10-Q 1 d10q.txt FORM 10-Q 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 July 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. 333-60247 --------- 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

2 PART I. Financial Information Item 1. Financial Statements Coyne International Enterprises Corp. and Subsidiaries Consolidated Balance Sheets -------------------------------------------------------------------------------

See notes to unaudited consolidated financial statements. 3 Coyne International Enterprises Corp. and Subsidiaries Consolidated Balance Sheets -------------------------------------------------------------------------------

See notes to unaudited consolidated financial statements. 4 Coyne International Enterprises Corp. and Subsidiaries Consolidated Statements of Operations

See notes to unaudited consolidated financial statements 5 Coyne International Enterprises Corp. and Subsidiaries Consolidated Statements of Cash Flows --------------------------------------------------------------------------------

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 have been labeled as of and for the periods ending July 31, 2001, October 31, 2000 and July 31, 2000 rather than the actual period-end dates. Operating results for the three and nine month periods ended July 31, 2001 are not necessarily indicative of the results that may be expected for the year ended October 31, 2001. 2. Income Taxes The Company's effective tax rate differs from the federal statutory rate of 34% due to state income 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. 3. Reclassification Certain amounts have been reclassified to conform with the fiscal 2001 presentation. 4. Comprehensive Income The components of comprehensive loss were as follows:

7 Coyne International Enterprises Corp. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) 5. 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. 8 Coyne International Enterprises Corp. And Subsidiaries

9 Coyne International Enterprises Corp. and Subsidiaries

10 Coyne International Enterprises Corp. and Subsidiaries Consolidating Statements of Operations

11 Coyne International Enterprises Corp. and Subsidiaries Consolidating Statements of Operations

12 Coyne International Enterprises Corp. and Subsidiaries Consolidating Statements of Operations

13 Coyne International Enterprises Corp. and Subsidiaries Consolidating Statements of Operations

14 Coyne International Enterprises Corp. and Subsidiaries

15 Coyne International Enterprises Corp. and Subsidiaries

16 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 Total revenues decreased 0.8% for the three months ended July 31, 2001 versus the three months ended July 31, 2000. Total revenues decreased 1.7% for the three months ended July 31, 2001 versus the three months ended April 30, 2001. The revenue results for the quarter stem from reduced business activity, driven by customer workforce reductions and increasing competition. Total revenues for the nine-month period ended July 31, 2001 have increased 1.3% over the nine- month period ended July 31, 2000. Cost of rental operations increased 2.7% for the three months ended July 31, 2001 versus the three months ended July 31, 2000. Cost of rental operations for the nine-month period ended July 31, 2001 has increased 5.4% over the nine-month period ended July 31, 2000. These increases reflect higher merchandise and installation costs for large high-cost garment accounts during 2001 and higher energy costs. Income from operations decreased 22% for the three months ended July 31, 2001 versus the three months ended July 31, 2000. Income from operations for the nine-month period ended July 31, 2001 has decreased 38% over the nine-month period ended July 31, 2000. These decreases reflect the higher costs of merchandise and energy noted above offset somewhat by recent cost control measures which have reduced selling, general and administrative costs 8.2% for the three months ended July 31, 2001 versus the three months ended April 30, 2001. 17 Liquidity and Capital Resources Net cash provided by operating activities increased $7.8 million for the nine months ended July 31, 2001 over the same period in fiscal 2000. This increase is primarily attributed to decreased purchases of inventory and more efficient use of existing inventory in 2001. The Company is highly leveraged, with total indebtedness of approximately $105 million and a shareholder deficit of approximately $11.4 million. Accordingly, the Company's primary source of liquidity has been cash flows from operations and borrowing under its existing credit facilities. In fiscal 2000, as a result of new business opportunities, the Company experienced increases in its inventory and uniforms in service. The increases directly accounted for the increase in the Company's revolving credit facility. As of July 31, 2001, the Company had approximately $1,565,000 available under its revolving credit facility. The Company's current bank credit facilities extend until 2003. However, management is presently evaluating its overall financial obligations to ensure adequate financing is available to fund its business operations. The Company may from time to time make purchases of the Notes on the open market or in privately negotiated transactions, subject to available liquidity and certain financial covenants and restrictions set forth in its credit facilities. 18

COYNE INTERNATIONAL ENTERPRISES CORP 10-Q