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SECURITIES AND EXCHANGE COMMISSION
Washington DC 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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
33-96808
(Commission File Number)
Crain Industries, Inc.
(Exact name of Registrant as specified in charter)
Delaware
(State of other jurisdiction of incorporation or organization)
43-1714086
(I.R.S. Employer Identification No.)
101 South Hanley Road
St. Louis, MO 63105
314-719-0100
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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 the latest practicable date:
Outstanding at
Class October 31, 1997
----------------------- -------------------------
Crain Industries, Inc.
Common Stock 1,000 shares
<PAGE>
CRAIN INDUSTRIES, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996 1
Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 1997 and 1996 2
Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
1997 and 1996 3
Notes to Consolidated Financial Statements 4
Management's Discussion and Analysis of Financial Condition and Results of
Operations 5
PART II - OTHER INFORMATION 7
SIGNATURES 8
i
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<TABLE>
CRAIN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents..........................$ 2,395 $ 6,102
Accounts receivable, less allowance of $8,691
and $7,554, respectively.......................... 49,589 40,921
Inventories......................................... 37,468 30,025
Prepaid expenses and other......................... 3,237 3,014
Total current assets........................... 92,689 80,062
Property, plant and equipment, net................... 52,184 49,873
Intangible assets, net............................... 62,527 56,297
Deferred financing costs, net......................... 10,303 11,334
Other assets.......................................... 1,821 1,310
Total assets..................................... 219,524 198,876
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term obligations........ $ 245 $ 136
Accounts payable..................................... 29,768 23,320
Accrued and other liabilities......................... 9,593 9,790
Accrued interest...................................... 1,747 5,176
Accrued payroll and personnel......................... 5,941 6,986
Total current liabilities........................ 47,294 45,408
Long term obligations, less current maturities........127,833 118,182
Other long-term liabilities........................... 5,092 5,444
Stockholder's equity:
Common stock, $.01 par value, 1,000 shares
authorized, issued, and outstanding............. 0 0
Contributed capital................................. 39,466 29,492
Retained earnings (deficit)......................... (161) 350
Total stockholder's equity..................... 39,305 29,842
Total liabilities and stockholder's equity..... 219,524 $ 198,876
</TABLE>
1
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<TABLE>
CRAIN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<CAPTION>
Three Months ended Nine Months ended
September 30, September 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................$ 87,413 $ 83,234 $237,890 $226,191
Operating expenses:
Cost of goods sold.............. 68,930 65,883 186,663 180,111
Selling, general and
administrative.................... 10,397 9,112 30,207 25,206
Depreciation and amortization....... 3,164 2,529 8,661 6,567
Operating income....................... 4,922 5,710 12,359 14,307
Other expense (income):
Interest expense................... 3,781 3,079 11,567 10,851
Amortization of deferred
financing costs..................... 500 422 1,496 1,268
Other, net..............................33 (4) 120 (24)
Income (loss) before income
taxes....................................608 2,213 (824) 2,212
Provision (benefit) for income
taxes................................. 262 800 (313) 938
Net income (loss)....................$ 346 $ 1,413 $ (511) $ 1,274
</TABLE>
2
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<TABLE>
CRAIN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
1997 1996
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income........................... $ (511) $ 1,274
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and amortization.................8,661 6,567
Amortization of deferred financing costs..... 1,496 1,268
Change in assets and liabilities:
Accounts receivable....................... (6,274) (6,180)
Inventories.............................. (6,955) (819)
Prepaid expenses and other............... (1,043) (1,077)
Accounts payable......................... 5,035 4,751
Accrued and other liabilities........... (3,044) 4,678
Accrued interest......................... (3,429) (3,279)
Net cash from operating activities.......... (6,064) 7,183
Cash flows from investing activities:
Acquisition, net of cash................. (12,578) --
Capital expenditures..................... (4,325) (8,887)
Net cash from investing activities........... (16,903) (8,887)
Cash flows from financing activities:
Proceeds from borrowings of long-term
obligations................................. 84,071 73,802
Repayment of long-term obligations........ (74,785) (69,840)
Deferred purchase price payment............ -- (2,319)
Capital contributed........................ 9,974 (100)
Net cash from financing activities.......... 19,260 1,543
Net change in cash and cash equivalents..... (3,707) (161)
Cash and cash equivalents at beginning of the
period....................................... 6,102 1,983
Cash and cash equivalents at end of the period $2,395 $ 1,822
</TABLE>
3
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CRAIN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
1. BASIS OF PRESENTATION
Unaudited Interim Consolidated Financial Statements
The undaudited interim consolidated financial statements reflect
all adjustments consisting only of normal recurring adjustments
which are, in the opinion of management, necessary for a fair
presentation of financial condition and results of operations.
The results for the three and nine months ended September 30,
1997, are not necessarily indicative of the results that may be
expected for a full fiscal year.
Statement of Cash Flows
Interest paid for the nine months ended September 30, 1997 and
1996, is approximately $14,996 and $14,304, respectively.
Income taxes paid for the nine months ended September 30,
1997 and 1996, is approximately $215 and $101 respectively.
2. INVENTORIES
Inventories are valued at the lower of cost or market. Cost
is determined using the first-in, first-out (FIFO) method.
The composition of inventories at September 30, 1997, is as follows:
<TABLE>
<S> <C>
Raw materials........................................ $ 27,412
Finished goods....................................... 10,056
Total.............................................. $ 37,468
</TABLE>
4
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<TABLE>
CRAIN INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANLYSIS OF
FINANCIAL CONDITION AND RESULTS OPERATIONS
The following table sets forth the unaudited components of operating income
for the periods indicated and should be used in reviewing the discussion and
analysis of the results of operations and liquidity and capital resources.
<CAPTION>
Three Months ended Nine Months ended
September 30, September 30,
------------------- ------------------
(In thousands) 1997 1996 1997 1996
--------- ---------- -------- --------
<S> <C> <C> <C> <C>
Net sales................................$ 87,413 $ 83,234 $237,890 $226,191
Cost of goods sold....................... 68,930 65,883 186,663 180,111
Selling, general and administrative...... 10,397 9,112 30,207 25,206
Depreciation and amortization............ 3,164 2,529 8,661 6,567
Operating income.........................$ 4,922 $ 5,710 $ 12,359 14,307
</TABLE>
RESULTS OF OPERATIONS
Three months ended September 30, 1997 compared to the three months ended
September 30, 1996
Net sales for the three months ended September 30, 1997 were $87.4
million, which represented an increase of $4.2 million or 5.0% compared
to the same period in 1996. This increase in net sales was primarily
due to the incremental sales associated with the acquisitions of the
Comfort Clinic Division of Bio Clinic Corporation ("Comfort Clinic")
(October 18, 1996) and SIMCO Corporation ("Simco")(May 5, 1997)
(together, the "Acquisitions"), combined with an increase in carpet cushion
sales volume. This performance was partially offset by pricing pressures
experienced during the quarter and a decline in carpet cushion prices
resulting from decreasing scrap foam prices.
Cost of goods sold as a percent of sales improved to 78.9% for the three
months ended September 30, 1997 from 79.2% for the comparable period
of 1996. The change was primarily due to cost improvement activities
implemented during the year and cost reductions achieved from plant
consolidations made in 1996, partially offset by certain raw material price
increases.
Selling, general and administrative expenses were $10.4 million for the
three months ended September 30, 1997 as compared to $9.1 million for the
comparable period of 1996. This increase of $1.3 million primarily
reflected the incremental costs associated with the Acquisitions.
5
<PAGE>
Nine months ended September 30, 1997 compared to the nine months ended
September 30, 1996
Net sales for the nine months ended September 30, 1997 were $237.9
million compared to $226.2 million for the same period in 1996, which
represented an increase of $11.7 million or 5.2%. This increase in net
sales was primarily due to the incremental sales associated with the
Acquisitions, combined with an increase in carpet cushion sales volume.
This performance was partially offset by pricing pressures experienced
during the year, certain softness within the furniture industry and a
decline in carpet cushion prices resulting from decreasing scrap foam prices.
Cost of goods sold as a percent of sales improved to 78.5% for the nine
months ended September 30, 1997 from 79.6% for the nine months ended
September 30, 1996. The change was primarily due to cost improvement
activities implemented during the year and cost reductions achieved from
plant consolidations made in 1996, partially offset by certain raw material
price increases experienced during the third quarter of 1997.
Selling, general and administrative expenses were $30.2 million for the
nine months ended September 30, 1997 as compared to $25.2 million for
the comparable period of 1996. This increase of $5.0 million primarily
reflected the incremental costs associated with the Acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the nine months ended September
30, 1997 was $6.1 million, compared to $7.2 million provided by
operating activities in the comparable period of 1996. This fluctuation
was primarily due to changes in working capital associated with increased
sales and the timing of inventory receipts. Net cash used in investing
activities was $16.9 million for the nine months ended September 30, 1997,
which represented approximately $4.3 million of capital expenditures and
approximately $12.6 million associated with the Simco acquisition.
Net cash used in investing activities for the comparable period of
1996 was $8.9 million, which represented capital expenditures associated
with the plant consolidations made in 1996. Net cash provided from
financing activities for the nine months ended September 30, 1997 was
$19.3 million compared to a source of $1.5 million in the comparable
period of 1996. The $19.3 million in cash from financing activities
represents an equity contribution of approximately $10.0 million from Crain
Holdings Corp., the Company's sole shareholder, along with approximately
$9.3 million in borrowings under the Company's revolving credit facility.
6
<PAGE>
PART II. OTHER INFORMATION
Item 6.Exhibits and Reports on Form 8-K
............(a) Exhibits
............. 27.1 Financial data schedule of Crain Industries, Inc.
............(b) Reports on Form 8K
No reports on Form 8-K were filed for the three months ended
September 30, 1997.
7
<PAGE>
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 hereunto duly
authorized.
Date: November 13, 1997.................CRAIN INDUSTRIES, INC.
............ ........By: /s/ James N. Mills
...........................Name: James N. Mills
...........................Title: Chairman of the Board and
........................ Chief Executive Officer
...........................By: /s/ David M. Sindelar
..... .................Name: David M. Sindelar
...........................Title: Senior Vice President
8
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S>
<CIK> 0001000458
<NAME> Crain Industries, Inc.
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> $ 2,395
<SECURITIES> 0
<RECEIVABLES> 58,280
<ALLOWANCES> 8,691
<INVENTORY> 37,468
<CURRENT-ASSETS> 92,689
<PP&E> 68,764
<DEPRECIATION> 16,580
<TOTAL-ASSETS> 219,524
<CURRENT-LIABILITIES> 47,294
<BONDS> 127,833
0
0
<COMMON> 0
<OTHER-SE> 39,305
<TOTAL-LIABILITY-AND-EQUITY> 219,524
<SALES> 237,890
<TOTAL-REVENUES> 237,890
<CGS> 186,663
<TOTAL-COSTS> 225,531
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 785
<INTEREST-EXPENSE> 11,567
<INCOME-PRETAX> (824)
<INCOME-TAX> (313)
<INCOME-CONTINUING> (511)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (511)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
</DOCUMENT>
</SEC-DOCUMENT>
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