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FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission File Number 1-8292
HELM RESOURCES, INC.
--------------------
(exact name of registrant as specified in charter)
Delaware 59-0786066
-------- ----------
(state or other jurisdiction (IRS EMPLOYER
of incorporation or organization) Identification No.)
537 Steamboat Road
Greenwich, CT 06830
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(Address of principal executive offices)
203-629-1400
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(registrant's telephone number, including area code.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (b) 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 has been subject to such filing
requirements for the past 90 days.
YES X NO
_____ _____
As of November 13, 1996 there were 2,458,953 shares of the Company's common
stock, par value $.01 per share, outstanding.
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PART I- FINANCIAL INFORMATION
HELM RESOURCES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(In Thousands)
(unaudited)
ASSETS September 30, 1996
- ------ ------------------
Current Assets: $
Cash and cash equivalents 64
Accounts receivable, net 1961
Inventories 232
Current portion of promissory notes
receivable from officers 163
Due from affiliates 23
Prepaid expenses 228
Other current assets 22
------
TOTAL CURRENT ASSETS 2693
INVESTMENTS IN AND DUE FROM AFFILIATES 1853
PROMISSORY NOTES RECEIVABLE FROM OFFICERS 488
PROPERTY, PLANT AND EQUIPMENT, NET 2424
DEFERRED CHARGES AND OTHER ASSETS 402
------
$7,860
======
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HELM RESOURCES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(IN THOUSANDS)
(UNAUDITED)
September 30, 1996
------------------
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY)
- -----------------------------------------
CURRENT LIABILITIES:
Notes payable to affiliates $1,115
Revolving loan 1,000
Accounts payable 2,286
Accrued interest 273
Accrued Expenses 929
Current portion of long-term debt 285
Due for contract settlement 259
Due to affiliates 406
------
TOTAL CURRENT LIABILITIES 6,553
LONG-TERM DEBT, NET OF CURRENT PORTION 1,296
SUBORDINATED DEBENTURES 3,099
OTHER LIABILITIES
760
------
TOTAL LIABILITIES 11,708
SHAREHOLDERS' DEFICIENCY (NOTE 5) (3,848)
------
$7,860
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HELM RESOURCES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In Thousands, Except per Share Amounts)
(unaudited)
Three Months Ended
September 30,
--------------------
1996 1995
------- -------
REVENUES $ 4,119 $ 4,088
------- -------
COSTS, EXPENSES AND OTHER:
Operating expenses 3,316 3,082
Selling, general and administrative
expenses 1,056 948
Gain on sale of securities (192) (163)
Equity in net (earnings) losses of
affiliates (30) (21)
Increase in underlying equity
of Intersystems, Inc. (18) --
Interest and debt expense, net 249 237
Non-recurring warehouse
reorganization expense 254 --
------- -------
TOTAL COSTS, EXPENSES AND OTHER 4,635 4,083
------- -------
NET INCOME (LOSS) $ (516) $ 5
======= =======
Earnings(loss)per share $ (.23) $ (.01)
======= =======
Average common shares outstanding 2,459 2,227
======= =======
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HELM RESOURCES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In Thousands, Except per Share Amounts)
(unaudited)
Nine Months Ended
September 30,
-----------------
1996 1995
-------- --------
REVENUES $ 13,996 $ 11,183
-------- --------
COSTS, EXPENSES AND OTHER:
Operating expenses 10,753 8,623
Selling, general and administrative
expenses 3,116 2,913
Gain on sale of securities (418) (293)
Equity in net (earnings) losses
of affiliates (22) 66
Increase in underlying equity of
Intersystems, Inc. (60) (40)
Interest and debt expense 675 687
Provision for settlement of
litigation 275 --
Non- recurring warehouse reorganization
expense 254 --
-------- --------
TOTAL COSTS, EXPENSES AND OTHER 14,573 11,956
-------- --------
LOSS FROM CONTINUING OPERATIONS (577) (773)
DISCONTINUED OPERATIONS OF AFFILIATE (168) --
-------- --------
NET(LOSS)PER SHARE $ (745) $ (773)
======== ========
Earnings(loss)per share:
Continuing operations (.28) $ (.40)
Discontinued operations (.07) --
-------- --------
Net(loss)per share $ (.35) $ (.40)
======== ========
Average common shares outstanding 2,453 2,183
======== ========
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HELM RESOURCES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(unaudited)
Nine Months Ended
September 30,
-----------------
1996 1995
----- -----
Net cash provided by (used in)
operating activities $ 343 $ (76)
----- -----
Cash flows from investing activities:
Decrease (increase) in investments
in and due from affiliates 227 139
Proceeds from sales of securities 85 172
Proceeds from sale of finance
subsidiary portfolio -- 467
Additions to property, plant and
equipment (480) (143)
----- -----
(168) 635
Cash flows from financing activities:
Increase in due to affiliate 406 --
Increase (decrease) in notes payable
and long term debt (951) --
Repayment of notes payable -- (660)
Repayment of term loan -- (200)
Proceeds from promissory note -- 318
Payment on contract settlement -- (33)
----- -----
(545) (575)
----- -----
NET INCREASE (DECREASE) IN CASH (370) (16)
CASH BEGINNING OF PERIOD 434 41
----- -----
CASH END OF PERIOD $ 64 $ 25
Cash paid during the period for:
Interest $ 305 $ 344
Taxes 2 --
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HELM RESOURCES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
September 30, 1996
Note 1. Management believes the accompanying unaudited condensed
consolidated financial statements of Helm Resources, Inc.
and subsidiaries (the "Company") include all adjustments
(consisting only of normal recurring accruals) required to
present fairly the financial statements for the periods
presented. The results of operations for any interim period
are not necessarily indicative of the annual results of
operations.
Note 2. Primary earnings per share is computed by dividing earnings, after
deducting the preferred stock dividend requirements of $31,600 and
$94,800 in the three month and nine month periods of each year by the
average common shares outstanding each period.
Note 3. Inventories consist of packaging supplies.
Note 4. Summarized Financial Data (in thousands):
Intersystems, Inc. Three Months Ended
- ------------------ September 30,
(23% owned in 1996 and 41% in 1995) ------------------
1996 1995
------ ------
REVENUES $5,855 $4,747
------ ------
Operating expenses 4,229 3,279
Selling, general and administrative
expenses 1,394 1,215
Interest expense (net) 166 194
------ ------
TOTAL COST AND EXPENSES 5,789 4,688
------ ------
NET INCOME $ 66 $ 59
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HELM RESOURCES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
September 30, 1996
Nine Months Ended
September 30,
-----------------
1996 1995
------- --------
REVENUES $14,826 $ 11,906
------- --------
Operating expenses 10,453 8,093
Selling, general and administrative
expenses 3,980 3,414
Settlement of note receivable-sale
of trading business 48 -
Interest expense (net) 469 558
------- --------
TOTAL COST AND EXPENSES 14,950 12,065
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LOSS FROM CONTINUING OPERATIONS (124) (159)
DISCONTINUED OPERATIONS (730) -
------- --------
NET (LOSS) $ (854) $ (159)
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Note 5. In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.121, "Accounting
for Impairment of Long-lived Assets to be Disposed of (SFAS NO. 121).
SFAS No. 121 requires, among other things, that impairment losses
on assets to be held, and gains or losses from assets that are
expected to be disposed of, be included as a component of income
from continuing operations. The Company adopted SFAS No. 121 in 1996
and its implementation did not have a material effect on the
consolidated financial statements.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 12, "Accounting for
Stock-Based Compensation"(SFAS No. 123). SFAS No. 123 encourages
entities to adopt the fair value method in place of the provisions
of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB No. 25), for all arrangements under which
employees receive shares of stock or other equity instruments of the
employer or the employer incurs liabilities to employees in amounts
based on the price of its stock. The Company did not adopt the fair
market method encouraged by SFAS No. 123 and will continue to account
for such transactions in accordance with APB No. 125. However, the
Company will be required to provide additional disclosures for the
1996 annual financial statements providing pro forma effects as if
the Company had elected to adopt SFAS No. 123.
Note 6. During the three months ended September 30, 1996 an officer
of the Company purchased 25,000 shares of common stock of Unapix
Entertainment, Inc. and 40,000 shares of common stock of
Professional Financial Services, Inc. from the Company, at market
value. The purchase price was paid by surrender of $200,000 principal
amount of senior subordinated notes due to him. The Company realized
a gain from the transaction of $177,000 which is included in gain
on sale of securities. In addition, the Company sold 10,000 shares
of Intersystems common stock for a gain of $15,000.
During the six months ended June 30, 1996,the Company sold 65,500
shares of Intersystems common stock at a gain of $106,000 and had an
additional gain of $79,000 from the sale of 17,152 common shares of
Professional Financial Services, Inc., 4,783 common shares of Unapix
Entertainment, Inc., 14,350 common shares of Intersystems and 86,098
warrants, which expire in 2006, to purchase a like number of shares of
Helm common stock at $1.25 per share, all at market value to another
officer of the Company in exchange for $91,250 principal amount of 8%
debentures and accrued interest thereon of $16,203.
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During the nine months ended September 30, 1995, two officers of the
Company purchased 44,282 shares of restricted common stock of Unapix
Entertainment, Inc.; 74,366 shares of restricted common stock of
Professional Financial Services, Inc. and 60,405 shares of restricted
common stock of Intersystems,Inc. at market value from the Company for
$344,000. One half of the purchase price was paid in cash and the other
half by surrender of senior subordinated notes due to them. The
purchases was approved by the Board of Directors and the Company
realized a gain from the transactions of $163,000 for the quarter ended
September 30 and $293,000 for the nine months ended September 30, 1995.
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Note 7. STOCKHOLDER'S EQUITY (IN THOUSANDS)
----------------------------------
Preferred Stock Common Stock Additional
Shares Amount $.01 par value Paid in Capital
------ ------ Shares Amount ---------------
---------------
Balance
Jan.1, 1996 40 $ -- 2,399 $24 $19,889
Warrants issued -- -- -- -- 22
Common Stock
issued, primarily
for accrued
interest -- -- 60 1 45
-- ------ ----- --- -------
Balance 40 $ -- 2,459 $25 $19,956
Sept 30,1996
== ==== ===== === =======
Unrealized gain Retained Treasury Total
on available for Earnings Stock
sale securities (Deficit) ----- -----
--------------- ---------
Balance
Jan.1, 1996 $ 763 $(23,501) $(29) $(2,854)
Warrants issued -- -- -- 22
Common stock
issued, primarily
for accrued interest -- -- -- 46
Change in unrealized
gain on available
for sale securities (317) -- -- (317)
Net (loss) -- (745) -- (745)
----- -------- ---- -------
Balance
September 30, 1996 $ 446 $(24,246) $(29) $(3,848)
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Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
Revenues increased slightly to $4,119,000 in the 1996 period compared
to $4,088,000 in the 1995 period. Interpak Terminal's revenue increased $76,000
in the 1996 period and was offset by a decrease of $45,000 in other
miscellaneous revenue. Railcars packaged by Interpak in the third quarter of
1996 decreased 10% from the second quarter of 1996 due to customer plant
shutdown for maintenance. The number of cars packaged is expected to increase
for the fourth quarter.
Operating expenses, which are all attributable to Interpak Terminals,
increased by $234,000 (8%) to $3,316,000 in the 1996 period compared to
$3,082,000 in the 1995 period primarily due to increased labor cost.
Selling, general and administrative expenses were $1,056,000 in the 1996
period compared to $948,000 in the 1995 period, an increase of $108,000 (11%) of
which $62,000 related to the settlement of a customer dispute and $35,000 in
additional travel expenses incurred in connection with customer contract
negotiations.
Gain on sale of securities is described in note 6 to the financial
statements.
In the third quarter of 1996, Interpak incurred $254,000 of expense
related to relocating customer products in various warehouses to improve
efficiency.
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NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
Revenue increased by $2,813,000 (25%) to $13,996,000 in the 1996 period
compared to $11,183,000 in the 1995 period primarily due to an increase in
packaging and storage volume at Interpak Terminals.
Operating expenses increased $2,130,000 (25%) to $10,753,000 in the
1996 period from $8,623,000 in the 1995 period due to increased labor cost,
packaging supply cost and rent to accommodate the increase in volume.
Gain on sales of securities in 1996 is described in note 6 to the
financial statements.
The provision for settlement of litigation of $275,000 in 1996 is for
the settlement of all claims related to a lawsuit against the Company and
Interpak which was described in Part II-Item 1 of the Company's Form 10QSB for
the first quarter of 1996.
In the third quarter of 1996, Interpak incurred $254,000 of expenses
related to relocating customer products in various warehouses to improve
efficiency.
Excluding the provision for settlement of litigation and the non recurring
warehouse relocation expense, the net loss from continuing operations for the
nine months ended September 30, 1996 would have been $48,000 or $.06 per share.
Impact of Inflation
Inflation has not had a significant impact on the Company's operations.
Liquidity and Capital Resources
Operating activities for the nine months ended September 30, 1996
provided cash of $343,000; $633,000 was provided by payments from affiliates,
and $85,000 was provided by proceeds from securities. $951,000 was used for
repayments of notes payable and long-term debt and additions to plant and
equipment used $480,000, which resulted in a decrease in cash of $370,000.
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At September 30, 1996, the Company had a working capital deficit of
$3,860,000, which included $2,446,000 for Interpak. The Interpak working capital
deficit included $1,000,000 under a revolving loan agreement which expires in
February 1997. The line, which has an annual interest rate of prime plus 1.25%,
was fully borrowed at September 30, 1996, is secured by substantially all of the
assets of Interpak, as well as Interpak's common stock and 400,000 shares of
common stock of an affiliated company, and is guaranteed by the Company. It is
expected that Interpak's operations should be sufficient to meet its other
obligations as they become due. The balance of the working capital deficit
included approximately $1,115,000 of payables to affiliates as to which the
Company is confident of its ability to fund as needed from the sale of
investment securities.
Future liquidity sources for the parent company will consist of
reimbursement of general and administrative expenses from subsidiaries and
affiliates, available funds from the earnings of Interpak and possible sales of
investment securities. On a longer term basis, the Company may be required to
seek additional liquidity through debt and equity offerings of the company
and/or its subsidiaries.
The Company has terminated discussions with Intersystems, Inc.
concerning the previously announced proposed sale of Interpak to Intersystems
due to an inability to reach an agreement on price, as well as Intersystem's
inability to finance the acquisition. The Company will continue in it's efforts
to sell Interpak.
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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 there unto duly authorized.
Helm Resources, Inc.
November 13, 1996 /S/ Daniel T. Murphy
_________________________________
Daniel T. Murphy
Executive Vice President
Chief Accounting and
Financial Officer
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