FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
_______________________________________________
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to ____________________
Commission file number 1-6322
_______________________________________________________
Medalist Industries, Inc.
__________________________________________________________
(Exact name of registrant as specified in its charter)
Wisconsin 39-0873294
_______________________________________ __________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10850 West Park Place, Suite 150
Milwaukee, Wisconsin 53224
__________________________________________________________
(Address of principal executive offices)
(Zip Code)
(414) 359-3000
__________________________________________________________
(Registrant's telephone number, including area code)
__________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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.
[X] Yes [ ] No
Number of shares of common stock outstanding as of March 31, 1995:
3,858,610 par value $1.00 per share
2
PART I -- FINANCIAL INFORMATION
Item 1. Financial statements.
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not misleading.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto included in
the Company's latest Annual Reports on Form 10-K.
Financial statements presented are:
Consolidated balance sheets -- March 31, 1995, and December 31, 1994.
Consolidated statement of operations for the three months ended March
31, 1995 and 1994.
Consolidated statement of cash flows for the three months ended March
31, 1995 and 1994.
Notes to condensed consolidated financial statements -- March 31, 1995
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Revenues of $34.4 million for the period ending March 31, 1995 were flat
when compared to the same period in 1994. However, last year's results
included $1.6 million of revenues from the Redi-Bolt operation, included in
the Company's Hardware Division, which was sold at year end 1994. The
remaining operations in the Hardware Division reported a 12% increase in
revenues. The Company's C-Tech Division reported a 16% increase in
revenues, resulting from expanded activity with existing customers. The
Industrial Fastener Division's revenues were flat period to period.
Gross margins as a percentage of net sales for the first quarter were
down 1.3% from the first quarter in 1994. Gross margins were
impacted as the Industrial Fastener Division experienced lower margin
contributions from the loss in 1994 of customers whose products carried
higher profit margins. The Company has made progress in regaining its
position with some of the customers it lost.
Selling, general and administrative expenses increased 1.8% when
compared to the first quarter of 1994. The Company's C-Tech Division
experienced a 6% increase in operating expenses over the first quarter of
1994, due to the opening of an additional branch during the second
quarter of 1994. The Industrial Fastener Division reported a 5.8% decrease
in operating expenses, reflecting efforts to streamline the operations.
Interest expense for the quarter of $1.0 million was up $.2 million from
the $.8 million reported for the same quarter in 1994. This increase reflects
the higher interest rates in existence at March 31, 1995 as compared to March
31, 1994.
Net income for the quarter was $.5 million versus net income of $1.4
million for the same quarter of last year. The Company had no provision for
income taxes in 1995 or 1994 due to utilization of net operating loss
carryforwards.
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CHANGES IN FINANCIAL CONDITION
The Company's working capital increased from December 31, 1994 by $.9
million to $30.7 million at March 31, 1995. A $2.2 million increase in
accounts receivable from year end levels, due to seasonality, was the most
significant contributor to the increase in working capital. Inventories at
March 31, 1995 remained almost flat with year end amounts. The increase in
accounts receivable was partially offset by increases in trade payables and
accruals and a $1.3 million decrease in cash. The decrease in cash was used
to pay down bank debt by $.5 million and to repurchase $.5 million of the
Company's subordinated debentures. The Company had no material commitments
for capital expenditures at March 31, 1995.
As reported in the Company's 1994 Annual Report, the Company's credit
facility was amended effective January 20, 1995. Through this amendment, the
Company's Lenders increased the Company's term loan availability by $4.2
million (staying within the existing $40 million credit facility), extended
the availability of the credit agreement from January 14, 1996 to January 14,
1997, and amended certain of the financial covenants. First quarter results
were within these 1995 covenants.
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Consolidated balance sheets
Dollars in thousands (unaudited)
==============================================================================
March 31, December 31,
1995 1994
____________ ____________
Assets
Current assets:
Cash $ 486 $ 1,765
Accounts receivable, less allowance
for doubtful accounts of $1,173 and $1,229 17,653 15,501
Inventories 30,279 30,066
Prepaid expenditures 2,503 2,625
Assets held for sale 228 255
____________ ____________
Total current assets 51,149 50,212
Other assets:
Intangibles less accumulated amortization
of $4,591 and $4,284 21,568 21,874
Other noncurrent assets 5,524 5,375
____________ ____________
Total other assets 27,092 27,249
Plant and equipment, at cost:
Land & buildings 590 590
Machinery and equipment 26,057 25,983
____________ ____________
Total 26,647 26,573
Less accumulated depreciation 11,100 10,330
____________ ____________
Net plant and equipment 15,547 16,243
____________ ____________
Total assets $ 93,788 $ 93,704
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 11,462 $ 10,967
Accrued liabilities 4,889 4,773
Current maturities of debt 2,544 3,030
Liabilities related to discontinued
operations 1,565 1,675
____________ ____________
Total current liabilities 20,460 20,445
Long-term liabilities:
Long-term debt 31,666 32,189
Convertible subordinated debentures 7,760 7,760
Other liabilities 3,546 3,631
____________ ____________
Total long-term liabilities 42,972 43,580
Stockholders' equity
Common stock ($1.00 par value), authorized
10,000,000 issued 3,858,610 shares
March 31, 1995 and 3,837,054 shares
December 31, 1994 3,859 3,837
Capital in excess of par value 17,054 16,934
Retained earnings 9,443 8,908
____________ ____________
Total stockholders' equity 30,356 29,679
____________ ____________
Total liabilities and stockholders' equity $ 93,788 $ 93,704
============ ============
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5
Consolidated statement of operations
Dollars in thousands except per share data (unaudited)
==============================================================================
Three months
_______________________
Periods ended March 31,
_______________________
1995 1994
__________ _________
Net sales of continuing operations $ 34,419 $ 34,670
Cost of products sold 26,034 25,755
Selling, general & administration 6,825 6,704
_________ _________
Operating income 1,560 2,211
Interest expense 1,025 776
_________ _________
Income before income taxes 535 1,435
Provision for income taxes 0 0
_________ _________
Net income $ 535 $ 1,435
========= =========
Earnings per share
Primary
Net income $ 0.14 $ 0.37
========= =========
Assuming full dilution
Net income $ 0.14 $ 0.37
========= =========
Average shares outstanding - Primary 3,854,408 3,890,304
Average shares outstanding - Full Dilution 3,854,408 3,890,304
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Consolidated statement of cash flows
Dollars in thousands (unaudited)
==============================================================================
[CAPTION]
Three months
__________________________
Periods ended March 31,
__________________________
1995 1994
____________ ___________
[S] [C] [C]
Cash flows from operating activities
Net income $ 535 $ 1,435
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation 820 671
Amortization 307 372
Changes in
Accounts receivable (2,152) (2,685)
Inventories (213) (1,559)
Other current assets 122 361
Accounts payable and accrued liabilities 611 3,859
Noncurrent assets and liabilities (234) (500)
____________ ____________
Net cash provided by (used in) continuing
operations (204) 1,954
Cash flows (to) discontinued operations (83) (77)
Cash flows from (used) by investing activities
Purchases of plant and equipment (184) (1,039)
Proceeds from disposal of plant and equipment 59 0
____________ ____________
Net cash (used) by investing activities (125) (1,039)
Cash flows from financing activities
Net bank debt (decrease) (525) (953)
Subordinate debenture (decrease) (484) 0
Proceeds from sale of common stock 142 25
____________ ____________
Net cash (used) by financing activities (867) (928)
____________ ____________
Net (decrease) in cash (1,279) (90)
Cash at beginning of period 1,765 472
____________ ____________
Cash at end of period $ 486 $ 382
============ ============
Cash paid (recovered) for
Interest $ 882 $ 593
Income taxes $ 15 $ (196)
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[/TABLE]
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Notes to condensed consolidated financial statements
Dollars in thousands (unaudited)
==============================================================================
1. The statements presented herein reflect all normal recurring adjustments
which, in the opinion of management, are necessary for a fair statement of the
results of the interim periods shown. Operating results for the periods
ending March 31, 1995, are not necessarily indicative of the results that may
be expected for the entire year ending December 31, 1995.
2. Inventories are stated at the lower of last-in-first-out cost or market.
Inventory cost includes material, labor, and all work associated with
production. The major classes of inventory are not segregated on the books of
the Company as to raw materials, work in process, and finished products,
except at the date of a physical inventory, which are at interim dates for
most divisions. However, a reasonable estimate of these allocations of
inventory are as follows:
March 31, December 31,
1995 1994
___________ ___________
Raw materials $ 3,930 $ 3,955
Work in process 5,167 4,425
Finished product 21,182 21,686
___________ ___________
Total $ 30,279 $ 30,066
=========== ===========
3. The earnings per common share computation for the periods ended March 31,
are as follows:
Three months ended March 31,
_________________________________________
1995 1994
___________________ ___________________
Shares Earnings Shares Earnings
_________ ________ _________ ________
Average shares outstanding 3,854,408 3,817,873
Net income $ 535 $ 1,435
Assumed issuance of stock upon
the exercise of stock options 0 0 72,431 0
_________ ________ _________ ________
Basis of primary computation 3,854,408 $ 535 3,890,304 $ 1,435
========= ======== ========= ========
Earnings per share $ 0.14 $ 0.37
======== ========
Fully diluted
Average shares outstanding 3,854,408 3,817,873
Net income $ 535 $ 1,435
Assumed issuance of stock upon
the exercise of stock options 0 0 72,431 0
Assumed issuance of common stock upon
the conversion of Convertible
Subordinated Debentures and the
elimination of related after-tax
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interest expense 0 0 0 0
_________ ________ _________ ________
Basis of fully-diluted computation 3,854,408 $ 535 3,890,304 $ 1,435
========= ======== ========= ========
Earnings per share $ 0.14 $ 0.37
======== ========
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PART II -- OTHER INFORMATION
Item 1. Legal proceedings. N/A
Item 2. Changes in securities. N/A
Item 3. Defaults upon senior securities. N/A
Item 4. Submission of Matters to a Vote of Security Holders.
On April 27, 1995, the Company held its annual meeting of shareholders.
The shareholders re-elected as directors Messrs. Peter A. Fischer (3,046,488
for, 21,744 against, 84,644 abstentions), and John S. Sammond (3,054,929 for,
13,303 against, 84,644 abstentions). The current terms of Messrs. Burker,
Dodson, Howenstine, and Secrist as directors also continued after the meeting.
Item 5. Other Information. N/A
Item 6. Exhibits and reports on Form 8-K. N/A
The Company did not file any reports on Form 8-K during the three months
ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Medalist Industries, Inc.
By: /s/ William C. O'Loughlin 05/12/95 /s/ John T. Paprocki 05/12/95
___________________________________ ________________________________
William C. O'Loughlin Date John T. Paprocki Date
Secretary Chief Financial Officer
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