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, 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 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
-------------
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
Unaudited Consolidated Statements of Operations ............................................... 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 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 ............................................................................................... 18
2
PART I. Financial Information
Item 1. Financial Statements
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Balance Sheets
================================================================================
January 31, October 31,
Assets 2001 2000
------ ------------------ ------------------
(unaudited)
Current Assets:
Cash and cash equivalents $ 693,312 $ 909,340
Accounts receivable, less allowance for doubtful accounts
of $381,000 in January and $341,000 in October 17,544,437 16,929,975
Inventories 11,762,422 12,725,141
Rental merchandise in service 33,118,843 32,712,967
Prepaid expenses and other assets 642,469 698,768
------------- -------------
Total current assets 63,761,483 63,976,191
Property, plant and equipment, at cost:
Land 2,432,180 2,432,180
Buildings and improvements 41,412,438 39,829,930
Machinery and equipment 41,521,592 42,729,434
Vehicles 11,573,483 11,420,295
Construction in process 1,519,560 1,505,965
------------- -------------
98,459,253 97,917,804
Less: Accumulated depreciation (55,465,017) (54,100,700)
------------- -------------
Total property, plant and equipment 42,994,236 43,817,104
Other assets:
Purchased routes and acquisition intangibles, net 17,044,767 17,239,942
Deferred financing costs, net 2,236,076 2,322,568
Deferred income taxes 4,324,623 3,724,623
Other 148,944 202,521
------------- -------------
Total other assets 23,754,410 23,489,654
------------- -------------
$ 130,510,129 $ 131,282,949
============= =============
See notes to unaudited consolidated financial statements
3
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
January 31, October 31,
Liabilities and Shareholders' Equity (Deficit) 2001 2000
---------------------------------------------- ------------------ -----------------
(unaudited)
Current Liabilities:
Current maturities of long-term obligations $ 3,294,841 $ 3,385,619
Accounts payable 11,789,742 8,934,685
Accrued expenses:
Salaries and employee benefits 3,832,298 4,714,396
Accrued interest 1,586,839 3,655,175
Other 3,103,567 2,268,201
Deferred income taxes 12,108,370 12,032,060
----------------- ----------------
Total current liabilities 35,715,657 34,990,136
Long-term obligations, net of current maturities 102,288,944 102,811,292
Other liabilities 2,243,825 2,170,095
----------------- ----------------
Total liabilities 140,248,426 139,971,523
----------------- ----------------
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) (13,101,190) (12,212,139)
Accumulated other comprehensive loss (138,599)
----------------- ----------------
(7,583,308) (6,555,658)
Less:
Treasury stock, 2,000 shares of Class B preferred stock
at cost (166,667) (166,667)
Shareholder receivables (1,988,322) (1,966,249)
----------------- ----------------
Total shareholders' equity (deficit) (9,738,297) (8,688,574)
----------------- ----------------
$ 130,510,129 $ 131,282,949
================= ================
See notes to unaudited consolidated financial statements
4
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended
January 31,
------------------------------------
2001 2000
---------------- ---------------
(Unaudited)
Revenue:
Rental operations $ 35,521,305 $ 34,789,711
Direct sales 2,622,199 2,349,296
--------------- ---------------
38,143,504 37,139,007
--------------- ---------------
Operating expenses:
Cost of rental operations 26,935,442 25,241,081
Cost of direct sales 1,636,903 1,576,042
Selling, general and administrative 6,407,881 5,858,518
Depreciation and amortization 1,558,073 1,525,673
--------------- ---------------
36,538,299 34,201,314
--------------- ---------------
Income from operations 1,605,205 2,937,693
Interest expense 2,995,256 2,793,313
--------------- ---------------
Income (loss) before income taxes (1,390,051) 144,380
Income tax expense (benefit) (501,000) 150,000
--------------- ---------------
Net Loss $ (889,051) $ (5,620)
======== ======
See notes to unaudited consolidated financial statements
5
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
Three Months
Ended January 31,
------------------------------------
2001 2000
------------------------------------
(unaudited)
Cash flows from operating activities:
Net loss $ (889,051) $ (5,620)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation of property, plant and equipment 1,095,967 1,081,964
Amortization of capitalized leases 268,350 268,350
Amortization of acquisition intangibles 195,175 185,791
Amortization of deferred financing costs 86,492 88,813
Provision for deferred income taxes (523,690) 41,000
Changes in operating assets and operating liabilities:
Accounts receivable (614,462) (1,012,224)
Inventories 962,719 (1,322,101)
Rental merchandise in service (405,876) 269,009
Prepaid expenses and other assets 109,876 149,380
Accounts payable, accrued expenses, and other liabilities 813,719 (1,712,567)
----------------- ---------------
Net cash provided by (used in) operating activities 1,099,219 (1,968,205)
----------------- ---------------
Cash flows from investing activities:
Purchase of property, plant and equipment (541,449) (1,392,279)
Acquisition of business, net of cash acquired 0 (221,938)
----------------- ---------------
Net cash used in investing activities (541,449) (1,614,217)
----------------- ---------------
Cash flows from financing activities:
Proceeds from long-term borrowings 11,243,933 13,770,643
Payments under long-term obligations (11,857,059) (10,328,240)
Other (160,672) (15,198)
----------------- ---------------
Net cash provided by (used in) financing activities (773,798) 3,427,205
----------------- ---------------
Net decrease in cash (216,028) (155,217)
Cash and cash equivalents:
Beginning of period 909,340 213,407
----------------- ---------------
End of period $ 693,312 $ 58,190
================= ===============
Supplemental disclosure of cash flow information:
Interest paid $4,975,391 $ 4,786,959
Income taxes paid 27,232 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 January 31, 2001,
October 31, 2000 and January 31, 2000 rather than the actual period-end dates.
Operating results for the three-month period ended January 31, 2001 are not
necessarily indicative of the results that may be expected for the year ended
October 31, 2001.
2. Long-term Obligations
At January 31, 2001 the Company was not in compliance with certain bank
financial covenants. Subsequent to January 31, 2001 the Company obtained waivers
of such non-compliance. In addition, in March 2001, the Company amended certain
of its financial covenants. Under the terms of the amendment the maximum credit
available under the Company's bank revolving credit facility has been increased
by $8,198,000 to $38,198,000, subject to certain collateral limitations. In
addition, credit available under the bank acquisition facility has been reduced
by $8,198,000 thereby eliminating all future availability under this acquisition
facility.
As of January 31, 2001, after giving consideration to the March 13, 2001
amendment, the Company had approximately $5.5 million available under its
revolving credit facility. Other bank credit facilities totaling $21.7 million
are in place and become available based on eligible collateral and other
limitations.
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 January 31, 2001, the
notional amount of such debt was $5,204,170.
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 $138,599 in other comprehensive income to
recognize this cash flow hedge at fair value.
5. Reclassification
Certain amounts have been reclassified to conform with the fiscal 2001
presentation.
6. Comprehensive Income
The components of comprehensive income (loss) were as follows:
Three Months Three Months
ended ended
January 31, 2001 January 31, 2000
---------------- ----------------
Net loss ($ 889,051) ($ 5,620)
Other comprehensive loss:
Unrealized holding losses (138,599) 0
Comprehensive loss ($1,027,650) ($ 5,620)
============ ==========
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 January 31, 2001
--------------------------------------------------------------------
Parent Subsidiary Consolidating Consolidated
Assets Company Guarantors Adjustments Totals
------ --------------- ---------------- --------------- -----------------
Current Assets:
Cash and cash equivalents $ 739,022 $ (45,710) $ 693,312
Accounts receivable 15,714,756 1,829,681 17,544,437
Inventories 9,485,571 2,276,851 11,762,422
Rental merchandise in service 30,448,526 2,670,317 33,118,843
Prepaid expenses and other assets 9,026,821 60,368 (8,444,720) 642,469
--------------- ---------------- --------------- -----------------
Total current assets 65,414,696 6,791,507 (8,444,720) 63,761,483
Property, plant and equipment, at cost: 89,574,937 8,884,316 98,459,253
Less: Accumulated depreciation (49,823,429) (5,641,588) (55,465,017)
--------------- ---------------- --------------- -----------------
Total property, plant and equipment 39,751,508 3,242,728 0 42,994,236
Other assets:
Purchased routes and acquisition intangibles, net 16,776,379 268,388 17,044,767
Deferred financing costs, net 2,236,076 0 2,236,076
Deferred income taxes 4,324,623 0 4,324,623
Other 148,944 0 148,944
--------------- ---------------- --------------- -----------------
Total other assets 23,486,022 268,388 0 23,754,410
--------------- ---------------- --------------- -----------------
$ 128,652,226 $ 10,302,623 $ (8,444,720) $ 130,510,129
=============== ================ =============== =================
Liabilities and Shareholders' Equity (Deficit)
----------------------------------------------
Current Liabilities:
Current maturities of long-term obligations $ 3,294,841 $ 3,294,841
Accounts payable 10,745,079 1,044,663 11,789,742
Accrued expenses:
Salaries and employee benefits 3,754,560 77,738 3,832,298
Accrued interest 1,586,839 0 1,586,839
Other 2,368,065 735,502 3,103,567
Deferred income taxes 12,108,370 0 12,108,370
--------------- ---------------- --------------- -----------------
Total current liabilities 33,857,754 1,857,903 0 35,715,657
Long-term obligations, net of current maturities 102,288,944 102,288,944
Other liabilities 2,243,825 2,407,812 (2,407,812) 2,243,825
--------------- ---------------- --------------- -----------------
Total liabilities 138,390,523 4,265,715 (2,407,812) 140,248,426
--------------- ---------------- --------------- -----------------
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) (13,101,190) 4,487,908 (4,487,908) (13,101,190)
Accumulated other comprehensive loss (138,599) (138,599)
--------------- ---------------- --------------- -----------------
(7,583,308) 6,036,908 (6,036,908) (7,583,308)
Less:
Treasury stock, 2,000 shares of Class B preferred stock
at cost (166,667) (166,667)
Shareholder receivables (1,988,322) (1,988,322)
--------------- ---------------- --------------- -----------------
Total shareholders' equity (deficit) (9,738,297) 6,036,908 (6,036,908) (9,738,297)
--------------- ---------------- --------------- -----------------
128,652,226 $ 10,302,623 $ (8,444,720) $ 130,510,129
=============== ================ =============== =================
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 January 31, 2001
-----------------------------------------------------------------------
Parent Subsidiary Consolidating Consolidated
Company Guarantors Adjustments Totals
----------------- ----------------- ---------------- ---------------
Revenue:
Net rentals $ 33,207,510 $ 2,313,795 $ $ 35,521,305
Net sales 1,177,481 3,919,672 (2,474,954) 2,622,199
----------------- ----------------- ---------------- ---------------
34,384,991 6,233,467 (2,474,954) 38,143,504
----------------- ----------------- ---------------- ---------------
Operating expenses:
Cost of rentals 24,970,862 1,964,580 26,935,442
Cost of sales 786,896 3,312,961 (2,462,954) 1,636,903
Selling, general and administrative 5,563,967 975,875 (131,961) 6,407,881
Depreciation and amortization 1,458,061 100,012 1,558,073
----------------- ----------------- ---------------- ---------------
32,779,786 6,353,428 (2,594,915) 36,538,299
----------------- ----------------- ---------------- ---------------
Income (loss) from operations 1,605,205 (119,961) 119,961 1,605,205
Interest expense 2,995,256 2,995,256
----------------- ----------------- ---------------- ---------------
Income (loss) before income taxes (1,390,051) (119,961) 119,961 (1,390,051)
Income taxes (501,000) (47,984) 47,984 (501,000)
----------------- ----------------- ---------------- ---------------
Net income (loss) (889,051) (71,977) 71,977 (889,051)
================= ================= ================ ===============
12
Coyne International Enterprises Corp. and Subsidiaries
Consolidating Statements of Operations
Three Months Ended January 31, 2000
-----------------------------------------------------------------------
Parent Subsidiary Consolidating Consolidated
Company Guarantors Adjustments Totals
----------------- ----------------- ---------------- ---------------
Revenue:
Net rentals $ 32,469,503 $ 2,320,208 $ 34,789,711
Net sales 817,927 4,184,884 (2,653,515) 2,349,296
----------------- ----------------- ---------------- ---------------
33,287,430 6,505,092 (2,653,515) 37,139,007
----------------- ----------------- ---------------- ---------------
Operating expenses:
Cost of rentals 23,402,871 1,838,210 25,241,081
Cost of sales 545,458 3,622,099 (2,591,515) 1,576,042
Selling, general and administrative 4,960,638 898,931 (1,051) 5,858,518
Depreciation and amortization 1,440,770 84,903 1,525,673
----------------- ----------------- ---------------- ---------------
30,349,737 6,444,143 (2,592,566) 34,201,314
----------------- ----------------- ---------------- ---------------
Income from operations 2,937,693 60,949 (60,949) 2,937,693
Interest expense 2,793,313 0 2,793,313
----------------- ----------------- ---------------- ---------------
Income (loss) before income taxes 144,380 60,949 (60,949) 144,380
Income taxes 150,000 24,380 (24,380) 150,000
----------------- ----------------- ---------------- ---------------
Net income (loss) (5,620) 36,569 (36,569) (5,620)
================= ================= ================ ===============
13
Coyne International Enterprises Corp. and Subsidiaries
-----------------------------------------------------------------
Three Months ended January 31, 2001
-----------------------------------------------------------------
Consolidating Statements of Cash Flows Parent Subsidiary Consolidating Consolidated
Company Guarantors Adjustments Totals
--------------- --------------- ----------------- ---------------
Cash flows from operating activities:
Net income (loss) $ (889,051) $ (71,977) $ 71,977 $ (889,051)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation of property, plant and equipment 995,955 100,012 1,095,967
Amortization of capitalized leases 268,350 268,350
Amortization of acquisition intangibles 192,530 2,645 195,175
Amortization of deferred financing costs 86,492 0 0 86,492
Provision for deferred income taxes (523,690) 0 0 (523,690)
Changes in operating assets and operating liabilities:
Accounts receivable (470,902) (143,560) 0 (614,462)
Inventories 1,630 961,089 0 962,719
Rental merchandise in service 195,411 (601,287) 0 (405,876)
Prepaid expenses and other assets 1,062,664 (45,740) (907,048) 109,876
Accounts payable, accrued expenses, and other liabilities 166,786 (188,138) 835,071 813,719
--------------- --------------- ----------------- ---------------
Net cash provided by (used in) operating activities 1,086,175 13,044 0 1,099,219
--------------- --------------- ----------------- ---------------
Cash flows from investing activities:
Purchase of property, plant and equipment (529,083) (12,366) (541,449)
Acquisition of business, net of cash acquired 0 0
--------------- --------------- ----------------- ---------------
Net cash used in investing activities (529,083) (12,366) 0 (541,449)
--------------- --------------- ----------------- ---------------
Cash flows from financing activities:
Proceeds from long-term borrowings 11,243,933 11,243,933
Payments under long-term obligations (11,857,059) (11,857,059)
Other (160,672) (160,672)
--------------- --------------- ----------------- ---------------
Net cash provided by (used in) financing activities (773,798) 0 0 (773,798)
--------------- --------------- ----------------- ---------------
Net increase in cash (216,706) 678 0 (216,028)
Cash and cash equivalents:
Beginning of period 955,728 (46,388) 0 909,340
--------------- --------------- ----------------- ---------------
End of period $ 739,022 $ (45,710) $ - $ 693,312
=============== =============== ================= ===============
14
Coyne International Enterprises Corp. and Subsidiaries
Three Months ended January 31, 2000
-----------------------------------------------------------------
Consolidating Statements of Cash Flows Parent Subsidiary Consolidating Consolidated
Company Guarantors Adjustments Totals
--------------- --------------- ----------------- ---------------
Cash flows from operating activities:
Net income (loss) $ (5,620) $ 36,569 $ (36,568) $ (5,620)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation of property, plant and equipment 997,061 84,903 1,081,964
Amortization of capitalized leases 268,350 268,350
Amortization of acquisition intangibles 183,147 2,644 185,791
Amortization of deferred financing costs 88,813 0 0 88,813
Provision for deferred income taxes 41,000 0 0 41,000
Changes in operating assets and operating liabilities:
Accounts receivable (2,926,714) 1,914,490 0 (1,012,224)
Inventories (1,300,311) (21,790) 0 (1,322,101)
Rental merchandise in service 236,119 32,890 0 269,009
Prepaid expenses and other assets 2,272,174 (14,334) (2,108,460) 149,380
Accounts payable, accrued expenses, and other liabilities (1,941,865) (1,915,731) 2,145,028 (1,712,567)
--------------- --------------- ----------------- ---------------
Net cash provided by (used in) operating activities (2,087,846) 119,641 0 (1,968,205)
--------------- --------------- ----------------- ---------------
Cash flows from investing activities:
Purchase of property, plant and equipment (1,381,253) (11,026) (1,392,279)
Acquisition of business, net of cash acquired (221,938) (221,938)
--------------- --------------- ----------------- ---------------
Net cash used in investing activities (1,603,191) (11,026) 0 (1,614,217)
--------------- --------------- ----------------- ---------------
Cash flows from financing activities:
Proceeds from long-term borrowings 13,770,643 13,770,643
Payments under long-term obligations (10,328,240) (10,328,240)
Other (15,198) 0 0 (15,198)
--------------- --------------- ----------------- ---------------
Net cash provided by (used in) financing activities 3,427,205 0 0 3,427,205
--------------- --------------- ----------------- ---------------
Net increase in cash (263,832) 108,615 0 (155,217)
Cash and cash equivalents:
Beginning of period 309,648 (96,241) 0 213,407
--------------- --------------- ----------------- ---------------
End of period $ 45,816 $ 12,374 $ - $ 58,190
=============== =============== ================= ===============
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 First Quarter of Fiscal 2001 Compared to the First
Quarter of Fiscal 2000
Total revenues increased 2.7% for the three months ended January 31, 2001 over
the same period in fiscal 2000. Income from operations decreased 45.3% for the
three months ended January 31, 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.
Interest expense increased 7.2% for the three months ended January 31, 2001 over
the same period in fiscal 2000 as a direct result of increased average
outstanding debt for the comparable periods.
Liquidity and Capital Resources
Net cash provided by operating activities increased $3.1 million for the three
months ended January 31, 2001 over the same period in fiscal 2000. This increase
is primarily attributed to large inventory purchases in 2000. Net cash used in
financing activities increased by $4.1 million for the three months ended
January 31, 2001 over the same period in fiscal 2000 as a result of decreased
borrowing needs for inventory purchases in 2001.
16
The Company's primary source of liquidity has been borrowings under its
revolving credit facilities. Giving consideration to collateral eligibility
formulae, the Company had approximately $5.5 million available under its
revolving credit line at January 31,2001. Other bank credit facilities totaling
$21.7 million are in place and become available based on eligible collateral and
other limitations.
As discussed above, the operating results of the Company for the three months
ended January 31,2001 were adversely impacted by increased operating costs. The
Company has responded by implementing an action plan that includes reduction in
workforce, revenue enhancements and improved merchandise spending controls. The
fiscal 2001 plan has been revised to reflect the anticipated impact of these
actions on operating results. Based on the revised plan, and the impact of the
revised credit facility, the Company expects that it will be able to meet its
obligations as they become due for the next twelve months.
PART II. Other Information
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: March 13, 2001 By: /S/ Thomas E. Krebbeks
--------------------------------
Thomas E. Krebbeks
VP of Finance and Chief Financial Officer
By: /S/ Thomas C. Crowley
--------------------------------
Thomas C. Crowley
Chief Operating Officer
18