-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K/L5bDmDDknwPG6uEBwI9sIpr4Ck5KylPY7kSv6iWXJe0xjxDeP7+Th8tXoiqS5d wn97G6lBDIEbwzIuFjjsxA== 0001068800-02-000342.txt : 20021122 0001068800-02-000342.hdr.sgml : 20021122 20021122143025 ACCESSION NUMBER: 0001068800-02-000342 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20021114 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: FILED AS OF DATE: 20021122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANGELICA CORP /NEW/ CENTRAL INDEX KEY: 0000006571 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PERSONAL SERVICES [7200] IRS NUMBER: 430905260 STATE OF INCORPORATION: MO FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05674 FILM NUMBER: 02837633 BUSINESS ADDRESS: STREET 1: 424 S WOODS MILL RD CITY: CHESTERFIELD STATE: MO ZIP: 63017-3406 BUSINESS PHONE: 3148543800 MAIL ADDRESS: STREET 1: 424 SOUTH WOODS MILL ROAD CITY: CHESTERFIELD STATE: MO ZIP: 63017-3406 FORMER COMPANY: FORMER CONFORMED NAME: ANGELICA UNIFORM CORP DATE OF NAME CHANGE: 19680621 8-K 1 form8k.txt ANGELICA CORPORATION FORM 8-K =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-5674 Date of Report (date of earliest event reported): NOVEMBER 14, 2002 ANGELICA CORPORATION (Exact name of registrant as specified in its charter) MISSOURI 43-0905260 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 424 SOUTH WOODS MILL ROAD CHESTERFIELD, MISSOURI 63017-3406 (Address of principal executive offices) (Zip Code) (314) 854-3800 (Registrant's telephone number, including area code) =============================================================================== ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits 99 Quarterly Report to Shareholders, dated November 14, 2002 ITEM 9. REGULATION FD DISCLOSURE Quarterly Report to Shareholders dated November 14, 2002 and mailed to Shareholders on November 22, 2002, furnished pursuant to Regulation FD. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: November 22, 2002 ANGELICA CORPORATION By: /s/ T. M. Armstrong ------------------------------------------- T. M. Armstrong Senior Vice President-Finance and Administration and Chief Financial Officer 2 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 99 Quarterly Report to Shareholders, dated November 14, 2002. 3 EX-99 3 exh99.txt QUARTERLY REPORT Exhibit 99 ---------- TEXTILE SERVICES IMAGE APPAREL INNOVATION VALUE Angelica Corporation 424 South Woods Mill Road Suite 300 Angelica [Logo] Chesterfield, Missouri 63017 3406 Tel: 314.854.3800 Fax: 314.854.3890 November 14, 2002 Dear Fellow Shareholder, Reporting third quarter earnings of $.41 per share ($.40 fully diluted) for continuing operations compared with $.26 per share last year, an increase of 57.7 percent on a 4.1 percent increase in combined sales and revenues, was most encouraging to the entire Angelica management team. Our largest segment, Textile Services, once again achieved impressive revenue and earnings increases in the quarter. The Life Retail segment also recorded excellent sales and earnings growth in a relatively weak retail environment, with a 5.2 percent same-store sales increase and a 50.5 percent increase in the catalogue and e-commerce distribution channels. For the first three quarters of the year, combined sales and revenues for continuing operations increased 4.1 percent over last year; and earnings, before an extraordinary item related to the second quarter debt refinancing, of $1.05 per share ($1.04 fully diluted) amounted to an increase of 110.0 percent over $.50 per share in the same period last year. The previously reported extraordinary item was a prepayment penalty paid in connection with the complete refinancing of the Company's debt following the sale of the Manufacturing and Marketing segment last spring. Including the extraordinary item, which was a loss of $.51 per share ($.50 fully diluted), results of continuing operations for the first three quarters this year were income of $.54 per share versus $.50 per share last year. For discontinued operations, consisting of the Manufacturing and Marketing segment, at the end of the third quarter we again reviewed and revised the estimated total loss on sale and discontinuation of that business. This review suggested that we needed to add $894,000 after tax to the previous estimate of the loss on the sale, or $.10 per share, which is reflected in the third quarter results of discontinued operations. Combining continuing and discontinued operations, total third quarter results were income of $.31 per share ($.30 fully diluted) compared with $.21 per share in the same period last year. The sales and revenue gains in the third quarter of both continuing business segments were impressive considering the fact that they were achieved despite Textile Services' sale earlier in the year of its Denver plant, and Life Retail's closing of 32 stores since the beginning of the year. We were also pleased with strong earnings performance in both segments, even though the third quarter of the year is normally our strongest quarter -- and this year should be no exception. Earnings also continue to benefit from lower interest costs resulting from the debt refinancing. Interest expense for the third quarter this year was $253,000 compared with $1,792,000 in the third quarter last year. Our balance sheet remains enviable, and cash flow from continuing operations of $20,164,000 in the first three quarters of this year is very strong, both of which support capital investments which will improve future earnings of both segments. You may be interested in why the earnings percentage increases have been significantly higher than the percentage revenue increases at Textile Services. There are three major reasons: 1. Customer Profitability Analyses. We now know when to say "yes" and when to say "no" in generating new business. Just as importantly, we now know how to build better "partnering" relationships with our existing customers. www.angelica-corp.com 2. Increased levels of capital reinvestment in our plants. We have invested heavily in recent years to improve our plant operations and, as a consequence, have increased productivity and reduced the consumption of utilities. We also sold or closed value-destroying plants, eliminating capital requirements for these unproductive plants. 3. Retention of existing customers. It is far more cost effective to retain value-adding customers than it is to add new customers, and our retention levels have increased as a consequence of improved service quality. It has taken us a number of years to accomplish it, but our management teams throughout the Textile Services segment are well aware of what it takes to add economic value, routinely and consistently. Adding profitable new business and retaining profitable existing business is a powerful "earnings couplet." Providing these teams with the capital and information systems to better serve customers has resulted in impressive earnings increases. We are on the threshold of accomplishing the same relationship to sales and earnings increases at Life Retail. We invested $1.6 million earlier this year to improve our financial control systems. We will be investing an additional $1.1 million for a new point-of-sale information hardware and software system. This investment is long overdue! Combined, these investments have the potential of improving Life's earnings rather significantly in future years. The considerable entry cost for Life Retail to service effectively the catalogue and e-commerce distribution channels is essentially behind us, and those channels are now beginning to contribute to improved operating earnings. Closing 32 unproductive and value-destroying stores over the first three quarters of this year contributed to the impressive earnings increases at Life Retail as well. Our focus on a single, robust industry (healthcare) has been strategically sound. While we still profitably serve the hospitality (lodging, food and beverage) industry segments at Textile Services, our revenues are approximately 90% healthcare product and service dependent. We believe that the current growth in this industry will be augmented by the aging of our population and the demands for improved quality of life as relates to healthcare services. In addition, the eventual outsourcing by the approximately 35 to 40 percent of hospitals still handling their laundry requirements "on premise" will provide an added market growth opportunity. We are not without major challenges as we enter the fourth quarter, normally our weakest quarter for revenues and earnings. One of these major challenges is the rapidly increasing cost of medical care for our associates. Absorbing our share of these increases negatively affects operating earnings, and passing along a portion to our associates will have other negative ramifications as well. Workers' compensation cost increases, due in part to higher healthcare costs, is another challenge for our Company. This is especially true in California, which is the leading state for Angelica's revenue and earnings. Further capital investments will need to be made in order to continue to reduce the labor intensity of our Textile Services' plants and thereby help lower workers' compensation and healthcare costs. At the end of the second quarter we increased our earnings forecast for the year to a range of $1.00 to $1.10 per share. Given the strong third quarter earnings performance of both Textile Services and Life Retail, I am pleased to be able to increase our earnings forecast once again. It now appears that earnings for continuing operations before extraordinary item will be in the range of $1.20 to $1.25 per share. In closing, I must comment regarding the state of corporate America. During the past couple of years, there have been some egregious examples of management malfeasance, an absence of rigorous auditing practices, insufficient oversight by regulatory agencies and less than clear reporting by financial analysts. These observations notwithstanding, the generalized "bashing" of "all" public companies is counterproductive to consumer and investor confidence and, in my opinion, is simply not fair. In spite of the well publicized bad examples (e.g., Enron, Arthur Andersen, WorldCom, Adelphia, Qwest Communications and Tyco), there are thousands of companies that continue to be led ethically, legally and effectively in the face of the difficult challenges of today's world events, and dislocations caused by the weak economy. It has been, and it remains, my commitment to you that Angelica will achieve revenue and earnings growth in a manner to earn your trust and justify your investment. Respectfully submitted, /s/ Don W. Hubble Don W. Hubble Chairman, President and Chief Executive Officer P.S. You may be interested in reviewing our Corporate Governance Guidelines on our website at www.angelica.com. ---------------- CONSOLIDATED STATEMENTS OF INCOME Angelica Corporation and Subsidiaries Unaudited (Dollars in thousands, except per share amounts)
Third Quarter Ended Three Quarters Ended ------------------------ ------------------------ October 26, October 27, October 26, October 27, 2002 2001 2002 2001 ----------- ----------- ----------- ----------- CONTINUING OPERATIONS: Textile service revenues $68,108 $65,095 $203,284 $194,965 Net retail sales 24,525 23,930 71,132 68,606 ------- ------- -------- -------- 92,633 89,025 274,416 263,571 ------- ------- -------- -------- Cost of textile services 54,506 53,547 161,605 160,648 Cost of goods sold 11,166 11,485 33,369 32,851 ------- ------- -------- -------- 65,672 65,032 194,974 193,499 ------- ------- -------- -------- Gross profit 26,961 23,993 79,442 70,072 ------- ------- -------- -------- Selling, general and administrative expenses 22,394 19,587 66,206 59,460 Interest expense 253 1,792 2,403 5,839 Other (income) expense, net (765) 150 (2,442) 17 ------- ------- -------- -------- 21,882 21,529 66,167 65,316 ------- ------- -------- -------- Income from continuing operations pretax 5,079 2,464 13,275 4,756 Provision for income taxes 1,524 222 4,159 428 ------- ------- -------- -------- Income from continuing operations before extraordinary item 3,555 2,242 9,116 4,328 Extraordinary loss on early extinguishment of debt, net of taxes of $2,374 (Note 4) - - (4,409) - ------- ------- -------- -------- Income from continuing operations 3,555 2,242 4,707 4,328 ------- ------- -------- -------- DISCONTINUED OPERATIONS: Loss from operations of discontinued segment, net of taxes of $792 and $1,904 - (437) - (179) Loss on disposal of discontinued segment, net of taxes of $481 and $3,393 (Note 5) (894) - (6,302) - ------- ------- -------- -------- Loss from discontinued operations (894) (437) (6,302) (179) ------- ------- -------- -------- Net income (loss) $ 2,661 $ 1,805 $ (1,595) $ 4,149 ======= ======= ======== ======== BASIC EARNINGS (LOSS) PER SHARE: Income from continuing operations before extraordinary item $ 0.41 $ 0.26 $ 1.05 $ 0.50 Extraordinary loss, net of tax - - (0.51) - ------- ------- -------- -------- Income from continuing operations 0.41 0.26 0.54 0.50 Loss from discontinued operations (0.10) (0.05) (0.72) (0.02) ------- ------- -------- -------- Net income (loss) $ 0.31 $ 0.21 $ (0.18) $ 0.48 ======= ======= ======== ======== DILUTED EARNINGS (LOSS) PER SHARE: Income from continuing operations before extraordinary item $ 0.40 $ 0.26 $ 1.04 $ 0.50 Extraordinary loss, net of tax - - (0.50) - ------- ------- -------- -------- Income from continuing operations 0.40 0.26 0.54 0.50 Loss from discontinued operations (0.10) (0.05) (0.72) (0.02) ------- ------- -------- -------- Net income (loss) $ 0.30 $ 0.21 $ (0.18) $ 0.48 ======= ======= ======== ========
NOTES TO CONSOLIDATED STATEMENTS OF INCOME Angelica Corporation and Subsidiaries Unaudited (Dollars in thousands) Note 1. Comprehensive income (loss), consisting of net income (loss), foreign currency translation and changes in the fair value of derivatives used for interest rate risk management, totaled $2,582 and $1,692 for the quarters ended October 26, 2002 and October 27, 2001, respectively; and $(1,674) and $3,982 for the three quarters ended October 26, 2002 and October 27, 2001, respectively. Note 2. Certain amounts in the prior period have been reclassified to conform to current period presentation. Note 3. Taxes on income from continuing operations have been provided for at an effective tax rate of 31.3 percent in fiscal 2003 and 9.0 percent in fiscal 2002 based upon the Company's estimated effective tax rate for the year. Note 4. During the second quarter of this fiscal year, the Company incurred a loss on early extinguishment of debt of $6,783 ($4,409 net of tax). The loss was due to a prepayment penalty of $6,684 paid to lenders in connection with the complete refinancing of the Company's debt following the sale of the Manufacturing and Marketing segment (plus the writeoff of unamortized loan fees of $99). In accordance with Statement of Financial Accounting Standards (SFAS) No. 4, the loss has been treated as an extraordinary item. Under recently issued SFAS No. 145, effective next fiscal year, the loss on early extinguishment of debt will not be treated as an extraordinary item, and accordingly, results will be restated at that time to reflect this change in accounting treatment. Note 5. The consolidated balance sheets as of October 26, 2002 and January 26, 2002 reflect the segregation of the net assets of the discontinued Manufacturing and Marketing segment and writedown of those assets to their estimated net realizable value, as well as estimates of the costs of disposal and transition. The differences between these estimates as of October 26, 2002 and January 26, 2002 resulted in recording of an after-tax loss on disposal of $894 in the third quarter and $6,302 in the first three quarters. The sale of certain assets of this segment's non-healthcare business to Cintas Corporation closed on April 19, 2002, and the sale of certain assets of the healthcare business to Medline Industries closed on May 17, 2002. The realization of total proceeds from the sale of assets, primarily inventory and accounts receivable, is subject to subsequent sale and collection activities, respectively, of the buyers. These amounts are included in the net assets of the discontinued segment at their estimated net realizable values. CONSOLIDATED BALANCE SHEETS Angelica Corporation and Subsidiaries Unaudited (Dollars in thousands)
October 26, January 26, 2002 2002 ----------- ----------- ASSETS - ------ Current Assets: Cash and short-term investments $ 7,855 $ 18,742 Receivables, less reserves of $1,873 and $1,306 34,653 33,536 Inventories 13,501 14,435 Linens in service 33,518 32,196 Prepaid expenses and other current assets 4,668 2,968 Deferred income taxes 11,506 16,478 Net current assets of discontinued segment (Note 5) 12,942 61,774 -------- -------- Total Current Assets 118,643 180,129 -------- -------- Property and Equipment 179,303 174,893 Less -- reserve for depreciation 102,415 98,208 -------- -------- 76,888 76,685 -------- -------- Goodwill 4,256 4,294 Other acquired assets 1,938 1,553 Cash surrender value of life insurance 26,126 25,349 Deferred income taxes - 654 Miscellaneous 1,259 365 -------- -------- 33,579 32,215 Net noncurrent assets of discontinued segment (Note 5) 815 1,836 -------- -------- Total Assets $229,925 $290,865 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current Liabilities: Current maturities of long-term debt $ 227 $ 71,602 Accounts payable 23,407 20,958 Accrued expenses 32,017 40,609 -------- -------- Total Current Liabilities 55,651 133,169 -------- -------- Long-Term Debt, less current maturities 20,644 812 Other Long-Term Obligations 14,918 15,380 Shareholders' Equity: Common Stock, $1 par value, authorized 20,000,000 shares, issued: 9,471,538 9,472 9,472 Capital surplus 4,200 4,200 Retained earnings 137,173 142,188 Accumulated other comprehensive income (79) - Common Stock in treasury, at cost: 773,358 and 863,329 (12,054) (14,356) -------- -------- 138,712 141,504 -------- -------- Total Liabilities and Shareholders' Equity $229,925 $290,865 ======== ========
CONSOLIDATED STATEMENTS OF CASH FLOWS Angelica Corporation and Subsidiaries Unaudited (Dollars in thousands)
Three Quarters Ended ---------------------------- October 26, October 27, 2002 2001 ----------- ----------- Cash Flows from Operating Activities: Income from continuing operations before extraordinary item $ 9,116 $ 4,328 Extraordinary loss, net of tax (4,409) - -------- -------- Income from continuing operations 4,707 4,328 Non-cash items included in income from continuing operations: Depreciation 9,619 8,281 Amortization 558 1,500 Change in working capital components, net of businesses acquired/disposed of 5,990 471 Utilization of restructuring reserves (647) - Other, net (63) (1,674) -------- -------- Net cash provided by operating activities of continuing operations 20,164 12,906 -------- -------- Cash Flows from Investing Activities: Expenditures for property and equipment, net (10,173) (10,085) Cost of businesses acquired (2,806) (125) Disposals of businesses and property 1,432 302 -------- -------- Net cash used in investing activities of continuing operations (11,547) (9,908) -------- -------- Cash Flows from Financing Activities: Long-term debt repayments on refinancing (71,543) (26,731) Net borrowings of long-term revolving debt 20,000 12,000 Dividends paid (2,075) (2,062) Other, net 878 659 -------- -------- Net cash used in financing activities of continuing operations (52,740) (16,134) -------- -------- Net cash provided by discontinued operations 33,236 2,844 -------- -------- Net decrease in cash and short-term investments (10,887) (10,292) Balance at beginning of year 18,742 20,311 -------- -------- Balance at end of period $ 7,855 $ 10,019 ======== ======== Supplemental cash flow information: Income taxes paid $ 1,041 $ 4,292 Interest paid $ 3,671 $ 5,282
BUSINESS SEGMENT INFORMATION Angelica Corporation and Subsidiaries Unaudited (Dollars in thousands)
Third Quarter Ended Three Quarters Ended -------------------------- --------------------------- October 26, October 27, October 26, October 27, 2002 2001 2002 2001 ----------- ----------- ----------- ----------- Combined sales and revenues: Textile Services $ 68,108 $ 65,095 $203,284 $194,965 Retail Sales 24,525 23,930 71,132 68,606 -------- -------- -------- -------- $ 92,633 $ 89,025 $274,416 $263,571 ======== ======== ======== ======== Income from continuing operations pretax: Textile Services $ 5,770 $ 4,785 $ 18,132 $ 14,356 Retail Sales 1,256 812 2,108 39 Interest, corporate expenses and other, net (1,947) (3,133) (6,965) (9,639) -------- -------- -------- -------- $ 5,079 $ 2,464 $ 13,275 $ 4,756 ======== ======== ======== ======== Depreciation and amortization: Textile Services $ 2,249 $ 2,408 $ 7,870 $ 7,190 Retail Sales 626 668 1,768 1,999 Corporate 297 179 539 592 -------- -------- -------- -------- $ 3,172 $ 3,255 $ 10,177 $ 9,781 ======== ======== ======== ========
SUMMARY FINANCIAL POSITION DATA Angelica Corporation and Subsidiaries Unaudited (Dollars in thousands, except ratios, shares and per share amounts)
October 26, January 26, 2002 2002 ----------- ----------- Working capital $ 62,992 $ 46,960 Current ratio 2.1 to 1 1.4 to 1 Long-term debt, including current maturities $ 20,871 $ 72,414 Shareholders' equity $ 138,712 $ 141,504 Percent total debt to debt and equity 13.1% 33.9% Book value per common share $ 15.95 $ 16.44 Common shares outstanding 8,698,180 8,608,209
- ------------------------------------------------------------------------------- Forward-Looking Statements: Any forward-looking statements made in this document reflect the Company's current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. These potential risks and uncertainties include, but are not limited to, competitive and general economic conditions, the ability to retain current customers and to add new customers in competitive market environments, competitive pricing in the marketplace, delays in the shipment of orders, availability of labor at appropriate rates, availability and cost of energy and water supplies, the cost of workers' compensation and healthcare benefits, the ability to attract and retain key personnel, consummation of the sale and discontinuation of the Manufacturing and Marketing segment as presently contemplated, unusual or unexpected cash needs for operations or capital transactions, the ability to obtain financing in required amounts and at appropriate rates, and other factors which may be identified in the Company's filings with the Securities and Exchange Commission. - ------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----