1
FORM 10-Q
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 March 31, 2001
[ ] 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, 2001.
Common Stock, No Par Value 4,508,196
- -------------------------------------------------------------------------------
Class Number of Shares
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS March 31 September 30,
2001 2000
(UNAUDITED)
-------------- ---------------
CURRENT ASSETS
Cash and cash equivalents $ 1,735,798 $ 1,401,810
Accounts receivable, (Net) 15,624,495 20,292,647
Inventories 46,854,358 52,031,112
Net investment in sales-type leases, current portion 7,800,000 7,500,000
Prepaid expenses 1,311,500 238,404
Refundable federal and state income taxes 1,918,862 587,612
------------ ------------
TOTAL CURRENT ASSETS 75,945,013 82,051,585
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, NET 21,938,118 23,298,832
------------ ------------
NET INVESTMENT IN SALES-TYPE LEASES, NET OF
CURRENT PORTION 15,159,606 16,486,444
------------ ------------
OTHER ASSETS 1,715,219 1,848,052
------------ ------------
TOTAL OTHER ASSETS 114,057,956 123,684,913
============ ============
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES $ 12,067,790 $ 14,523,573
Accounts payable 66,639,030 4,200,000
Current portion of long-term debt 4,521,506 3,740,452
Accrued expenses ------------ ------------
83,928,326 22,464,025
TOTAL CURRENT LIABILITIES
0 67,476,117
Long-term debt, net of current portion
940,215 1,182,315
Product liability
2,355,000 2,355,000
Deferred income taxes ------------ ------------
87,223,541 93,477,457
TOTAL LIABILITIES ------------ ------------
27,534,415 30,207,456
STOCKHOLDERS' INVESTMENT ------------ ------------
$114,057,956 $123,684,913
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT ============ ============
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
MARCH 31, MARCH 31,
------------------------------ ------------------------------
2001 2000 2001 2000
-------------- -------------- -------------- --------------
Net sales $ 24,748,635 $ 38,334,080 $ 45,836,321 $ 67,926,698
Cost of sales 20,773,019 31,809,115 38,701,317 55,814,549
Inventory writedown 700,000 0 700,000 0
------------ ------------ ------------ ------------
GROSS PROFIT 3,275,616 6,524,965 6,435,004 12,112,149
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
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS (1,511,744) 2,273,453 (2,438,626) 3,930,707
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (1,278,383) (1,435,795) (2,850,747) (2,694,049)
Interest income 848,589 526,588 1,638,621 994,921
Other, net (69,388) (153,632) (61,038) (295,695)
------------ ------------ ------------ ------------
OTHER EXPENSE - NET (499,182) (1,062,839) (1,273,164) (1,994,823)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (2,010,926) 1,210,614 (3,711,790) 1,935,884
Income taxes (benefit) (684,000) 411,000 (1,262,000) 658,000
------------ ------------ ------------ ------------
NET INCOME (LOSS) ($ 1,326,926) $ 799,614 ($ 2,449,790) $ 1,277,884
============ ============ ============ ============
Net income (loss) per share:
Basic ($ 0.29) $ 0.17 ($ 0.54) $ 0.28
============ ============ ============ ============
Assuming dilution ($ 0.29) $ 0.17 ($ 0.54) $ 0.28
============ ============ ============ ============
See notes to condensed consolidated financial statements
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McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
Six Months Ended
March 31,
--------------------------------
2001 2000
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($2,449,790) $ 1,277,884
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation and amortization 1,665,972 1,691,535
Common stock issued to directors for services 17,987 16,484
Net changes in operating assets and liabilities
which provided (used) cash:
Current assets excluding cash & cash equivalents 8,471,810 1,292,436
Other assets 1,192,251 (1,491,697)
Accounts payable (2,455,783) (1,879,792)
Accrued expenses 781,054 1,119,176
Federal and state income taxes (1,331,250) (1,398,377)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,892,251 627,649
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of plant and equipment (37,838) (926,217)
Payments (made on) liabilities assumed upon the
Galion acquisition (242,100) (317,749)
----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES (279,938) (1,243,966)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal increase (reduction) of long term debt (5,037,087) 1,594,223
Repurchase of common stock (241,238) (310,630)
----------- -----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (5,278,325) 1,283,593
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 333,988 667,276
----------- -----------
Cash and cash equivalents, beginning of period 1,401,810 1,908,397
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,735,798 $ 2,575,673
=========== ===========
See notes to condensed consolidated financial statements
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MCCLAIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED MARCH 31, 2001
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-month period ended March 31, 2001 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 March 31, 2001 and September 30, 2000 are summarized as
follows:
(Unaudited)
March 31, 2001 September 30, 2000
------------------------------------
Materials and Supplies $ 17,502,441 $ 23,918,300
Work in Process 5,700,000 5,521,754
Finished Goods 12,572,035 11,146,428
Chassis 11,079,882 11,444,630
------------- -------------
$ 46,854,358 $ 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, including 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 March 31, 2001 and 2000 options to
purchase 146,983 and 134,684 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)
SIX MONTHS ENDED MARCH 31, 2001
4. Depreciation
For the six months ended March 31, 2001 and 2000, depreciation charges
were $1,398,552 and $1,424,115, respectively. Accumulated depreciation
totaled $24,696,160 and $23,259,276 at March 31, 2001 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 March 31, 2001, 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 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)
SIX MONTHS ENDED MARCH 31, 2001
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 March 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)
SIX MONTHS ENDED MARCH 31, 2001
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
The Company recorded a $1,100,000 charge against operations in March 2001
primarily related to the reduction of certain truck chassis to their
estimated realizable value and for various severance packages for
terminated employees.
8. Segment Information
The Company operates in three principal operating segments 1)
Manufactured Equipment, 2) Truck Chassis Sales, and 3) Leasing
Operations. 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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McCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2001
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
------------------- ------------------- ------------------ --------------------
2001
Net sales $18,851,958 $5,896,677 $0 $24,748,635
Lease revenues 0 0 1,925,387 1,925,387
Operating income (loss) (1,744,594) (58,958) 291,808 (1,511,744)
Interest expense, net 662,219 195,315 420,849 1,278,383
Income (loss) before
income taxes (2,039,460) (263,274) 291,808 (2,010,926)
Identifiable assets 79,167,360 11,930,990 22,959,606 114,057,956
Capital expenditures 14,672 0 0 14,672
Depreciation and
amortization 833,456 0 0 833,456
2000
Net sales $28,065,838 $10,268,242 $0 $38,334,080
Lease revenues 0 0 1,450,250 1,450,250
Operating income 2,231,545 (118,822) 160,730 2,273,453
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 2,850,747
Income (loss) before
income taxes (3,659,841) (700,634) 648,685 (3,711,790)
Identifiable assets 79,167,360 11,930,990 22,959,606 114,057,956
Capital expenditures 37,838 0 0 37,838
Depreciation and
amortization 1,665,972 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 1,691,535
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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, March 31,
2001 2000 2001 2000
---- ---- ---- ----
Net Sales $24,748,635 $38,334,080 $45,836,321 $67,926,698
Net Income (Loss) (1,326,926) 799,614 (2,449,790) 1,277,884
Net Earnings (Loss) Per Common
Share (Basic and Diluted) $ (.29) .17 $ (.54) $ .28
(Unaudited)
As of As of
March 31, September 30,
2001 2000
-------------- ---------------
Working Capital $ (7,983,313) $ 59,587,560
Total Assets 114,057,956 123,684,913
Long-Term Debt 0 67,476,117
Stockholders' Investment 27,534,415 30,207,456
Common shares outstanding
(Basic and Diluted) 4,508,196 4,565,661
Current Ratio 0.91:1 3:65:1
Funded Debt to Equity
Stockholders' Investment 2.42:1 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
March 31, March 31,
2001 2000 2001 2000
------------------- -------------------
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
------ ------ ------ ------
Gross Profit 13.23 17.02 14.04 17.83
Selling, General &
Administrative Expenses 17.72 11.09 18.49 12.04
Restructuring charge 1.61 0.00 .087 0.00
------ ------ ------ ------
Operating Income (Loss) (6.10) 5.93 (5.32) 5.79
Other Expenses (2.02) (2.77) (2.78) (2.94)
------ ------ ------ ------
Income (Loss) before Income Taxes (8.12) 3.16 (8.10) 2.85
Income (Taxes) Benefit 2.76 (1.07) 2.75 (0.97)
------ ------ ------ ------
Net Income (Loss) (5.36)% 2.09% (5.35)% 1.88%
------ ------ ------ ------
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MCCLAIN INDUSTRIES, INC.
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Net sales decreased 36.7% to $24.7 million for the quarter ended March
31, 2001 (Quarter 2001) from $38.3 million for the quarter ended March 31, 2000
(Quarter 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 33.9% or $7.7 million during the Quarter 2001 compared to the
Quarter 2000 while McClain Truck sales decreased 51.1% or $4.5 million during
the Quarter 2001 compared to the Quarter 2000. 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%
or $2.3 million for the Quarter 2001 compared to the Quarter 2000 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% of the Company's sales
for the Quarter 2001 compared to 22.9% of the Company's sales for the Quarter
2000.
Cost of goods sold increased to 86.8% for the Quarter 2001 from 83.0%
for the Quarter 2000 due to the lower sales volume and a write down of the
Company's chassis inventory (See Net Income Loss discussion below). The gross
profit margin on manufactured products decreased to 19.8% for the Quarter 2001
compared to 22.0% for the Quarter 2000. The McClain Truck division had a gross
loss of 11.87% for the Quarter 2001 compared to a gross profit of 4.5% for the
Quarter 2000.
Selling, General & Administrative Expenses increased to 17.72% of net
sales for the Quarter 2001 from 11.09% 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% of net
sales for the six months 2001 from 12.04% of net sales for the six months 2000
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 million at March 31,
2001 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 0.91:1 at March 31, 2001 and 3.65:1
at September 30, 2000. The Company's cash and cash equivalents totaled $1.7
million at March 31, 2001. Cash flows provided by operations were $5.9 million
for the six months ended March 31, 2001.
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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 March 31, 2001, 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 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
-------------- -------------------------------------
Kenneth D. McClain, President
Date: May 4, 2001 By: /s/ Mark S. Mikelait
-------------- -------------------------------------
Mark S. Mikelait, Treasurer
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