<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: March 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 _____________
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. C.P. 32340
Cd. Juarez, Chihuahua Mexico (Zip code)
(Address of principal executive offices)
(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 April 15, 1997 was:
7,400,000
<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 30, 1997 and December 31, 1996....................... 1
Consolidated Statements of Earnings for the thirteen weeks
ended March 30, 1997 and March 31, 1996.................... 2
Consolidated Statements of Cash Flows for the thirteen weeks
ended March 30, 1997 and March 31, 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 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
<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>
MARCH 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
------------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents..................................... $ 6,318,662 6,269,825
Receivables:
Trade accounts, less allowance for doubtful accounts........ 19,293,337 13,944,948
Other....................................................... 1,095,649 2,047,019
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Total receivables......................................... 20,388,986 15,991,967
Inventories, net.............................................. 12,524,766 16,200,149
Prepaid expenses.............................................. 846,155 492,933
------------- ------------
Total current assets...................................... 40,078,569 38,954,874
Property, plant and equipment, net.............................. 28,283,035 28,610,719
Other assets, net............................................... 271,576 410,460
------------- ------------
$ 68,633,180 67,976,053
------------- ------------
------------- ------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable.............................................. $ 6,467,128 8,886,613
Accrued expenses.............................................. 3,128,241 2,292,682
Current obligations of capital leases......................... 522,104 564,216
Taxes payable................................................. 1,255,169 1,286,132
Deferred income taxes, net.................................... 1,379,783 1,379,783
Due to related parties........................................ 96,181 86,743
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Total current liabilities................................. 12,848,606 14,496,169
Capital lease obligations, excluding current obligations........ 821,329 923,273
Other liabilities............................................... 242,208 212,403
Deferred income taxes, net...................................... 3,169,984 2,480,399
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Total liabilities......................................... 17,082,127 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
shares issued and outstanding............................... 35,010,468 35,010,468
Retained earnings............................................. 16,540,585 14,853,341
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Total stockholders' equity................................ 51,551,053 49,863,809
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Commitments and contingencies................................... -- --
$ 68,633,180 67,976,053
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</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Earnings
(In U. S. Dollars)
<TABLE>
<CAPTION>
13 WEEKS ENDED
--------------------------
<S> <C> <C>
MARCH 30, MARCH 31,
1997 1996
(UNAUDITED) (UNAUDITED)
------------- -----------
Net sales........................................................ $33,815,271 25,337,202
Cost of sales.................................................... 29,381,427 21,484,408
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Gross Profit............................................... 4,433,844 3,852,794
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Operating expenses:
General and administrative..................................... 1,878,330 1,499,361
Selling........................................................ 151,776 170,938
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Total operating expenses................................... 2,030,106 1,670,299
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Operating income........................................... 2,403,738 2,182,495
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Other income (expense):
Interest income................................................ 39,450 58,810
Interest expense............................................... (50,238) (508,699)
Other, net..................................................... 88,290 489,334
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Total other income (expense)............................... 77,502 39,445
------------ ------------
Income before income taxes................................. 2,481,240 2,221,940
Income tax expense............................................... 793,996 776,790
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Net income................................................ $1,687,244 1,445,150
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------------ ------------
Net income per common share.................................... $0.23 0.27
Weighted average shares outstanding............................ 7,400,000 5,316,484
------------ ------------
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</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In U. S. Dollars)
<TABLE>
<CAPTION>
13 WEEKS ENDED
--------------------------------------------
<S> <C> <C>
MARCH 30, MARCH 31,
1997 1996
(UNAUDITED) (UNAUDITED)
---------------- ----------------
Cash flows provided by operating activities:
Net income........................................ $ 1,687,244 1,445,150
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................ 1,000,036 702,754
Allowance for doubtful trade accounts........ 1,938 (9,030)
Allowance for excess and obsolete inventory 323,709 15,138
Deferred income taxes, net................... 689,585 681,705
Change in assets and liabilities:
Trade accounts receivable................... (5,350,327) (355,918)
Other receivables........................... 951,370 (734,402)
Inventories................................. 3,351,674 (1,826,627)
Prepaid expenses............................ (353,222) 83,341
Other assets................................ 138,884 54,243
Accounts payable............................ (2,419,485) 446,103
Accrued expenses, taxes payable and due
to related parties........................ 814,034 1,005,225
Other liabilities........................... 29,805 12,659
---------------- ----------------
Net cash provided by operating activities 865,245 1,520,341
---------------- ----------------
Cash flows used by investing activities:
Purchase of property, plant and equipment...... (672,352) (627,089)
---------------- ----------------
Cash flows provided (used) by financing activities:
Net increase (decrease) in notes payable....... -- (2,000,000)
Proceeds from issuance of long-term debt....... -- 2,500,000
Repayment of long-term debt.................... -- (18,260,688)
Principal repayments of capital lease
obligations................................... (144,056) (96,291)
Proceeds from sale of stock, net............... -- 18,900,009
---------------- ----------------
Net cash provided (used) by financing
activities............................... (144,056) 1,043,030
---------------- ----------------
Net increase in cash and cash equivalents........... 48,837 1,936,282
Cash and cash equivalents, beginning of period...... 6,269,825 2,848,628
---------------- ----------------
Cash and cash equivalents, end of period............ $6,318,662 4,784,910
---------------- ----------------
---------------- ----------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
MARCH 30, 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
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 30, 1997
are not necessarily indicative of the results to be expected for the entire
year.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Raw materials................................................... $ 11,277,754 12,998,270
Work-in-process................................................. 2,671,926 3,138,189
Finished goods.................................................. 796,520 1,961,415
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14,746,200 18,097,874
Reserve for excess and obsolete inventory....................... (2,221,434) (1,897,725)
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$ 12,524,766 16,200,149
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</TABLE>
(3) FOREIGN CURRENCY TRANSLATION
Included in "other, net" on the accompanying consolidated statements of
operations are foreign exchange gains of $18,220 and $440,084 for the
thirteen weeks ended March 30, 1997 and March 31, 1996, respectively. Assets
and liabilities denominated in pesos are summarized as follows in U. S.
dollars:
<TABLE>
<CAPTION>
MARCH 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Cash and cash equivalents....................................... $ 809,941 957,000
Other receivables............................................... 667,419 1,634,700
Prepaid expenses................................................ 312,838 218,142
Other assets, net............................................... 34,474 26,064
4
<PAGE>
ELAMEX, S.A. DE C.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN U.S. DOLLARS)
MARCH 30, 1997
(Unaudited)
Accounts payable................................................ (484,503) (1,542,331)
Accrued expenses and other liabilities.......................... (2,819,821) (2,206,667)
------------- ------------
Net non-U.S. currency position.................................. $(1,479,652) (913,092)
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</TABLE>
(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 32% 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 at March 30, 1997.
(5) EARNINGS PER SHARE
Earnings per share of common stock ("EPS") for the thirteen weeks ended
March 30, 1997 and March 31, 1996 were calculated using the weighted average
number of common shares outstanding. The weighted average number of common
shares outstanding for the thirteen-week period ended March 30, 1997 was
7,400,000, and the weighted average number of shares used to determine EPS at
March 31, 1996 was 5,316,484.
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 indicated, unless otherwise indicated.
PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
Thirteen Weeks Ended
MARCH 30, 1997 MARCH 31, 1996
(unaudited) (unaudited)
-------------- --------------
<S> <C> <C>
Net sales.............................................................. 100.0% 100.0%
Cost of sales.......................................................... 86.9 84.8
Gross profit........................................................... 13.1 15.2
Selling, general and administrative expenses........................... 6.0 6.6
Operating income....................................................... 7.1 8.6
Other income (expense)................................................. 0.2 0.2
Income before income taxes............................................. 7.3 8.8
Income tax expense..................................................... 2.3 3.1
Net income............................................................. 5.0 5.7
</TABLE>
NET SALES. Net sales for the thirteen weeks ended March 30, 1997
increased 33.5% to $33.8 million from $25.3 million for the comparable period
of 1996. The increase is primarily due to sales to new customers beginning in
late 1996 and higher sales to existing customers over the same period in
1996. For the thirteen weeks ended March 30, 1997, the Company's sales mix
changed slightly from that of the comparable period of 1996, as assembly
sales were slightly increased.
GROSS PROFIT. Gross profit increased 15.1% to $4.4 million for the
thirteen weeks ended March 30, 1997, compared to $3.9 million for the same
period of the prior year. Gross profit as a percentage of net sales ("Gross
Margin") decreased to 13.1% for the thirteen weeks ended March 30, 1997,
compared to 15.2% for the thirteen weeks ended March 31, 1996. The Gross
Margin decrease was due primarily to wage inflation without peso devaluation,
in addition to a change in the business structure in some assembly contracts.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 21.5% to $2.0 million and decreased as
percentage of net sales 6.0%, for the thirteen weeks ended March 30, 1997, as
compared to $1.7 million, or 6.6% of net sales, for the thirteen weeks ended
March 31, 1996. 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 10.1% to $2.4 million,
or 7.1% of net sales, for the thirteen weeks ended March 30, 1997, from $2.2
million, or 8.6% of net sales, for the thirteen weeks ended March 31, 1996.
The decrease in operating income as a percentage of sales was mainly a result
of the Gross Margin decrease explained above partially offset by the
economies of scale in Selling, General and Administrative expense.
INCOME TAX EXPENSE. Income tax expense increased to $0.8 million, or 2.3%
of net sales for the thirteen weeks ended March 30, 1997, from $0.8 million
or 3.1% of net sales for the thirteen weeks ended March 31, 1996. The
estimated effective tax rate for the thirteen weeks ended March 30, 1997 was
32%, compared to an estimated effective tax rate of 35% for the same period
in 1996. The lower effective tax rate was due to an increased dollar value of
net operating losses.
LIQUIDITY AND CAPITAL RESOURCES.
6
<PAGE>
During the thirteen weeks ended March 30, 1997, the Company had gross
operating funds of $3.7 million, which consisted of net income of $1.7
million plus depreciation and amortization of $1.0 million, in addition to
deferred taxes and allowances of $1.0 million. This flow of funds financed a
net increase in accounts and other receivables of $4.4 million and prepaid
and other assets of $0.2 million, in addition to a decrease in accounts
payable of $2.4 million, which were offset by a net decrease in inventories
of $3.4 million, and increases in accrued expenses and other liabilities of
$0.8 million, resulting in net cash provided by operations of $0.9 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 inventories and a line of products phasing out. Cash provided by
operations allowed the Company to pay down $0.1 million of capital lease
obligations and to invest $0.7 million in property, plant and equipment.
The Company had the following lines of credit, outstanding borrowings and
significant capital leases at March 30, 1997:
<TABLE>
<CAPTION>
AMOUNT INTEREST
LENDER OR OUTSTANDING AT RATE AT
CLASS OF SECURITIES TYPE MARCH 30, 1997 MARCH 30, 1997 MATURITY DATE
- ---------------------------- ---------------------------- -------------- ------------------- ----------------------
<S> <C> <C> <C> <C>
Comerica Bank $10 million Line of Credit $ -- 9.0% May 1, 1999
Bank of America N.T. & S.A. $10 million Line of Credit -- 8.77% December 15, 1999
Norwest Bank El Paso $7 million Line of Credit -- 8.5% December 6, 2001
Amplicon Financial $1.3 million Capital Lease $ 1,208,978 7.92% December 15, 1999
------------
Total $ 1,208,978
</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. At March 30, 1997 the
Company believes it was in compliance with all material covenants related to
its debt obligations.
7
<PAGE>
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 24, 1997, the stockholders of Elamex, S.A. de C.V., at the
general ordinary annual stockholder meeting approved: (i) the business report
on Elamex, S.A. de C.V. for the 1996 fiscal year; (ii) the audited financial
statements as of and for the period ended December 31, 1996 and the report by
statutory auditor; (iii) the proposal for application of net income; (iv) the
election of Board of Directors, Secretary and Statutory Auditor; and (v) the
ratification of the appointment of KPMG Peat Marwick LLP as independent
auditors of Elamex, S.A. de C.V. for the fiscal year ending December 31, 1997.
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).*
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.*
21 Subsidiaries of the Registrant.*
99 Financial statement schedule, valuation and qualifying accounts and reserves and report thereon included
on pages 49 and 50.
</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: May 12, 1997 By: /s/ HECTOR RAYNAL
------------------------------
Hector M. Raynal
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(DULY AUTHORIZED OFFICER)
Date: May 12, 1997 By: /s/ CARLOS MARTENS
-------------------------------
Carlos D. Martens
VICE-PRESIDENT OF FINANCE AND
CHIEF FINANCIAL OFFICER
10
