523
--------------- --------------- --------------- -----------------
Shareholders' equity (deficit):
Preferred stock 4,806,200 4,806,200
Common stock 769 1,250,019 (1,250,019) 769
Additional paid-in capital 849,512 298,981 (298,981) 849,512
Retained earnings (deficit) (12,212,139) 4,559,884 (4,559,884) (12,212,139)
--------------- --------------- --------------- -----------------
(6,555,658) 6,108,884 (6,108,884) (6,555,658)
Less:
Treasury stock, 2,000 shares of Class B preferred
stock at cost (166,667) (166,667)
Shareholder receivables (1,966,249) (1,966,249)
--------------- -------------------------------- -----------------
Total shareholders' equity (deficit) (8,688,574) 6,108,884 (6,108,884) (8,688,574)
--------------- --------------- --------------- -----------------
$ 130,071,979 $ 10,562,737 $ (9,351,767) $ 131,282,949
=============== =============== =============== =================
11
Coyne International Enterprises Corp. and Subsidiaries
Consolidating Statements of Operations
Three Months Ended April 30, 2001
----------------------------------------------------------------------
Parent Subsidiary Consolidating Consolidated
Company Guarantors Adjustments Totals
---------------- ---------------------------------------------------
Revenue:
Rental Operation 33,652,185 2,508,967 0 36,161,152
Direct Sales 892,631 2,892,938 (1,642,737) 2,142,832
---------------- ---------------- -------------- --------------
34,544,816 5,401,905 (1,642,737) 38,303,984
---------------- ---------------- -------------- --------------
Operating expenses:
Cost of rental operations 25,328,575 2,015,412 0 27,343,987
Cost of direct sales 499,018 2,467,690 (1,633,737) 1,332,971
Selling, general and administrative 5,689,246 941,834 (119,728) 6,511,352
Depreciation and amortization 1,463,942 87,697 0 1,551,639
---------------- ---------------- -------------- --------------
32,979,781 5,512,633 (1,753,465) 36,738,949
---------------- ---------------- -------------- --------------
Income (loss) from operations 1,565,036 (110,728) 110,728 1,565,036
Interest expense 2,929,159 0 0 2,929,159
---------------- ---------------- -------------- --------------
Income (loss) before income tax (1,364,123) (110,728) 110,728 (1,364,123)
Income taxes (444,709) (44,291) 0 (489,000)
---------------- ---------------- -------------- --------------
Net income (loss) (919,414) (66,437) 110,728 (875,123)
================ ================ ============== ==============
12
Coyne International Enterprises Corp. and Subsidiaries
Consolidating Statements of Operations
Three Months Ended April 30, 2000
----------------------------------------------------------------------
Parent Subsidiary Consolidating Consolidated
Company Guarantors Adjustments Totals
---------------- ---------------------------------------------------
Revenue:
Rental Operations 32,948,789 2,372,727 35,321,516
Direct Sales 796,928 4,094,821 (2,665,276) 2,226,473
---------------- ---------------- --------------- --------------
33,745,717 6,467,548 (2,665,276) 37,547,989
---------------- ---------------- --------------- --------------
Operating expenses:
Cost of rental operations 23,832,124 1,802,776 25,634,900
Cost of direct sales 460,031 3,465,324 (2,603,276) 1,322,079
Selling, general and administrative 5,127,373 1,015,488 36,850 6,179,671
Depreciation and amortization 1,485,138 85,110 1,570,248
---------------- ---------------- --------------- --------------
30,904,666 6,368,698 (2,556,426) 34,706,898
---------------- ---------------- --------------- --------------
Income from operations 2,841,051 98,850 (98,850) 2,841,091
Interest expense 2,870,855 0 0 2,870,855
---------------- ---------------- --------------- --------------
Income (loss) before income tax (29,804) 98,850 (98,850) (29,764)
Income taxes 33,460 39,540 0 73,000
---------------- ---------------- --------------- --------------
Net income (loss) (63,264) 59,310 (98,850) (102,764)
================ ================ =============== ==============
13
Coyne International Enterprises Corp. and Subsidiaries
-------------------------------------------------------------------
Six Months Ended April 30, 2001
-------------------------------------------------------------------
Consolidating Statements of Cash Flows Parent Subsidiary Consolidating Consolidated
Company Guarantors Adjustments Totals
------------- ------------ ------------- -------------
Cash flows from operating activities:
Net income (loss) $ (1,809,252) $ (138,414) $ 182,705 $ (1,764,961)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation of property, plant and equipment 1,990,373 187,709 2,178,082
Amortization of capitalized leases 536,701 536,701
Amortization of acquisition intangibles 385,147 2,645 387,792
Amortization of deferred financing costs 172,434 0 0 172,434
Provision for deferred income taxes (1,092,690) 0 0 (1,092,690)
Changes in operating assets and operating liabilities:
Accounts receivable 784,214 (149,519) 0 634,695
Inventories 2,379,967 1,078,716 0 3,458,683
Rental merchandise in service 26,042 (479,331) 0 (453,289)
Prepaid expenses and other assets 1,507,436 (62,676) (1,401,496) 43,264
Accounts payable, accrued expenses, and other
liabilities (623,793) (596,927) 1,263,081 42,361
------------- ------------ ------------- -------------
Net cash provided by (used in) operating activities 4,256,579 (157,797) 44,290 4,143,072
Cash flows from investing activities:
Purchase of property, plant and equipment (1,410,195) (48,897) (1,459,092)
Acquisition of business, net of cash acquired 38,668 38,668
------------- ------------ ------------- -------------
Net cash used in investing activities (1,371,527) (48,897) 0 (1,420,424)
Cash flows from financing activities:
Proceeds from long-term borrowings 20,259,269 20,259,269
Payments under long-term obligations (22,824,073) (22,824,073)
Other (143,428) (143,428)
------------- ------------ ------------- -------------
Net cash provided by (used in) financing activities (2,708,232) 0 0 (2,708,232)
------------- ------------ ------------- -------------
Net increase in cash 176,820 (206,694) 44,290 14,416
Cash and cash equivalents:
Beginning of period 955,728 (46,388) 0 909,340
------------- ------------ ------------- -------------
End of period $ 1,132,548 $ (253,082) $ 44,290 $ 923,756
------------- ------------ ------------- -------------
14
Coyne International Enterprises Corp. and Subsidiaries
Six Months Ended March 30, 2000
-----------------------------------------------------------------
Consolidating Statements of Cash Flows Parent Subsidiary Consolidating Consolidated
Company Guarantors Adjustments Totals
------------- ------------- -------------- ------------
Cash flows from operating activities:
Net income (loss) $ (68,797) $ 95,879 $ (135,379) $ (108,384)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation of property, plant and equipment 1,976,211 187,709 2,163,920
Amortization of capitalized leases 536,701 536,701
Amortization of acquisition intangibles 370,154 2,644 372,798
Amortization of deferred financing costs 176,040 0 0 176,040
Provision for deferred income taxes (110,000) 265,000 0 155,000
Changes in operating assets and operating liabilities:
Accounts receivable (2,605,396) 2,046,512 0 (558,884)
Inventories (3,057,490) 102,276 0 (2,955,214)
Rental merchandise in service (865,697) (78,238) 0 (943,935)
Prepaid expenses and other assets 3,877,019 (2,466) (3,485,799) 388,754
Accounts payable, accrued expenses, and other liabilities (31,909) (2,439,066) 2,264,920 (206,055)
------------- ------------- -------------- ------------
Net cash provided by (used in) operating activities 196,789 180,250 (1,356,258) (979,259)
------------- ------------- -------------- ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (1,983,296) (11,026) (1,994,322)
Acquisition of business, net of cash acquired (251,506) (251,506)
------------- ------------- -------------- ------------
Net cash used in investing activities (2,234,802) (11,026) 0 (2,245,828)
------------- ------------- -------------- ------------
Cash flows from financing activities:
Proceeds from long-term borrowings 21,247,993 21,247,993
Payments under long-term obligations (17,942,278) (17,942,278)
Other (20,144) 0 0 (20,144)
------------- ------------- -------------- ------------
Net cash provided by (used in) financing activities 3,285,571 0 0 3,285,571
------------- ------------- -------------- ------------
Net increase in cash 247,558 169,224 (1,356,258) 60,484
Cash and cash equivalents:
Beginning of period 309,648 (96,241) 0 213,407
------------- ------------- -------------- ------------
End of period $ 1,557,206 $ 264,741 $ (1,356,258) $ 273,891
============= ============= ============== ============
15
ITEM 2. Management's Discussion and Analysis of the Financial Condition and
Results of Operations
Coyne International Enterprises Corp. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Certain statements included in this Part I, Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
Quarterly Report on Form 10-Q, which are not statements of historical fact, are
intended to be, and are hereby identified as, "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Without limiting the foregoing, the words "believe," "anticipate," "plan,"
"expect," "estimate," "intend" and other similar expressions are intended to
identify forward-looking statements. The Company cautions readers that
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievement expressed or implied by such forward-looking statements. Such
factors include, among others, the following: the success or failure of the
Company in implementing its current business and operational strategies;
availability, terms and access to capital and customary trade credit; general
economic and business conditions; competition; changes in the Company's business
strategy; labor relations; the outcome of pending or yet-to-be instituted legal
proceedings; labor and employee benefit costs; and availability and terms of
necessary or desirable financing or refinancing.
Results of Operations for the Second Quarter of Fiscal 2001 Compared to the
Second Quarter of Fiscal 2000
Total revenues increased 2.0% and 2.4% for the three and six month period ended
April 30, 2001 over the same period in fiscal 2000. Income from operations
decreased 45.2% for the six months ended April 30, 2001 versus the same period
in fiscal 2000. Factors contributing to this decrease, include increased
merchandise and installation costs associated with new business and
re-garmenting existing accounts; increases in natural gas and vehicle fuel
costs; and increased spending to train and develop the professional sale force
and improve the customer service program.
Liquidity and Capital Resources
Net cash provided by operating activities increased $5.1 million for the six
months ended April 30, 2001 over the same period in fiscal 2000. This increase
is primarily attributed to decreased purchases of inventory in 2001 and more
efficient use of existing inventory in 2001.
16
Item 1. Legal Proceedings
The Company is involved in certain claims and litigation arising in the ordinary
course of business, which are not considered material to the financial
operations or cash flow of the Company.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Not applicable.
17
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
COYNE INTERNATIONAL ENTERPRISES CORP.
Date: June 12, 2001 By: /S/ Stephen M. Owen
-----------------------------------------
Stephen M. Owen
VP of Finance and Chief Financial Officer
By: /S/ Thomas C. Crowley
-----------------------------------------
Thomas C. Crowley
Chief Operating Officer
18