-----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, T2QDyBwAvk7Od46pjYUtUq2vGR6dHnkCxdW3e94qea/Ky17IGwNJOfW87z/U33WR Opz5fuaitaH/E72xfrjzgw== 0000899140-95-000336.txt : 19951119 0000899140-95-000336.hdr.sgml : 19951119 ACCESSION NUMBER: 0000899140-95-000336 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STRATEGIC DISTRIBUTION INC CENTRAL INDEX KEY: 0000073822 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 221849240 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05228 FILM NUMBER: 95589522 BUSINESS ADDRESS: STREET 1: 12600 WEST COLFAX AVE STE A200 STREET 2: C/O PRENTICE HALL CORP SYSTEM INC CITY: LAKEWOOD STATE: CO ZIP: 80215 BUSINESS PHONE: 2036298750 MAIL ADDRESS: STREET 2: 12600 WEST COLFAX AVE SUITE 200 CITY: LAKEWOOD STATE: CO ZIP: 80215 FORMER COMPANY: FORMER CONFORMED NAME: STRATEGIC INFORMATION INC DATE OF NAME CHANGE: 19901113 FORMER COMPANY: FORMER CONFORMED NAME: INFORMEDIA CORP DATE OF NAME CHANGE: 19890221 FORMER COMPANY: FORMER CONFORMED NAME: OCTO LTD DATE OF NAME CHANGE: 19870921 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 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 number 0-5228 STRATEGIC DISTRIBUTION, INC. (Exact name of registrant as specified in its charter) Delaware 22-1849240 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 12136 W. Bayaud, Lakewood, CO 80228 (Address of principal executive offices) (Zip Code) 303-234-1419 (Registrant's telephone number, including area code) 12600 W. Colfax Avenue, Lakewood, CO 80215 (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 [ ] Number of Common Shares outstanding at November 13, 1995: 21,075,947. TABLE OF CONTENTS Part I - Financial Information ------------------------------ Page No. Item 1 -------- - ------ Consolidated Financial Statements: - Consolidated Balance Sheets - September 30, 1995 (unaudited), and December 31, 1994 1 - Consolidated Statements of Income (unaudited) - Three and Nine Months Ended September 30, 1995 and 1994 2 - Consolidated Statements of Cash Flows (unaudited) - Nine Months Ended September 30, 1995 and 1994 3 - Notes to Consolidated Financial Statements (unaudited) 4 Item 2 - ------ Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Part II - Other Information --------------------------- Item 6 - ------ Exhibits and Reports on Form 8-K 9 Signatures 10 STRATEGIC DISTRIBUTION, INC. AND SUBSIDIARIES Consolidated Balance Sheets
September 30, 1995 December 31, Assets (unaudited) 1994 - ------ ------------- ------------ Current assets: Cash and cash equivalents $ 758,997 $ 3,022,428 Accounts receivable, net 20,541,305 10,078,210 Inventories 14,381,079 13,469,229 Prepaid expenses and other current assets 908,772 418,926 Deferred tax asset 1,053,900 1,793,000 ---------- ---------- Total current assets 37,644,053 28,781,793 Property and equipment, net 3,001,432 2,571,796 Excess of cost over fair value of net assets acquired, net 5,982,350 5,158,911 Other assets 809,752 895,541 ---------- ---------- Total assets $47,437,587 $37,408,041 ========== ========== Liabilities and Stockholders' Equity - ------------------------------------ Current liabilities: Accounts payable and accrued expenses $17,201,250 $10,670,635 Current portion of long-term debt 140,743 209,643 ---------- ---------- Total current liabilities 17,341,993 10,880,278 Long-term debt 1,495,112 1,617,517 Note payable to bank 825,000 -- Deferred tax liability 203,750 189,000 ---------- ---------- Total liabilities 19,865,855 12,686,795 ---------- ---------- Stockholders' equity: Preferred stock, par value $.10 per share. Authorized: 500,000 shares; issued and outstanding: none -- -- Common stock, par value $.10 per share. Authorized: 25,000,000 shares; issued and outstanding: 21,070,781 and 21,020,535 shares 2,107,078 2,102,054 Additional paid-in capital 29,761,131 28,154,039 Accumulated deficit (4,246,477) (5,484,847) Note receivable from sale of stock (50,000) (50,000) ---------- ---------- Total stockholders' equity 27,571,732 24,721,246 ---------- ---------- Total liabilities and stockholders' equity $47,437,587 $37,408,041 ========== ==========
See accompanying notes to consolidated financial statements. -1- STRATEGIC DISTRIBUTION, INC. AND SUBSIDIARIES Consolidated Statements of Income (unaudited)
Three months ended Nine months ended September 30, September 30, ------------------ ----------------- 1995 1994 1995 1994 ---- ---- ---- ---- Revenues $31,926,589 $20,568,439 $84,557,180 $56,308,657 Cost of sales 25,401,817 15,731,189 65,999,148 43,210,506 ---------- ---------- ---------- ---------- Gross profit 6,524,772 4,837,250 18,558,032 13,098,151 Selling, general and administrative expenses 5,932,325 4,281,675 16,332,328 11,657,741 ---------- ---------- ---------- ---------- Operating income 592,447 555,575 2,225,704 1,440,410 Interest expense (income): Interest expense 44,948 316,608 116,232 716,645 Interest (income) (6,892) (9,549) (78,898) (35,323) ---------- ---------- ---------- ---------- Interest expense, net 38,056 307,059 37,334 681,322 ---------- ---------- ---------- ---------- Income before income taxes 554,391 248,516 2,188,370 759,088 Income taxes 237,000 - 950,000 - ---------- ---------- ---------- ---------- Net income $ 317,391 $ 248,516 $ 1,238,370 $ 759,088 ========== ========== ========== ========== Net income per common share $0.02 $0.02 $0.06 $0.05 ========== ========== ========== ========== Average number of shares of common stock outstanding 21,064,692 15,263,195 21,051,455 16,498,277 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements. -2- STRATEGIC DISTRIBUTION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (unaudited)
Nine months ended September 30, ----------------- 1995 1994 ---- ---- Cash flows from operating activities: Net income $ 1,238,370 $ 759,088 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 847,843 579,986 Deferred taxes, net 753,850 -- Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable (8,676,683) (3,312,726) Inventories (911,850) (2,364,425) Prepaid expenses and other current assets (586,205) (297,861) Accounts payable and accrued expenses 5,222,074 1,407,754 Other, net (9,101) (72,732) ---------- ---------- Net cash used in operating activities (2,121,702) (3,300,916) ---------- ---------- Cash flows used in investing activities: Acquisition of businesses 73,576 (5,020,777) Additions of property and equipment (651,016) (423,940) ---------- ---------- Net cash used in investing activities (577,440) (5,444,717) ---------- ---------- Cash flows from financing activities: Proceeds from sale of common stock, net 52,016 2,982,051 Proceeds from notes payable 825,000 6,330,324 Repayment of long-term obligations (441,305) (495,964) ---------- ---------- Net cash provided by financing activities 435,711 8,816,411 ---------- ---------- Increase (decrease) in cash and cash equivalents (2,263,431) 70,778 Cash and cash equivalents, at beginning of the period 3,022,428 1,271,985 ---------- ---------- Cash and cash equivalents, at end of the period $ 758,997 $ 1,342,763 ========== ========== Supplemental cash flow information: Taxes paid $ 147,136 $ 218,042 Interest paid 95,358 690,279 ========== ==========
See accompanying notes to consolidated financial statements. -3- STRATEGIC DISTRIBUTION, INC. AND SUBSIDIARIES Notes To Consolidated Financial Statements (unaudited) 1. The accompanying unaudited consolidated financial statements include the accounts of Strategic Distribution, Inc. and subsidiaries (the "Company"). These financial statements have been prepared in accordance with the instructions to Form 10-Q. In the opinion of management, all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation of the results of operations for the three and nine months ended September 30, 1995 and 1994 have been included. The statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1994. 2. On June 16, 1994, a subsidiary of the Company, Lewis Supply (Delaware), Inc. ("Lewis"), acquired certain assets of the Industrial Supplies Division of Lufkin Industries, Inc., (the "Lufkin Division"). The purchase price consisted of: (i) $2,040,000 in cash and (ii) a mortgage note in the amount of $600,000. The source of the cash portion of the purchase price was borrowings under a revolving bank facility. On May 12, 1995, the Company acquired all of the outstanding common stock of American Technical Services Group, Inc. ("ATSG"). The purchase price consisted of options to purchase an aggregate of 1,006,516 shares of the Company's Common Stock at a price of $6.00 per share. The fair market value of these options, as determined by an independent investment bank, was $1,560,100. Presented below is an unaudited pro forma condensed statement of income for the nine months ended September 30, 1995 and 1994. The applicable pro forma adjustments give effect in 1994 to the acquisition of the Lufkin Division as if such acquisition occurred on January 1, 1994, and the applicable pro forma adjustments give effect in 1994 and 1995 to the acquisition of ATSG as if such acquisition occurred on January 1 of each period. Nine Months Ended September 30, ------------------------------- 1995 1994 ---- ---- Revenues $ 87,328,576 $ 68,406,063 Operating income $ 1,627,653 $ 1,412,595 Net income $ 668,484 $ 645,358 Net income per common share $ 0.03 $ 0.04 For the nine months ended September 30, 1995 and 1994, one customer (dealing with the Company under four separate contracts) represented approximately 10.3% and 12.9% of the pro forma revenues. -4- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General - ------- The Company is a leading provider of industrial supply services to industrial and commercial customers in the United States. The Company conducts its operations through its four subsidiaries, SafetyMaster Corporation ("SafetyMaster"), Lewis, Industrial Systems Associates, Inc. ("ISA") and ATSG. The Company, at September 30, 1995, operated 29 full-service branch warehouses, nine sales and service locations and 28 In-Plant Store[SM] facilities, which service over 13,000 customers in 25 states and Mexico.
Three Months Ended September 30, Nine Months Ended September 30, -------------------------------- ------------------------------- 1995 1994 1995 1994 ---- ---- ---- ---- Revenues $31,926,589 $20,568,439 $84,557,180 $56,308,657 100.0% 100.0% 100.0% 100.0% Cost of sales 79.6% 76.5% 78.1% 76.7% Gross profit 20.4% 23.5% 21.9% 23.3% Selling, general and administrative expenses 18.6% 20.8% 19.3% 20.7% Operating income 1.8% 2.7% 2.6% 2.6% Interest expense, net .1% 1.5% -- 1.3% Income before income taxes 1.7% 1.2% 2.6% 1.3% Income taxes .7% -- 1.1% -- Net income 1.0% 1.2% 1.5% 1.3%
Three Months Ended September 30, 1995 Compared to Three Months Ended September 30, 1994 - -------------------------------------------------------------------- Revenues for the three months ended September 30, 1995 increased 55.2% to $31,926,589 from $20,568,439 in 1994. For the 1995 period, $14,992,267 of revenues were from In-Plant Store[SM] facilities and $16,934,322 were from Local Branches (including sales and service locations). For the 1994 period, $8,046,895 of revenues were from In-Plant Store[SM] facilities and $12,521,544 were from Local Branches. Internal growth, primarily from ISA, accounted for 69.3% of the increase. The balance of the increase came from the inclusion of the results of operations of ATSG for the three months ended September 30, 1995. One customer (dealing with the Company under four separate contracts) represented approximately 10.8% and 14.0% of the revenues for the three months ended September 30, 1995 and 1994. -5- Cost of sales as a percentage of revenues increased to 79.6% for the three months ended September 30, 1995 from 76.5% for the comparable period in 1994. The increase resulted primarily from the higher percentage of sales from ISA's In-Plant Store[SM] program which has lower margins than the Company's Local Branch program. Selling, general and administrative expenses as a percentage of revenues decreased to 18.6% for the three months ended September 30, 1995 from 20.8% for the comparable period in 1994. The improvement resulted primarily from the higher percentage of sales from ISA's In-Plant Store[SM] program which has lower levels of selling, general and administrative expenses than the Company's Local Branch program. Despite the fact that ISA's In-Plant Store[SM] program has a lower level of selling, general and administrative expenses than the Company's Local Branch program, ISA's selling, general and administrative expenses have increased as a percentage of ISA's revenue, primarily as a result of expenses incurred by ISA in connection with its expansion of the In-Plant Store[SM] program. Interest expense, net decreased by $269,003 to $38,056 for the three months ended September 30, 1995 from interest expense, net of $307,059 in 1994. The decrease in interest expense, net resulted primarily from the repayment of the Company's bank indebtedness with the net proceeds from the sale of 5,750,000 shares of the Company's Common Stock on October 13, 1994. The Company had no Federal income tax expense for the three months ended September 30, 1994 due to its utilization of a net operating loss carryforward, which was not previously recognized. Net income for the three months ended September 30, 1995 was $317,391 as compared to net income of $248,516 for the comparable period in 1994. This change was primarily the result of the items previously discussed. Nine Months Ended September 30, 1995 Compared to Nine Months Ended September 30, 1994 - ------------------------------------------------------------------ Revenues for the nine months ended September 30, 1995 increased 50.2% to $84,557,180 from $56,308,657 in 1994. For the 1995 period, $37,587,785 of revenues were from In-Plant Store[SM] facilities and $46,969,395 were from Local Branches (including sales and service locations). For the 1994 period, $23,342,660 of revenues were from In-Plant Store[SM] facilities and $32,965,997 were from Local Branches. Internal growth, primarily from ISA, accounted for 62.7% of the increase. The balance of the increase came from the inclusion of the results of operations of the Lufkin Division and ATSG for the nine months ended September 30, 1995. One customer (dealing with the Company under four separate contracts) represented approximately 10.6% and 16.7% of the revenues for the nine months ended September 30, 1995 and 1994. -6- Cost of sales as a percentage of revenues increased to 78.1% for the nine months ended September 30, 1995 from 76.7% for the comparable period in 1994. The increase resulted primarily from the higher percentage of sales from ISA's In-Plant Store[SM] program which has lower margins than the Company's Local Branch program. Selling, general and administrative expenses as a percentage of revenues decreased to 19.3% for the nine months ended September 30, 1995 from 20.7% for the comparable period in 1994. The improvement resulted primarily from the higher percentage of sales from ISA's In-Plant Store[SM] program which has lower levels of selling, general and administrative expenses than the Company's Local Branch program. Despite the fact that ISA's In-Plant Store[SM] program has a lower level of selling, general and administrative expenses than the Company's Local Branch program, ISA's selling, general and administrative expenses have increased as a percentage of ISA's revenue, primarily as a result of expenses incurred by ISA in connection with its expansion of the In-Plant Store[SM] program. Interest expense, net decreased $643,988 to $37,334 for the nine months ended September 30, 1995 from interest expense, net of $681,322 in 1994. The decrease in interest expense, net resulted primarily from the repayment of the Company's bank indebtedness with the net proceeds from the sale of 5,750,000 shares of the Company's Common Stock on October 13, 1994, and interest income earned on the remaining net proceeds. The Company had no Federal income tax expense for the nine months ended September 30, 1994 due to its utilization of a net operating loss carryforward, which was not previously recognized. Net income for the nine months ended September 30, 1995 was $1,238,370 as compared to net income of $759,088 for the comparable period in 1994. This change was primarily the result of the items previously discussed. Liquidity and Capital Resources - ------------------------------- SafetyMaster and Lewis maintain a revolving bank credit facility which provides maximum borrowings at any time of $15,000,000 for SafetyMaster and $5,000,000 for Lewis (with the aggregate amount borrowed not to exceed $15,000,000). SafetyMaster and Lewis are permitted to make loans to ISA under the credit facility, subject to certain limitations set forth therein. The credit facility expires on January 4, 1997. $825,000 was borrowed under the credit facility as of September 30, 1995. The amount that SafetyMaster and Lewis may borrow under the credit facility is based upon a percentage of eligible accounts receivable and inventory. The maximum availability at September 30, 1995 was $15,000,000. Under the credit facility, SafetyMaster, Lewis and ISA are restricted from paying any dividends to the Company other than semi-annual payments equal to 50% of after tax income (calculated on the basis of taxes actually paid). The Company and its subsidiaries file a consolidated federal income tax return. The credit facility is -7- collateralized by substantially all of the subsidiaries' assets (net book value of approximately $34,177,000) and a pledge of all the capital stock of SafetyMaster, Lewis, ISA and SafetyMaster's wholly-owned subsidiary, Coulson Technologies, Inc. The Company and ISA have also guaranteed the full and prompt payment of all liabilities of SafetyMaster and Lewis under the credit facility. On October 13, 1994, the Company sold 5,750,000 shares of Common Stock in an underwritten public offering (the "Offering"). The net proceeds to the Company were $15,405,500. The Company's bank indebtedness was repaid, with the balance of the proceeds available for working capital, for general corporate purposes and for possible corporate acquisitions. The net cash used in operating activities was $2,121,702 for the nine months ended September 30, 1995, down from $3,300,916 in the comparable period in 1994, principally as a result of a smaller increase in inventories, an increase in deferred taxes, and accounts payable and accrued expenses which were partially offset by an increase in accounts receivable. The Company believes that cash on hand, cash generated from operations and cash from the Company's bank credit facility will generate sufficient funds to permit the Company to meet its liquidity needs for the foreseeable future. The Company has stated its intention to seek further acquisition opportunities. If the Company is able to identify satisfactory acquisitions, the source of funds for such acquisitions will be internally generated cash and cash from future borrowings or sales of equity, although there is no guarantee that the Company would be successful in raising funds from such sources. -8- PART II Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a). None (b). None -9- 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 thereunto duly authorized. STRATEGIC DISTRIBUTION, INC. Date: November 13, 1995 By: /s/ Andrew M. Bursky - ------------------------ -------------------- Andrew M. Bursky, Chairman of the Board Date: November 13, 1995 By: /s/ Charles J. Martin - ------------------------ --------------------- Charles J. Martin, Vice President, Controller and Chief Accounting Officer -10- -----END PRIVACY-ENHANCED MESSAGE-----