SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: March 31, 1996
Commission file Number: 333-1448
SPURLOCK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Virginia 84-1019856
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
5090 General Mahone Hwy, Waverly, VA 23890
(Address and zip code of principal executive offices)
(804) 834-3113
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required 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 the filing
requirements for at least the past 90 days.
YES [ ] NO [X]
Indicate the number of shares outstanding of each of the issuer/s classes of
common stock, as of the last practicable date:
Number of Shares Outstanding
Class as of March 31, 1996
Common Stock, no par value 100
<PAGE>
SPURLOCK INDUSTRIES, INC.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Spurlock Industries, Inc. (the "Registrant") had no activity for the period
ended March 31, 1996. The financial statements and notes thereto included in
this Form 10-Q reflect the consolidated financial position and results of
operations of Air Resources Corporation, a Colorado corporation, (the
"Company") for the period ended March 31, 1996. A plan of merger was approved
by the shareholders of the Company, at a special meeting of shareholders held
on June 11, 1996. The Registrant presently expects the merger to become
effective on or before July 15, 1996.
<PAGE>
<TABLE>
AIR RESOURCES CORP.
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and Cash Equivalents $ 352,074 $ 250,751
Trading Securities 297,500 200,000
Accounts Receivable - Trade 1,825,390 1,813,775
Other Accounts Receivable 9,500 62,179
Accounts and Notes Receivable
- officers current portion 40,458 40,520
Inventories 646,151 595,765
Deferred tax asset 98,300 98,300
Prepaid Expenses 127,879 38,124
--------------- -------------
Total current assets $ 3,397,182 $ 3,099,414
Property, plant and equipment, net
of accumulated depreciation of
$3,703,385 and $3,559,436 5,904,470 5,712,885
Other assets:
Accounts and Notes Receivable - officers 123,182 118,119
Investments 150,000 150,000
Other 83,290 262,550
------------- ------------
$ 9,658,124 $ 9,342,968
============== ============
</TABLE>
<PAGE>
<TABLE>
AIR RESOURCES CORP.
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
March 31, December 31,
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable - Line of Credit $ 1,167,040 $ 1,329,096
Notes Payable - Other 75,672 82,447
Current portion of long-term debt 832,838 993,590
Accounts Payable 1,879,214 2,069,561
Accrued Expenses 415,240 249,922
Amounts due stockholders and
related parties 81,094 95,622
Deferred Rent 480,070 510,070
------------ -----------
Total current liabilities 4,931,168 5,330,308
Long-term debt 965,364 983,652
Deferred tax liability 353,793 109,900
Stockholders' equity
Preferred stock, convertible,
$2 par value, 5,000,000 shares
authorized, 1,200,000 issued and
outstanding 0 2,400,000
Common stock, $.001 par value,
50,000,000 shares authorized,
6,725,066 shares
issued and outstanding 6,725 4,325
Paid in capital 4,922,089 2,524,489
Retained earnings (1,521,015) (2,009,706)
-------------- ------------
3,407,799 2,919,108
-------------- ------------
$ 9,658,124 $ 9,342,968
============= ============
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
AIR RESOURCES CORP.
Consolidated Statements of Operations
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
Three Months Ended
March 31,
1996 1995
<CAPTION>
<S> <C> <C>
Revenues:
Net Sales $ 7,473,167 $ 10,427,776
Cost of Sales 5,471,222 9,125,106
------------- -------------
2,001,945 1,302,670
Selling, general and
administrative expenses 1,017,729 823,311
------------- ------------
Income (Loss) from operations 984,216 479,359
Other income and (expense):
Other income 9,604 2,922
Interest expense (109,337) (160,622)
------------- ----------
(99,733) (157,700)
Net Income before income taxes 884,483 321,659
Provision for income taxes 353,793 0
------------- ----------
Net income (loss) $ 530,690 $ 321,659
============ ==========
Net income (loss)
per share $ .079 $ .074
=========== ==========
Average shares
outstanding 6,725,066 4,326,066
============ ===========
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
AIR RESOURCES CORP.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1996 and 1995
1996 1995
<CAPTION>
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 530,690 $ 321,661
Adjustments to reconcile net
income to net cash provided
by operating activities
Depreciation 143,950 151,765
----------- -----------
Total from operations 674,640 473,426
Change in assets and
liabilities:
(Increase) decrease in assets:
Trading Securities (97,500) 0
Accounts Receivable 41,196 (313,061)
Inventories (50,386) 492,226
Prepaid Expenses (89,755) (322,620)
Fixed Assets (335,535) (53,387)
Other Assets 174,197 185,769
(Decrease) increase in liabilities:
Accounts Payable and Accrued Expenses (67,029) (1,709,179)
Notes and Loans Payable (392,399) 1,365,012
Deferred Tax Liability 243,893 0
------------- ------------
Total adjustments (573,318) (355,240)
Net cash provided by (used in)
operating activities 101,323 118,186
------------ ------------
Cash and cash equivalents,
beginning of period 250,750 76,984
------------ -----------
Cash and cash equivalents,
end of period $ 352,074 $ 195,170
============ ===========
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
AIR RESOURCES CORP.
Notes to Consolidated Financial Statements
March 31, 1996
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year.
Income taxes were computed using a statutory rate of 34% net of the effects of
federal surtax exemptions and deductions for state income taxes.
Income (loss) per share was computed using the weighted average number of
common shares outstanding.
<PAGE>
AIR RESOURCES CORP.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
For the three months ended March 31, 1996, the Company generated net income
after tax of $530,793 or $0.08 per share of common stock as compared to net
income of $321,661 or $0.07 per share of common stock, for the same period
last year.
The Company's net sales for the three months ended March 31, 1996 were
$7,473,167 as compared to $10,427,777 for the same period for 1995. All the
sales were from shipments of resin and formaldehyde by the Company's wholly
owned subsidiary, Spurlock Adhesives, Inc. The decrease in sales as compared
to the same period in 1995 can be attributed to reduced raw material cost and
lower average selling prices. Product volume shipments were very similar
between the two periods.
Cost of goods sold for the first quarter were $5,471,222 or 73.2% of net sales
as compared to $9,125,105 or 87.5% of net sales for the same period in 1995.
The decrease in cost of goods sold as a percentage of net sales is primarily a
result of a concerted effort by the Company to improve its profit margins on
its products and a decrease in raw material costs. Another factor is a change
in the Company's working capital credit facilities that took effect late in
the first quarter of 1995 which reclassified certain charges as interest
expense that previously had been deducted directly from gross sales.
The Company began to accrue for state income taxes in the third quarter of
1995 and started to accrue for federal income taxes in the first quarter of
1996. The total tax accrual for the first quarter was $353,793.
Operating expenses (sales, general & administrative expenses) for the first
quarter were $1,017,729 or 13.6% of net sales as compared to $823,312 or 7.9%
of net sales for the same period in 1995.
Interest expense was $109,337 or 1.5% of net sales as compared to $160,621 or
1.5% of net sales in 1995. The decrease in interest expense is a direct
result of the lower net sales, as the balance on the Company's working capital
line of credit is lower due to the lower net sales.
Liquidity and Capital Resources
Operating Activities
Net cash provided by operating activities was $674,640 and $473,426 for the
three months ended March 31, 1996 and 1995, respectively. At March 31, 1996
and 1995, working capital was $(2,180,137) and $(2,826,659), respectively.
Investing Activities
Net cash used for investing activities of $357,783 and $11,073 for the three
months ended 1996 and 1995, respectively, reflects primarily capital
expenditures.
Financing Activities
Net cash used for financing activities was $ 215,535 and $(344,167) for the
three months ended 1996 and 1995, respectively.
Management believes that its present working capital position, combined with
projected cash flows from operations and available borrowing capacity will be
sufficient to meet the Company's 1996 anticipated cash requirements for
operating needs and projected capital expenditures.
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the special meeting of the Company's shareholders held on June 11,
1996, the following matter was voted on:
To approve the Agreement and Plan of Merger by and between Air
Resources and Spurlock Industries, Inc., dated as of February 15,
1996, which was previously adopted by the Board of Directors of
Air Resources (the 'Plan"). If the plan is approved by
shareholders at the special meeting, Air Resources will be
converted from a Colorado chartered corporation to a Virginia
chartered corporation by merging into Spurlock Industries, Inc.,
and each outstanding share of Air Resources' common stock, par
value $.OO1 per share ("Air Resources Common Stock"), will be
converted into the right to receive one share of Spurlock
Industries, Inc. common stock, no par value ("Spurlock Industries
Common Stock"). All outstanding options to purchase Air
Resources Common Stock shall be converted on the same basis into
options to purchase shares of Spurlock Industries' Common Stock.
The following number of affirmative, negative and abstention
votes were cast with respect to the matter:
Votes For Votes Against Abstain
4,795,792 200,555 925
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The registrant has included the following exhibits pursuant
to Item 601 of Regulation S-K.
Exhibit No. Description
11 Statement re: Computation of Per Share
Earnings.
27 Financial Data Schedule
<PAGE>
SPURLOCK INDUSTRIES, INC.
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.
SPURLOCK INDUSTRIES, INC.
(Registrant)
Dated: June 20, 1996 By: /s/H. Norman Spurlock, Jr.
H. Norman Spurlock, Jr.
Vice-President and Secretary
Chief Financial Officer
Dated: June 20, 1996 By: /s/Warren E. Beam, Jr.
Warren E. Beam, Jr.
Treasurer and Controller
Chief Accounting Officer
<PAGE>
Exhibit Index
Exhibit No. Description
11 Statement re: Computation of Per Share
Earnings.
27 Financial Data Schedule
<PAGE>
<TABLE>
EXHIBIT 11
AIR RESOURCES CORP.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
Three Months Ended
March 31,
1996 1995
<CAPTION>
<S> <C> <C>
Earnings:
Net Income $ 530,690 $ 321,669
========== ==========
Shares:
Weighted Average number of shares used in
computing primary and fully diluted earnings
per share 6,725,066 6,666,066
========= =========
Earnings per share: .079 .048
==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 352,074
<SECURITIES> 297,500
<RECEIVABLES> 1,825,390
<ALLOWANCES> 0
<INVENTORY> 646,151
<CURRENT-ASSETS> 3,397,182
<PP&E> 9,607,855
<DEPRECIATION> 3,703,385
<TOTAL-ASSETS> 9,658,124
<CURRENT-LIABILITIES> 4,931,168
<BONDS> 0
0
0
<COMMON> 6,725
<OTHER-SE> 3,401,074
<TOTAL-LIABILITY-AND-EQUITY> 9,658,124
<SALES> 7,473,167
<TOTAL-REVENUES> 7,473,167
<CGS> 5,471,222
<TOTAL-COSTS> 5,471,222
<OTHER-EXPENSES> 1,017,729
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 109,337
<INCOME-PRETAX> 884,483
<INCOME-TAX> 353,793
<INCOME-CONTINUING> 530,690
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 530,690
<EPS-PRIMARY> .079
<EPS-DILUTED> .079
