-----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, GOwauB906I489dYBJAjDUjgFIJ9T9j8kv6ZiUGOoPavfFj+mpyHRA/9lcmIGF+q9 hRMP0l3H46ONJ7PcbWvhTg== 0000912057-96-016670.txt : 19960928 0000912057-96-016670.hdr.sgml : 19960928 ACCESSION NUMBER: 0000912057-96-016670 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960808 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SULLIVAN DENTAL PRODUCTS INC CENTRAL INDEX KEY: 0000861290 STANDARD INDUSTRIAL CLASSIFICATION: 5047 IRS NUMBER: 363070444 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18347 FILM NUMBER: 96606017 BUSINESS ADDRESS: STREET 1: 10920 WEST LINCOLN AVENUE STREET 2: 12O S RIVERSIDE PLAZA SUITE 430 CITY: WEST ALLIS STATE: WI ZIP: 53227 BUSINESS PHONE: 4143218881 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q --------- [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period ended June 30, 1996 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 0-18347 SULLIVAN DENTAL PRODUCTS, INC. ------------------------------ (Exact name of registrant as specified in its charter) WISCONSIN 36-3070444 --------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 10920 West Lincoln Avenue, West Allis, Wisconsin 53227 - - - ------------------------------------------------ ----- (Address of principal executive offices) (Zip Code) (414)321-8881 ------------- (Registrant's telephone number, including area code) 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 twelve (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 ninety (90) days. Yes X No --- --- As of August 1, 1996, 9,306,747 shares of common stock, $.01 par value, were outstanding. SULLIVAN DENTAL PRODUCTS, INC. FORM 10-Q FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 INDEX PAGE Part I Item 1 - Financial Information 1 Balance Sheets as of June 30, 1996 and December 31, 1995 1-2 Statements of Income for the three months and six months ended June 30, 1996 and 1995 3 Statements of Cash Flows for the three months and six months ended June 30, 1996 and 1995 4 Notes to Financial Statements 5-6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 Part II Item 4 - Submission of Matters to a Vote of Security Holders 9 Item 5 - Other Information 10 Item 6 - Exhibits and Reports on Form 8-K 10 Signatures 11 PART I FINANCIAL INFORMATION SULLIVAN DENTAL PRODUCTS, INC. BALANCE SHEETS June 30, December 31, 1996 1995 ------------- ------------- ASSETS CURRENT ASSETS: Cash $ 29,391 $ 172,482 Accounts receivable: Trade, less allowance for uncollectible accounts 30,183,319 31,753,427 Other 24,743 1,039,093 Inventory 40,827,097 45,977,729 Prepaid expenses and income taxes 2,310,865 1,851,508 ------------- ------------- Total current assets 73,375,415 80,794,239 EQUIPMENT AND LEASEHOLD IMPROVEMENTS: Warehouse and office equipment 7,898,909 7,528,286 Transportation equipment 2,860,916 2,672,728 Leasehold improvements 1,331,626 1,296,970 ------------- ------------- 12,091,451 11,497,984 Less accumulated depreciation and amortization 5,382,567 4,899,204 ------------- ------------- Net equipment and leasehold improvements 6,708,884 6,598,780 OTHER ASSETS: Goodwill 8,996,680 9,276,039 Other 287,383 245,568 ------------- ------------- $ 89,368,362 $ 96,914,626 ------------- ------------- ------------- ------------- See notes to financial statements. -1- June 30, December 31, 1996 1995 ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable to banks $ 1,725,000 $ 9,900,000 Accounts payable 15,318,250 18,474,537 Accrued expenses: Salaries, commissions and benefits 2,125,890 2,098,566 Other 4,754,202 3,293,498 Dividends payable 450,313 - ------------- ------------- Total current liabilities 24,373,655 33,766,601 DEFERRED INCOME TAXES 695,000 695,000 STOCKHOLDERS' EQUITY: Preferred stock--$.01 par value; 500,000 shares authorized, none issued - - Common stock--$.01 par value; 30,000,000 shares authorized, 9,306,747 shares issued in 1996 and 1995 93,067 93,067 Paid-in capital 31,030,201 31,030,201 Retained earnings 35,988,652 33,662,217 ------------- ------------- Total 67,111,920 64,785,485 Less treasury stock at cost (300, 496 and 257,496 shares in 1996 and 1995, respectively) (2,812,213) (2,332,460) ------------- ------------- Total stockholders' equity 64,299,707 62,453,025 ------------- ------------- $ 89,368,362 $ 96,914,626 ------------- ------------- ------------- ------------- See notes to financial statements. -2- SULLIVAN DENTAL PRODUCTS, INC. STATEMENTS OF INCOME
Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 ------------- ------------- ------------- ------------- Net sales $ 58,496,802 $ 51,527,997 $112,957,115 $103,520,982 Cost of sales 38,603,853 33,905,422 74,438,739 68,116,806 ------------- ------------- ------------- ------------- Gross profit 19,892,949 17,622,575 38,518,376 35,404,176 Operating expenses 16,882,011 15,166,285 33,348,795 30,601,610 ------------- ------------- ------------- ------------- Operating income 3,010,938 2,456,290 5,169,581 4,802,566 Interest expense (60,418) (3,825) (206,138) (5,794) Other income 136,479 163,290 418,117 470,263 ------------- ------------- ------------- ------------- Income before provision for income taxes 3,086,999 2,615,755 5,381,560 5,267,035 Provision for income taxes 1,235,000 1,046,000 2,153,000 2,107,000 ------------- ------------- ------------- ------------- Net income $ 1,851,999 $ 1,569,755 $ 3,228,560 $ 3,160,035 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Net income per common and common equivalent share: Primary and fully diluted $ .20 $ .17 $ .35 $ .33 Weighted average common shares: Primary 9,383,000 9,488,000 9,351,000 9,514,000 Fully diluted 9,383,000 9,488,000 9,351,000 9,514,000
See notes to financial statements. -3- SULLIVAN DENTAL PRODUCTS, INC. STATEMENTS OF CASH FLOWS
Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 ------------- ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,851,999 $ 1,569,755 $ 3,228,560 $ 3,160,035 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 513,700 468,898 1,017,578 897,610 (Gain) loss on sale of equipment (10,044) 37,172 (19,598) 22,253 Provision for losses on accounts receivable 105,000 82,500 210,000 232,500 Changes in assets and liabilities: Decrease (increase) in accounts receivable--trade (2,321,601) 918,355 1,315,587 2,499,843 Decrease (increase) in accounts receivable--other 361,844 (136,537) 1,014,350 697,380 Decrease (increase) in inventory 936,384 790,559 5,150,632 (2,645,416) (Increase) in prepaid expenses and income taxes (1,385,348) (900,978) (459,357) (617,052) (Increase) decrease in other assets (71,148) 12,440 (72,148) 456 (Decrease) increase in accounts payable 1,923,169 (4,764,947) (3,156,287) (7,042,328) Increase in accrued expenses-- salaries, commissions and benefits 879,836 732,222 27,324 187,601 Increase (decrease) in accrued expenses--other 1,810,528 (89,844) 1,460,704 (639,778) (Decrease) in income taxes payable (367,697) (935,631) - (414,073) ------------- ------------- ------------- ------------- Net cash provided by (used in) operating activities 4,226,622 (2,216,036) 9,717,345 (3,660,969) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of assets, net of cash received - - - 42,155 Purchase of equipment and leasehold improvements (552,387) (815,355) (1,002,887) (1,634,175) Proceeds from sale of equipment 54,416 162,762 76,766 190,866 ------------- ------------- ------------- ------------- Net cash (used in) investing activities (497,971) (652,593) (926,121) (1,401,154) CASH FLOWS FROM FINANCING ACTIVITIES: Net (decrease) in notes payable to banks (3,000,000) - (8,175,000) - Purchase of treasury stock (307,503) (2,231,250) (307,503) (2,231,250) Dividends paid (451,812) - (451,812) - Proceeds from stock options exercised - 93,239 - 154,289 ------------- ------------- ------------- ------------- Net cash (used in) financing activities (3,759,315) (2,138,011) (8,934,315) (2,076,961) ------------- ------------- ------------- ------------- NET (DECREASE) IN CASH AND CASH EQUIVALENTS (30,664) (5,006,640) (143,091) (7,139,084) CASH AND CASH EQUIVALENTS, beginning of period 60,055 5,067,572 172,482 7,200,016 ------------- ------------- ------------- ------------- CASH AND CASH EQUIVALENTS, end of period $ 29,391 $ 60,932 $ 29,391 $ 60,932 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 54,918 $ 3,825 $ 236,770 $ 5,794 Income taxes 1,793,320 2,381,271 1,895,302 2,920,713
See notes to financial statements. -4- SULLIVAN DENTAL PRODUCTS, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1996 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION: The financial statements have been prepared by the Company, without audit by independent certified public accountants, in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations since the Company believes that the disclosures contained herein are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and notes included in the Company's 1995 Annual Report on Form 10-K. In the opinion of the Company, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of June 30, 1996, as well as the results of operations and the cash flows for the three and six months ended June 30, 1996 and 1995, have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. INVENTORY: The Company measures inventory and cost of sales for interim financial statements by use of a historically developed gross profit percentage. Annually, the Company adjusts the inventory to reflect the results of a physical count. NET INCOME PER SHARE: Net income per share and the dilutive effect on net income per share of potentially dilutive stock options are computed by the treasury stock method. Common stock equivalents result from the assumed issuance of shares under stock option plans. CASH FLOWS: For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The change in assets and liabilities in the operating section of the statement of cash flows for the six months ended June 30, 1995, is reflected net of the effects of the acquisition consummated. -5- SULLIVAN DENTAL PRODUCTS, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 1996 NOTE B - DIVIDENDS On March 20, 1996, the Company declared a cash dividend of $.05 per share payable April 20, 1996, to stockholders of record on April 10, 1996. On June 20, 1996, the Company declared a cash dividend of $.05 per share payable July 19, 1996, to stockholders of record on July 10, 1996. Total dividends are $902,125. NOTE C - TREASURY STOCK During June 1996, the Company repurchased 30,000 shares of its own common stock in the open market for $307,503. Also during June 1996, an acquisition from a prior year was revalued and 13,000 shares valued at $172,250 were returned to the Company and recorded as treasury stock. NOTE D - SUBSEQUENT EVENT On July 8, 1996, the Company signed a letter of intent to purchase substantially all of the assets and assume certain liabilities of Mountain West Dental Company, an Idaho based dental supply, equipment and service company, in exchange for approximately 429,000 shares of common stock of the Company. The value of the shares and goodwill will be determined at the date of closing. -6- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 AND 1995 Net sales for the three months ended June 30, 1996 ("Current Quarter") were $58,497,000, an increase of $6,969,000, or 13.5%, over the three months ended June 30, 1995 ("Prior Quarter"). The $6,969,000 increase in net sales was substantially due to increased unit sales and, to a lesser extent, price increases. The growth in unit sales was generated largely by increased penetration in existing markets. Sales of dental supplies comprised 67.8% of net sales in the second quarter of 1996 versus 69.4% during the same period in 1995. Sales of dental equipment constituted 25.7% of net sales in the Current Quarter versus 24.0% in the Prior Quarter. The balance of sales in each period consisted of repair service and parts. The change in product mix is largely due to the opening of 4 new equipment sales and service centers in the last 12 months which, when adjusting for the closing of one center, brings the total number of equipment sales and service centers to 46 nationwide. Gross profit rose $2,270,000, or 12.9%, in the Current Quarter compared to the Prior Quarter, primarily as the result of increased sales. Gross Profit as a Percentage of net sales decreased from 34.2% to 34.0%. Operating expenses rose $1,716,000, or 11.3%, to $16,882,000, in the second quarter of 1996 compared to $15,166,000 in the second quarter of 1995 and decreased as a percentage of net sales to 28.9% from 29.4% over the same period last year. Of this increase in operating expenses, $877,000 resulted from increased salaries and commissions due to higher sales creating higher commissions and salaries paid to new sales trainees and support staff and $540,000 due to increases in health and general insurance premiums. Operating income in the Current Quarter increased from the Prior Quarter by $555,000 to $3,011,000, due to the factors identified above. Interest expense rose by $56,000 to $60,000 due to use of the bank credit lines. The weighted average interest rate for the Current Quarter was 6.6%. Net income per share for primary and fully diluted shares rose to $.20 per share during the second quarter of 1996 compared to $.17 per share for the corresponding period in 1995. Net income increased $282,000 in the second three months of 1996 as compared to such period in 1995, due to higher sales. -7- SIX MONTHS ENDED JUNE 30, 1996 AND 1995 Net sales for the six months ended June 30, 1996 ("Current Period") were $112,957,000, an increase of $9,436,000, or 9.1% over the six months ended June 30, 1995 ("Prior Period"). The $9,436,000 increase in net sales was substantially due to increased unit sales and, to a lesser extent, price increases. The growth in unit sales was generated largely by increased penetration in existing markets. Sales of dental supplies comprised 69.1% of net sales in the first half of 1996 versus 70.7% during the same period in 1995. Sales of dental equipment constituted 24.1% of net sales in the Current Period versus 22.4% in the Prior Period. Gross profit rose $3,114,000, or 8.8%, in the first half of 1996, compared to the same period last year, primarily as a result of increased sales. Gross profit as a percentage of sales decreased from 34.2% to 34.1%. Operating expenses for the Current Period rose $367,000, or 9.0%, compared to the Prior Period and decreased as a percentage of net sales to 29.5% from 29.6% over the same period last year. Of this increase in operating expenses, $1,429,000 resulted from increased salaries and commissions due to higher sales creating higher commissions and salaries paid to new sales trainees and support staff. Operating income in the Current Period increased from the Prior Period by $2,747,000 to $5,170,000 due to the factors identified above. Interest expense increased by $200,000 to $206,000. The weighted average interest rate for the Current Period was 6.6%. Net income per share for primary and fully diluted shares increased to $.35 per share from $.33 per share during the Current Period compared to the Prior Period. Net income increased by $69,000, or 2.2%, in the first half of 1996 as compared to the same period last year, primarily due to increased sales. LIQUIDITY AND CAPITAL RESOURCES The Company had no short-term investments at June 30, 1996 or at year-end 1995. The Company, pursuant to a stock repurchase plan which authorized the purchase of up to 500,000 shares, has to date repurchased 280,000 shares of its common stock from the public at various prices with an average price of approximately $9.00 per share, which repurchases total $2,538,750. Inventories decreased $5,151,000 due to reduced purchasing in the first and second quarter of 1996. Working capital at June 30, 1996 was $49,002,000, an increase of $1,974,000 over December 31, 1995 reflecting net income of $3,229,000 reduced by dividends of $902,000 and the purchase of treasury stock of $308,000. Cash and cash equivalents as of June 30, 1996 decreased by $143,000 from December 31, 1995. Net cash provided by operating activities for the six months ended June 30, 1996 was $9,717,000 primarily as a result of -8- net income adjusted for depreciation and bad debts and decreases in inventory and accounts receivable offset by decreases in accounts payable. Cash was used for equipment purchases ($1,003,000), to reduce notes payable to banks ($8,175,000), to pay dividends ($452,000) and to repurchase stock ($308,000). Other assets, net of amortization, as of June 30, 1996 decreased $238,000 to $9,284,000 compared to $9,522,000 at December 31, 1995. The decrease is due to amortization of goodwill ($182,000), the reduction of goodwill for the revaluing of the acquisition of Inglis Dental Supply, Inc. ($128,000) and offset by the purchase of customer lists ($65,000). The Company expects that the $23,000,000 available lines of credit, of which $1,725,000 was borrowed as of June 30, 1996, together with internally generated funds from its operations, will be sufficient to meet its currently foreseeable short-term and long-term liquidity and capital needs. On June 20, 1996, the Company declared a cash dividend of $.05 cents per share paid on July 19, 1996 to shareholders of record on July 10, 1996. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS The Company held its Annual Shareholders Meeting on May 14, 1996, and the following directors were elected, having received votes as follows: AUTHORITY AUTHORITY DIRECTOR GRANTED WITHHELD Robert J. Sullivan 7,993,025 97,012 Robert E. Doering 7,993,525 96,512 Wayne G. Holt 7,993,185 96,852 Kevin J. Ackeret 7,994,585 95,452 Timothy J. Sullivan 7,989,815 100,122 Howard O. Wolfe 7,921,685 168,252 Kerry B. Wolfe 7,921,575 168,362 The Shareholders also approved the Board of Directors Resolution to adopt the Company's 1995 Long-Term Stock Plan. The vote was 5,207,721 in favor, 1,412,212 opposed and 663,120 abstentions. -9- ITEM 5. OTHER INFORMATION On July 8, 1996, the Company executed a letter of intent to purchase substantially all of the assets and assume the liabilities of Mountain West Dental Company, an Idaho-based dental equipment and supply company, in exchange for 429,000 registered shares of common stock of the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Reports on Form 8-K - The Company was not required to, and did not, file a Form 8-K during the period covered by this report. -10- 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. SULLIVAN DENTAL PRODUCTS, INC. (Registrant) By /S/ Timothy J. Sullivan ------------------------------------ Dated: August 8, 1996 TIMOTHY J. SULLIVAN, Vice President and Principal Financial Officer -11- EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 29 0 31,029 846 40,827 73,375 12,091 5,382 89,368 24,374 0 0 0 93 64,207 64,300 112,957 113,375 74,439 74,439 33,349 210 206 5,382 2,153 3,229 0 0 0 3,229 .345 .345
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