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INDEX TO EXHIBITS - PAGE 12 OF 13
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended NOVEMBER 30, 1996
----------------------------------
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 0-14057
MET-COIL SYSTEMS CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 42-1027215
- ------------------------------------------------ ----------------------
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer No.)
5486 SIXTH STREET SW, CEDAR RAPIDS, IOWA 52404
- ------------------------------------------------ ----------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (319) 363-6566
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
------- -------
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 3,140,068
------------------
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MET-COIL SYSTEMS CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
PAGE
----
ITEM 1. FINANCIAL STATEMENTS
Consolidated condensed balance sheets, November 30, 1996
(unaudited) and May 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Unaudited consolidated condensed statements of operations,
three months and six months ended November 30, 1996 and 1995 . . . . . . . . . . . . . . . . . 4
Unaudited consolidated condensed statements of cash flows,
six months ended November 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to consolidated condensed financial statements (unaudited) . . . . . . . . . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . 10
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exhibit 11 - Computation of income (loss) per common
and common equivalent share . . . . . . . . . . . . . . . . . . . . . . . . 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MET-COIL SYSTEMS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except shares)
November 30, May 31,
1996 1996
(Unaudited) (Note)
- ------------------------------------------------------------------------
Current assets
Cash $ 226 $ 890
Trade receivables, net 4,748 4,585
Notes and other receivables 267 303
Inventories 8,794 8,007
Prepaid expenses 1,207 1,048
- ------------------------------------------------------------------------
Total current assets 15,242 14,833
Property and equipment, net 5,218 5,507
Investments and other assets 1,476 1,574
Intangibles, net 2,553 2,749
- ------------------------------------------------------------------------
Total Assets $24,489 $24,663
========================================================================
Current liabilities
Revolving lines of credit $ 2,895 $ 2,715
Current maturities of long-term debt 4,527 3,556
Accounts payable and accrued liabilities 4,492 4,849
Customer deposits 1,917 1,959
- ------------------------------------------------------------------------
Total current liabilities 13,831 13,079
Long-term debt 7,499 9,244
Other 637 543
Preferred stock, convertible and redeemable at
$13 per share 3,835 3,709
Stockholders' equity (deficit):
Common stock, $.01 par value, authorized
10,000,000 shares; 1997 issued 3,140,068;
1996 issued 3,146,521 31 31
Additional paid-in capital 16,280 16,205
Accumulated deficit (17,262) (17,759)
Foreign currency translation (260) (260)
Common stock in treasury, at cost (102) (129)
- ------------------------------------------------------------------------
Net equity (deficit) (1,313) (1,912)
- ------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity
(deficit) $24,489 $24,663
========================================================================
Note: Condensed from audited financial statements
See notes to consolidated financial statements
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MET-COIL SYSTEMS CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
November 30, November 30,
1996 1995 1996 1995
- --------------------------------------------------------------------------------------
Net revenues $9,013 $11,161 $17,692 $20,815
Cost of goods sold 6,944 8,628 13,805 16,742
Operating expenses 1,387 2,120 2,583 4,361
Interest expense, net 503 698 1,022 1,391
Other (income) expense, net 93 87 (323) 40
- --------------------------------------------------------------------------------------
Income (loss) before income taxes $ 86 (372) $ 605 (1,719)
Income taxes 0 0 0 0
- --------------------------------------------------------------------------------------
Net income (loss) $ 86 $ (372) $ 605 $ (1,719)
Preferred stock dividends 54 108 108 108
- --------------------------------------------------------------------------------------
Net income (loss) applicable to
common stock $ 32 $ (480) $ 497 $ (1,827)
======================================================================================
Weighted average common and
common equivalent shares 3,127 3,002 3,123 2,997
======================================================================================
Net income (loss) per common and
common equivalent share $ 0.01 $ (0.16) $ 0.16 $ (0.61)
======================================================================================
See notes to consolidated financial statements
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MET-COIL SYSTEMS CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
November 30,
1996 1995
- -----------------------------------------------------------------------------------------------------------------------
Net Cash Flows From Operating Activities
Net income (loss) $ 605 $(1,719)
Adjustments to reconcile net income (loss) to net cash flows from
operating activities:
Depreciation 766 798
Amortization 196 220
Accretion of discount on debt and preferred stock 339 336
Undistributed loss of affiliate 120 7
- -----------------------------------------------------------------------------------------------------------------------
2,026 (358)
Changes in assets and liabilities:
Trade receivables (163) 2,426
Notes and other receivables 36 181
Inventories (787) (71)
Accounts payable and accrued liabilities (175) (1,655)
Customer deposits and progress billings (42) 859
Prepaid expenses and other (269) 158
- -----------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 626 1,540
- -----------------------------------------------------------------------------------------------------------------------
Net Cash Flows From Investing Activities
Purchase of property and equipment, net (477) (128)
Other, net 0 (27)
- -----------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (477) (155)
- -----------------------------------------------------------------------------------------------------------------------
Net Cash Flows From Financing Activities
Net borrowings (repayments) under revolving credit agreements 180 (863)
Repayments of long-term debt (987) (846)
Use of restricted cash for debt repayment 0 750
Dividends on preferred stock (108) 0
Issuance of common stock 102 281
- -----------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities (813) (678)
- -----------------------------------------------------------------------------------------------------------------------
Cash
Increase (decrease) (664) 707
Beginning balance 890 159
- -----------------------------------------------------------------------------------------------------------------------
Ending balance $ 226 $ 866
=======================================================================================================================
See notes to consolidated financial statements
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MET-COIL SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. PRESENTATION OF FINANCIAL INFORMATION
The unaudited consolidated condensed financial statements have been
prepared by the Company in accordance with the instructions for
Securities and Exchange Commission's Form 10-Q and do not include all
of the information and footnotes required by generally accepted
accounting principles for audited financial statements. The unaudited
consolidated condensed financial statements include the accounts of
the Company and its subsidiaries. All material intercompany items and
transactions have been eliminated in the consolidation. In the
preparation of the unaudited amounts, all adjustments (consisting
solely of normal recurring adjustments) have been made which are, in
the opinion of management, necessary for a fair statement of the
results for the interim periods. The results for the interim periods
are not necessarily indicative of the results of operations that may
be expected for the year. It is suggested that the condensed
unaudited consolidated financial statements contained herein be read
in conjunction with the consolidated statements and notes included in
the Company's Annual Report on Form 10-K for the year ended May 31,
1996.
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles necessarily
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
NOTE 2. INVENTORIES
The composition of the inventories, using the FIFO method, which
approximates replacement cost, is as follows:
(in thousands)
November 30, May 31,
1996 1996
------------ -------
Raw materials & parts . . . . . . $ 8,416 $ 7,241
Work in process . . . . . . . . . 1,263 1,375
Finished goods . . . . . . . . . 304 580
------- -------
$ 9,983 $ 9,196
Reduction to LIFO basis . . . . . (1,189) (1,189)
------- -------
$ 8,794 $ 8,007
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NOTE 3. INVESTMENT IN AFFILIATE
The Company is accounting for its investment in Met-Coil Ltd. (50%
owned) by the equity method of accounting. Selected financial
information of the investment in affiliate is as follows (in
thousands):
Three Months Ended Six Months Ended
November 30, November 30,
1996 1995 1996 1995
----------------------- ---------------------
Net revenues ............................... $ 2,098 $ 4,028 $ 4,328 $5,523
Gross profit ............................... 711 940 1,516 1,363
Operating income (loss) ................... (233) 128 (224) (67)
Net income (loss) .......................... (240) 92 (240) 8
======= ======= ======= ======
Income (loss) from equity investments,
included in net revenues ............ $ (120) $ 46 $ (120) $ 4
======= ======= ======= ======
NOTE 4. DEBT
Revolving lines of credit:
At May 31, 1996 the Company had a revolving credit agreement with
two insurance companies under which it could borrow up to $3,500,000
in current notes payable. Borrowings are limited pursuant to a
borrowing base formula (certain percentages of eligible trade
receivables and inventories), bear interest at 11.5% and require the
payment of certain fees. The credit agreement expires on April 30,
1999. The Company and it's lenders amended the note agreement
effective September 11, 1996. At November 30, 1996 the Company's
calculation of working capital was $86,000 below the required
consolidated working capital of $1.5 million as called for in the loan
covenants of the senior notes and revolving line of credit. However,
the Company has obtained a waiver from the lenders for the quarter
ended November 30, 1996 and was in compliance with all other covenant
requirements.
Senior debt:
At November 30, 1996 the Company had $6,630,000 of senior notes
with two insurance companies. Interest is at 11.5% payable monthly.
The notes are due in monthly payments of $110,000 plus interest.
Additionally there is a payment of $1,200,000 due on April 18, 1997.
The Company and it's lenders amended the note agreement effective
September 11, 1996. At November 30, 1996 the Company's calculation of
working capital was $86,000 below the required consolidated working
capital of $1.5 million as called for in the loan covenants of the
senior notes and revolving line of credit. However, the Company has
obtained a waiver from the lenders for the quarter ended November 30,
1996 and was in compliance with all other covenant requirements.
For additional information concerning the Company's loan agreements
and accompanying terms and restrictions see Note 5 to the Consolidated
Financial Statements in the Company's Annual Report on Form 10-K for
the year ended May 31, 1996 herein incorporated by reference thereto.
NOTE 5. SUPPLEMENTAL CASH FLOW DATA
Nov. 30, Nov. 30,
1996 1995
---------- ---------
Cash paid for Interest .................................. $ 313 $1,027
======== =======
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MET-COIL SYSTEMS CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SECOND QUARTER AND SIX MONTH RESULTS OF OPERATIONS
Revenues of $9.0 million for the second quarter decreased 20% from
$11.2 million in the second quarter of fiscal year 1996 primarily due
to the sale of Rowe Machinery on February 5, 1996. The 1997 second
quarter margin of 23% was consistent with the 1996 second quarter
margin. Second quarter 1997 operating expenses of $1.4 million
decreased from the prior year second quarter of $2.1 million primarily
due to the sale of Rowe Machinery and the Company's effort to trim
costs in its operations. The decrease in interest expense from the
prior second quarter reflects a lower level of borrowings on the
Company's revolving lines of credit and reduction of long term debt.
The second quarter 1997 net income of $86,000 or $0.01 earnings per
common share compares to a 1996 second quarter net loss of $372,000 or
$0.14 loss per common share.
For the first half of fiscal 1997 and 1996, reported revenues were
$17.7 million and $20.8 million, respectively. The 1997 first half
gross margin of 22% was slightly higher than the 1996 first half
margin of 20%. Operating expenses decreased significantly from the
prior year due primarily to the sale of Rowe Machinery and cost
cutting measures implemented. Interest expense decreased due to lower
borrowing levels on revolving lines of credit and reduction of long
term debt. Other income and expense increased over the prior year due
to the recognition of $450,000 related to the settlement of a long
standing lawsuit in the first quarter of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
Working capital of $1.4 million decreased $300,000 from the fiscal
year end level. While the Company has successfully reduced accounts
payable and accrued liabilities, the classification of long-term debt
due within one year reduced the Company's working capital calculation.
Backlog was $11.4 million at November 30, 1996, which is a slight
decrease when compared to $12.0 at May 31, 1996.
There were no preferred dividends due or paid during the second
quarter. However, preferred shareholders Messrs. Nonnenmann and
Carver took a deferral on the September 30, 1996 and one-half of the
March 31, 1996 dividend payments until March 31, 1997 subject to a
promissory note which allows for a 9% rate of interest. No common
stock dividends were paid during the second quarter by the Company due
to loan covenants. It is uncertain when, and if, the Company will pay
common stock dividends in the future.
At November 30, 1996 the Company's calculation of working capital was
$86,000 below the required consolidated working capital of $1.5
million as called for in the loan covenants of the senior notes and
revolving line of credit. However, the Company has obtained a waiver
from the lenders for the quarter ended November 30, 1996 and was in
compliance with all other covenant requirements. Based upon amounts
available under the Company's line of credit and cash flows from
operations, the Company expects to meet the cash required for
investing and financing activities for the fiscal year.
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The statements under Management's Discussion and Analysis of Financial
Condition and Results of Operations and the other statements in this Quarterly
Report which are not historical facts are forward looking statements. These
forward looking statements involve risks and uncertainties that could render
them materially different, including, but not limited to, the effect of
economic conditions, the impact of competition, availability and costs of
inventory, the rate of technology change, the availability of capital, supply
constraints of difficulties, the effect of the Company's accounting policies,
the effect of regulatory and legal developments, and other risks.
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MET-COIL SYSTEMS CORPORATION
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - None
ITEM 2. CHANGES IN SECURITIES - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - At November 30, 1996 the
Company's calculation of working capital was $86,000 below the required
consolidated working capital of $1.5 million as called for in the loan
covenants of the senior notes and revolving line of credit. However,
the Company has obtained a waiver from the lenders for the quarter
ended November 30, 1996 and was in compliance with all other covenant
requirements.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5. OTHER INFORMATION - None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS -- See Index to Exhibits included elsewhere herein.
(b) FORM 8-K -- A report on Form 8-K was filed on November 19, 1996
regarding NASDAQ market delisting.
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: January 15 , 1997 Met-Coil Systems Corporation
Randall J. Stodola
Vice President, Controller and
Chief Accounting Officer
/s/ Randall J. Stodola
------------------------------
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MET-COIL SYSTEMS CORPORATION
INDEX TO EXHIBITS
Page
EXHIBIT 3.1 Restated Certificate of Incorporation of the Registrant, as amended--incorporated by reference to Exhibit
3.2 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended Nov. 30, 1987
EXHIBIT 3.2 Amended and Restated Bylaws of the Registrant--incorporated by reference to Exhibit 3.4 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended November 30, 1987
EXHIBIT 4 Private Placement Offering of convertible preferred stock dated December 24, 1993--incorporated by
reference to Form 8-K filed May 27,1994
Private Placement Offering of convertible preferred stock dated November 28, 1994--incorporated by
reference to Form 8-K filed March 10, 1995
EXHIBIT 11 Computation of Income (Loss) Per Common and
Common Equivalent Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14