1
FORM 10-Q10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d) of
The Securities Exchange Act of 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 14 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended MarchDecember 31, 20012000
[ ] TRANSITION REPORT PURSUANT OR SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-7770
MCCLAIN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-1867649
State of Incorporation IRS Employer I.D. No.
6200 Elmridge Road
Sterling Heights, Michigan 48310
(810) 264-3611
(Address of principal executive offices and telephone number)
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 .
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of May 4,February 9, 2001.
Common Stock, No Par Value 4,508,1964,504,953
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Class Number of Shares
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
McCLAINMCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS MarchDECEMBER 31, SeptemberSEPTEMBER 30,
20012000 2000
(UNAUDITED)
-------------- -------------------------------- ------------------
CURRENT ASSETS
Cash and cash equivalents $ 1,735,798 $ 1,401,810$1,512,164 $1,401,810
Accounts receivable, (Net) 15,624,49511,438,706 20,292,647
Inventories 46,854,35848,624,577 52,031,112
Net investment in sales-type leases, current portion 7,800,000 7,500,000
Prepaid expenses 1,311,5001,604,519 238,404
Refundable federal and state income taxes 1,918,8621,228,717 587,612
------------ ----------------------------- ------------------
TOTAL CURRENT ASSETS 75,945,01372,208,683 82,051,585
------------ ----------------------------- ------------------
PROPERTY, PLANT AND EQUIPMENT, NET 21,938,11822,623,193 23,298,832
------------ ----------------------------- ------------------
NET INVESTMENT IN SALES-TYPE LEASES, NET OF
CURRENT PORTION 15,159,60617,334,261 16,486,444
------------ ----------------------------- ------------------
OTHER ASSETS 1,715,2191,810,688 1,848,052
------------ ----------------------------- ------------------
TOTAL OTHER ASSETS 114,057,956113,976,825 123,684,913
============ ============================= ==================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
$ 12,067,790 $ 14,523,573
Accounts payable 66,639,030 4,200,000$13,439,771 $14,523,573
Current portion of long-term debt 4,521,506 3,740,45264,012,777 4,200,000
Accrued expenses ------------ ------------
83,928,326 22,464,0254,347,776 3,740,452
----------------- ------------------
TOTAL CURRENT LIABILITIES 0 67,476,11781,800,324 22,464,025
Long-term debt, net of current portion 940,215 1,182,3150 67,476,117
Product liability 2,355,000 2,355,000969,155 1,182,315
Deferred income taxes ------------ ------------
87,223,541 93,477,4572,355,000 2,355,000
----------------- ------------------
TOTAL LIABILITIES ------------ ------------
27,534,415 30,207,45685,124,479 93,477,457
----------------- ------------------
STOCKHOLDERS' INVESTMENT ------------ ------------
$114,057,956 $123,684,91328,852,346 30,207,456
----------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT ============ ============$113,976,825 $123,684,913
================= ==================
See notes to condensed consolidated financial statements
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MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
THREE MONTHS ENDED
SIX MONTHS ENDED
MARCHDECEMBER 31,
MARCH 31,
------------------------------ ------------------------------
2001-------------------------------------
2000 2001 2000
-------------- -------------- -------------- --------------1999
----------------- ------------------
Net sales $ 24,748,635 $ 38,334,080 $ 45,836,321 $ 67,926,698$21,087,686 $29,592,618
Cost of sales 20,773,019 31,809,115 38,701,317 55,814,549
Inventory writedown 700,000 0 700,000 0
------------ ------------ ------------ ------------17,928,298 24,005,434
----------------- ------------------
GROSS PROFIT 3,275,616 6,524,965 6,435,004 12,112,1493,159,387 5,587,184
Selling, general and administrative
expenses 4,387,360 4,251,512 8,473,630 8,181,442
Restructuring charge 1,100,000 0 1,100,000 0
------------ ------------ ------------ ------------4,086,270 3,929,930
----------------- ------------------
INCOME (LOSS) FROM OPERATIONS (1,511,744) 2,273,453 (2,438,626) 3,930,707
------------ ------------ ------------ ------------(926,883) 1,657,254
----------------- ------------------
OTHER INCOME (EXPENSE)
Interest expense (1,278,383) (1,435,795) (2,850,747) (2,694,049)(1,572,364) (1,258,254)
Interest income 848,589 526,588 1,638,621 994,921790,032 468,333
Other, net (69,388) (153,632) (61,038) (295,695)
------------ ------------ ------------ ------------8,350 (142,063)
----------------- ------------------
OTHER EXPENSE - NET (499,182) (1,062,839) (1,273,164) (1,994,823)
------------ ------------ ------------ ------------(773,982) (931,984)
----------------- ------------------
INCOME (LOSS) BEFORE INCOME TAXES (2,010,926) 1,210,614 (3,711,790) 1,935,884(1,700,865) 725,270
Income taxes (benefit) (684,000) 411,000 (1,262,000) 658,000
------------ ------------ ------------ ------------(578,000) 247,000
----------------- ------------------
NET INCOME (LOSS) ($ 1,326,926) $ 799,614 ($ 2,449,790) $ 1,277,884
============ ============ ============ ============1,122,865) $478,270
================= ==================
Net income (loss) per share:
Basic ($ 0.29) $ 0.17 ($ 0.54) $ 0.28
============ ============ ============ ============0.25) $0.10
================= ==================
Assuming dilution ($ 0.29) $ 0.17 ($ 0.54) $ 0.28
============ ============ ============ ============0.25) $0.10
================= ==================
See notes to condensed consolidated financial statements
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McCLAINMCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Six Months Ended
MarchTHREE MONTHS ENDED
DECEMBER 31,
--------------------------------
2001-------------------------------------------
2000 -------------- --------------1999
--------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($2,449,790) $ 1,277,8841,122,865) $561,486
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation and amortization 1,665,972 1,691,535832,516 800,753
Common stock issued to directors for services 17,987 16,4848,993 0
Net changes in operating assets and liabilities
which provided (used) cash:
Current assets excluding cash & cash equivalents 8,471,810 1,292,4369,612,151 1,746,712
Other assets 1,192,251 (1,491,697)(1,244,163) (306,331)
Accounts payable (2,455,783) (1,879,792)(1,083,802) (2,557,315)
Accrued expenses 781,054 1,119,176607,324 243,404
Federal and state income taxes (1,331,250) (1,398,377)
----------- -----------641,105 (513,994)
--------------------- --------------------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES 5,892,251 627,649
----------- -----------8,251,258 (25,285)
--------------------- --------------------
--------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of plant and equipment (37,838) (926,217)(23,166) (324,870)
Payments (made on) received from liabilities assumed upon the
Galion acquisition (242,100) (317,749)
----------- -----------(213,160) 721,409
--------------------- --------------------
NET CASH (USED IN)USED IN INVESTING ACTIVITIES (279,938) (1,243,966)
----------- -----------(236,326) 396,539
--------------------- --------------------
--------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal increase (reduction)reduction of long term debt (5,037,087) 1,594,223(7,663,340) (1,570,778)
Repurchase of common stock (241,238) (310,630)
----------- -----------0
--------------------- --------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (5,278,325) 1,283,593
----------- -----------(7,904,578) (1,570,778)
--------------------- --------------------
--------------------- --------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 333,988 667,276
----------- -----------110,354 (1,199,524)
--------------------- --------------------
Cash and cash equivalents, beginning of periodyear 1,401,810 1,908,397
----------- -----------1,924,006
--------------------- --------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,735,798 $ 2,575,673
=========== ===========YEAR $1,512,164 $724,482
===================== ====================
See notes to condensed consolidated financial statements
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MCCLAIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIXTHREE MONTHS ENDED MARCHDECEMBER 31, 20012000
1. Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of McClain
Industries, Inc. 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, such Statements do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments consisting of normal recurring items
considered necessary for a fair presentation have been included.
Operating results for the six-monththree-month period ended MarchDecember 31, 20012000
are not necessarily indicative of the results that may be expected for
the year ending September 30, 2001. For further information, refer to
the Consolidated Financial Statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended September
30, 2000.
2. Inventories
Inventories at MarchDecember 31, 20012000 and September 30, 2000 are summarized
as follows:
(Unaudited)
MarchDecember 31, 20012000 September 30, 2000
---------------------------------------------------------------------------------
Materials and Supplies $ 17,502,44123,189,577 $ 23,918,300
Work in Process 5,700,0005,500,000 5,521,754
Finished Goods 12,572,03511,850,000 11,146,428
Chassis 11,079,8828,085,000 11,444,630
------------- -------------
$ 46,854,35848,624,577 $ 52,031,112
============= =============------------- -------------
3. Earnings per Common Share and Common Equivalent Share:
Earnings per share are computed using the weighted average number of
common shares outstanding during the periods, includingyear. The Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share", effective September 30, 1998. This statement requires a
dual presentation and reconciliation of "basic" and "diluted" per share
amounts. Diluted reflects the potential dilution of all common stock
equivalents for the periods ended Marchequivalents. At December 31, 20012000 and 20001999 options to purchase 146,983
and 134,684258,337 shares, respectively, were excluded from the computation of
earnings per share because the options' exercise prices were greater
than the average market price of the common shares.
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MCCLAIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIXTHREE MONTHS ENDED MARCHDECEMBER 31, 20012000
4. Depreciation
For the sixthree months ended MarchDecember 31, 20012000 and 2000,1999, depreciation
charges were $1,398,552$698,805 and $1,424,115,$710,242, respectively. Accumulated
depreciation totaled $24,696,160$23,977,679 and $23,259,276 at MarchDecember 31, 20012000
and September 30, 2000, respectively.
5. Debt
The Company's debt agreements contain certain restrictive covenants
that require the Company to, among other things, meet certain net worth
and working capital requirements along with maintaining various
financial ratios. As of MarchDecember 31, 2001,2000, the Company was not in
compliance with certain of the financial covenants contained in the
loan agreements with its principal lending institution and the Company
has been unable to obtain a waiver of the from its principal lender of
its right to accelerate repayment of debt arising from these covenant
violations. Accordingly, the debt related to these agreements has been
shown as a current liability.
6. Contingencies
Product Liability
As a manufacturer of industrial products, the Company is occasionally
subjected to various product liability claims. Such claims typically
involve personal injury or wrongful death associated with the use or
misuse of the Company's products. The Company is currently defending
certain legal proceedings involving allegations of product liability
relating to products manufactured and sold by the Company.
Historically, such claims have not resulted in material losses to the
Company in any one year, and the Company maintains product liability
insurance in amounts believed by management to be adequate.
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MCCLAIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIXTHREE MONTHS ENDED MARCHDECEMBER 31, 20012000
McClain E-Z Pack, Inc., as successor to Galion Holding Company (GHC),
pursuant to an indemnification it provided to the seller in connection
with GHC's July 1992 acquisition of the Galion operations, is currently
defending a number of legal proceedings involving product liability
claims arising out of products manufactured and sold prior to the
acquisition. These claims are covered by insurance and many of these
cases have been settled. In addition, the acquisition agreement called
for the seller to share in the payment of certain costs related to the
defense of these cases. On December 29, 1998 the Company reached a
settlement agreement with the seller the terms of which called for the Company to release the
seller from its obligations related to
product liability claims under the Galion acquisition agreement in
exchange for a cash payment of $1,050,000.
A reserve to provide for these product claims was established at the
acquisition date. Since many of the cases have been settled and
insurance coverage exists, management believes that the ongoing costs
to defend these claims will not exceed the amount accrued on the
accompanying consolidated balance sheet at MarchDecember 31, 2000.
Nevertheless, it is not possible to predict the ultimate outcome of any
product liability claim, and any such claim not fully covered by
insurance, as well as adverse publicity from a product claim, could
have a material adverse effect on the Company.
Environmental Matters
The Company's operations are subject to extensive federal, state and
local regulation under environmental laws and regulations concerning,
among other things, emissions into the air, discharges into the waters
and the generation, handling, storage, transportation, treatment and
disposal of waste and other materials. Inherent in manufacturing
operations and in owning real estate is the risk of environmental
liabilities as a result of both current and past operations, which
cannot be predicted with certainty. The Company has incurred and will
continue to incur costs, on an ongoing basis, associated with
environmental regulatory compliance in its business.
Labor Union Matters
Certain of the Company's hourly employees are represented by various
labor unions pursuant to collective bargaining agreements which expire
between November 2002 and June 2003.
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MCCLAIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIXTHREE MONTHS ENDED MARCHDECEMBER 31, 20012000
On February 23, 1995, the National Labor Relations Board (NLRB)
conducted an election in response to a petition filed by a local union
(Union) to represent the hourly employees at the Company's Macon,
Georgia plant. The ballots of certain employees were challenged as
ineligible. The Union filed charges asserting that the Company
committed various unfair labor practices, which affected the election
results, and that the challenged ballots should be counted. On October
17, 1996, the NLRB upheld the unfair labor practice charges and on
November 5, 1996, the NLRB determined that the results of the election
were in favor of the Union. The Company continues to vigorously defend
against the unfair labor practice allegations. The Company does not
believe a final decision upholding the Union certification or the
unfair labor practice charges would have a material adverse effect on
the Company. The Company believes that relations with the hourly
employees at McClain of Georgia are generally satisfactory. There have
been no work stoppages due to labor difficulties.
Other Legal Matters
The Company is also involved in routine litigation incidental to its
business. Management believes that the resolution of these matters will
not materially affect the consolidated financial statements.
7. Other Matters
The6. Segment Information
During fiscal 1999, the Company recorded a $1,100,000 charge against operations in March 2001
primarily relatedadopted Statement of Financial
Accounting Standards (SFAS) No. 131 "Disclosures About Segments of an
Enterprise and Related Information. This statement requires financial
information to be reported on the reduction of certain truck chassis to their
estimated realizable valuebasis that management uses for
evaluating segment performance and for various severance packages for
terminated employees.
8. Segment Informationmaking operating decisions.
The Company operates in three principal operating segments 1)
Manufactured Equipment, 2) Truck Chassis Sales, and 3) Leasing
Operations. The accounting policies of the reportable segments are the
same as those described in Note 1. Management evaluates the performance
of its operating segments separately to individually monitor the
different factors affecting performance. The Company measures the
performance of its operating segments based on net revenue and
operating income. Income taxes are managed on a Company-wide basis.
Segment performance is also evaluated based on profit or loss before
income taxes.
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McCLAINMCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCHDECEMBER 31, 20012000
Information regarding the Company's operating segments follows for the three
months ended March 31, 2001 and 2000 follows:
Manufacturing Truck Leasing
Operations Group Operations Totals
------------------- ------------------- ------------------ --------------------
20012000
----
Net sales $18,851,958 $5,896,677$15,446,670 $5,641,016 $0 $24,748,635$21,087,686
Lease revenues 0 0 1,925,387 1,925,3871,798,609 1,798,609
Operating income (loss) (1,744,594) (58,958) 291,808 (1,511,744)(1,090,865) (192,896) 356,877 (926,883)
Interest expense, net 662,219 195,315 420,849 1,278,383933,386 250,870 388,108 1,572,364
Income (loss) before
income taxes (2,039,460) (263,274) 291,808 (2,010,926)(1,042,382) (437,360) 356,877 (1,122,865)
Identifiable assets 79,167,360 11,930,990 22,959,606 114,057,95677,408,495 11,434,069 25,134,261 113,976,825
Capital expenditures 14,67223,166 0 0 14,67223,166
Depreciation and
amortization 833,456832,516 0 0 833,456
2000832,516
1999
----
Net sales $28,065,838 $10,268,242$22,848,062 $6,744,556 $0 $38,334,080$29,592,618
Lease revenues 0 0 1,450,250 1,450,2501,188,257 1,188,257
Operating income 2,231,545 (118,822) 160,730 2,273,453(loss) 1,360,155 60,415 236,684 1,657,254
Interest expense, net 708,475 472,328 254,992 1,435,795
Income before
income taxes 1,643,475 (600,150) 167,289 1,210,614
Identifiable assets 84,452,910 23,150,563 22,421,835 130,025,308
Capital expenditures 454,230 0 0 454,230
Depreciation and
amortization 847,582 0 0 847,582
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McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED MARCH 31, 2001
Information regarding the Company's operating segments follows for the six
months ended March 31, 2001 and 2000 follows:
Manufacturing Truck Leasing
Operations Group Operations Totals
------------------- ------------------- ------------------ --------------------
2001
Net sales $34,298,629 $11,537,692 $0 $45,836,321
Lease revenues 1,789,609 0 1,925,387 3,714,996
Operating income (loss) (2,835,457) (251,854) 648,685 (2,438,626)
Interest expense, net 1,595,605 446,185 808,957 2,850,747615,737 414,063 228,454 1,258,254
Income (loss) before
income taxes (3,659,841) (700,634) 648,685 (3,711,790)851,234 (362,648) 236,684 725,270
Identifiable assets 79,167,360 11,930,990 22,959,606 114,057,95682,595,945 25,310,013 22,265,667 130,171,625
Capital expenditures 37,838471,987 0 0 37,838471,987
Depreciation and
amortization 1,665,972843,953 0 0 1,665,972
2000
Net sales $50,913,900 $17,012,798 $0 $67,926,698
Lease revenues 0 0 2,638,507 2,638,507
Operating income (loss) 3,591,700 (58,407) 397,414 3,930,707
Interest expense, net 1,324,212 886,391 483,446 2,694,049
Income (loss) before
income taxes 2,494,709 (962,798) 403,973 1,935,884
Identifiable assets 84,452,910 23,150,563 22,421,835 130,025,308
Capital expenditures 926,217 0 0 926,217
Depreciation and
amortization 1,691,535 0 0 1,691,535843,953
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MCCLAIN INDUSTRIES, INC.
ITEM TWO. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Overview
The following discussion should be read in conjunction with the
condensed consolidated financial statements, including the notes thereto,
appearing elsewhere in this report.
Selected financial data for the Company for the periods indicated:
(Unaudited)
(Unaudited)
Three Months Ended
Six Months Ended
March 30, MarchDecember 31,
2001 2000 2001 2000
---- ---- ---- ----1999
----------------- -----------------
Net Sales $24,748,635 $38,334,080 $45,836,321 $67,926,698$ 21,087,686 $ 29,592,618
Net Income (Loss) (1,326,926) 799,614 (2,449,790) 1,277,884(1,122,865) 478,270
Net Earnings (Loss) Per Common
Share (Basic and Diluted) $ (.29) .17(.25) $ (.54) $ .28.10
(Unaudited)
As of As of
MarchDecember 31, September 30,
20012000 2000
-------------- -------------------------------
Working Capital $ (7,983,313)(9,591,641) $ 59,587,560
Total Assets 114,057,956113,976,825 123,684,913
Long-Term Debt 0 67,476,117
Stockholders'Stockholder's Investment 27,534,41528,852,346 30,207,456
Common shares outstandingShares Outstanding
(Basic and Diluted) 4,508,1964,504,953 4,565,661
Current Ratio 0.91:0.88:1 3:65:1
Funded Debt to Equity
Stockholders' Investment 2.42:2.07:1 2.23:1
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MCCLAIN INDUSTRIES, INC.
The following table presents, as a percentage of net sales, certain selected
financial data for the Company for the periods indicated:
(Unaudited)
(Unaudited)
Three Months Ended
Six Months Ended
MarchDecember 31,
March 31,
2001 2000 2001 2000
------------------- -------------------1999
--------------------------
Net Sales 100.00% 100.00%
100.00% 100.00%
Cost of Sales 83.94 82.98 84.43 82.17
Inventory Writedown 2.83 0.00 1.53 0.00
------ ------ ------ ------85.02 81.12
--------------------------
Gross Profit 13.23 17.02 14.04 17.8314.98 18.88
Selling, General &
Administrative Expenses 17.72 11.09 18.49 12.04
Restructuring charge 1.61 0.00 .087 0.00
------ ------ ------ ------19.38 13.28
--------------------------
Operating Income (Loss) (6.10) 5.93 (5.32) 5.79(4.40) 5.60
Other Expenses (2.02) (2.77) (2.78) (2.94)
------ ------ ------ ------( 3.67) ( 3.15)
--------------------------
Income (Loss) before Income Taxes (8.12) 3.16 (8.10) 2.85(8.07) 2.45
Income (Taxes) Benefit 2.76 (1.07) 2.75 (0.97)
------ ------ ------ ------Taxes (Benefit) ( 2.74) 2.74
--------------------------
Net Income (Loss) (5.36)(5.33)% 2.09% (5.35)% 1.88%
------ ------ ------ ------1.62%
==========================
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MCCLAIN INDUSTRIES, INC.
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Net sales decreased 36.7%28.8% to $24.7$21.1 million for the quarter ended
MarchDecember 31, 20012000 (Quarter 2001)2000) from $38.3$29.6 million for the quarter ended
MarchDecember 31, 20001999 (Quarter 2000)1999). The decrease was due primarily to slumping
sales resulting from the slowdown in the manufacturing sector of the economy.
Sales for all product lines were down for the Quarter 2000. McClain E-Z Pack's
sales decreased 33.9%30.4% or $7.7$5.6 million during the Quarter 20012000 compared to the
Quarter 20001999 while McClain Truck sales decreased 51.1%24.5% or $4.5$1.3 million during
the Quarter 20012000 compared to the Quarter 2000.1999. These decreases were the result
of the economic slowdown and limited capital expenditures by the national
hauling companies. Sales of the Company's dump body products decreased by 37.1%25.8%
or $2.3$1.0 million for the Quarter 20012000 compared to the Quarter 20001999 due to the
continued slump and excess production capacity in the dump body markets. The
sales of the McClain Truck division accounted for 20.6%22.8% of the Company's sales
for the Quarter 20012000 compared to 22.9%26.7% of the Company's sales for the Quarter
2000.1999.
Cost of goods sold increased to 86.8% for the Quarter 2001 from 83.0%85.02% for the Quarter 2000 due tofrom 81.12%
for the lower sales volume and a write down of the
Company's chassis inventory (See Net Income Loss discussion below).Quarter 1999. The gross profit margin on manufactured products decreased
to 19.8%20.3% for the Quarter 20012000 compared to 22.0%22.98% for the Quarter 2000. The1999 due to the
lower sales volume. McClain Truck division had a gross loss of 11.87%2.96% for the Quarter 20012000
compared to a gross profit of 4.5%5.4% for the Quarter 2000.1999 primarily as a result of
the liquidation of certain stale chassis from inventory.
Selling, General & Administrative Expenses increased slightly to 17.72% of net
sales for the Quarter 2001 from 11.09%19.38%
of net sales for the Quarter 2000 due
primarily the lower sales volume.
The Company had a Net Loss of 5.36% of sales for the Quarter 2001
compared to a Net Income 2.09% of sales for the Quarter 2000. The loss was due
primarily to reduced sales volumes throughout the Company's product lines and a
$1.1 million charge taken to operations in March 2001. This charge was
primarily related to the reduction of certain truck chassis to their estimated
realizable value and for various severance packages for terminated employees.
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Net sales decreased 33.3% to $45.8 million for the six months ended
March 31, 2001 (six months 2001) from $67.9 million for the six months quarter
March 31, 2000 (six months 2000). The decrease was due primarily to slumping
sales resulting from the slowdown in the manufacturing sector of the economy.
McClain E-Z Pack's sales decreased 32.3% or $13.3 million during the six months
2001 compared to the six months 2000 while McClain Truck sales decreased 41.1%
or $5.8 million during the six months 2001 compared to the six months 2000.
These decreases were the result of the continuing economic slowdown and limited
capital expenditures by the national hauling companies. Sales of the Company's
dump body products decreased by 32.6% or $3.3 million for the six months 2001
compared to the six months 2000 due to the continued slump and excess production
capacity in the dump body markets. The sales of the McClain Truck division
accounted for 27.0% of the Company's sales for the six months 2001 compared to
31.9% of the Company's sales for the six months 2000.
Cost of goods sold increased to 86.0% for the six months 2001 from
82.1% for the six months 2000 due to the lower sales volume and a write down
of the Company's chassis inventory (See Net Income Loss discussed below). The
gross profit margin on manufactured products decreased to 20.0% for the six
months 2001 compared to 22.4% for the six months 2000. The McClain Truck
division had a gross loss of 7.57% for the six months 2001 compared to a gross
profit of 4.5% for the Quarter 2000.
Selling, General & Administrative Expenses increased to 18.5%13.28% of net sales for the six months 2001 from 12.04% of net sales for the six months 2000Quarter 1999
as a result of the lower sales volume.
The Company had a Net Loss of 5.35% of sales for the six months 2001
compared to a Net Income of 1.88% of sales for the six months 2000. The loss was
due primarily to reduced sales volumes throughout the Company's product lines
and a $1.1 million charge taken to operations in March 2001. This charge was
primarily related to the reduction of certain truck chassis to their estimated
realizable value and for various severance packages for terminated employees.
The Company had negative working capital of $8.0$9.6 million at MarchDecember
31, 20012000 compared to positive working capital of $59.6 million at September 30, 2000 (see subsequent
discussion regarding the Company's debt agreements). The ratio of current assets
to current liabilities was 0.91:0.88:1 at MarchDecember 31, 20012000 and 3.65:1 at September
30, 2000. The Company's cash and cash equivalents totaled $1.7$1.5 million at
MarchDecember 31, 2001.2000. Cash flows provided by operations were $5.9$8.3 million for the
sixthree months ended MarchDecember 31, 2001.2000.
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The Company's debt agreements contain certain restrictive covenants
that require the Company to, among other things, meet certain net worth and
working capital requirements along with maintaining various financial ratios. As
of MarchDecember 31, 2001,2000, the Company was not in compliance with certain of the
financial covenants contained in the loan agreements with its principal lending
institution and the Company has been unable to obtain a waiver of the from its
principal lender of its right to accelerate repayment of debt arising from these
covenant violations. Accordingly, the debt related to these agreements has been
shown as a current liability. The Company is currently exploring other options
while it negotiates with its principal lender to amend its current agreements to
among other things reset those covenants that are currently out of compliance
and extend the maturity dates on certain of its revolving credit agreements.
While management believes it will be successful in its negotiations with it
principal lender or in obtaining an alternative financing source, that outcome
is not guaranteed. If either of these options are ultimately unavailable to the
Company and the principal lender exercises it right to accelerate the repayment
of the outstanding debt, the Company would be unable to pay the amount
outstanding.
Management believes, that if its principal lender does not chose to
accelerate its right to payment, the negotiations discussed above are successful
or the Company secures an alternative financing source, that the Company's cash
flow, together with the credit available to it under existing debt facilities,
will provide it with adequate cash for its working capital needs for the next 12
months (For further information on the Company's debt agreements, refer to the
Consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended September 30, 2000). If
these options are ultimately unavailable to the Company and the principal lender
exercises it right to accelerate the repayment of the outstanding debt, the
Company would be unable to pay the amount outstanding.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
McCLAIN INDUSTRIES, INC.
Date: May 4, 2001 By: /s/ Kenneth D. McClain
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Kenneth D. McClain, President
Date: May 4, 2001 By: /s/ Mark S. Mikelait
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Mark S. Mikelait, Treasurer
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