ZEP INC (ZEP, Financial) filed Quarterly Report for the period ended 2010-05-31.
Zep Inc has a market cap of $371.82 million; its shares were traded at around $17.14 with a P/E ratio of 18.84 and P/S ratio of 0.74. The dividend yield of Zep Inc stocks is 0.93%.ZEP is in the portfolios of John Keeley of Keeley Fund Management.
Our principal sources of liquidity are operating cash flows generated primarily from operating activities and various sources of borrowings. Our ability to generate sufficient cash flow from operations and to access certain capital markets, including lending from financial institutions, is necessary for us to fund our operations, to pay dividends, to meet obligations as they become due, and to maintain compliance with covenants contained within our financing agreements. Our ongoing liquidity will depend on a number of factors, including available cash resources, cash flow from operations, compliance with covenants contained in certain of our financing agreements, and the ability to access capital markets. As of May 31, 2010, we had additional borrowing capacity under our Revolving Credit Facility of $23.3 million. We entered into four interest rate swap arrangements during the fourth quarter of fiscal year 2008 effectively swapping the variable interest rate associated with $20 million of borrowings made under our Revolving Credit Facility for fixed rates ranging from 3.2% to 3.5%. These cash flow hedges matured in June 2010. On October 14, 2009, we entered into a three-year Receivables Facility that allows for borrowings up to $40 million secured by our trade accounts receivable. As of May 31, 2010, we had $15.0 million outstanding under the Receivables Facility with additional borrowing capacity of $15.0 million. We were in compliance with all debt covenants to which we are subject as of May 31, 2010. Based on our current cash on hand, current financing arrangements, and current projections of cash flow from operations, management believes that we will be able to meet the liquidity needs of our current business over the next 12 months. Further detail regarding our debt instruments is provided in the Capitalization section that follows as well as in Note 4 of Notes to Consolidated Financial Statements.
Management believes that investing in assets and programs that will over time increase the return on our invested capital is a key factor in creating stockholder value. We invested $7.7 million and $5.8 million in the first nine months of fiscal year 2010 and 2009, respectively, primarily for building improvements, machinery, equipment, and information technology. We expect to make capital expenditures of approximately $10.0 million to $12.0 million in fiscal year 2010.
Net sales totaled $153.0 million in the third quarter of fiscal year 2010 compared with $123.0 million in the third quarter of fiscal year 2009, representing an increase of $30.1 million or 24.4%. Acquisition-related revenues comprised $29.3 million of the current quarters increase in net sales. Excluding volume attributable to acquisition-related revenues, demand experienced within the majority of the Companys end markets resulted in volume-related sales declines of $2.6 million. Foreign currency translation on international sales and higher selling prices favorably impacted total net sales by $2.5 million and $0.9 million, respectively.
Diluted earnings per share generated in the three months ended May 31, 2010 totaled $0.23, which is a per share decrease of $0.02 compared with the $0.25 earnings per diluted share reported in the prior year period. Earnings in the third fiscal quarter of 2010 were negatively impacted by $0.06 per diluted share resulting from a restructuring charge and by $0.01 per diluted share due resulting from incremental costs associated with recording acquired inventory at estimated fair value in accordance with purchase accounting rules. Neither restructuring nor acquisition-related charges were recorded during the three months ended May 31, 2009.
Net sales were $407.1 million in the nine months ended May 31, 2010 compared with $366.7 million in the prior year-to-date period, representing an increase of $40.4 million or 11.0%. Revenues generated from the Amrep acquisition completed in January 2010 comprised $47.1 million of the Companys year-to-date sales. While the Company has experienced year-over-year volume growth in sales to customers accessed through the retail channel, excluding volume attributable to acquisition-related revenues, softness in demand experienced within the majority of the Companys institutional and industrial end markets resulted in overall volume-related sales declines of $16.5 million. Foreign currency translation on international sales and higher selling prices favorably impacted total net sales by $7.9 million and $2.0 million, respectively. During the first quarter of the fiscal year, the Company renegotiated the terms of the Companys contract with its licensee in France. Terms of the new contract are favorable to Zep. Separately, the Company executed a release agreement with its licensee in France that addressed historical business transactions. Zep received a one-time, $1.1 million payment pursuant to this release agreement, all of which was recognized in net sales during the first quarter of fiscal year 2010.
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Zep Inc has a market cap of $371.82 million; its shares were traded at around $17.14 with a P/E ratio of 18.84 and P/S ratio of 0.74. The dividend yield of Zep Inc stocks is 0.93%.ZEP is in the portfolios of John Keeley of Keeley Fund Management.
Highlight of Business Operations:
On January 4, 2010, Zep acquired Amrep, Inc. a specialty chemical formulator and packager focused in the automotive, fleet maintenance, industrial/MRO supply, institutional supply, and motorcycle markets. Amrep was acquired for approximately $63.5 million. Amreps products are marketed under the recognized and established brand names such as Misty®, Next DimensionTM , Petro®, and i-Chem®. Zep believes the acquisition of Amrep to be an important strategic step in the Companys efforts to utilize distribution to expand its presence in a number of end markets while minimizing channel conflict through the manufacture of both private branded products and national brands. The integration efforts associated with the Amrep acquisition are in their early stages and the Company remains optimistic about the synergies afforded by the transaction. Borrowings of $49.4 million and $15.0 million were drawn from the Companys Revolving Credit Facility and Receivables Facility, respectively, in order to finance an initial $64.4 million purchase price that was subsequently reduced by $0.9 million pursuant to an agreement involving the final determination of Amreps Closing Date working capital. The acquisition of Amrep did not impact our compliance with debt covenants, nor does it affect managements belief that we will be able to meet the liquidity needs of our business over the next 12 months. See Note 2 of the Notes to Consolidated Financial Statements for more information regarding this acquisition.Our principal sources of liquidity are operating cash flows generated primarily from operating activities and various sources of borrowings. Our ability to generate sufficient cash flow from operations and to access certain capital markets, including lending from financial institutions, is necessary for us to fund our operations, to pay dividends, to meet obligations as they become due, and to maintain compliance with covenants contained within our financing agreements. Our ongoing liquidity will depend on a number of factors, including available cash resources, cash flow from operations, compliance with covenants contained in certain of our financing agreements, and the ability to access capital markets. As of May 31, 2010, we had additional borrowing capacity under our Revolving Credit Facility of $23.3 million. We entered into four interest rate swap arrangements during the fourth quarter of fiscal year 2008 effectively swapping the variable interest rate associated with $20 million of borrowings made under our Revolving Credit Facility for fixed rates ranging from 3.2% to 3.5%. These cash flow hedges matured in June 2010. On October 14, 2009, we entered into a three-year Receivables Facility that allows for borrowings up to $40 million secured by our trade accounts receivable. As of May 31, 2010, we had $15.0 million outstanding under the Receivables Facility with additional borrowing capacity of $15.0 million. We were in compliance with all debt covenants to which we are subject as of May 31, 2010. Based on our current cash on hand, current financing arrangements, and current projections of cash flow from operations, management believes that we will be able to meet the liquidity needs of our current business over the next 12 months. Further detail regarding our debt instruments is provided in the Capitalization section that follows as well as in Note 4 of Notes to Consolidated Financial Statements.
Management believes that investing in assets and programs that will over time increase the return on our invested capital is a key factor in creating stockholder value. We invested $7.7 million and $5.8 million in the first nine months of fiscal year 2010 and 2009, respectively, primarily for building improvements, machinery, equipment, and information technology. We expect to make capital expenditures of approximately $10.0 million to $12.0 million in fiscal year 2010.
Net sales totaled $153.0 million in the third quarter of fiscal year 2010 compared with $123.0 million in the third quarter of fiscal year 2009, representing an increase of $30.1 million or 24.4%. Acquisition-related revenues comprised $29.3 million of the current quarters increase in net sales. Excluding volume attributable to acquisition-related revenues, demand experienced within the majority of the Companys end markets resulted in volume-related sales declines of $2.6 million. Foreign currency translation on international sales and higher selling prices favorably impacted total net sales by $2.5 million and $0.9 million, respectively.
Diluted earnings per share generated in the three months ended May 31, 2010 totaled $0.23, which is a per share decrease of $0.02 compared with the $0.25 earnings per diluted share reported in the prior year period. Earnings in the third fiscal quarter of 2010 were negatively impacted by $0.06 per diluted share resulting from a restructuring charge and by $0.01 per diluted share due resulting from incremental costs associated with recording acquired inventory at estimated fair value in accordance with purchase accounting rules. Neither restructuring nor acquisition-related charges were recorded during the three months ended May 31, 2009.
Net sales were $407.1 million in the nine months ended May 31, 2010 compared with $366.7 million in the prior year-to-date period, representing an increase of $40.4 million or 11.0%. Revenues generated from the Amrep acquisition completed in January 2010 comprised $47.1 million of the Companys year-to-date sales. While the Company has experienced year-over-year volume growth in sales to customers accessed through the retail channel, excluding volume attributable to acquisition-related revenues, softness in demand experienced within the majority of the Companys institutional and industrial end markets resulted in overall volume-related sales declines of $16.5 million. Foreign currency translation on international sales and higher selling prices favorably impacted total net sales by $7.9 million and $2.0 million, respectively. During the first quarter of the fiscal year, the Company renegotiated the terms of the Companys contract with its licensee in France. Terms of the new contract are favorable to Zep. Separately, the Company executed a release agreement with its licensee in France that addressed historical business transactions. Zep received a one-time, $1.1 million payment pursuant to this release agreement, all of which was recognized in net sales during the first quarter of fiscal year 2010.
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