For
The
Quarter Ended
|
Commission
File
|
April
30,
2005
|
Number
1-5674
|
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
|
(Address
of
principal executive offices)
|
(Zip
Code)
|
Page
Number
|
|
Reference
|
|
Part
I. Financial Information:
|
|
Item
1.
Condensed Financial Statements:
|
|
2
|
|
3
|
|
4
|
|
5-12
|
|
13-17
|
|
18
|
|
18-19
|
|
Part
II. Other Information:
|
|
20
|
|
20
|
|
21
|
|
22
|
Angelica
Corporation and Subsidiaries
|
|||||||
Unaudited
(Dollars in thousands, except per share amounts)
|
|||||||
|
First
Quarter
Ended
|
||||||
|
April
30,
2005
|
May
1,
2004
|
|||||
Continuing
Operations:
|
|||||||
Net
revenues
|
$
|
102,580
|
$
|
77,730
|
|||
Cost
of
services
|
(87,046
|
)
|
(65,563
|
)
|
|||
Gross
profit
|
15,534
|
12,167
|
|||||
Selling,
general and administrative expenses
|
(12,663
|
)
|
(10,180
|
)
|
|||
Amortization
of other acquired assets
|
(811
|
)
|
(225
|
)
|
|||
Other
operating expense, net
|
(52
|
)
|
(29
|
)
|
|||
Income
from
operations
|
2,008
|
1,733
|
|||||
Interest
expense
|
(1,150
|
)
|
(280
|
)
|
|||
Non-operating
income, net (Note 4)
|
539
|
2,100
|
|||||
Income
from
continuing operations before taxes
|
1,397
|
3,553
|
|||||
Provision
for
income taxes (Note 5)
|
(377
|
)
|
(1,030
|
)
|
|||
Income
from
continuing operations
|
1,020
|
2,523
|
|||||
Discontinued
Operations:
|
|||||||
Income
from
operations of discontinued segment,
|
|||||||
net
of
tax
|
-
|
672
|
|||||
Loss
on
disposal of discontinued segment,
|
|||||||
net
of
tax
|
-
|
(3,064
|
)
|
||||
Loss
from
discontinued operations
|
-
|
(2,392
|
)
|
||||
Net
income
|
$
|
1,020
|
$
|
131
|
|||
Basic
earnings per share (Note 7):
|
|||||||
Income
from
continuing operations
|
$
|
0.11
|
$
|
0.28
|
|||
Loss
from
discontinued operations
|
-
|
(0.27
|
)
|
||||
Net
income
|
$
|
0.11
|
$
|
0.01
|
|||
Diluted
earnings per share (Note 7):
|
|||||||
Income
from
continuing operations
|
$
|
0.11
|
$
|
0.27
|
|||
Loss
from
discontinued operations
|
-
|
(0.26
|
)
|
||||
Net
income
|
$
|
0.11
|
$
|
0.01
|
Angelica
Corporation and Subsidiaries
|
|||||||
Unaudited
(Dollars in thousands)
|
|||||||
April
30,
|
January
29,
|
||||||
2005
|
2005
|
||||||
ASSETS
|
|||||||
Current
Assets:
|
|||||||
Cash
and
short-term investments
|
$
|
2,488
|
$
|
926
|
|||
Receivables,
less reserves of $707 and $510
|
55,210
|
44,454
|
|||||
Linens
in
service
|
45,870
|
38,846
|
|||||
Prepaid
expenses and other current assets
|
3,371
|
3,817
|
|||||
Deferred
income taxes
|
4,354
|
5,386
|
|||||
Total
Current
Assets
|
111,293
|
93,429
|
|||||
Property
and
Equipment
|
200,636
|
193,835
|
|||||
Less
—accumulated
depreciation
|
95,100
|
92,170
|
|||||
Total
Property and Equipment
|
105,536
|
101,665
|
|||||
Other:
|
|||||||
Goodwill
(Note 8)
|
50,586
|
31,272
|
|||||
Other
acquired assets (Note 8)
|
43,659
|
24,860
|
|||||
Cash
surrender value of life insurance (Note 9)
|
11,785
|
30,942
|
|||||
Deferred
income taxes
|
1,515
|
2,040
|
|||||
Miscellaneous
|
4,977
|
4,745
|
|||||
Total
Other
Assets
|
112,522
|
93,859
|
|||||
Total
Assets
|
$
|
329,351
|
$
|
288,953
|
|||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|||||||
Current
Liabilities:
|
|||||||
Current
maturities of long-term debt
|
$
|
7,919
|
$
|
419
|
|||
Accounts
payable
|
21,349
|
16,865
|
|||||
Accrued
wages
and other compensation
|
6,646
|
5,145
|
|||||
Deferred
compensation and pension liabilities
|
4,019
|
4,226
|
|||||
Other
accrued
liabilities
|
28,093
|
29,063
|
|||||
Total
Current
Liabilities
|
68,026
|
55,718
|
|||||
Long-Term
Debt, less current maturities (Note 9)
|
94,706
|
67,811
|
|||||
Other
Long-Term Obligations
|
13,910
|
14,068
|
|||||
Shareholders’
Equity:
|
|||||||
Common
Stock,
$1 par value, authorized 20,000,000
|
|||||||
shares,
issued: 9,471,538 shares
|
9,472
|
9,472
|
|||||
Capital
surplus
|
6,594
|
5,336
|
|||||
Retained
earnings
|
144,632
|
144,621
|
|||||
Accumulated
other comprehensive loss
|
(1,283
|
)
|
(1,337
|
)
|
|||
Unamortized
restricted stock
|
(2,642
|
)
|
(1,007
|
)
|
|||
Common
Stock
in treasury, at cost: 293,967 and 405,304 shares
|
(4,064
|
)
|
(5,729
|
)
|
|||
Total
Shareholders’
Equity
|
152,709
|
151,356
|
|||||
Total
Liabilities and Shareholders’ Equity
|
$
|
329,351
|
$
|
288,953
|
Angelica
Corporation and Subsidiaries
|
|||||||
Unaudited
(Dollars in thousands)
|
|||||||
First
Quarter
Ended
|
|||||||
|
April
30,
2005
|
May
1,
2004
|
|||||
Cash
Flows
from Operating Activities:
|
|||||||
Income
from
continuing operations
|
$
|
1,020
|
$
|
2,523
|
|||
Non-cash
items included in income from continuing operations:
|
|||||||
Depreciation
|
3,800
|
2,711
|
|||||
Amortization
|
1,139
|
355
|
|||||
Deferred
income taxes
|
1,558
|
892
|
|||||
Cash
surrender value of life insurance
|
(168
|
)
|
(791
|
)
|
|||
Loss
(gain)
on sale of assets
|
61
|
(1,472
|
)
|
||||
Change
in
working capital components of continuing
|
|||||||
operations,
net of businesses acquired/disposed of
|
(4,817
|
)
|
(117
|
)
|
|||
Other,
net
|
(202
|
)
|
90
|
||||
Net
cash
provided by operating activities of
|
|||||||
continuing
operations
|
2,391
|
4,191
|
|||||
Cash
Flows
from Investing Activities:
|
|||||||
Expenditures
for property and equipment, net
|
(4,341
|
)
|
(3,199
|
)
|
|||
Cost
of
businesses and assets acquired
|
(49,491
|
)
|
(6,988
|
)
|
|||
Disposals
of
assets
|
26
|
1,472
|
|||||
Life
insurance premiums paid, net
|
(149
|
)
|
(163
|
)
|
|||
Net
cash used
in investing activities of continuing operations
|
(53,955
|
)
|
(8,878
|
)
|
|||
Cash
Flows
from Financing Activities:
|
|||||||
Repayments
of
long-term debt
|
(41,705
|
)
|
(23,000
|
)
|
|||
Borrowings
of
long-term debt
|
76,100
|
30,200
|
|||||
Borrowings
from life insurance policy loans
|
19,474
|
-
|
|||||
Debt
issuance
costs
|
(44
|
)
|
(145
|
)
|
|||
Dividends
paid
|
(1,009
|
)
|
(983
|
)
|
|||
Treasury
stock reissued
|
488
|
22
|
|||||
Net
cash
provided by financing activities of
|
|||||||
continuing
operations
|
53,304
|
6,094
|
|||||
Net
cash used
in discontinued operations
|
(178
|
)
|
(2,702
|
)
|
|||
Net
increase
(decrease) in cash and short-term investments
|
1,562
|
(1,295
|
)
|
||||
Balance
at
beginning of year
|
926
|
2,188
|
|||||
Balance
at
end of period
|
$
|
2,488
|
$
|
893
|
|||
Supplemental
cash flow information:
|
|||||||
Income
taxes
paid
|
$
|
112
|
$
|
96
|
|||
Interest
paid
|
$
|
624
|
$
|
223
|
The
accompanying condensed consolidated financial statements are
unaudited,
and these consolidated statements should be read in conjunction
with the
Company’s audited consolidated financial statements and notes thereto
contained in the Company’s Annual Report on Form 10-K for the fiscal year
ended January 29, 2005 (fiscal 2004). It is management’s opinion that all
adjustments, consisting only of normal recurring adjustments,
necessary
for a fair statement of the results during the interim period
have been
included. All significant intercompany accounts and transactions
have been
eliminated. The results of operations and cash flows for the
first quarter
ended April 30, 2005 are not necessarily indicative of the results
that
will be achieved for the full fiscal year 2005.
|
|
Certain
amounts in the prior period have been reclassified to conform
to current
period presentation.
|
In
December
2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based
Compensation - Transition and Disclosure.” SFAS No. 148 amends SFAS No.
123, “Accounting for Stock-Based Compensation,” to provide alternative
methods of transition for a voluntary change to the fair-value
based
method of accounting for stock-based employee compensation.
In addition,
this statement amends the disclosure requirements of SFAS No.
123 to
require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported
results.
|
|
The
Company
has various stock option and stock bonus plans that provide
for the
granting of incentive stock options, non-qualified stock options,
restricted stock and performance awards to certain employees
and
directors. As permitted by SFAS No. 123, the Company applies
APB Opinion
No. 25, “Accounting for Stock Issued to Employees,” in accounting for its
plans. Accordingly, no compensation expense has been recognized
for its
stock-based compensation plans other than for restricted stock
and
performance-based awards, as to which the amounts charged to
expense in
the first quarter ended April 30, 2005 and May 1, 2004 totaled
$333,000
and $143,000, respectively. During the first quarter ended
April 30, 2005,
68,000 shares of restricted stock were granted with a weighted-average
share price of $28.88.
|
|
Had
compensation expense for stock-based compensation plans for
the first
quarter ended April 30, 2005 and May 1, 2004 been determined
consistent
with SFAS No. 123, the Company’s net income and earnings per share would
approximate the following pro forma
amounts:
|
|
First
Quarter
Ended
|
||||||
April
30,
|
May
1,
|
||||||
(Dollars
in
thousands, except per share amounts)
|
2005
|
2004
|
|||||
Net
income
(loss):
|
|||||||
As
reported
|
$
|
1,020
|
$
|
131
|
|||
Add:
stock-based employee compensation expense
|
|||||||
included
in
net income, net of tax
|
243
|
102
|
|||||
Deduct:
stock-based employee compensation
|
|||||||
expense
determined under fair-value based
|
|||||||
method
for
all awards, net of tax
|
(562
|
)
|
(248
|
)
|
|||
Pro
forma net
income (loss)
|
$
|
701
|
$
|
(15
|
)
|
||
Basic
earnings per share:
|
|||||||
As
reported
|
$
|
0.11
|
$
|
0.01
|
|||
Pro
forma
|
0.08
|
0.00
|
|||||
Diluted
earnings per share:
|
|||||||
As
reported
|
$
|
0.11
|
$
|
0.01
|
|||
Pro
forma
|
0.08
|
0.00
|
The
effect of
the application of SFAS No. 123 in this disclosure is not
necessarily
indicative of the pro forma effect on net income in future
periods.
|
|
In
December
2004, the FASB issued SFAS No. 123R, “Share-Based Payment,” which revises
SFAS No. 123 and supersedes APB No. 25 and its related implementation
guidance. SFAS No. 123R requires all share-based payments
to employees,
including grants of employee stock options, to be recognized
in the
consolidated financial statements based on their fair values
and
eliminates the alternative method of accounting for employee
share-based
payments previously available under APB No. 25. The provisions
of this
statement are required to be adopted by the Company beginning
in the first
quarter of fiscal 2006. The impact of adoption of this statement
on the
Company’s net income in future periods will include the remaining
amortization of the fair value of existing unamortized stock
options
currently disclosed as pro-forma expense above, and is contingent
upon the
number of future options granted, the selected transition
method and the
selection between acceptable valuation methodologies for
valuing
options.
|
On
March 21,
2005, the Company acquired one hundred percent of the issued
and
outstanding shares of common stock and warrants of Royal Institutional
Services, Inc. and its affiliate, The Surgi-Pack Corporation
(together
“Royal”). The total purchase price of $45,000,000 was paid in cash,
plus
an additional $834,000 of related acquisition costs. In connection
with
this transaction, a portion of the purchase price was paid
into an escrow
account as of the closing of the transaction pending the resolution
of
certain contingencies set forth in the stock purchase
agreement.
|
|
Royal
is the
largest healthcare linen services company in New England, providing
full
linen management services to the healthcare industry in a manner
consistent with the
|
|
Company’s
core business. With annual revenues of approximately $45,000,000,
the
Royal acquisition strengthens the Company’s market position in this region
of the country. The net assets acquired consisted primarily
of working
capital, leasehold interests in two operating facilities and
the related
equipment, and customer contracts. The Company has recorded
the
preliminary purchase price allocation for this acquisition
in the first
quarter ended April 30, 2005, and expects to finalize the allocation
in
the second quarter fiscal 2005 once all required information
is
obtained.
|
The
results
of operations of Royal are included in the Company’s Consolidated
Statement of Income for the first quarter ended April 30, 2005
since the
date of acquisition on March 21, 2005. Unaudited pro forma
consolidated
net revenues for the first quarter ended April 30, 2005 and
May 1, 2004,
assuming the Royal acquisition had been completed as of the
beginning of
those periods, totaled $109,371,000 and $88,873,000, respectively;
and
unaudited pro forma consolidated income from continuing operations
amounted to $933,000 or $.10 per diluted share, and $2,986,000
or $.33 per
diluted share, in the first quarter ended April 30, 2005 and
May 1, 2004,
respectively. These pro forma amounts are not necessarily indicative
of
the consolidated results of operations that would have occurred
had this
acquisition been made at the beginning of each period.
|
In
the first
quarter of fiscal 2005, the Company recorded non-operating income
of
$539,000 which included $360,000 from the second cash distribution
received in connection with the liquidation of the parent company
of an
issuer of life insurance policies owned by the Company following
its
demutualization in 2000. These distributions did not affect the
life
insurance policies or their cash surrender value. The Company
does not
anticipate any further significant distributions from this
liquidation.
|
|
In
the first
quarter of fiscal 2004, the Company recorded non-operating income
of
$2,100,000 which included a gain of $1,472,000 from the sale
of real
estate in Miami, FL. In addition, the Company recognized gains
totaling
$610,000 for the excess of death benefits from Company-owned
life
insurance policies surrendered over the cash value of the policies.
|
|
Non-operating
income, net, also includes interest earned on invested cash balances
and
notes receivable.
|
Taxes
on
income from continuing operations were provided for at an effective
tax
rate of 27.0 percent and 29.0 percent in the first quarter
of fiscal 2005
and fiscal 2004, respectively, based upon the Company’s estimated
effective tax rate for the year including the effects of permanent
items
and tax credits. The effective tax rate of 34.0 percent on
the loss from
discontinued operations in the first quarter fiscal 2004 reflects
the
statutory tax rate adjusted for unutilized state net operating
losses.
|
|
The
Company
maintains tax reserves pending the resolution of certain tax
issues. Once
established, these reserves are adjusted as information becomes
available
or when an event requiring a change in the reserves occurs.
The ultimate
resolution of tax matters could have a material impact on the
Company’s
net income and financial condition in the period in which the
item is
resolved.
|
The
Company
believes all deferred tax items will be realized and therefore
no
valuation allowances have been
recorded.
|
Prior
to the
sale of Life Uniform to Healthcare Uniform Company in fiscal
2004, the
Company was a guarantor under certain Life Uniform store lease
agreements.
These guarantees obligated the Company to make all payments due
under the
leases until their expiration in the event of default of Life
Uniform. In
connection with the sale of Life Uniform, the Company requested
consents,
as required, from landlords to assign the store leases to Healthcare
Uniform Company. As a condition to such consents, certain landlords
required that the Company continue as a guarantor of the leases.
Under the
Company’s agreement with Healthcare Uniform Company, these guarantees
will
only extend until the end of each lease’s current term. As of April 30,
2005, the Company is secondarily obligated as a guarantor for
90 store
lease agreements and the estimated maximum potential amount of
future
payments the Company could be required to make under these guarantees
is
$15,000,000. Although these guarantees expire at various dates
through
fiscal year 2014, approximately 77 percent of the estimated maximum
potential future payments expires by the end of fiscal year
2008.
|
|
The
Company
has provided certain indemnities to the buyer in connection with
the sale
of Life Uniform. Although indemnification claims are generally
subject to
an aggregate limit of $6,000,000, the Company believes the likelihood
of
making any payments for indemnification claims is remote and
has reserved
accordingly.
|
|
The
Company
faces a possible exposure to outstanding workers’ compensation claims
incurred prior to fiscal 1999 that were sold to a former insurance
carrier, in addition to exposure for deposits with that carrier
for claims
incurred in fiscal years 1999, 2000 and 2001 that have not yet
been
resolved and for claims in excess of the deductible for fiscal
years 1999,
2000, 2001 and 2002. This carrier is experiencing financial difficulties
and may be unable to fulfill its obligation to pay these claims,
which
could have a material unfavorable impact on the Company’s results of
operations and financial condition if it is forced to assume
these
liabilities. The Company estimates its exposure from these outstanding
claims and deposits to be approximately $1,536,000 as of April
30,
2005.
|
|
The
Company
faces significant risks and uncertainties to its business operations
resulting from certain of its collective bargaining agreements
that have
expired without any extensions in place, and from certain others
that are
scheduled to expire in fiscal 2005. The Company believes the
renewal of
these contracts is being delayed due, in large part, to the corporate
campaign undertaken by a labor union that currently represents
many of the
Company’s employees. Any work interruptions or stoppages that result
from
this labor unrest could have a material unfavorable impact on
the
Company’s results of operations and financial condition. Approximately
two-thirds of the Company’s employees are covered by collective bargaining
agreements. Of those employees, approximately 36 percent are
covered by
collective bargaining agreements that have expired or will expire
within
one year from April 30, 2005. The Company is actively negotiating
with the
labor union to renew the expired labor contracts and reach agreement
on
the broader union organizing and collective bargaining issues
in dispute.
|
Basic
earnings per share is computed by dividing net income by the
weighted
average number of shares of Common Stock outstanding during the
period.
Diluted earnings per share is computed by dividing net income
by the
weighted average number of Common and Common equivalent shares
outstanding.
|
|
The
following
table reconciles weighted average shares outstanding to amounts
used to
calculate basic and diluted earnings per share for the first
quarter ended
April 30, 2005 and May 1, 2004 (shares in
thousands):
|
First
Quarter
Ended
|
|||||||
April
30,
|
May
1,
|
||||||
2005
|
|
|
2004
|
||||
Weighted
average shares:
|
|||||||
Average
shares outstanding
|
9,032
|
8,876
|
|||||
Effect
of
dilutive securities
|
279
|
229
|
|||||
Average
shares outstanding,
|
|||||||
adjusted
for
dilutive effects
|
9,311
|
9,105
|
In
accordance
with SFAS No. 142, “Goodwill
and
Other Intangible Assets,” the Company performed its annual goodwill
impairment test at the end of the third quarter of fiscal 2004
which
resulted in no indication of impairment. During the first quarter
ended
April 30, 2005, the Company recorded goodwill from business combinations
totaling $19,314,000, due principally to the acquisition of Royal
disclosed in Note 3.
|
|
During
the
first quarter ended April 30, 2005, the Company acquired customer
contracts of Royal and various other laundry businesses valued
at
$13,136,000, with amortization periods of mainly 15 years, and
non-compete
covenants with a value of $6,474,000 to be amortized over 10
years. Other
acquired assets consisted of the following (dollars in
thousands):
|
April
30,
2005
|
January
29,
2005
|
||||||||||||||||||
Gross
|
|
|
|
Other
|
|
Gross
|
|
|
Other
|
||||||||||
Carrying
|
|
Accumulated
|
|
Acquired
|
|
Carrying
|
|
Accumulated
|
|
Acquired
|
|||||||||
Amount
|
|
Amortization
|
|
Assets,
net
|
|
Amount
|
|
Amortization
|
|
Assets,
net
|
|||||||||
Customer
contracts
|
$
|
40,771
|
$
|
(6,205
|
)
|
$
|
34,566
|
$
|
27,635
|
$
|
(5,619
|
)
|
$
|
22,016
|
|||||
Non-compete
covenants
|
10,484
|
(1,391
|
)
|
9,093
|
4,010
|
(1,166
|
)
|
2,844
|
|||||||||||
Other
acquired assets
|
$
|
51,255
|
$
|
(7,596
|
)
|
$
|
43,659
|
$
|
31,645
|
$
|
(6,785
|
)
|
$
|
24,860
|
Goodwill
and
other acquired assets recorded in connection with the Royal
acquisition
are based on the preliminary purchase price allocation, which
is subject
to change once all required information is obtained.
|
|
Aggregate
amortization expense for the first quarter ended April 30,
2005 and May 1,
2004
|
amounted
to $811,000
and $225,000, respectively. Other acquired assets are scheduled
to be
fully amortized by fiscal year 2020 with corresponding annual
amortization
expense estimated for each of the next five fiscal years as
follows
(dollars in thousands):
|
2005
|
$3,921
|
|||
2006
|
4,103
|
|
||
2007
|
4,021
|
|||
2008
|
3,627
|
|||
2009
|
3,344
|
On
March 21,
2005, the Company borrowed the entire amount of its term loan
of
$50,000,000. The proceeds of the term loan were used to fund
the
acquisition of Royal (see Note 3), and reduce the amount outstanding
on
the Company’s revolving credit facility. On April 5, 2005, the Company
entered into a LIBOR contract for the $50,000,000 outstanding
under the
term loan which bears interest at 2.87 percent plus a margin
(2.0 percent
as of April 30, 2005) based on the Company’s ratio of “Funded Debt” to
“EBITDA,” as each is defined in the loan agreement. The term loan is
payable in quarterly installments beginning September 30, 2005,
with the
final payment due on January 27, 2010.
|
|
The
Company
is subject to certain financial covenants under its loan agreement.
One of
these covenants requires that the Company maintain a minimum
consolidated
net worth of $126,023,000 plus an aggregate amount equal to 50
percent of
quarterly net income beginning with the fourth quarter of fiscal
2004
(with no reduction for net losses). Other covenants require the
Company to
maintain a minimum ratio of “EBITDA” to “fixed charges” of no less than
1.2 to 1, and a maximum ratio of “Funded Debt” to “EBITDA” of no more than
2.75 to 1. The Company was in compliance with these loan covenants
as of
April 30, 2005.
|
|
At
the end of
the first quarter fiscal 2005, the Company borrowed a total of
$19,474,000
from the issuers of its company-owned life insurance policies
against the
cash surrender value of the policies. The proceeds of the policy
loans
were used to reduce the amount outstanding on the revolving credit
facility as of April 30, 2005. The loans bear interest at variable
rates
ranging from 5.7 percent to 6.4 percent, or a fixed rate of 8.0
percent.
The proceeds upon surrender of the policies will be reduced by
the amount
of any loans outstanding, unless repaid by the Company prior
to that time.
The total amount borrowed is netted against cash surrender value
of life
insurance in the Consolidated Balance Sheet as of April 30, 2005.
|
The
Company
entered into an interest-rate swap agreement with one of its
lenders
effective September 9, 2002. The swap agreement fixes the variable
portion
of the interest rate (excluding a margin) at 3.58 percent on
$10,000,000
of the outstanding debt under the revolving line of credit until
termination on May 30, 2007. The Company has elected to apply
cash flow
hedge accounting for the interest-rate swap agreement in accordance
with
SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities.” Accordingly, the derivative is recorded as an asset or
liability at its fair value. The
effective
|
portion
of
changes in the fair value of the derivative, as measured quarterly,
is
reported in accumulated other comprehensive income, and the
ineffective
portion, if any, is reported in net income of the current period.
The gain
on the derivative included in accumulated other comprehensive
loss in the
first quarter ended April 30, 2005 and May 1, 2004 amounted
to $54,000 and
$89,000, respectively, net of tax. The Company has recorded
a long-term
asset (liability) of $67,000 and $(9,000) for the fair value
of the
derivative as of April 30, 2005 and January 29, 2005,
respectively.
|
|
To
moderate
price risk due to market fluctuations, the Company has entered
into
fixed-price contracts as of April 30, 2005 for approximately
23 percent of
its estimated natural gas purchase requirements in the next
12 months.
Although these contracts are considered derivative instruments,
they meet
the normal purchases exclusion contained in SFAS No. 133, as
amended by
SFAS No. 138 and SFAS No. 149, and are therefore exempted from
the related
accounting requirements.
|
Comprehensive
income, consisting primarily of net income and changes in the
fair value
of derivatives used for interest rate risk management, net of
taxes,
totaled $1,074,000 and $217,000 for the first quarter ended April
30, 2005
and May 1, 2004, respectively.
|
The
Company
has a non-contributory defined benefit pension plan covering
primarily
salaried and hourly administrative non-union personnel. The benefit
formula is based on years of service and compensation during
employment.
The funding policy of the pension plan is in accordance with
the
requirements of the Employee Retirement Income Security Act of
1974. The
Company amended the pension plan, effective September 1, 2004,
to freeze
participation in the plan. No employee shall become a participant
in the
pension plan on or after that date.
|
|
The
net
periodic pension expense recognized in the first quarter ended
April 30,
2005 and May 1, 2004 was as
follows:
|
First
Quarter
Ended
|
|||||||
April
30,
|
May
1,
|
||||||
(Dollars
in
thousands)
|
2005
|
2004
|
|||||
Pension
expense:
|
|||||||
Service
cost
|
$
|
105
|
$
|
149
|
|||
Interest
cost
|
317
|
319
|
|||||
Expected
return on plan assets
|
(333
|
)
|
(353
|
)
|
|||
Amortization
of prior service cost
|
5
|
5
|
|||||
Recognized
actuarial loss
|
-
|
29
|
|||||
Net
periodic
pension expense
|
$
|
94
|
$
|
149
|
In
May 2005,
the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.”
SFAS No. 154 replaces APB Opinion No. 20, “Accounting Changes,” and SFAS
No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and
changes the requirements for the accounting for and reporting
of a
voluntary change in accounting principle. This statement requires
retrospective application to prior periods’ financial statements of
changes in accounting principle, unless it is impracticable to
determine
either the period-specific effects or the cumulative effect of
the change,
instead of including in net income of the period of the change
the
cumulative effect of changing to the new accounting principle.
SFAS No.
154 is effective for accounting changes and corrections of errors
made in
fiscal years beginning after December 15,
2005.
|
Votes
|
Votes
|
||
Name
|
“For”
|
“Withheld”
|
|
For
terms
expiring at the 2008
Annual
Meeting:
|
|||
|
|||
Charles
W.
Mueller
|
8,333,473
|
|
182,016
|
William
A.
Peck
|
8,430,937
|
|
84,552
|
Ronald
N.
Riner
|
8,489,093
|
|
26,396
|
Angelica
Corporation
|
|
(Registrant)
|
|
Date:
June 9,
2005
|
/s/
James
W. Shaffer
|
James
W.
Shaffer
|
|
Vice
President and
|
|
Chief
Financial Officer
|
|
(Principal
Financial Officer)
|
|
/s/
Richard M. Fiorillo
|
|
Richard
M.
Fiorillo
|
|
Principal
Accounting Officer
|
Exhibit
|
|
Number
|
Description
|
*Asterisk
indicates exhibits filed herewith.
|
|
**Incorporated
by reference from the document listed.
|
|
3.1
|
Restated
Articles of Incorporation of the Company, as currently in effect.
Filed as
Exhibit 3.1 to the Form 10-K for the fiscal year ended January
26,
1991.**
|
3.2
|
Current
By-Laws of the Company, as last amended January 27, 2004. Filed
as Exhibit
3.2 to the Form 10-K for the fiscal year ended January 31,
2004.**
|
|
|
4.1
|
Shareholder
Rights Plan dated August 25, 1998. Filed as Exhibit 1 to Registration
Statement on Form 8-A on August 28, 1998.**
|
10.1
|
Employment
Agreement between the Company and David A. Van Vliet, dated June
1, 2005.
Filed as Exhibit 10.1 to a Form 8-K filed June 6,
2005.**
|
10.2
|
Non-Qualified
Stock Option Agreement between the Company and David A. Van Vliet,
dated
June 6, 2005 (50,000 shares at $27.00 exercise price).*
|
10.3
|
Non-Qualified
Stock Option Agreement between the Company and David A. Van Vliet,
dated
June 6, 2005 (25,000 shares at $28.35 exercise price).*
|
10.4
|
Non-Qualified
Stock Option Agreement between the Company and David A. Van Vliet,
dated
June 6, 2005 (25,000 shares at $29.70 exercise price).*
|
10.5
|
Restricted
Stock Agreement between the Company and David A. Van Vliet, dated
June 6,
2005.*
|
31.1
|
Section
302
Certification of Chief Executive Officer.*
|
31.2
|
Section
302
Certification of Chief Financial Officer.*
|
32.1
|
Section
906
Certification of Chief Executive Officer.*
|
32.2
|
Section
906
Certification of Chief Financial
Officer.*
|