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INDEX TO EXHIBITS - PAGE 14 OF 17
UNITED STATES
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, 1997
---------------------
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
[LOGO APPEARS HERE]
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, IA 52404
- -------------------------------------------------- ---------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (319) 363-6566
NOT APPLICABLE
- --------------------------------------------------------------------------------
(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
----- -----
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: As of November 30, 1997,
there were 3,194,227 shares of common stock, par value .01 per share.
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MET-COIL SYSTEMS CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
PAGE
----
ITEM 1. FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets, November 30, 1997
(Unaudited) and May 31, 1997 ............................................3
Unaudited Consolidated Condensed Statements of Operations,
Three Months and Six Months Ended November 30, 1997 and 1996 ............4
Unaudited Consolidated Condensed Statements of Cash Flows,
Six Months Ended November 30, 1997 and 1996 .............................5
Notes to Consolidated Condensed Financial Statements (Unaudited) ........6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ...............................10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS .................................................12
ITEM 2. CHANGES IN SECURITIES .............................................12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ...................................12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ...............12
ITEM 5. OTHER INFORMATION .................................................12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ..................................12
INDEX TO EXHIBITS ...........................................................14
Exhibit 11 - Computation of Income Per Common
and Common Equivalent Shares ........................15
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MET-COIL SYSTEMS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except shares) November 30, May 31,
1997 1997
(Unaudited) (Note)
==============================================================================
Current assets
Cash $ 454 $ 594
Trade receivables, net 5,334 4,926
Notes and other receivables 0 800
Inventories 9,032 8,793
Prepaid expenses and other 1,123 905
- -------------------------------------------------------------------------------
Total current assets 15,943 16,018
Property and equipment, net 3,107 4,093
Investments and other assets 845 998
Intangibles, net 2,201 2,416
- -------------------------------------------------------------------------------
TOTAL ASSETS $ 22,096 $23,525
===============================================================================
Current liabilities
Revolving line of credit $2,958 $2,371
Current maturities of long-term debt 2,420 4,620
Accounts payable and accrued liabilities 4,667 4,225
Customer deposits 2,455 2,831
- -------------------------------------------------------------------------------
Total current liabilities 12,500 14,047
Long-term debt 6,116 6,617
Other 396 423
Preferred stock, convertible and redeemable at $13 per 4,248 4,036
share
Stockholders' equity (deficit):
Common stock, $.01 par value, authorized 10,000,000 32 31
shares; 1998 issued 3,194,227; 1997 issued 3,171,824
Additional paid-in capital 16,307 16,248
Accumulated deficit (17,206) (17,725)
Foreign currency translation adjustment (43) (50)
Common stock in treasury, at cost (254) (102)
- -------------------------------------------------------------------------------
Stockholders' equity (deficit) (1,164) (1,598)
- -------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $22,096 $23,525
===============================================================================
Note: Condensed from audited financial statements
See Notes to Consolidated Condensed Financial Statements
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MET-COIL SYSTEMS CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended Six Months Ended
November 30, November 30,
1997 1996 1997 1996
===============================================================================
Net revenues $12,444 $ 9,013 $22,898 $ 17,692
Cost of goods sold 9,606 6,944 17,634 13,805
Operating expenses 1,618 1,387 3,309 2,583
Interest expense, net 447 440 842 896
Other (income) expense, net 111 93 274 (323)
- -------------------------------------------------------------------------------
Income before income taxes 662 149 839 731
Income taxes 0 0 0 0
- -------------------------------------------------------------------------------
Net income $ 662 $ 149 $ 839 $ 731
Preferred stock dividends and
accretion 160 117 320 234
===============================================================================
Net income applicable to
common stock $ 502 $ 32 $ 519 $ 497
===============================================================================
Weighted average common
and common equivalent shares 3,191 3,127 3,207 3,123
===============================================================================
Net income per common
and common equivalent share $ 0.15 $ 0.01 $ 0.16 $ 0.16
===============================================================================
See Notes to Consolidated Condensed Financial Statements
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MET-COIL SYSTEMS CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
November 30,
1997 1996
================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 839 $ 731
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation 496 766
Amortization of intangibles and deferred finance
charges 215 196
Accretion of discount on debt 203 213
Write-down of property held for sale 80 0
Undistributed loss of affiliate 138 120
- --------------------------------------------------------------------------------
1,971 2,026
Changes in assets and liabilities:
Trade receivables (408) (163)
Notes and other receivables 50 36
Inventories (239) (787)
Prepaid expenses and other assets (203) (269)
Accounts payable, accrued liabilities and other
liabilities 422 (175)
Customer deposits (376) (42)
- --------------------------------------------------------------------------------
Net cash flows from operating activities 1,217 626
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from note receivable-related party 750 0
Proceeds from sale of assets 920 0
Purchase of property and equipment (510) (477)
- -------------------------------------------------------------------------------
Net cash flows from investing activities 1,160 (477)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under revolving credit agreements 587 180
Repayments of long-term debt (2,904) (987)
Dividends on preferred stock (108) (108)
Repurchase of treasury stock (152) 0
Issuance of common stock 60 102
- --------------------------------------------------------------------------------
Net cash flows from financing activities (2,517) (813)
- --------------------------------------------------------------------------------
CASH
Increase (decrease) (140) (664)
Beginning balance 594 890
- --------------------------------------------------------------------------------
Ending balance $ 454 $ 226
================================================================================
See Notes to Consolidated Condensed Financial Statements
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MET-COIL SYSTEMS CORPORATION
NOTES TO CONSOLIDATED CONDENSED 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 unaudited consolidated condensed 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, 1997.
Risks and Uncertainties:
The preparation of the Company's financial statements in
conformity with generally accepted accounting principles 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 the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to
significant change in the near-term relate to the determination of
the allowance for uncollectible accounts receivable, recoverability
of long-term assets, environmental and product liability accruals and
income tax accruals including valuation allowances for deferred
income tax assets.
The Company has two collective bargaining agreements covering
production employees at its main operating units which expire in
fiscal 1998. The Company expects to negotiate with the unions and to
enter into new collective bargaining agreements.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED), CONTINUED
Reclassifications:
Certain amounts for the prior year have been reclassified to
conform with the current year presentation.
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,
1997 1997
----------- ------
Raw materials & parts ........... $7,369 $6,779
Work in process ................. 2,366 2,425
Finished goods ................. --- 292
--------- ------
9,735 9,496
Reduction to LIFO basis 703 703
--------- ------
$9.032 $8,793
========= ======
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,
1997 1996 1997 1996
------------------ ----------------
Net revenues...................... $1,345 $2,098 $2,652 $4,328
Gross profit...................... 367 711 768 1,516
Operating income (loss)........... (35) (233) (228) (224)
Net income (loss)................. (25) (240) (276) (240)
====== ====== ====== ======
Income (loss) from equity
investments included in
net revenues................... $ (13) $ (120) $ (138) $ (120)
====== ====== ====== ======
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED), CONTINUED
NOTE 4. DEBT
Revolving Line of Credit:
At November 30, 1997 the Company had a revolving credit
agreement with two insurance companies under which it could borrow up
to $3,500,000. Borrowings are limited pursuant to a borrowing base
formula (certain percentages of eligible trade receivables and
inventories), bear interest at 11.5% and require payment of certain
fees. Under this line, which expires April 30, 1999, outstanding
borrowings as of November 30, 1997 were $2,958,000.
Long-Term Debt:
At November 30, 1997 the Company had $4.1 million of senior
notes with two insurance companies, due in December 2000. Interest
is at 11.5% payable monthly. The notes are due in monthly payments
of $110,000 in total plus interest.
For additional information concerning the Company's loan agreements
and accompanying terms and restrictions see Note 5 to Financial
Statements in the Company's Annual Report on Form 10-K for the year
ended May 31, 1997 herein incorporated by reference thereto.
NOTE 5. SUPPLEMENTAL CASH FLOW DATA
Six Months Ended
November 30,
1997 1996
---------- ---------
Cash paid for interest $ 571 $ 611
========== =========
Preferred stock accretion included
with preferred stock dividends $ 212 $ 126
========== =========
NOTE 6. PENDING ACCOUNTING CHANGES
In February 1997, the Financial Accounting Standards Board
(FASB) issued Statement No. 128, "Earnings Per Share". This
Statement simplifies the computation of earnings per share and makes
the computation more consistent with those of International
Accounting Standards. The Statement is effective for periods ending
after December 15, 1997. The Company does not expect the adoption of
this new standard to significantly impact previously reported
earnings per share or earnings per share trends.
In June 1997, the FASB issued Statement No. 130 "Reporting
Comprehensive Income" and Statement No. 131 "Disclosures About
Segments of an Enterprise and Related Information". Statement No.
130 establishes standards for reporting comprehensive income in
financial statements. Statement No. 131 expands
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certain reporting and disclosure requirements for segments from
current standards. The Statements are effective for fiscal years
beginning after December 15, 1997 and the Company does not expect the
adoption of these new standards to result in material changes to
previously reported amounts or disclosures.
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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 for the quarter ended November 30, 1997 increased to $12.4 million
from $9 million for the prior year period, which represented an increase of
38%. Met-Coil reported net income of $662,000 or $.15 income per common share
for the quarter ended November 30, 1997 compared to net income of $149,000 or
$.01 income per common share for the second quarter of last year.
The increase in revenues, cost of sales, operating expenses and net income is
primarily attributable to increased demand for the Company's Vulcan Plasma
Cutting Machines and Fabrication Systems. This growth is attributable to our
continued product developments for the steel service center industry and
end-product HVAC manufacturers.
For the first half of fiscal 1998 revenues were $22.9 million, an increase of
29% compared to revenues of $17.7 million last year. Net income for the six
months ended November 30, 1997 was $839,000 or $.16 income per common share. A
year ago net income included profit from operations of $281,000 plus a lawsuit
settlement of $450,000 to total $731,000 or $.16 income per common share. The
Company's backlog was $13.6 million at November 30, 1997, an increase of 19%
over the November 30, 1996 level of $11.4 million.
LIQUIDITY AND CAPITAL RESOURCES
Financial Review:
At November 30, 1997, current assets exceeded current liabilities by $3.4
million and the Company had approximately $500,000 available under its
revolving credit agreement.
Cash Flows and Commitments:
In the first half of fiscal 1998 the Company reduced its long-term debt by $2.9
million. Cash flow from operations in the first half of fiscal 1998 was $1.2
million. In September 1997 the Company sold the land and building which
previously contained the operations of a former subsidiary for $920,000. No
material gain or loss resulted from the transaction. In addition, the Company
received the remaining $750,000 receivable from the sale of land in fiscal
1997. The proceeds were used to retire long-term debt.
In September 1997 all dividends were paid on the Company's preferred stock.
The Company continues to omit quarterly common stock dividends due to loan
covenants, which prohibit the payment of common stock dividends. It is
uncertain when, and if, the Company will pay common stock dividends in the
future.
The Company was in compliance with all debt covenants contained in its note
agreements as of November 30, 1997. Management of the Company believes that
amounts available from operating cash flows; funds available under its
revolving credit agreement and the Company's borrowing capacity will be
sufficient to meet its expected cash needs and capital expenditures for the
fiscal year.
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The statements under Management's Discussion and Analysis of Financial
Condition and Results of Operations and 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 of capital, supply
constraints or 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 - See Legal Proceedings as included in the Company's Annual
Report on Form 10-K for the year ended May 31, 1997.
ITEM 2. CHANGES IN SECURITIES - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders on October 22, 1997,
the following actions were voted on:
1. Board of Directors
a. All nominees for election were elected as follows:
Raymond H. Blakeman
Shares in favor Shares against/withheld
--------------- -----------------------
2,303,342 176,361
Gary M. Neal
Shares in favor Shares against/withheld
--------------- -----------------------
2,474,827 4,876
b. Continuing in office:
Michael J. Nonnenmann Keith Moore
James D. Heitt Roy Carver
2. Ratification of appointments of Deloitte & Touche LLP as
independent auditors.
Shares in favor Shares against/withheld
--------------- -----------------------
2,470,631 9,072
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 December 23, 1997
regarding a change of independent auditors.
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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.
Date: January 7, 1998 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
EXHIBIT NO. PAGE
- ---------- ----
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 November 30, 1987...........................................
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.................................................
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....................................................
10 Material contracts -- incorporated by reference to Form 10-K
filed August 29, 1997.............................................
11 Computation of Income Per Common and
Common Equivalent Shares.......................................... 15
27 Financial Statement Schedule...................................... 16
99 Press Release dated January 7, 1998............................... 17