1
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 June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission file number 1-7399
TCC INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Texas 74-1366626
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
816 Congress Avenue, Suite 1250, Austin, TX 78701
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(Address of principal executive offices) (Zip code)
(512) 320-0976
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(Registrant's telephone number, including area code)
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(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.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 2,759,115 shares as
of August 2, 1995.
2
Part I. Contents of Consolidated Financial Information:
PAGE NUMBER(S)
----------------------------
Consolidated Balance Sheets 1 - 2
Consolidated Statements of Operations 3 - 4
Condensed Consolidated Statements of Cash Flows 5
Consolidated Statement of Shareholders' Equity 6
Notes to Consolidated Financial Statements 7 - 9
Management's Discussion and Analysis 10 - 12
Part II. Other Information 13 - 14
Signatures 15
3
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
June 30, December 31,
ASSETS 1995 1994
--------------- -------------
Current assets:
Cash and cash equivalents $1,863 $2,124
Receivables:
Trade receivables, net
of allowance of
$100 and 121,
respectively 4,992 3,339
Other 46 97
--------------- -------------
5,038 3,436
--------------- -------------
Inventories:
Raw materials 1,158 944
Work in process 343 164
Finished goods 5,991 6,375
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7,492 7,483
--------------- -------------
Other 343 136
--------------- -------------
Total current assets 14,736 13,179
--------------- -------------
Property, plant and
equipment 9,696 9,659
Accumulated depreciation (5,015) (4,826)
--------------- -------------
4,681 4,833
--------------- -------------
Assets held for sale 374 409
Intangible assets:
Goodwill 1,169 1,164
Patents and trademarks 74 74
--------------- -------------
1,243 1,238
Accumulated Amortization (375) (347)
--------------- -------------
868 891
--------------- -------------
Other assets 565 552
--------------- -------------
Total assets $21,224 $19,864
=============== =============
The accompanying notes are an integral part of the financial statements.
-1-
4
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - continued
(Unaudited)
(In Thousands, except share amounts)
LIABILITIES AND June 30, December 31,
SHAREHOLDERS' EQUITY 1995 1994
--------------- -------------
Current liabilities:
Notes payable $3,637 $2,200
Current maturities of
long-term debt 285 281
Accounts payable 557 600
Accrued expenses:
Interest 35 53
Other 980 1,133
Customer deposits 335 59
--------------- -------------
Total current
liabilities 5,829 4,326
Long-term debt, less
current maturities 1,984 2,142
Deferred liabilities 287 300
--------------- -------------
Total liabilities 8,100 6,768
--------------- -------------
Commitments & contingencies
Shareholders' equity:
Preferred stock, authorized
2,000,000 shares, no par value,
no shares issued -- --
Common stock, authorized
10,000,000 shares, par
value $1 per share,
2,840,601 shares issued 2,841 2,841
Additional paid-in capital 8,766 8,748
Cumulative foreign currency
translation adjustment (12) (22)
Retained earnings
since January 1, 1985 1,795 1,770
--------------- -------------
13,390 13,337
Less treasury stock,
81,486 and 72,586
shares, respectively,
at cost (266) (241)
--------------- -------------
Total shareholders'
equity 13,124 13,096
--------------- -------------
Total liabilities
and shareholders'
equity $21,224 $19,864
=============== =============
The accompanying notes are an integral part of the financial statements.
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5
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, except per share amounts)
For the Three Months Ended
June 30,
1995 1994
--------------- ---------------
Revenue $5,531 $6,516
Cost of goods sold 3,704 4,307
--------------- ---------------
Gross profit 1,827 2,209
Selling, general and administrative
expenses 1,676 1,918
--------------- ---------------
Operating income 151 291
--------------- ---------------
Other income (expense):
Interest income 25 22
Interest expense (158) (118)
Other, net 0 29
--------------- ---------------
(133) (67)
--------------- ---------------
Income before provision for
income taxes 18 224
Provision for income taxes:
Federal 7 89
State 5 12
--------------- ---------------
12 101
--------------- ---------------
Net income $6 $123
=============== ===============
Weighted average number of common and common
equivalent shares outstanding 2,771 2,877
=============== ===============
Income per common and common
equivalent share $0.00 $0.04
=============== ===============
The accompanying notes are an integral part of the financial statements.
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6
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, except per share amounts)
For the Six Months Ended
June 30,
1995 1994
--------------- ---------------
Revenue $10,780 $12,873
Cost of goods sold 7,164 8,739
--------------- ---------------
Gross profit 3,616 4,134
Selling, general and administrative
expenses 3,413 3,843
--------------- ---------------
Operating income 203 291
--------------- ---------------
Other income (expense):
Interest income 53 43
Interest expense (292) (216)
Other, net 87 136
--------------- ---------------
(152) (37)
--------------- ---------------
Income before provision for
income taxes 51 254
Provision for income taxes:
Federal 18 100
State 8 17
--------------- ---------------
26 117
--------------- ---------------
Net income $25 $137
=============== ===============
Weighted average number of common and common
equivalent shares outstanding 2,781 2,877
=============== ===============
Income per common and common
equivalent share $0.01 $0.05
=============== ===============
The accompanying notes are an integral part of the financial statements.
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7
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
For the Six Months Ended
June 30,
1995 1994
--------------- ---------------
Net cash used by operating activities ($1,483) ($1,153)
--------------- ---------------
Cash flows of investing activities:
Additions to property, plant and
equipment (163) (802)
Proceeds from sale of assets 138 402
Other, net (1) (5)
--------------- ---------------
Net cash used by investing activities (26) (405)
--------------- ---------------
Cash flows of financing activities:
Net borrowings of short-term debt 1,437 1,666
Proceeds from long-term debt 6 472
Long-term debt paid (173) (96)
Purchase of common stock for treasury (25) (28)
--------------- ---------------
Net cash provided by financing
activities 1,245 2,014
--------------- ---------------
Effect of exchange rate changes on cash 3 3
Net increase (decrease) in cash and
cash equivalents (261) 459
Cash and cash equivalents at beginning
of period 2,124 2,111
--------------- ---------------
Cash and cash equivalents at end of
period $1,863 $2,570
=============== ===============
The accompanying notes are an integral part of the financial statements.
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TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
(IN THOUSANDS)
Cumulative Retained
Foreign Earnings
Par Value of Addt'l Currency Since
Number of Common Paid-in Translation January Treasury
Shares Shares Capital Adjustment 1, 1985 Stock Total
--------- ------------ ------- ---------- ------- -------- -----
Balances, January 1, 1995 2,841 $ 2,841 $ 8,748 $ (22) $ 1,770 $ (241) $ 13,096
Net income 25 25
Utilization of net operating
loss carryforwards 18 18
Purchase of common stock for
treasury (25) (25)
Foreign currency
translation adjustment 10 10
----- ------- --------- ------- ------- ------- --------
Balances, June 30, 1995 2,841 $ 2,841 $ 8,766 $ (12) $ 1,795 $ (266) $ 13,124
===== ======= ========= ======= ======= ======= ========
The accompanying notes are an integral part of the financial statements.
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9
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 Summary of Significant Accounting Policies
The consolidated financial statements include the accounts of TCC
Industries, Inc. and Subsidiaries ("the Company"), and have been presented in
accordance with the reporting requirements for interim financial statements.
Such requirements do not include all of the disclosures normally required by
generally accepted accounting principles or those normally made in an Annual
Report on Form 10-K. Certain amounts have been reclassified for consistency in
presentation. In connection therewith readers are referred to the Company's
most recent Annual Report on Form 10-K filed for the year ended December 31,
1994. The information furnished herein reflects all adjustments which, in the
opinion of management, are of a normal recurring nature and necessary for a
fair statement of the results of interim periods. Such results for interim
periods are not necessarily indicative of the results to be expected for a full
year, principally due to seasonal fluctuations in wholesale distribution
revenue.
Income Taxes
The Company and its wholly owned domestic subsidiaries join in
filing a consolidated federal income tax return. The provision for income
taxes for interim financial reporting is determined utilizing the estimated
annual effective tax rate method of allocation. Separate state and foreign
income tax returns are filed by subsidiaries where required.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
Foreign Currency Translation
The consolidated financial statements of Meyer Europe Ltd. are
translated into U.S. dollars in accordance with SFAS 52, "Foreign Currency
Translation". SFAS 52 requires the foreign operations to be translated using
current exchange rates for balance sheet items, historical rates for capital
accounts, and average exchange rates for income statement items. The resulting
translation adjustments are recorded directly into a separate component of
shareholders' equity.
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10
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Note 2 Assets Held for Sale
Assets held for sale include real estate held by the Company that,
in management's opinion, are not required by the Company's continuing
operations. At June 30, 1995 and December 31, 1994, the assets held for sale
were valued at approximately $374,000 and $409,000, respectively. The assets
held for sale are recorded at the lower of cost or net realizable value. Net
realizable value has been determined by management after giving consideration
to independent appraisals and current market conditions.
Note 3 Commitments and Contingencies
A Writ of Summons was filed on or around November 25, 1992,
which initiated a civil action against Meyer Machine Company ("Meyer Machine").
Pursuant to this action a complaint was filed March 30, 1993, styled Vicki L.
Goodman vs. Meyer Machine Company (Case No. 5544-1992) in the Court of Common
Pleas of Lancaster County, Pennsylvania. The plaintiff is requesting judgment
for compensatory damages, interest and costs in excess of $20,000, allegedly
incurred as a result of an accident involving a piece of equipment claimed to
be manufactured by Meyer Machine. Meyer Machine has joined in the suit the
party who made certain modifications to the equipment. Such party has
asserted cross claims against Meyer Machine, the nature of which are not
significantly different from the claims asserted by the plaintiff against Meyer
Machine. Meyer Machine has denied liability and intends to vigorously defend
the case. In any event, Meyer Machine carries product liability, as well as
umbrella insurance coverage. Management does not believe the ultimate
resolution of the suit will have a significant impact on the financial position
or results of operations of the Company.
There are sundry claims pending against certain of the
Company's subsidiaries, all of which are incidental to the ordinary course of
business and, in the opinion of Company management, should not result in any
significant liability.
-8-
11
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Note 4 Shareholders' Equity
During January 1995, the Company purchased in the open market
8,900 shares of its common stock at prices ranging from $2.625 - $2.875 per
share. These shares were purchased pursuant to resolutions passed in 1994 by
the Company's Board of Directors authorizing the purchase of up to two percent
of the Company's outstanding common stock. The purchases in January 1995,
along with the 47,000 shares purchased in 1994, completed the Company's
purchase of two percent of the outstanding stock and no further purchases have
been authorized by the Board of Directors. Costs incurred for the buy-back
program have been included in the cost of treasury shares.
For purposes of calculating the Company's earnings per share
for the three and six months ended June 30, 1995, the weighted average number of
common and common equivalent shares has been used.
-9-
12
TCC INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is management's discussion and analysis of the
results of operations and financial condition of TCC Industries, Inc. and
Subsidiaries ("the Company") during the periods included in the accompanying
consolidated financial statements. The discussion below relates to material
changes in the results of operations for the three and six months ended
June 30, 1995 as compared to the same periods ended June 30, 1994 and to
material changes in the financial condition of the Company occurring since the
prior fiscal year end of December 31, 1994. The reader is invited to review
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 for further details regarding the significant factors
affecting the results of operations and financial condition of the Company.
COMPARISONS OF THE RESULTS OF OPERATIONS FOR THE THREE
MONTHS ENDED JUNE 30, 1995 AND JUNE 30, 1994
Revenue
Consolidated revenue decreased 15.1% to $5.5 million for the
second quarter of 1995 as compared to revenue of $6.5 million in the second
quarter of 1994. The decline is the result of lower revenue at both the
manufacturing and wholesale distribution segments. Manufacturing revenue
decreased in the second quarter by 16.4% to $2.4 million in 1995 from $2.8
million in 1994 and is primarily the result of lower parts and service revenue
in the second quarter of 1995 when compared to the same period of 1994 when the
manufacturing group recorded unusually high parts and service sales.
Wholesale distribution revenue for the second quarter
decreased by 14.4% to $3.1 million in 1995 from $3.7 million in 1994. The
decline is primarily attributable to the delay in receipt of merchandise
from the Far East which had been purchased to fill customers' orders.
-10-
13
TCC INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
Gross Profit
Gross profit decreased 17.3% to $1.8 million in the second quarter of
1995, as compared to $2.2 million for the same period in 1994. The decline in
gross profit results from the lower revenue previously discussed, as well as a
decrease in gross profit margins to 33.0% in the second quarter of 1995 as
compared to 33.9% in the second quarter of 1994. The decline in the gross
profit margin is the result of a decline in wholesale distribution margins to
33.5% in the second quarter of 1995, compared to 36.9% for the same period in
1994, offset by an improvement in manufacturing gross profit margins to 31.2%
in the second quarter of 1995, compared to 28.9% in the same period in 1994.
The decline in the wholesale distribution gross profit margins in 1995
is attributable to a less favorable sales mix than in 1994. The improved
gross profit margins at the manufacturing segment is primarily attributable to
lower material costs.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses declined $242,000,
or 12.6%, in the second quarter of 1995 when compared to the same period in
1994. The decrease is primarily attributable to a $130,000 decrease in
employee related expenses as a result of cost cutting measures implemented at
the end of 1994.
Other Income (Expense)
Other expense, net of other income, increased $66,000 for the second
quarter of 1995 when compared to the same quarter in 1994. The increase is
primarily attributable to a $40,000 increase in interest expense which is
primarily the result of a higher line of credit balance at the wholesale
distribution segment during the second quarter of 1995 when compared to the
same period in 1994.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 30, 1995 AND JUNE 30, 1994
Revenue
Consolidated revenue decreased 16.3% to $10.8 million for the six
months ended June 30, 1995, as compared to revenue of $12.9 million for the
same period in 1994. The decline is the result of lower revenue at both the
manufacturing and wholesale distribution segments. Manufacturing revenue
decreased by 21.0% from $5.9 million in 1994 to $4.6 million in 1995. The
decrease is primarily due to a decline in equipment sales of $970,000 which
resulted from the lower backlog at December 31, 1994, when compared to December
31, 1993. The lower backlog at December 31, 1994 was the result of increased
competition and continuing weakness in the markets served by the manufacturing
segment that began in the second quarter of 1994.
The decline in wholesale distribution revenue of 12.4% to $6.1 million
in 1995 from $6.9 million in 1994 is primarily attributable to the continuing
weakness and increased competitiveness of the markets it serves.
Gross Profit
Gross profit decreased 12.5% to $3.6 million for the six months ended
June 30, 1995, as compared to $4.1 million for the same period in 1994. The
decline in gross profit results from the lower revenue previously discussed,
offset by an increase in gross profit margins to 33.5% of sales for the
first six months of 1995 as compared to 32.1% of sales for the same period in
1994. The improved gross profit margins are primarily attributable to improved
margins at the manufacturing segment. The manufacturing gross profit margins
improved to 31.7% in 1995, up from 28.2% for the same period in 1994. This
improvement is the result of a more favorable product mix in the first
quarter of 1995, when compared to the same period in 1994. During the first
quarter of 1994, the equipment sold by the manufacturing segment contained a
higher level of equipment with components that were produced by sub-contractors
versus manufactured in-house, thereby causing material costs to be a higher
percentage of sales; this did not recur during 1995.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses decreased 11.2% to
$3.4 million in 1995 from $3.8 million in 1994. The decline is primarily
attributable to a $84,000 decrease in employee related expenses and a $98,000
decrease in selling and marketing expenses at the manufacturing
segment; and lower maintenance and employee related expense at the general
corporate and other level of $38,000 and $36,000, respectively.
Other Income (Expense)
Other expense (net of other income) increased approximately $115,000
in 1995 compared to 1994. This increase is attributable to a $76,000 increase
in interest expense, which is due to higher interest rates and a higher balance
outstanding on the line of credit at the wholesale distribution segment.
Additionally, the Company realized lower gains on the sale of real estate
properties for the six months ending June 30, 1995, as compared to the same
period in 1994.
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14
TCC INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Company had working capital of $8.9
million and a current ratio of 2.5 to 1. This compares to working capital of
$8.9 million and a current ratio of 3.0 to 1 at December 31, 1994. The decrease
in the current ratio is a result of a greater percentage increase in current
liabilities versus current assets. Current liabilities increased primarily as a
result of an increase in the line of credit balance. Current assets were higher
at the end of the six month period ending June 30, 1995 than at December 31,
1994 because of an increase in accounts receivable, which can be attributed to
the seasonality of the Company's wholesale distribution segment. Cash for the
six months ended June 30, 1995 decreased a net $261,000.
At June 30, 1995, Meyer Machine maintained a $1,000,000 bank
line of credit, of which approximately $797,000 was available after a reduction
in availability of $203,000 to support a letter of credit issued by the bank
as partial collateral for the real estate lien note payable to a bank by Meyer
Vi-Tech. Meyer Machine has a commitment from its primary bank lender to provide
a line of credit for up to $400,000, if needed, for equipment purchases, of
which all was available at June 30, 1995. This commitment expires in 1996.
Allen-Lewis maintains a line of credit with a bank that
provides maximum borrowing capabilities of $4.5 million, subject to a borrowing
base calculation, for working capital purposes and letters of credit. At June
30, 1995, Allen-Lewis had approximately $738,000 available under this line of
credit. Subsequent to June 30, 1995, the line of credit was restructured
whereby $1.2 million of the outstanding balance on the line of credit was
converted into a three year term note and the line of credit was reduced from
$4.5 million to $3.3 million.
TCC Industries has an $85,000 and a $300,000 line of credit,
neither of which had outstanding balances at June 30, 1995. These lines of
credit are used to supplement the short-term cash needs of the parent company.
Each of the subsidiaries' bank lines of credit agreements
contain provisions that limit or restrict the transfer of funds to the parent
company in the form of cash dividends, loans, or advances. Management does not
believe the restrictions will have a significant effect on the parent company's
ability to meet ordinary cash obligations.
-12-
15
TCC INDUSTRIES, INC. AND SUBSIDIARIES
Form 10-Q for the Quarter Ended June 30, 1995
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 3 to the financial statements included elsewhere
herein for a discussion of legal proceedings.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
-13-
16
TCC INDUSTRIES, INC. AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1995
PART II - OTHER INFORMATION (CONTINUED)
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
6(a) Exhibits:
3.ii Articles of Incorporation and By-Laws:
(ii) By-laws:
3.19 1995 Amendment No. 1 to Third Amended and
Restated By-laws of TCC Industries, Inc.
11 The computation of fully diluted earnings per shares
would be the same as primary earnings per share,
which is easily discernable on the face of the
statements of operations included elsewhere herein.
27 Financial Data Schedules:
(i) For the quarterly period ended June 30, 1995.
6(b) Reports on Form 8-K:
The following is the date and description of the events
reported on Forms 8-K filed during the first quarter of 1995:
Date of Earliest Event
Reported on Form 8-K Description
None.
-14-
17
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.
TCC INDUSTRIES, INC.
-------------------------------
(Registrant)
/s/ LAWRENCE W. SCHUMANN
-------------------------------
LAWRENCE W. SCHUMANN
President
(Duly Authorized Officer)
/s/ CHRISTOPHER A. HOPKINS
-------------------------------
CHRISTOPHER A. HOPKINS
Controller
(Chief Accounting Officer)
Date: August 11, 1995
-15-
18
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
3.ii Articles of Incorporation and By-Laws
(ii) By-laws:
3.19 1995 Amendment No. 1 to Third Amended and
Restated By-Laws of TCC Industries, Inc.
11 The computation of fully diluted earnings per shares
would be the same as primary earnings per share,
which is easily discernable on the face of the
statements of operations included elsewhere herein.
27 Financial Data Schedules:
(i) For the quarterly period ended June 30, 1995.