ZEP INC (ZEP, Financial) filed Annual Report for the period ended 2011-08-31.
Zep Inc. has a market cap of $334.6 million; its shares were traded at around $15.24 with a P/E ratio of 15.6 and P/S ratio of 0.5. The dividend yield of Zep Inc. stocks is 1%.
2018. Our industrial revenue bonds were issued by the City of DeSoto Industrial Development Authority, Inc. in May 1991 in connection with the construction of Zeps facility in DeSoto, Texas. We have issued outstanding letters of credit totaling $11.0 million primarily for the purpose of providing credit support for our industrial revenue bonds, securing collateral requirements under our casualty insurance programs as well as supporting certain environmental obligations. These letters of credit were issued under the 2010 Credit Facility as of August 31, 2011, thereby reducing the total availability under the facility by such amount. As of August 31, 2011, we had $7.2 million in cash and cash equivalents of which $4.7 million was held by our foreign subsidiaries. Cash and cash equivalents held by our foreign subsidiaries averaged $13.0 million during fiscal year 2011. If in the future it becomes necessary to use all or a portion of the accumulated earnings generated by our foreign subsidiaries for our U.S. operations, we would be required to accrue and pay U.S. taxes on the funds repatriated for use within our U.S. operations. Our plans do not demonstrate a need to repatriate foreign earnings to fund our U.S. operations. Rather, our intent is to reinvest earnings generated by our foreign subsidiaries indefinitely outside of the U.S. for purposes including but not limited to growing our international operations through acquisitions. The increase of operating working capital (calculated by adding accounts receivable and inventories, and subtracting accounts payable), total debt and capital lease obligations, and total debt-to-total capitalization (net of cash) during fiscal years 2011 and 2010 reflects the effect of acquisition activity discussed throughout this Form 10-K. We were in compliance with our debt covenants as of August 31, 2011, and we believe that our liquidity and capital resources are sufficient to meet our working capital, capital expenditure and other anticipated cash requirements over the next twelve months, excluding acquisitions that we may choose to execute in pursuit of our strategic initiatives. We do not expect the sources of or intended uses for our cash to change significantly in the foreseeable future, excluding acquisitions. In addition, we have an effective shelf registration statement that registers the issuance of up to an aggregate of $200 million of equity, debt, and certain other types of securities through one or more future offerings. The net proceeds from the sale of any securities pursuant to the shelf registration statement may be used for general corporate purposes, which may include funding capital expenditures, pursuing growth initiatives, whether through acquisitions, joint ventures or otherwise, repaying or refinancing indebtedness or other obligations, and financing working capital.
Net sales were $646.0 million for the year ended August 31, 2011, compared with $568.5 million generated in the prior fiscal year, representing an increase of $77.5 million or 13.6%. Our fiscal year 2011 sales performance included $81.4 million of incremental revenue associated with the acquisitions discussed throughout this Form 10-K. In addition, higher selling prices primarily realized in our direct sales and service channel and favorable foreign currency translation on international sales contributed approximately $16.1 million and $4.6 million, respectively to net sales. We implemented higher selling prices to offset raw material costs, which continued to rise throughout the majority of fiscal year 2011. However, weakness in demand, primarily for our products sold through the North American sales and service channel, continued during fiscal year 2011. Excluding revenues derived directly from our recent acquisitions, we experienced volume related sales declines of $23.4 million during fiscal year 2011. Our customers in the North American sales and service channel are typically small business operations, who are themselves struggling in the current economic environment.
Gross profit increased $19.7 million, or 7.0% to $302.9 million in fiscal year 2011 compared with $283.2 million in the prior fiscal year. Gross profit margin of 46.9% in fiscal year 2011 decreased approximately 290 basis points from that of the prior fiscal year. Fiscal year 2011 net sales included a full year of sales related to both the Amrep and Waterbury acquisitions, whereas, during the same period in the fiscal year 2010, we only benefited from eight months of sales from the Amrep acquisition. The decline in gross profit margin percentage was primarily attributable to the impact on sales and product mix from the Amrep and Waterbury acquisitions.
Net sales were $568.5 million for the year ended August 31, 2010, compared with $501.0 million generated in the prior fiscal year, representing an increase of $67.5 million or 13.5%. Revenues generated from the Amrep acquisition, which was completed in January 2010, comprised $76.7 million of our sales in fiscal year 2010. Amrep sales grew $6.7 million in fiscal year 2010 from the same prior year eight-month period. In total, volume in fiscal year 2010 grew $55.4 million. Excluding revenues derived from the acquisition of Amrep, in fiscal year 2010 we experienced volume related sales declines of $21.3 million. While we achieved year-over-year volume growth in sales to customers accessed through the retail channel, we experienced softness in demand within the majority of our institutional and industrial end markets. Management believes these markets, which include transportation, food processing and service, industrial manufacturing and government, are strongly correlated to seasonally-adjusted manufacturing employment, overall employment levels and, to some degree, new motor vehicle sales. Furthermore, our sales and service sales organization focuses on small businesses, which continued to suffer the effects of the economic downturn in fiscal 2010. Favorable foreign currency translation on international sales and the realization of higher selling prices made necessary by rising raw material costs impacted total net sales by $7.6 million and $4.5 million, for the years ended August 31, 2010 and 2009, respectively. During the first quarter of fiscal year 2010, we renegotiated the terms of our contract with our licensee in France. We believe the terms of the new contract are favorable to us. Separately, we executed a release agreement with our licensee in France that addressed historical business transactions. We 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 $334.6 million; its shares were traded at around $15.24 with a P/E ratio of 15.6 and P/S ratio of 0.5. The dividend yield of Zep Inc. stocks is 1%.
Highlight of Business Operations:
Selling, Distribution, and Administrative Expenses. We believe this presentation is consistent with many of our peers and competitors. However, we acknowledge that our gross profit amounts may not be comparable to certain other entities, as some entities may include all of the costs related to their distribution network in their cost of products sold. Customer-related shipping and handling costs included within our Selling, Distribution, and Administrative Expenses totaled $42.4 million, $36.0 million, and $31.5 million for the fiscal years ended August 31, 2011, 2010, and 2009, respectively. Other distribution costs, which primarily consist of the cost of warehousing finished goods inventory, totaled $22.0 million, $21.0 million, and $22.9 million for the fiscal years ended August 31, 2011, 2010, and 2009, respectively.2018. Our industrial revenue bonds were issued by the City of DeSoto Industrial Development Authority, Inc. in May 1991 in connection with the construction of Zeps facility in DeSoto, Texas. We have issued outstanding letters of credit totaling $11.0 million primarily for the purpose of providing credit support for our industrial revenue bonds, securing collateral requirements under our casualty insurance programs as well as supporting certain environmental obligations. These letters of credit were issued under the 2010 Credit Facility as of August 31, 2011, thereby reducing the total availability under the facility by such amount. As of August 31, 2011, we had $7.2 million in cash and cash equivalents of which $4.7 million was held by our foreign subsidiaries. Cash and cash equivalents held by our foreign subsidiaries averaged $13.0 million during fiscal year 2011. If in the future it becomes necessary to use all or a portion of the accumulated earnings generated by our foreign subsidiaries for our U.S. operations, we would be required to accrue and pay U.S. taxes on the funds repatriated for use within our U.S. operations. Our plans do not demonstrate a need to repatriate foreign earnings to fund our U.S. operations. Rather, our intent is to reinvest earnings generated by our foreign subsidiaries indefinitely outside of the U.S. for purposes including but not limited to growing our international operations through acquisitions. The increase of operating working capital (calculated by adding accounts receivable and inventories, and subtracting accounts payable), total debt and capital lease obligations, and total debt-to-total capitalization (net of cash) during fiscal years 2011 and 2010 reflects the effect of acquisition activity discussed throughout this Form 10-K. We were in compliance with our debt covenants as of August 31, 2011, and we believe that our liquidity and capital resources are sufficient to meet our working capital, capital expenditure and other anticipated cash requirements over the next twelve months, excluding acquisitions that we may choose to execute in pursuit of our strategic initiatives. We do not expect the sources of or intended uses for our cash to change significantly in the foreseeable future, excluding acquisitions. In addition, we have an effective shelf registration statement that registers the issuance of up to an aggregate of $200 million of equity, debt, and certain other types of securities through one or more future offerings. The net proceeds from the sale of any securities pursuant to the shelf registration statement may be used for general corporate purposes, which may include funding capital expenditures, pursuing growth initiatives, whether through acquisitions, joint ventures or otherwise, repaying or refinancing indebtedness or other obligations, and financing working capital.
Net sales were $646.0 million for the year ended August 31, 2011, compared with $568.5 million generated in the prior fiscal year, representing an increase of $77.5 million or 13.6%. Our fiscal year 2011 sales performance included $81.4 million of incremental revenue associated with the acquisitions discussed throughout this Form 10-K. In addition, higher selling prices primarily realized in our direct sales and service channel and favorable foreign currency translation on international sales contributed approximately $16.1 million and $4.6 million, respectively to net sales. We implemented higher selling prices to offset raw material costs, which continued to rise throughout the majority of fiscal year 2011. However, weakness in demand, primarily for our products sold through the North American sales and service channel, continued during fiscal year 2011. Excluding revenues derived directly from our recent acquisitions, we experienced volume related sales declines of $23.4 million during fiscal year 2011. Our customers in the North American sales and service channel are typically small business operations, who are themselves struggling in the current economic environment.
Gross profit increased $19.7 million, or 7.0% to $302.9 million in fiscal year 2011 compared with $283.2 million in the prior fiscal year. Gross profit margin of 46.9% in fiscal year 2011 decreased approximately 290 basis points from that of the prior fiscal year. Fiscal year 2011 net sales included a full year of sales related to both the Amrep and Waterbury acquisitions, whereas, during the same period in the fiscal year 2010, we only benefited from eight months of sales from the Amrep acquisition. The decline in gross profit margin percentage was primarily attributable to the impact on sales and product mix from the Amrep and Waterbury acquisitions.
Net sales were $568.5 million for the year ended August 31, 2010, compared with $501.0 million generated in the prior fiscal year, representing an increase of $67.5 million or 13.5%. Revenues generated from the Amrep acquisition, which was completed in January 2010, comprised $76.7 million of our sales in fiscal year 2010. Amrep sales grew $6.7 million in fiscal year 2010 from the same prior year eight-month period. In total, volume in fiscal year 2010 grew $55.4 million. Excluding revenues derived from the acquisition of Amrep, in fiscal year 2010 we experienced volume related sales declines of $21.3 million. While we achieved year-over-year volume growth in sales to customers accessed through the retail channel, we experienced softness in demand within the majority of our institutional and industrial end markets. Management believes these markets, which include transportation, food processing and service, industrial manufacturing and government, are strongly correlated to seasonally-adjusted manufacturing employment, overall employment levels and, to some degree, new motor vehicle sales. Furthermore, our sales and service sales organization focuses on small businesses, which continued to suffer the effects of the economic downturn in fiscal 2010. Favorable foreign currency translation on international sales and the realization of higher selling prices made necessary by rising raw material costs impacted total net sales by $7.6 million and $4.5 million, for the years ended August 31, 2010 and 2009, respectively. During the first quarter of fiscal year 2010, we renegotiated the terms of our contract with our licensee in France. We believe the terms of the new contract are favorable to us. Separately, we executed a release agreement with our licensee in France that addressed historical business transactions. We 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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