<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: June 29, 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)
<TABLE>
<S> <C>
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)
</TABLE>
(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 July 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 June 29, 1997 and December 31, 1996...... 1
Consolidated Statements of Earnings for the thirteen
and twenty-six weeks ended June 29, 1997 and June 30, 1996............... 2
Consolidated Statements of Cash Flows for the twenty-six weeks ended
June 29, 1997 and June 30, 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>
JUNE 29,
1997 DECEMBER 31,
(UNAUDITED) 1996
------------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................................................... $ 12,429,538 6,269,825
Receivables
Trade accounts, less allowance for doubtful accounts.............................. 17,820,617 13,944,948
Other receivables................................................................. 1,109,224 2,047,019
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Total receivables................................................................ 18,929,841 15,991,967
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Inventories, net.................................................................. 10,687,767 16,200,149
Prepaid expenses.................................................................. 856,466 492,933
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Total current assets............................................................. 42,903,612 38,954,874
Property, plant and equipment, net.................................................. 27,828,105 28,610,719
Other assets, net................................................................... 380,963 410,460
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$ 71,112,680 67,976,053
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable................................................................... $ 5,877,086 8,886,613
Accrued expenses................................................................... 3,280,248 2,292,682
Current obligations of capital leases.............................................. 468,165 564,216
Taxes payable...................................................................... 1,387,025 1,286,132
Deferred income taxes, net......................................................... 1,379,783 1,379,783
Due to related parties............................................................. -- 86,743
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Total current liabilities......................................................... 12,392,307 14,496,169
Capital lease obligations, excluding current obligations............................ 717,564 923,273
Other liabilities................................................................... 253,720 212,403
Deferred income taxes, net.......................................................... 4,067,715 2,480,399
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Total liabilities................................................................. 17,431,306 18,112,244
Stockholders' equity:
Preferred stock, authorized 50,000,000 shares,
none issued or outstanding........................................................ -- --
Common stock, authorized 22,400,000 shares,
7,400,000 issued and outstanding.................................................. 35,010,468 35,010,468
Retained earnings.................................................................. 18,670,906 14,853,341
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Total stockholders' equity........................................................ 53,681,374 49,863,809
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Commitments and contingencies....................................................... -- --
$ 71,112,680 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 26 WEEKS ENDED
--------------------------- --------------------------
<S> <C> <C> <C> <C>
JUNE 29, JUNE 30, JUNE 29, JUNE 30,
1997 1996 1997 1996
------------- ------------ ------------ ------------
Net sales............................................... $ 33,826,874 30,924,505 67,642,145 56,261,707
Cost of sales........................................... 28,559,425 25,681,125 57,940,852 47,165,533
------------- ------------ ------------ ------------
Gross Profit.......................................... 5,267,449 5,243,380 9,701,293 9,096,174
------------- ------------ ------------ ------------
Operating expenses:
General and administrative............................. 2,150,765 1,856,499 4,029,095 3,355,860
Selling................................................ 193,351 162,777 345,127 333,715
------------- ------------ ------------ ------------
Total operating expenses.............................. 2,344,116 2,019,276 4,374,222 3,689,575
------------- ------------ ------------ ------------
Operating income...................................... 2,923,333 3,224,104 5,327,071 5,406,599
------------- ------------ ------------ ------------
Other income (expense):
Interest income........................................ 83,520 42,827 122,970 101,637
Interest expense....................................... (50,918) (126,890) (101,156) (635,589)
Other, net............................................. 132,773 (36,614) 221,063 452,720
------------- ------------ ------------ ------------
Total other income (expense).......................... 165,375 (120,677) 242,877 (81,232)
------------- ------------ ------------ ------------
Income before income taxes............................ 3,088,708 3,103,427 5,569,948 5,325,367
Income tax provision................................... 958,387 1,084,958 1,752,383 1,861,748
------------- ------------ ------------ ------------
Net income............................................ $ 2,130,321 2,018,469 3,817,565 3,463,619
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Net income per common share............................ $ 0.29 0.27 0.52 0.54
Weighted average shares outstanding.................... 7,400,000 7,400,000 7,400,000 6,358,242
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
</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)
<TABLE>
<CAPTION>
26 WEEKS ENDED
----------------------------
<S> <C> <C>
JUNE 29, JUNE 30,
1997 1996
(UNAUDITED) (UNAUDITED)
------------- -------------
Cash flows provided (used) by operating activities:
Net income......................................................................... $ 3,817,565 3,463,619
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization.................................................... 2,025,245 1,423,840
Allowance for doubtful trade accounts receivable................................. 33,680 9,019
Allowance for excess and obsolete inventory...................................... (35,991) 37,073
Deferred income taxes, net....................................................... 1,587,316 1,649,443
Loss on disposal of equipment.................................................... 70,642 --
Change in assets and liabilities:
Trade accounts receivable......................................................... (3,909,349) (4,567,802)
Other receivables................................................................. 937,795 (613,705)
Inventories....................................................................... 5,548,373 (3,635,082)
Prepaid expenses.................................................................. (363,533) 194,862
Other assets...................................................................... 29,497 7,164
Accounts payable.................................................................. (3,009,527) 34,082
Accrued expenses, taxes payable and due to related parties........................ 1,001,716 1,615,138
Other liabilities................................................................. 41,317 13,743
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Net cash provided (used) by operating activities................................ 7,774,746 (368,606)
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Cash flows used (provided) by investing activities:
Purchase of property, plant and equipment.......................................... (1,466,339) (4,342,784)
Proceeds from disposal of equipment................................................ 153,066 --
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Net cash used by investing activities............................................. (1,313,273) (4,342,784)
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Cash flows provided (used) by financing activities:
Net increase (decrease) in notes payable........................................... -- 1,000,000
Repayment of long-term debt........................................................ -- (15,906,576)
Principal repayments of capital lease obligations.................................. (301,760) (243,036)
Proceeds from sale of stock, net................................................... -- 18,740,009
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Net cash provided (used) by financing activities.................................. (301,760) 3,590,397
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Net increase (decrease) in cash and cash equivalents................................ 6,159,713 (1,120,993)
Cash and cash equivalents, beginning of period...................................... 6,269,825 2,848,628
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Cash and cash equivalents, end of period............................................ $ 12,429,538 1,727,635
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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)
JUNE 29, 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 twenty-six week periods ended
June 29, 1997 are not necessarily indicative of the results to be expected for
the entire year.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 29, DECEMBER 31,
1997 1996
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<S> <C> <C>
Raw materials....................................................................... $ 9,716,403 12,998,270
Work-in-process..................................................................... 1,926,254 3,138,189
Finished goods...................................................................... 906,844 1,961,415
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12,549,501 18,097,874
Reserve for excess and obsolete inventory........................................... (1,861,734) (1,897,725)
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$ 10,687,767 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 $17,309 and a $309,551gain for the
twenty-six week periods ended June 29, 1997 and June 30, 1996, respectively.
Assets and liabilities denominated in pesos are summarized as follows in U. S.
dollars:
<TABLE>
<CAPTION>
JUNE 29, DECEMBER 31,
1997 1996
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<S> <C> <C>
Cash and cash equivalents............................................................. $ 228,749 957,000
Other receivables..................................................................... 771,266 1,634,700
Prepaid expenses...................................................................... 299,084 218,142
Other assets, net..................................................................... 45,568 26,064
Accounts payable...................................................................... (332,521) (1,542,331)
Accrued expensesand other liabilities................................................. (2,907,556) (2,206,667)
----------- ------------
Net non-U.S. currency position .......................................... $ (1,895,410) (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 (CONTINUED)
(IN U.S. DOLLARS)
JUNE 29, 1997
(Unaudited)
(4) 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 31% 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 June 29, 1997.
(5) EARNINGS PER SHARE
Earnings per share of common stock ("EPS") for the twenty-six weeks ended
June 29, 1997 and June 30, 1996 were calculated using the weighted average
number of common shares outstanding. The weighted average number of common
shares outstanding for the twenty-six week period ended June 29, 1997 was
7,400,000, and the weighted average number of shares used to determine EPS at
June 30, 1996 was 6,358,242.
(6) SUBSEQUENT EVENTS
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
<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.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
JUNE 29 JUNE 30 JUNE 29 JUNE 30
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------- ------------- ------------- -------------
Net sales.................................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales................................................ 84.4 83.0 85.7 83.8
Gross profit................................................. 15.6 17.0 14.3 16.2
Selling, general and administrative expenses................. 6.9 6.5 6.5 6.6
Operating income............................................. 8.7 10.4 7.8 9.6
Other income (expense)....................................... 0.5 (0.4) 0.4 (0.1)
Income before income taxes................................... 9.2 10.0 8.2 9.5
Income tax provision......................................... 2.8 3.5 2.6 3.3
Net income................................................... 6.4 6.5 5.6 6.2
</TABLE>
Net Sales for the thirteen weeks ended June 29, 1997 increased 9.39% to
$33.8 million from $30.9 million for the comparable period of 1996. The increase
is primarily due to a rise in sales to existing customers that either increased
volume or started new products. For the thirteen weeks ended June 29, 1997, the
Company's sales mix changed from that of the comparable period of 1996, as
assembly sales increased.
Gross Profit increased 0.5% to $5.3 million for the thirteen weeks ended
June 29, 1997, compared to $5.2 million for the same period of the prior year.
Gross profit as a percentage of net sales ("Gross Margin") decreased to 15.6%
for the thirteen weeks ended June 29, 1997, compared to 17.0% for the thirteen
weeks ended June 30, 1996. 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 Expenses increased 16.1% to $2.3 million
and 6.9% as a percentage of net sales, for the thirteen weeks ended June 29,
1997, as compared to $2.0 million, or 6.5% of net sales, for the thirteen weeks
ended the same period in 1996. This increase resulted in part from an increase
in costs associated with personnel in several departments.
Operating Income decreased by 9.3% to $2.9 million, or 8.7% of net sales,
for the thirteen weeks ended June 29, 1997, from $3.2 million, or 10.4% of net
sales, for the thirteen weeks ended June 30, 1996. The decrease in operating
income as a percentage of sales was mainly a result of the Gross Margin decrease
explained above and the increase in Selling, General and Administrative
expenses.
Income tax provision decreased to $1.0 million, or 2.8% of net sales for the
thirteen weeks ended June 29, 1997, from $1.1 million or 3.5% of net sales for
the thirteen weeks ended June 30, 1996. The estimated effective tax rate for the
thirteen weeks ended June 29, 1997 was 31%, compared to an estimated effective
tax rate of 35% for the same period in 1996. The lower effective tax rate for
1997 was caused by inflation adjustments on tax attributes in Mexico,
denominated in pesos.
6
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LIQUIDITY AND CAPITAL RESOURCES
During the twenty-six weeks ended June 29, 1997, the Company had gross
operating funds of $7.4 million, which consisted of net income of $3.8 million
plus depreciation and amortization of $2.0 million, in addition to deferred
taxes and allowances of $1.6 million. This flow of funds financed a net increase
in receivables of $3.0 million and prepaid and other assets of $0.3 million, in
addition to a decrease in accounts payable of $3.0 million, which were offset by
a net decrease in inventories of $5.5 million, accrued expenses and other
liabilities of $1.0 million, resulting in net cash provided by operations of
$7.8 million. The increase in accounts receivable was due to the Company's
increased net sales during the period. The decrease in inventory was due to
increased turnover in qinventories and a line of products phasing out. Cash
provided by operations allowed the Company to pay down $0.3 million of capital
lease obligations and to invest $1.5 million in property, plant, and equipment.
The Company had the following lines of credit, outstanding borrowings, and
significant capital leases at June 29, 1997:
<TABLE>
<CAPTION>
AMOUNT INTEREST
LENDER OR OUTSTANDING AT RATE AT
CLASS OF SECURITIES TYPE JUNE 29, 1997 JUNE29, 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. &
S.A........................ $10 million Line of Credit
-- 8.91% December 15, 1999
Norwest Bank El Paso......... $7 million Line of Credit -- 8.50% December 6, 2001
Amplicon Financial........... $1.3 million Capital Lease $ 1,103,133 7.92% December 15, 1999
--------------
Total...................... $ 1,103,133
</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 June 29, 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 10Q 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
EXHIBIT
NUMBER DESCRIPTION
- ------------- ---------------------------------------------------------------
3 Estatutos Sociales (By-Laws) of the Registrant (including
English translation).*
*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
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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: JULY 31, 1997 BY: /S/HECTOR RAYNAL
-------------------
HECTOR M. RAYNAL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(DULY AUTHORIZED OFFICER)
DATE: JULY 31, 1997 BY: /S/ CARLOS MARTENS
-------------------
CARLOS D. MARTENS
VICE-PRESIDENT OF FINANCE AND
CHIEF FINANCIAL OFFICER
10
