1
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 September 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: 0-8767
CALNETICS CORPORATION
(Exact name or registrant as specified in its charter)
CALIFORNIA 95-2303687
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20401 PRAIRIE STREET, CHATSWORTH, CALIFORNIA 91311
(Address of principle executive offices) (zip code)
(818) 886-9819
Registrant's telephone number, including area code
NA
(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
--- ---
Number of shares outstanding of each of the issuer's classes of common stock,
as of the September 30, 1995 date was 2,914,799.
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CALNETICS CORPORATION
INDEX
Part I. Financial Information Page Number
-----------
Item 1. Financial Statements
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets (Unaudited)
September 30, 1995 and June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated
Financial Statements (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Page 2 of 13
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PART I - FINANCIAL INFORMATION
CALNETICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
September 30
----------------------------
1995 1994
---- ----
Net sales $8,771,275 $6,647,171
Cost of sales 6,807,579 5,057,370
---------- ----------
Gross profit 1,963,696 1,589,801
---------- ----------
Selling, general and
administrative expenses 1,332,273 1,166,887
Other expense, net, including interest 124,519 127,221
---------- ----------
Total costs and expenses 1,456,792 1,294,108
Income from operations before income taxes 506,904 295,693
Provision for income taxes 210,700 126,000
---------- ----------
Net income $ 296,204 $ 169,693
========== ==========
Earnings per common share and common share
equivalent $ 0 .10 $ 0.06
Weighted average common shares and common
share equivalents outstanding 3,066,881 3,011,900
========== ==========
No dividends were paid during the period set forth above.
See accompanying notes to condensed consolidated financial statements.
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CALNETICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
September 30, 1995 June 30, 1995
------------------ -------------
CURRENT ASSETS:
Cash and cash equivalents $ 1,395,646 $ 1,580,974
Accounts receivable, net 4,474,667 4,448,526
Inventories 5,123,544 4,962,037
Prepaid expenses 228,548 312,996
Deferred income taxes 272,000 272,000
----------- -----------
Total current assets 11,494,405 11,576,533
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
(at cost):
Land 466,288 466,288
Buildings and leasehold improvements 2,204,992 2,204,992
Machinery and equipment 3,994,894 3,752,505
Furniture and fixtures 234,793 224,251
----------- -----------
6,900,967 6,648,036
Less--Accumulated depreciation
and amortization 2,928,619 2,776,164
----------- -----------
Property, plant and equipment,
net 3,972,348 3,871,872
----------- -----------
Deposits and other assets 202,246 201,205
Goodwill 1,455,268 1,472,968
----------- -----------
Total assets $17,124,267 $17,122,578
=========== ===========
See accompanying notes to condensed consolidated financial statements.
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CALNETICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 1995 June 30, 1995
------------------ -------------
CURRENT LIABILITIES:
Current portion of
long-term debt $ 295,097 $ 338,000
Accounts payable 2,848,209 2,650,651
Customer deposits 120,088 150,004
Accrued liabilities 808,713 1,145,300
Income taxes payable 145,721 58,193
----------- -----------
Total current liabilities 4,217,828 4,342,148
----------- -----------
LONG-TERM DEBT,
net of current portion 5,381,089 5,551,284
----------- -----------
DEFERRED INCOME TAXES 93,000 93,000
----------- -----------
SHAREHOLDERS' EQUITY:
Preferred stock: authorized-
2,000,000 shares, none issued --- ---
Common stock, no par value:
Authorized - 20,000,000 shares;
Issued and outstanding --
2,914,799 at September 30, 1995
and June 30, 1995 2,397,635 2,397,635
Retained earnings 5,034,715 4,738,511
----------- -----------
Total shareholders' equity 7,432,350 7,136,146
----------- -----------
Total liabilities and
shareholders' equity $17,124,267 $17,122,578
=========== ===========
See accompanying notes to condensed consolidated financial statements.
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CALNETICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
September 30,
---------------------------
1995 1994
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 296,204 $ 169,693
--------- ---------
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Provision for doubtful accounts 13,000 10,500
Depreciation and amortization 174,958 191,561
Changes in operating assets and
liabilities:
Accounts receivable (39,141) 324,308
Inventories (161,507) (452,074)
Prepaid expenses 84,448 (21,875)
Deposits and other assets (1,041) (29,462)
Accounts payable 197,558 25,785
Customer deposits (92,416) 2,735
Accrued liabilities (274,087) (419,142)
Income taxes payable 87,528 (24,367)
--------- ---------
Total adjustments (10,700) (392,031)
--------- ---------
Net cash provided by (used in)
operating activities 285,504 (222,338)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (257,734) (94,906)
--------- ---------
Net cash used in investing activities (257,734) (94,906)
--------- ---------
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CALNETICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
Three Months Ended
September 30,
---------------------------
1995 1994
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt $ (213,098) $ (57,966)
Net proceeds from issuance of
common stock --- 7,190
---------- ----------
Net cash used in financing
activities (213,098) (50,776)
---------- ----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (185,328) (368,020)
CASH AND CASH EQUIVALENTS,
beginning of period 1,580,974 1,853,091
---------- ----------
CASH AND CASH EQUIVALENTS,
end of period
$1,395,646 $1,485,071
========== ==========
Supplemental disclosures of cash flow
information:
Cash paid for interest expense $ 119,962 $ 98,778
========== ==========
Cash paid for income taxes $ 124,000 $ 150,000
========== ==========
See accompanying notes to condensed consolidated financial statements.
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CALNETICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1995
1. General
In the opinion of the management of the Company, the
accompanying condensed unaudited financial statements contain all
adjustments, consisting of only normal recurring accruals, necessary
to present fairly the financial position at September 30, 1995, the
results of its operations for the three months ended September 30,
1995 and 1994 and the cash flows for the three months ended September
30, 1995 and 1994. Certain information and footnote disclosures
normally included in financial statements that would have been
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission, although management of the
Company believes that the disclosures in these financial statements
are adequate to make the information presented therein not misleading.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto
included in the Company's June 30, 1995 Form 10-K.
The results of operations for the three months ended September
30, 1995 are not necessarily indicative of the results of operations
to be expected for the full fiscal year ending June 30, 1996.
2. Receivables.
The following tabulation shows the elements of receivables:
September 30, 1995 June 30, 1995
------------------ -------------
Trade accounts receivable $4,750,682 $4,711,541
Less allowance for doubtful
accounts 276,015 263,015
---------- ----------
$4,474,667 $4,448,526
========== ==========
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3. Income Taxes.
Income taxes for the three-month period ended September 30,
1995 were computed using the effective tax rate estimated to be
applicable for the full fiscal year. This rate is subject to ongoing
evaluation and review by management.
4. Long-term debt.
At September 30, 1995 and June 30, 1995, long-term debt
consisted of the following:
September 30, 1995 June 30, 1995
------------------ -------------
Term loans payable to banks,
secured by inventory and
receivables, interest at the
banks' reference rate (8.75
percent at September 30, 1995)
plus .75 percent, due in
various monthly install-
ments of principal and
interest through July 1,
1999, with balloon payments
totaling $1,458,462 due on
August 1, 1999 $3,399,977 $3,683,316
Industrial revenue bond payable,
principal due in annual
sinking fund installments
ranging from $15,000 to
$130,000 through December
2021, plus interest due
monthly based on the Issuers
Weekly Adjustable Interest
Rates for Revenue Bonds
(totaling 4.7 percent at
September 30, 1995),secured
by a standby letter of credit
issued by a bank with an annual
fee of 1.25 percent 1,455,000 1,455,000
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Long-term debt. (cont'd)
September 30, 1995 June 30, 1995
------------------ -------------
Loans payable to former Agricultural
Products, Inc's shareholders,
unsecured, interest payable
semi-annually at 7.50 percent,
principal payable in four equal
annual installments beginning
June 1996 402,042 402,042
Mortgage payable to bank, secured
by the related building and
land, payable in monthly
installments of $1,665
plus interest at .75
percent over the bank's
prime rate, with a balloon
payment of $201,415 due
March 5, 2000 289,669 294,663
Equipment term notes payable to banks,
secured by the related equipment,
due in equal monthly installments
of principal and interest ranging
from $214 to $780, interest at
rates ranging from 1.0 percent
over the bank's prime rate to
11.87 percent through October
1998 129,498 54,263
---------- ----------
$5,676,186 $5,889,284
Current portion of long-term debt 295,097 338,000
---------- ----------
Long-term portion $5,381,089 $5,551,284
========== ==========
The term loans and notes payable include certain restrictive
financial and non-financial covenants, including certain cash
restrictions and limitations on payment of cash dividends and
redemption of stock. At September 30, 1995, the Company was in
compliance with all bank covenants.
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5. Earnings per common share and common share equivalent.
Earnings per common share and common share equivalent are based
on the weighted average number of shares of common stock and common
stock equivalents (dilutive stock options) outstanding during the
related periods. The weighted average number of common stock
equivalent shares includes shares issuable upon the assumed exercise of
stock options less the number of shares assumed purchased with the
proceeds available from such exercise. Fully diluted net income per
share does not differ materially from net income per common share and
common share equivalent.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial condition.
There were no significant changes in current assets or current
liabilities of the Company between September 30, 1995, the end of the
first quarter, and June 30, 1995.
Liquidity and Capital Resources.
At September 30, 1995, the Company's working capital was
$7,276,577, compared with $6,881,050 at the same time a year ago.
The Company has a working capital agreement with a bank under
which the Company may borrow up to $2,000,000 on an unsecured basis
and as of September 30, 1995, the entire amount of $2,000,000 was
available under this credit arrangement, which expires on November 30,
1995.
The Company has no immediate plans for any significant capital
expenditures and the Company believes that its available funds and
internally generated cash from operations will be sufficient to meet
its working capital needs in fiscal 1996. Certain loan agreements
limit capital expenditures to $500,000 in the fiscal year ending June,
1996 and thereafter.
During the past year the Company experienced increases in raw
material resin prices, which at this time appear to have stabilized;
however, the availability of polycarbonate resin continues to remain
in short supply. If these conditions worsen, it could affect a
portion of the sales of our Manchester Plastics Co., Inc.
("Manchester") subsidiary.
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Results of Operations.
Three Months ended September 30, 1995 compared to three months ended
September 30, 1994
Net sales increased 32% from $6,647,171 for the three month
period ended September 30, 1994 to $8,771,275 for the three month
period ended September 30, 1995. The increase in revenue was
attributed to the improved performance of all subsidiaries, and
particularly that of Agricultural Products, Inc. ("API").
Cost of sales as a percentage of sales increased from 76.1%
during the the three month period ended September 30, 1994 to 77.6%
for the three month period ended September 30, 1995. The increase is
primarily attributed to the increase in plastic resin prices at API
and Manchester.
Selling, general and administrative expenses increased to
$1,332,273 as compared with $1,166,887 for the same period in the
prior year, an increase of 14%.
Net income for the current three-month period was $296,204 as
compared with $169,693, after provisions for income taxes of $210,700
and $126,000 for the three months ended September 30, 1995 and 1994,
respectively. Earnings per share increased to $0.10 from $0.06 per
share for the three months ended September 30, 1995 and 1994,
respectively. The increase in net income was attributed to the
improved performance of all subsidiaries, particularly that of API.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
None.
27.1 Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CALNETICS CORPORATION
(Registrant)
Dated: November 1, 1995 /s/ Clinton G. Gerlach
--------------------------------------
Clinton G. Gerlach
President
Dated: November 1, 1995 /s/ Teresa S. Louie
--------------------------------------
Teresa S. Louie
Treasurer
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