- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission file number
March 31, 1996 0-27992
ELAMEX, S.A. de C.V.
(Exact name of registrant as specified in its charter)
Mexico Not Applicable
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
Avenida Insurgentes No. 4145-B Ote.
Cd. Juarez, Chihuahua Mexico C.P. 32340
(Address of principal executive offices) (Zip code)
(915) 774-8252
Registrant's telephone number, including area code
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
--- ---
The number of shares of Class I Common Stock, no par value of the
Registrant outstanding as of May 1, 1996 was:
7,400,000
- --------------------------------------------------------------------------------
<PAGE>
Item 1. Financial Statements
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Balance Sheets
(In U. S. Dollars)
<TABLE>
<CAPTION>
March 31,
1996 December 31,
(unaudited) 1995
-------------- ----------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,784,910 2,848,628
Receivables:
Trade accounts, less allowance for doubtful accounts 15,225,666 14,860,718
Other 1,566,142 831,740
-------------- ----------------
Total receivables 16,791,808 15,692,458
-------------- ----------------
Inventories, net 13,169,671 11,358,182
Prepaid expenses 603,425 686,766
-------------- ----------------
Total current assets 35,349,814 30,586,034
Property, plant and equipment, net 24,035,465 24,022,728
Other assets, net 359,081 501,726
-------------- ----------------
$ 59,744,360 55,110,488
============== ================
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ - 2,000,000
Accounts payable 7,581,046 7,134,943
Accrued expenses 3,108,836 1,902,198
Current installments of long-term debt 424,387 2,691,054
Current obligations of capital leases 565,304 565,555
Taxes payable 660,384 861,797
-------------- ----------------
Total current liabilities 12,339,957 15,155,547
Subordinated debentures - 2,044,558
Long-term debt, excluding current installments 1,537,158 12,986,621
Capital lease obligations, excluding current obligations 85,022 181,062
Other liabilities 194,623 181,964
Deferred income taxes, net 2,046,112 1,364,407
-------------- ----------------
Total liabilities 16,202,872 31,914,159
Stockholders' equity:
Preferred stock - -
Common stock, 7,400,000 and 5,000,000 shares issued and
outstanding at March 31, 1996 and December 31, 1995 35,170,468 16,270,459
Retained earnings 8,371,020 6,925,870
-------------- ----------------
Total stockholders' equity 43,541,488 23,196,329
-------------- ----------------
Commitments and contingencies - -
$ 59,744,360 55,110,488
============== ================
See accompanying notes to consolidated financial statements.
</TABLE>
-2-
<PAGE>
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Earnings
(In U. S. Dollars)
(Unaudited)
<TABLE>
<CAPTION>
13 weeks ended
--------------------------------------
March 31, April 2,
1996 1995
---------------- ----------------
<S> <C> <C>
Net sales $ 25,337,202 24,947,155
Cost of sales 21,484,408 21,338,389
---------------- ----------------
Gross Profit 3,852,794 3,608,766
---------------- ----------------
Operating expenses:
General and administrative 1,499,361 1,408,377
Selling 170,938 169,615
---------------- ----------------
Total operating expenses 1,670,299 1,577,992
---------------- ----------------
Operating income 2,182,495 2,030,774
---------------- ----------------
Other income (expense)
Interest income 58,810 261,453
Interest expense (508,699) (514,430)
Other, net 489,334 (576,123)
---------------- ----------------
Total other income (expense) 39,445 (829,100)
---------------- ----------------
Income before income taxes 2,221,940 1,201,674
Income tax provision 776,790 295,750
---------------- ----------------
Net income $ 1,445,150 905,924
================ ================
Net income per common share 0.27 0.17
=============== ================
Weighted average shares outstanding 5,316,484 5,000,000
=============== ================
See accompanying notes to consolidated financial statements.
</TABLE>
-3-
<PAGE>
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In U. S. Dollars)
(Unaudited)
<TABLE>
<CAPTION>
13 weeks ended
---------------------------------------
March 31, April 2,
1996 1995
---------------- ----------------
<S> <C> <C>
Cash flows provided by operating activities:
Net income $ 1,445,150 905,924
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 702,754 536,955
Allowance for doubtful trade accounts receivable (9,030) (43,826)
Allowance for excess and obsolete inventory 15,138 659,979
Deferred income taxes, net 681,705 180,987
Change in assets and liabilities:
Increase in trade accounts receivable (355,918) (2,147,740)
Increase in other receivables (734,402) (36,494)
Increase in inventories (1,826,627) (328,437)
(Increase) decrease in prepaid expenses 83,341 (36,904)
Decrease in other assets 54,243 41,304
Increase in accounts payable 446,103 214,164
Increase in accrued expenses, related
party, and taxes payable 1,005,225 459,378
Increase (decrease) in other liabilities 12,659 (61,649)
---------------- ----------------
Net cash provided by operating activities 1,520,341 343,641
---------------- ----------------
Cash flows used by investing activities:
Purchase of property, plant and equipment (627,089) (423,607)
---------------- ----------------
Cash flows provided by financing activities:
Net increase (decrease) in notes payable (2,000,000) 3,000,000
Proceeds from long-term debt 2,500,000 886,772
Repayment of long-term debt (18,260,688) (200,000)
Principal repayments of capital lease obligations (96,291) (139,408)
Proceeds from sale of stock, net 18,900,009 -
---------------- ----------------
Net cash provided by financing activities 1,043,030 3,547,364
---------------- ----------------
Net increase in cash and cash equivalents 1,936,282 3,467,398
Cash and cash equivalents, beginning of period 2,848,628 1,694,987
---------------- ----------------
Cash and cash equivalents, end of period $ 4,784,910 5,162,385
================ ================
See accompanying notes to consolidated financial statements.
</TABLE>
-4-
<PAGE>
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In U.S. Dollars)
March 31, 1996
(1) General
The financial statements of Elamex, S.A. de C.V. and subsidiaries
("Elamex" or the "Company") are unaudited and certain information and footnote
disclosures normally included in financial statements have been omitted. While
the management of the Company believes that the disclosures presented are
adequate, interim financial statements should be read in conjunction with the
financial statements and notes included in the Company's 1995 annual report on
Form 10-K.
In the opinion of management, the accompanying unaudited financial
statements contain all normal recurring adjustments necessary for a fair
presentation of the Company's financial statements for the interim period. The
results of operations for the thirteen-week period ended March 31, 1996 are not
necessarily indicative of the results to be expected for the entire year.
(2) Foreign Currency Translation
Included in "other" on the accompanying consolidated statements of
operations are foreign exchange gains (losses) of $440,084 and ($555,798) for
the quarters ended March 31, 1996 and April 2, 1995, respectively. Assets and
liabilities denominated in pesos are summarized as follows in U. S. dollars:
March 31, December 31,
1996 1995
--------- ------------
Cash and cash equivalents $ 868,329 73,000
Other receivable 1,173,253 585,491
Prepaid expenses 162,352 363,796
Other assets, net 52,651 42,905
Accounts payable (212,611) (101,662)
Accrued expenses (1,661,574) (961,973)
Other liabilities (194,623) (598,257)
----------- ----------
$ 187,777 (596,700)
=========== ==========
(3) Earnings per Share
Earnings per share of common stock ("EPS") for the period ended March 31,
1996 was calculated using the weighted average of common shares outstanding. EPS
for the period ended April 2, 1995 were calculated using the number of common
shares outstanding immediately prior to the date of the stock sale. Weighted
average shares outstanding at March 31, 1996 were 5,316,484, and shares used to
determine EPS at April 2, 1995 were 5,000,000. Amounts attributed to the rights
of holders of senior securities of $56,454 were deducted from April 2, 1995 net
income in arriving at the earnings per share amount for that period. There were
no amounts attributable to the rights of senior securities for the thirteen
weeks ended March 31, 1996.
-5-
<PAGE>
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In U.S. Dollars)
March 31, 1996
(4) Income Taxes
Pursuant to Statement of Financial Account Standards No. 109, Accounting
for Income Taxes ("FAS 109"), the Company has estimated income taxes using an
expected effective tax rate for the twelve months ended December 31, 1996. The
actual effective tax rate for the year ended December 31, 1996 may differ from
that used to estimate taxes at March 31, 1996.
(5) Inventories
Inventories consist of the following:
March 31, December 31,
1996 1995
--------- ------------
Raw materials $ 10,750,365 8,717,922
Work-in-process 1,496,752 2,286,032
Finished goods 2,409,059 1,825,595
--------- ---------
14,656,176 12,829,549
Reserve for excess and obsolete inventory (1,486,505) (1,471,367)
---------- ----------
$ 13,169,671 11,358,182
========== ==========
(6) Sale of Common Stock and Long-Term Debt
Effective March 19, 1996, the Company completed a public offering of
2,400,000 shares of Class I, no par value, common stock. The shares are traded
on the NASDAQ National Market. The total amount of common stock outstanding
after the offering is 7,400,000 shares. Upon completion of the offering, Accel,
S.A. de C.V. ("Accel") remained the Company's majority stockholder; accordingly,
Accel has the ability to elect a majority of the Company's directors, subject to
certain limitations, and will continue to control the Company. Proceeds from the
public offering net of expenses of $2,700,000 were approximately $18,900,000.
During March 1996, the Company used proceeds from its initial public
offering to pay approximately $15,900,000 of long-term debt and subordinated
debentures, including accrued interest. The only long-term debt agreement that
was not paid is a note payable to a financing corporation, due August 30, 1999
and bearing interest at a rate of 13.64% per annum. The balance outstanding at
March 31, 1996 was $1,961,545. Prepayment of this note is subject to penalty.
(7) Stockholders Equity
On April 18, 1996, at the Company's annual stockholders' meeting,
$897,406 of retained earnings was reserved for the future repurchase and
cancellation of outstanding common stock.
-6-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Results of Operations
General
The following table sets forth income statement data as a percentage of
net sales, derived from Consolidated Financial Statements included elsewhere
herein, for each period indicated, unless otherwise indicated.
Percentage of Net Sales
<TABLE>
<CAPTION>
Thirteen weeks ended,
-----------------------------------
March 31, April 2,
1996 1995
--------- --------
(unaudited) (unaudited)
<S> <C> <C>
Net sales................................................. 100.0% 100.0%
Cost of sales............................................ 84.8 85.5
Gross profit............................................. 15.2 14.5
Selling, general and administrative expenses............. 6.6 6.3
Operating income......................................... 8.6 8.1
Other income (expense), net.............................. 0.2 (3.3)
Income before income taxes............................... 8.8 4.8
Income tax provision..................................... 3.1 1.2
Net income (loss)........................................ 5.7 3.6
</TABLE>
Net Sales. Net sales for the thirteen weeks ended March 31, 1996
increased 1.6% to $25.3 million from $24.9 million in the comparable period of
1995. For the thirteen weeks ended March 31, 1996 the Company's sales mix
changed from that of the comparable period of 1995, as assembly sales increased
while turnkey sales slightly decreased.
Gross Profit. Gross profit increased 6.8%, to $3.9 million in the
thirteen weeks ended March 31, 1996 compared to $3.6 million for the same period
of the prior year. Gross profit as a percentage of net sales ("gross margin")
increased to 15.2% in the thirteen weeks ended March 31, 1996 from 14.5% for the
comparable period of 1995 due primarily to a shift in the Company's sales mix
toward assembly services. Economies of scale in utilization of the Company's
manufacturing facilities also contributed to the increased gross margin.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 5.9% to $1.7 million, or 6.6% of net sales, in
the thirteen weeks ended March 31, 1996, as compared to $1.6 million, or 6.3% of
net sales, in the thirteen weeks ended April 2, 1995. This increase resulted in
part from an increase in costs associated with personnel restructuring in
several departments, in addition to an increase in other corporate expenses.
Operating Income. Operating income increased by 7.5% to $2.2 million, or
8.6% of net sales, in the thirteen weeks ended March 31, 1996 from $2.0 million,
or 8.1% of net sales, in the thirteen weeks ended April 2, 1995, as a result of
the above factors, the most significant of which were changes in sales mix and
the economies of scale described under "-Gross Profit".
-7-
<PAGE>
Other income (expense), net. Interest and other expenses were offset by
other income and interest income, netting $39,000 or 0.2% of sales, compared
with $(0.8) million or (3.2%) of net sales, in the thirteen weeks ended April 2,
1995. This decrease resulted principally from a translation loss on a foreign
currency net asset position in the first quarter of 1995, in addition to
decreased borrowings and lower interest rates as compared with the same period
of the prior year.
Income tax. Income tax expense increased to $0.7 million, or 3.1% of
sales for the thirteen weeks ended March 31, 1996, from $0.2 million or 1.2% for
the comparable period in 1995. This increase was due to an increase in the
effective tax rate.
Liquidity and Capital Resources
During the thirteen weeks ended March 31, 1996, the Company's operations
provided $1.9 million of cash flow, consisting of net income of $1.4 million
plus depreciation and amortization of $0.7 million, which was offset by a net
$1.5 million use of cash resulting in increases in current assets and decreases
in current liabilities. During this period, the Company had cash inflows from
financing activities of $1.0 million and invested $0.6 million in property,
plant and equipment. Included in financing activities are net proceeds from its
initial public offering of approximately $18.9 million.
The Company had the following lines of credit and outstanding borrowings
at March 31, 1996:
<TABLE>
<CAPTION>
Amount Interest
Lender or Outstanding at Rate at
Class of Securities Type March 31, 1996 March 31, 1996 Maturity Date
- ------------------- ---- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Comerica Bank $10 million Line of Credit $ - 9.0% May 1, 1998
Bank of America
N.T. & S.A. $7 million Line of Credit - 8.6 April 23, 1996 <F1>
Confia S.A $2.2 million Line of Credit - 9.0 January 8, 1997
AT&T Credit
Corporation Term Loan 1,961,545 13.64 August 30, 1999
----------
Total $1,961,545
<FN>
- --------------
<F1> Negotiations for the renewal of this credit line are now taking place.
</FN>
</TABLE>
Effective March 19, 1996 the Company completed an initial public
offering of 2,400,000 shares of Class I common stock, no par value, the net
proceeds of which were approximately $18,900,000 and were used to pay
$15,900,000 of outstanding debt, including the Company's subordinated
debentures. The remaining $3,000,000 was used as working capital.
Under its several credit agreements, Elamex has committed to maintain:
(a) a debt service coverage ratio of 1.3, (b) a current ratio no lower than
1.25, (c) a leverage ratio (defined as the ratio of senior indebtedness to the
sum of capital plus subordinated indebtedness) no greater than 1.5 and (d)
equity plus subordinated indebtedness of no less than $18 million. The Company
may not invest in or advance significant amounts to other companies that are not
a party to one of the debt agreements. At March 31, 1996 the Company was in
compliance with all material covenants related to its debt obligations.
-8-
<PAGE>
PART II
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual General Ordinary Stockholders meeting was held on
April 18, 1996. At the meeting the following items were voted upon and passed:
(i) a resolution approving the Audited Financial Statements and Statutory
Auditor's Report for the fiscal year ended December 31, 1995 and ratifying,
confirming and approving all actions taken by the Board of Directors during
1995; (ii) a resolution dealing with the application of net income in accordance
with Mexican law and the Company's By-Laws, in which $897,406 were applied to
the stock repurchase fund; (iii) a resolution to elect Directors and the
Statutory Auditor, (iv) a resolution appointing KPMG Peat Marwick LLP. to be the
Company's independent auditors for the fiscal year that will end on December 31,
1996; and (v) a resolution approving payment of fees to the Board of Directors
and the Statutory Auditor. Each of these resolutions received 4,250,000 votes in
favor of passage. There were 3,150,000 abstentions. No negative votes, no
withheld votes and no broker non-votes were recorded.
The following nominees were elected to serve as Directors until the next
annual General Ordinary Stockholders meeting. Voting for Directors was as
follows:
Nominee For Abstaining
- --------------------------------------------------------------------------------
Eloy S. Vallina 4,250,000 3,150,000
Federico Barrio 4,250,000 3,150,000
Jesus Alvarez-Morodo 4,250,000 3,150,000
Hector M. Raynal 4,250,000 3,150,000
Jesus E. Vallina 4,250,000 3,150,000
Rafael Vallina 4,250,000 3,150,000
Eduardo L. Gallegos 4,250,000 3,150,000
Robert J. Whetten 4,250,000 3,150,000
Charles H. Dodson 4,250,000 3,150,000
Antonio L. Elias 4,250,000 3,150,000
Jerry W. Neely 4,250,000 3,150,000
-9-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description
------- -----------
3 Estatutos Sociales (By-Laws) of the Registrant (including
English translation).*
10.1 Modification Agreement Between Fonlyser, S.A. and Accel, S.A.
de C.V., with a translation in English, and subsequent
modification letter, with a translation in English.*
10.2 Credit Agreement with Confia, S.A., with a summary in English,
and renewal letter, with a translation in English.*
10.3 Revolving Credit Agreement with Comerica Bank.*
10.4 Contract for the Opening of Credit with Bancomer, S.A., with a
summary of subsequent modifications in English.*
10.5 Tax Sharing Agreement between Accel, S.A. de C.V. and Elamex
S.A. de C.V.*
10.6 Lease of Elamex de Juarez Plant #3, with a translation in
English.*
10.7 Lease of Elamex de Juarez Plant #4, with a translation in
English.*
10.8 Lease of Elamex de Juarez Plant #5, with a translation in
English.*
10.9 Lease of Elamex de Juarez Plant #9.*
10.10 Lease of Elamex de Nuevo Laredo Plant.*
10.11 Lease of Elamex de Torreon Plant.*
10.12 Executive Phantom Stock Plan.*
* Filed as an exhibit to the Company's Registration Statement on Form S-1, file
No. 333-01768
(b) No reports on Form 8-K were filed during the period covered by
this report.
-10-
<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, thereunto duly authorized, in Ciudad Juarez, Chihuahua, Mexico on
May 14, 1996.
ELAMEX, S.A. de C.V.
By: /s/ HECTOR M RAYNAL
Hector M. Raynal
President and Chief Executive Officer
By: /s/ SALVADOR ALMEIDA
Salvador Almeida
Vice President of Finance and
Chief Financial Officer
-11-
<PAGE>
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets as of
March 31, 1996 and December 31, 1995.................... 2
Consolidated Statements of Earnings for the thirteen
weeks ended March 31, 1996 and April 2, 1995............ 3
Consolidated Statement of Cash Flow for the thirteen
weeks ended March 31, 1996 and April 2, 1995............ 4
Notes to Consolidated Financial Statements.............. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders..... 9
Item 6. Exhibits and Reports on Form 8-K.........................10
SIGNATURES.................................................................11
<PAGE>
