<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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 28, 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: 0-27992
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 in El Paso, Texas
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 October 28, 1997 was:
7,400,000
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ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets as of
September 28, 1997 and December 31, 1996..................... 1
Consolidated Statements of Earnings for the thirteen
and thirty-nine weeks ended September 28, 1997 and
September 29, 1996........................................... 2
Consolidated Statements of Cash Flows for the
thirty-nine weeks ended September 28, 1997 and
September 29, 1996........................................... 3
Notes to Consolidated Financial Statements..................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 6
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities............................... 8
Item 4. Submission of Matters to a Vote of Security Holders........... 8
Item 5. Other Information............................................. 8
Item 6. Exhibits and Reports on Form 8-K.............................. 9
SIGNATURES ............................................................ 10
</TABLE>
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Balance Sheets
(In U.S. Dollars)
<TABLE>
<CAPTION>
SEPTEMBER 28,
1997 DECEMBER 31,
(UNAUDITED) 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 15,716,770 6,269,825
Receivables
Trade accounts, less allowance for doubtful accounts............................ 14,555,337 13,944,948
Other receivables............................................................... 2,577,067 2,047,019
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Total receivables............................................................. 17,132,404 15,991,967
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Inventories, net.................................................................. 11,376,967 16,200,149
Prepaid expenses.................................................................. 713,156 492,933
------------- ------------
Total current assets.......................................................... 44,939,297 38,954,874
Property, plant and equipment, net.................................................. 29,932,647 28,610,719
Other assets, net................................................................... 1,116,718 410,460
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$ 75,988,662 67,976,053
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................. $ 7,235,398 8,886,613
Accrued expenses.................................................................. 4,370,741 2,292,682
Current obligations of capital leases............................................. 425,568 564,216
Taxes payable..................................................................... 1,497,873 1,286,132
Deferred income taxes, net........................................................ 1,379,783 1,379,783
Due to related parties............................................................ 174,377 86,743
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Total current liabilities..................................................... 15,083,740 14,496,169
Capital lease obligations, excluding current obligations............................ 617,866 923,273
Other liabilities................................................................... 287,875 212,403
Deferred income taxes, net.......................................................... 4,587,100 2,480,399
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Total liabilities............................................................. 20,576,581 18,112,244
Stockholders' equity:
Preferred stock, authorized 50,000,000 shares, none issued or outstanding......... -- --
Common stock, 22,400,000 authorized and 7,400,000 shares issued and outstanding... 35,010,468 35,010,468
Retained earnings................................................................. 20,401,613 14,853,341
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Total stockholders' equity.................................................... 55,412,081 49,863,809
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$ 75,988,662 67,976,053
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</TABLE>
See accompanying notes to consolidated financial statements.
1
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ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Earnings
(In U. S. Dollars)
(Unaudited)
<TABLE>
<CAPTION>
13 WEEKS ENDED 39 WEEKS ENDED
---------------------------- ----------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales............................................ $ 32,871,921 30,496,368 100,514,066 86,758,075
Cost of sales........................................ 28,656,054 25,097,059 86,596,906 72,262,592
------------- ------------- ------------- -------------
Gross Profit................................... 4,215,867 5,399,309 13,917,160 14,495,483
------------- ------------- ------------- -------------
Operating expenses:
General and administrative......................... 2,047,195 1,956,638 6,076,290 5,312,498
Selling............................................ 164,286 196,719 509,413 530,434
------------- ------------- ------------- -------------
Total operating expenses....................... 2,211,481 2,153,357 6,585,703 5,842,932
------------- ------------- ------------- -------------
Operating income............................... 2,004,386 3,245,952 7,331,457 8,652,551
------------- ------------- ------------- -------------
Other income (expense):
Interest income.................................... 187,371 89,774 310,341 191,411
Interest expense................................... (49,629) (224,363) (150,785) (859,952)
Other, net......................................... 214,028 68,764 435,091 521,484
------------- ------------- ------------- -------------
Total other income (expense)................... 351,770 (65,825) 594,647 (147,057)
------------- ------------- ------------- -------------
Income before income taxes..................... 2,356,156 3,180,127 7,926,104 8,505,494
Income tax provision............................... 625,448 860,010 2,377,831 2,721,758
------------- ------------- ------------- -------------
Net income..................................... $ 1,730,708 2,320,117 5,548,273 5,783,736
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net income per common share.......................... $ 0.23 0.31 0.75 0.86
Weighted average shares outstanding.................. 7,400,000 7,400,000 7,400,000 6,705,495
------------- ------------- ------------- -------------
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</TABLE>
See accompanying notes to consolidated financial statements.
2
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ELAMEX, S.A.DE C.V. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In U.S. Dollars)
(Unaudited)
<TABLE>
<CAPTION>
39 WEEKS ENDED
----------------------------
SEPTEMBER 28 SEPTEMBER 29,
1997 1996
------------- -------------
<S> <C> <C>
Cash flows provided (used) by operating activities:
Net income........................................................................ $ 5,548,273 5,783,736
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization................................................. 3,088,648 2,185,279
Allowance for doubtful trade accounts receivable.............................. (91,869) 224,917
Allowance for excess and obsolete inventory................................... 9,598 433,601
Deferred income taxes, net.................................................... 2,106,701 2,395,801
Loss on disposal of property, plant and equipment............................. 175,114 --
Change in assets and liabilities:
Trade account receivable.................................................... 167,004 (2,401,144)
Other receivables........................................................... (505,917) (1,111,084)
Inventories................................................................. 5,215,109 (3,855,150)
Prepaid expenses............................................................ (220,223) (132,112)
Other assets................................................................ (706,258) (68,891)
Accounts payable............................................................ (1,651,215) (272,158)
Accrued expenses, taxes payable and due to related parties.................. 2,335,156 1,556,301
Other liabilities........................................................... 75,472 13,874
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Net cash provided by operating activities................................. 15,545,593 4,752,970
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Cash flows used by investing activities:
Purchase of property, plant and equipment..................................... (2,177,760) (4,948,049)
Purchase of plastics operating assets......................................... (3,868,903) --
Proceeds from sale of property, plant and equipment........................... 392,070 --
------------- -------------
Net cash used by investing activities..................................... (5,654,593) (4,948,049)
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Cash flows provided (used) by financing activities:
Decrease in notes payable..................................................... -- (500,000)
Proceeds from long term debt.................................................. -- 2,500,000
Repayment of long-term debt................................................... -- (20,222,233)
Principal repayments of capital lease obligations............................. (444,055) (393,647)
Proceeds from sale of stock, net.............................................. -- 18,740,009
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Net cash provided (used) by financing activities.......................... (444,055) 124,129
Net increase (decrease) in cash and cash equivalents................................ 9,446,945 (70,950)
Cash and cash equivalents, beginning of period...................................... 6,269,825 2,848,628
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Cash and cash equivalents, end of period............................................ $ 15,716,770 2,777,678
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</TABLE>
See accompanying notes to consolidated financial statements.
3
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ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In U.S. Dollars)
September 28, 1997
(Unaudited)
(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 1996 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 and thirty-nine week periods ended
September 28, 1997 are not necessarily indicative of the results to be expected
for the entire year.
(2) Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 28, DECEMBER 31,
1997 1996
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<S> <C> <C>
Raw materials.................................... $ 10,719,745 12,998,270
Work-in-process.................................. 1,709,612 3,138,189
Finished goods................................... 947,277 1,961,415
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13,376,634 18,097,874
Reserve for excess and obsolete inventory........ (1,999,667) (1,897,725)
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$ 11,376,967 16,200,149
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</TABLE>
(3) Foreign Currency Translation
Included in "other, net" on the accompanying consolidated statements of
operations are a foreign exchange loss of $5,090 and a $317,331 gain for the
thirty-nine week periods ended September 28, 1997 and September 29, 1996,
respectively. Assets and liabilities denominated in pesos are summarized as
follows in U. S. dollars:
<TABLE>
<CAPTION>
SEPTEMBER 28, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Cash and cash equivalents........................ $ 429,892 957,000
Other receivables................................ 1,442,104 1,634,700
Prepaid expenses................................. 225,528 218,142
Other assets, net................................ 78,225 26,064
Accounts payable................................. (1,056,426) (1,542,331)
Accrued expenses and other liabilities........... (3,573,564) (2,206,667)
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Net non-U.S. currency position................... $(2,454,241) (913,092)
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</TABLE>
4
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ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In U.S. Dollars)
September 28, 1997
(Unaudited)
(4) Acquisition
On July 1, 1997, the Company completed the acquisition of Eurotec's
business, a Mexican plastic molding and metal stamping plant based in Cd.
Juarez, Mexico, through an asset based transaction. This acquisition expands the
Company's plastic molding injection capacity and adds metal stamping and powder
coat painting capabilities. This operation generated revenues of $7.9 million
dollars in 1996.
(5) Major Customers
During the thirteen weeks ended on September 28, 1997 we conducted the last
significant shipments to two of our major customers. For the year ended 1996,
these customers accounted for 16% and 14% of total sales. During the thirty-nine
weeks ended of 1997, sales to these customers represented 11% and 8% of total
sales. However, for this quarter, the reduction of revenue from these two
customers was compensated by the start up of new projects and increased sales to
existing customers.
(6) Income Taxes
Pursuant to Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes ("FAS 109"), the Company has estimated income taxes using an
expected effective tax rate of approximately 30% for the twelve months ended
December 31, 1997. The actual effective tax rate for the year ended December 31,
1997 may differ from that used to estimate taxes on September 28, 1997.
(7) Earnings per Share
Earnings per share on common stock ("EPS") for the thirty-nine weeks ended
September 28, 1997 and September 29, 1996 were calculated using the weighted
average number of common shares outstanding. The weighted average number of
common shares outstanding for the thirty-nine week period ended September 28,
1997 was 7,400,000, and the weighted average number of shares used to determine
EPS at September 29, 1996 was 6,705,495.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
The following table sets forth statement of earnings data as a percentage of
net sales, derived from Consolidated Financial Statements included elsewhere
herein, for each period presented, unless otherwise indicated.
PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
-------------------------------- --------------------------------
SEPTEMBER 28 SEPTEMBER 29 SEPTEMBER 28 SEPTEMBER 29
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales.................................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales................................................ 87.2 82.3 86.2 83.3
Gross profit................................................. 12.8 17.7 13.8 16.7
Selling, general and administrative expenses................. 6.7 7.1 6.6 6.7
Operating income............................................. 6.1 10.6 7.2 10.0
Other income (expense)....................................... 1.1 (0.2) 0.6 (0.2)
Income before income taxes................................... 7.2 10.4 7.8 9.8
Income tax provision......................................... 1.9 2.8 2.4 3.1
Net income................................................... 5.3 7.6 5.4 6.7
</TABLE>
Net Sales for the thirteen weeks ended September 28, 1997 increased 7.8% to
$32.9 million from $30.5 million for the comparable period of 1996. The increase
is primarily due to a rise in sales to new and existing customers that either
increased volume or started new products. For the thirteen weeks ended September
28, 1997, the Company's sales mix changed from that of the comparable period of
1996, as turnkey sales increased slightly.
Gross Profit decreased 21.9% to $4.2 million or 12.8% as a percentage of
sales, for the thirteen weeks ended September 28, 1997, as compared to $5.4
million or 17.7% as a percentage of sales, for the same period of the prior
year. The Gross Margin decrease was due primarily to wage inflation without peso
devaluation, in addition to a change in the business structure of some assembly
contracts.
Selling, General and Administrative (SG&A) Expenses increased 2.7% to $2.2
million for the thirteen weeks ended September 28, 1997, compared to $2.1
million for the same period of the prior year. SG&A Expenses decreased as a
percentage of sales to 6.7% for the thirteen weeks ended September 28, 1997,
compared to 7.1% for the thirteen weeks ended the same period in 1996.
Operating Income decreased by 38.2% to $2.0 million, or 6.1% of net
sales, for the thirteen weeks ended September 28, 1997, from $3.2 million, or
10.6% of net sales, for the thirteen weeks ended September 29, 1996. The
decrease in operating income as a percentage of sales was mainly a result of
the Gross Margin decrease.
Income tax provision decreased to $0.6 million, or 1.9% of net sales for the
thirteen weeks ended September 28, 1997, from $0.9 million or 2.8% of net sales
for the thirteen weeks ended September 29, 1996. The estimated effective tax
rate was 27% for the thirteen weeks ended September 28, 1997 and September 29,
1996. The estimated effective tax rate for the thirty-nine weeks ended September
28, 1997 was 30%, as compared to 32% for the same period ended 1996. The
difference between the estimated tax rate of 30% and the statutory tax rate of
34% for 1997, is caused by inflation adjustments on tax attributes in Mexico,
denominated in pesos.
6
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LIQUIDITY AND CAPITAL RESOURCES
During the thirty-nine weeks ended September 28, 1997, the Company had gross
operating funds of $10.8 million, which consisted of net income of $5.5 million
plus depreciation and amortization of $3.1 million, in addition to deferred
taxes and allowances and a loss on disposal of property, plant and equipment of
$2.2 million. This flow of funds financed a net increase in receivables of $0.3
million and prepaid and other assets of $0.9 million, in addition to a decrease
in accounts payable of $1.7 million, which were offset by a net decrease in
inventories of $5.1 million, and an increase in accrued expenses and other
liabilities of $2.4 million, resulting in net cash provided by operations of
$15.5 million. The decrease in inventory was due to the phasing out of several
products. Cash provided by operations allowed the Company to pay down $0.4
million of capital lease obligations and to invest $5.7 million in property,
plant, and equipment and the acquisition of operating assets, net of proceeds
from the sale of equipment.
The Company had the following lines of credit, outstanding borrowings, and
significant capital leases at September 28, 1997:
<TABLE>
<CAPTION>
LENDER OR AMOUNT OUTSTANDING AT INTEREST RATE AT
CLASS OF SECURITIES TYPE SEPTEMBER 28, 1997 SEPTEMBER 28, 1997 MATURITY DATE
- ---------------------- ---------------------- --------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
Comerica Bank $10 million Line of
Credit $ -- 9.00% May 1, 1999
Bank of America N.T. & $10 million Line of
S.A. Credit -- 8.91% December 15, 1999
Norwest Bank El Paso $5 million Line of
Credit -- 8.50% December 6, 2001
Amplicon Financial $1.3 million Capital
Lease 1,042,230 7.92% December 15, 1999
---------------
Total $ 1,042,230
</TABLE>
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. As of September 28, 1997 the Company believes it
was in compliance with all material covenants related to its debt obligations.
7
<PAGE>
PART II
OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Security Holders during the period
covered by this report.
ITEM 5. OTHER INFORMATION
Elamex, S.A. de C.V. intends to provide periodic reports according to
Section 13 of the Securities Exchange Act of 1934, as amended, and the rules
promulgated thereunder. It expects that its annual reports will be filed on Form
10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, or
equivalent forms, following the customary time deadlines therefor; but, as a
foreign private issuer, it is entitled to report on Form 20-F and Form 6-K and
it hereby reserves all of its rights to use such forms or their equivalent as
permitted for such an issuer under applicable laws, rules and regulations.
8
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------------
<C> <S>
3 Estatutos Sociales (By-Laws) of the Registrant (including English translation).*
</TABLE>
- ------------------------
* 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.
9
<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.
ELAMEX, S.A. DE C.V.
DATE: October 31, 1997 By: /S/ HECTOR RAYNAL
---------------------------------
HECTOR M. RAYNAL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(DULY AUTHORIZED OFFICER)
DATE: October 31, 1997 By: /S/ CARLOS MARTENS
---------------------------------
CARLOS D. MARTENS
VICE-PRESIDENT OF FINANCE AND
CHIEF FINANCIAL OFFICER
10
