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 January 31, 2000
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 Incorporation (IRS Employer Identification No.)
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
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Securities Registered Pursuant to Section 12(b) of the Act: NONE
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Securities Registered Pursuant to Section 12(g) of the Act: NONE
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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 [_]
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TABLE OF CONTENTS
Page
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PART I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheets .............................................................. 3
Unaudited Consolidated Statements of Operations and Retained Earnings (Deficit)........... 5
Unaudited Consolidated Statements of Cash Flows........................................... 6
Notes to Unaudited Consolidated Financial Statements...................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition............................... 9
Liquidity and Capital Resources........................................................... 9
Results of Operations for the First Quarter of Fiscal 2000 Compared to
the First Quarter of Fiscal 1999......................................................... 10
Information Systems; Year 2000............................................................ 10
PART II. Other Information
Signatures................................................................................ 11
2
PART I. Financial Information
ITEM 1. Financial Statements
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Balance Sheets
January 31, October 31,
ASSETS 2000 1999
---------- ---------------------- --------------------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 58,190 $ 213,407
Receivables, principally trade 17,781,182 16,768,958
Inventories 8,693,496 7,371,395
Uniforms and other rental items in service, net 27,569,075 27,838,084
Prepaid expense and other assets 646,307 796,094
---------------------- --------------------
Total current assets 54,748,250 52,987,938
Property, plant and equipment, net 46,595,674 46,553,709
Purchased routes and acquisition intangibles, net 17,098,694 17,062,547
Deferred financing cost, net 2,517,780 2,606,593
Deferred income taxes 2,149,000 2,190,000
Other assets 445,202 444,795
---------------------- --------------------
Total assets $ 123,554,600 $ 121,845,582
====================== ====================
See notes to consolidated financial statements
3
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Balance Sheets (continued)
January 31, October 31,
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) 2000 1999
---------------------------------------------- -------------------- ---------------------
(Unaudited)
Current Liabilities:
Current maturities of long-term debt $ 3,445,440 $ 3,214,908
Accounts payable 5,391,664 5,378,142
Accrued expenses:
Salaries and employee benefits 4,995,714 5,297,557
Other 7,649,987 8,970,850
Deferred income taxes 10,000,000 10,000,000
-------------------- ---------------------
Total current liabilities 31,482,805 32,861,457
Long-term debt obligations:
Long-term debt, net of current maturities 22,544,299 19,332,429
Senior subordinated notes 75,000,000 75,000,000
Other liabilities 2,980,125 3,083,507
-------------------- ---------------------
Total liabilities 132,007,229 130,277,393
-------------------- ---------------------
Shareholders' equity (deficit):
Preferred stock - 5% non-cumulative, non-voting, callable at par:
Class A - $100 par value; authorized 30,000; issued and
outstanding 23,107 2,310,700 2,310,700
Class B - $500 par value; authorized 5,000; issued 4,991,
outstanding 2,991 2,495,500 2,495,500
Common stock - $.01 par value:
Class A - voting; authorized 100,000 shares, issued
and outstanding 2923 29 29
Class B - non-voting; authorized 99,000; issued and
outstanding 74,030 740 740
Additional paid-in capital 849,512 849,512
Retained earnings (deficit) (12,035,707) (12,030,087)
-------------------- ---------------------
(6,379,226) (6,373,606)
Less:
Cost of 2,000 shares of Class B preferred stock
held in treasury (166,667) (166,667)
Shareholder receivable (1,906,736) (1,891,538)
-------------------- ---------------------
Total shareholders' equity (deficit) (8,452,629) (8,431,811)
-------------------- ---------------------
Commitments and contingencies
Total liabilities $ 123,554,600 $ 121,845,582
==================== =====================
4
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Statements Of Operations And Retained Earnings (Deficit)
For the Three Months Ended January 31,
2000 1999
-------------------- ----------------------
(Unaudited)
Revenue:
Net rentals $ 34,789,711 $ 33,652,497
Net sales 2,349,296 2,398,965
-------------------- ----------------------
37,139,007 36,051,462
-------------------- ----------------------
Operating expenses:
Cost of rentals 26,578,494 25,716,729
Cost of sales 1,576,042 1,561,516
Selling, general and administrative 6,046,778 6,237,545
-------------------- ----------------------
34,201,314 33,515,790
-------------------- ----------------------
Income from operations 2,937,693 2,535,672
Interest expense 2,793,313 2,578,612
-------------------- ----------------------
Income (loss) before income taxes 144,380 (42,940)
Income tax provision 150,000 86,000
-------------------- ----------------------
NET LOSS (5,620) (128,940)
Retained deficit, beginning of the year (12,030,087) (11,078,823)
-------------------- ----------------------
RETAINED DEFICIT, END OF PERIOD $ (12,035,707) $ (11,207,763)
==================== ======================
See notes to consolidated financial statements
5
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended January 31,
2000 1999
------------------- -------------------
Cash flows from operating activities:
Net loss $ (5,620) $ (128,941)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation of plant and equipment 1,350,314 1,247,003
Amortization of acquisition intangibles 185,791 169,996
Amortization of deferred financing 88,813 88,812
Provision for deferred income taxes 41,000 (46,000)
Changes in operating assets and operating liabilities:
Accounts receivable (1,012,224) (1,150,023)
Inventories (1,322,101) (455,202)
Uniforms in service 269,009 872,264
Prepaid expenses and other assets 149,380 297,175
Accounts payable and other liabilities (1,712,567) (4,644,243)
------------------- -------------------
Net cash used in operating activities (1,968,205) (3,749,157)
------------------- -------------------
Cash flows used in investing activities:
Purchases of property, plant and equipment (1,392,279) (1,619,600)
Acquisition of business, net of cash acquired (221,939)
------------------- -------------------
Net cash used in investing activities (1,614,217) (1,619,600)
------------------- -------------------
Cash flows from financing activities:
Proceeds from long-term borrowings 13,770,643 10,150,000
Payments under long-term debt obligations (10,328,240) (4,583,273)
Increase in shareholder receivable (15,198)
Deferred financing costs incurred 0 (2,232)
------------------- -------------------
Net cash provided by financing activities 3,427,205 5,564,495
------------------- -------------------
Net (decrease) increase in cash (155,217) (195,738)
Cash and cash equivalents:
Beginning of the period 213,407 1,073,496
------------------- -------------------
End of the period $ 58,190 $ 1,268,234
=================== ===================
Supplemental disclosure of cash flow information:
Interest paid $ 4,786,959 $ 4,008,488
Income taxes paid (refunded) 11,734 (4,700)
See notes to consolidated financial statements
6
Coyne International Enterprises Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements 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 generally accepted accounting principles 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 have been included. 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, 1999.
The unaudited consolidated financial statements include the accounts of the
Company and its subsidiaries. All material intercompany transactions have been
eliminated in consolidation.
Operating results for the three-month period ended January 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
October 31, 2000.
Note B - 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 include the amortization of certain intangible assets and the
non-deductible portion of certain meals and entertainment expenses.
Note C - Reclassification
Certain amounts have been reclassified to conform with the fiscal 2000
presentation.
7
Coyne International Enterprises Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note D - Summarized Financial Information for Subsidiaries
The following table presents financial information for the wholly-owned
subsidiaries of Coyne International Enterprises: Blue Ridge Textile
Manufacturing, Inc. and Ohio Garment Rental, Inc., on a combined basis:
January 31, October 31,
2000 1999
(Unaudited)
Balance sheets:
Current assets $ 5,434,646 $ 6,376,826
Noncurrent assets 3,745,719 3,815,243
Current liabilities 2,611,315 3,419,888
Noncurrent liabilities 175,000 175,000
Three Months Ended
January 31,
-----------------------------
2000 1999
(Unaudited)
Statement of operations:
Revenues $ 3,851,576 $ 4,004,816
Operating expenses 3,704,066 3,610,742
Operating income 147,510 394,074
Net income (loss) (17,943) 123,631
The Company has not provided separate financial statements and other disclosures
for its wholly-owned subsidiaries because management has determined that such
information is not material to investors.
8
ITEM 2. Management's Discussion and Analysis of the Financial Condition
Coyne International Enterprises Corp. and Subsidiaries
Management's Discussion and Analysis of the 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.
Liquidity and Capital Resources
The Company's primary sources of liquidity have been cash flow from operations
and borrowings under the revolving credit facilities described below.
Cash used in operating activities of $2.0 million and $3.75 million for the
three months ended January 31, 2000 and 1999, respectively, results from higher
levels of inventory and accounts receivable, due largely to growth in rental
revenue.
The Company's working capital was $23.3 million at January 31, 2000 as compared
to $20.1 million at October 31, 1999. The increase in working capital of $3.2
million reflects a decrease in current liabilities through utilization of the
Company's revolving credit facility.
As of the end of January 2000, the Company had approximately $10.5 million
available under its revolving credit line and up to an additional $24.5 million
available under bank credit facilities for capital expenditures and
acquisitions. Management believes that its operations and bank credit facilities
will provide sufficient cash to meet the requirements for operations,
acquisitions and capital expenditure for the next twelve months.
Cash used in investing activities was $1.6 million for the three months ended
January 31, 2000 and 1999. In fiscal 2000, these expenditures consist primarily
of investments in new information systems, route trucks and route acquisitions.
The Company anticipates that capital expenditures will be approximately $4.0
million for fiscal 2000, compared with $7.7 million in fiscal 1999.
9
Coyne International Enterprises Corp. and Subsidiaries
Results of Operations for the First Quarter of Fiscal 2000 Compared to the First
Quarter of Fiscal 1999
Revenues increased 3.0% to $37.1 million in the first quarter of fiscal 2000
from $36.0 million in the first quarter of fiscal 1999. This increase is
attributable to new rental business written and increases in revenue at existing
accounts.
Cost of rental operations increased $862 thousand to $26.6 million in the first
quarter of 2000 from $25.7 million in the first quarter of 1999. As a percent of
rental revenue, cost of rentals remained unchanged at 76.4% in both quarters.
Selling, general and administrative expenses decreased 3.1% to $6.0 million in
the first quarter of fiscal 2000 from $6.23 million in the first quarter of
1999. This decrease is attributable primarily to lower selling expense in the
first quarter of 2000 as a result head count adjustments.
Income from operations increased 16% to $2.9 million in the first quarter of
2000 from $2.5 million in the same period last year.
Interest expense increased 8% to $2.8 million in for the first quarter of 2000
from $2.6 million in the first quarter of 1999. This increase is attributable to
higher average balances on the Company's bank credit facilities in the first
quarter of 2000 compared to the same period last year.
Net loss decreased to approximately $6,000 in the first quarter of 2000 from
$129 thousand in the first quarter of 1999. This is primarily attributable to
improved operational performance offset by increased interest expense.
Information Systems; Year 2000
In order to enhance the Company's information management capabilities and
achieve Year 2000 compliance (Y2K), the Company has implemented new software for
Billing, Route Accounting, Accounts Receivable, Purchasing, Accounts Payable and
Financial Reporting. The Company's new systems are Y2K compliant and
implementation has been completed with no material interruption in customer
service or information flow. The Company has used third party application
software that is Y2K compliant to replace or upgrade its remaining management
information systems, primarily payroll.
The Company has experienced no disruption of daily operations resulting from Y2K
computer issues.
10
PART II. Other Information
None
SIGNATURES
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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: March 14, 2000 By: /s/ Thomas E. Krebbeks
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Thomas E. Krebbeks
VP of Finance and Chief Financial Officer
By: /s/ Thomas C. Crowley
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Thomas C. Crowley
Chief Operating Officer
11