<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1999
(Mark One) 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: 001-13635
MEADOWCRAFT, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
Delaware 63-0891252
- ----------------------------------------------------- -----------------------------------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
4700 Pinson Valley Parkway
Birmingham, Alabama 35215 (205) 853-2220
- ----------------------------------------------------- -----------------------------------------------------
(Address of principal executive office) (Registrant's telephone number, including area code)
</TABLE>
Indicate by check mark whether Registrant (1) has filled out all reports 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 Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
YES [X] NO [ ]
As of May 31, 1999, 19,708,750 shares of the Registrant's Common Stock, $.01 par
value, were issued and outstanding.
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<PAGE> 2
MEADOWCRAFT, INC. AND SUBSIDIARIES
FORM 10-Q
April 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of July 31, 1998, May 2, 1998 and
April 30, 1999 3
Unaudited Condensed Consolidated Statements of Income for the Quarter Ended
May 2, 1998 and April 30, 1999 4
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended May 2, 1998 and April 30, 1999 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
2
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Part I - Financial Information
MEADOWCRAFT, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
July 31, May 2, April 30,
1998 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Due from factor $ 14,686,000 $ 42,526,000 $ 38,744,000
Accounts receivable 6,810,000 35,787,000 22,292,000
Inventories 21,599,000 33,300,000 33,738,000
Prepaid expenses and other 359,000 585,000 417,000
Deferred income taxes 4,334,000 3,200,000 4,797,000
------------- ------------- -------------
Total Current Assets 47,788,000 115,398,000 99,988,000
------------- ------------- -------------
Property, plant and equipment 84,429,000 84,131,000 86,744,000
Less accumulated depreciation (23,039,000) (22,110,000) (27,923,000)
------------- ------------- -------------
Net Property, Plant and Equipment 61,390,000 62,021,000 58,821,000
------------- ------------- -------------
Other Assets 973,000 696,000 872,000
------------- ------------- -------------
$ 110,151,000 $ 178,115,000 $ 159,681,000
============= ============= =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 2,990,000 $ 2,740,000 $ 2,990,000
Notes payable 14,024,000 53,164,000 51,074,000
Accounts payable 2,400,000 15,654,000 7,446,000
Accrued expenses and warranty 6,594,000 9,527,000 9,481,000
Income taxes payable 2,799,000 3,360,000 4,437,000
------------- ------------- -------------
Total Current Liabilities 28,807,000 84,445,000 75,428,000
------------- ------------- -------------
Long-Term Debt 26,513,000 26,863,000 24,620,000
------------- ------------- -------------
Commitment and Contingencies
Stockholders' Equity:
Common stock, $.01 par value, 30,000,000 shares
authorized, 19,708,750 issued and outstanding at
July 31, 1998 and April 30, 1999 197,000 197,000 197,000
Additional paid-in capital 44,614,000 44,614,000 44,614,000
Retained earnings 10,020,000 21,996,000 14,822,000
------------- ------------- -------------
54,831,000 66,807,000 59,633,000
------------- ------------- -------------
$ 110,151,000 $ 178,115,000 $ 159,681,000
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
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MEADOWCRAFT, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- -------------------------------
May 2, April 30, May 2, April 30,
1998 1999 1998 1999
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Net Sales $81,840,000 $66,950,000 $ 117,303,000 $97,923,000
Cost of Sales 52,849,000 45,773,000 79,351,000 74,129,000
----------- ----------- ------------- -----------
Gross Profit 28,991,000 21,177,000 37,952,000 23,794,000
----------- ----------- ------------- -----------
Operating Expenses:
Selling 3,230,000 3,075,000 5,852,000 5,682,000
General and administrative 1,980,000 1,837,000 5,539,000 6,317,000
----------- ----------- ------------- -----------
5,210,000 4,912,000 11,391,000 11,999,000
----------- ----------- ------------- -----------
Operating Income 23,781,000 16,265,000 26,561,000 11,795,000
Interest Expense 1,606,000 1,315,000 2,990,000 3,027,000
----------- ----------- ------------- -----------
Income before provision for
income taxes - historical 22,175,000 14,950,000 23,571,000 8,768,000
Provision for income taxes 3,550,000 5,573,000 1,520,000 3,280,000
----------- ----------- ------------- -----------
Net income - historical $18,625,000 $ 9,377,000 $ 22,051,000 $ 5,488,000
=========== =========== ============= ===========
Pro Forma Presentation:
Net income - historical $18,625,000 $ 9,377,000 $ 22,051,000 $ 5,488,000
Pro forma income tax:
Provision 4,700,000 0 7,250,000 0
Benefit related to change in tax status 0 0 (3,200,000) 0
----------- ----------- ------------- -----------
4,700,000 0 4,050,000 0
----------- ----------- ------------- -----------
Pro forma net income $13,925,000 $ 9,377,000 $ 18,001,000 $ 5,488,000
=========== =========== ============= ===========
Pro forma net income excluding
benefit related to change in tax status $13,925,000 $ 9,377,000 $ 14,799,000 $ 5,488,000
=========== =========== ============= ===========
Earnings per share:
Historical:
Basic $ 0.95 $ 0.48 $ 1.22 $ 0.28
=========== =========== ============= ===========
Diluted $ 0.94 $ 0.48 $ 1.22 $ 0.28
=========== =========== ============= ===========
Pro forma earnings per share:
Basic and Diluted $ 0.71 $ 0.48 $ 0.99 $ 0.28
=========== =========== ============= ===========
Pro forma earnings per share
excluding benefit related to change in
tax status:
Basic and Diluted $ 0.71 $ 0.48 $ 0.82 $ 0.28
=========== =========== ============= ===========
Weighted average shares outstanding
Basic 19,708,750 19,708,750 18,123,709 19,708,750
=========== =========== ============= ===========
Diluted 19,723,167 19,708,750 18,129,716 19,708,750
=========== =========== ============= ===========
</TABLE>
The accompanying notes are an integral part
of these condensed consolidated statements.
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<PAGE> 5
MEADOWCRAFT, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
May 2, April 30,
1998 1999
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 22,051,000 $ 5,488,000
------------ ------------
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation and amortization 4,434,000 5,190,000
Credit for deferred income taxes (3,200,000) (463,000)
Changes in assets and liabilities:
Due from factor (31,768,000) (24,058,000)
Accounts receivable (30,087,000) (15,482,000)
Inventories (21,710,000) (12,139,000)
Prepaid expenses and other (292,000) (58,000)
Other assets 135,000 (61,000)
Accounts payable 12,807,000 5,046,000
Accrued expenses and warranty 2,712,000 2,887,000
Income taxes payable 3,262,000 1,638,000
------------ ------------
Total adjustments (63,707,000) (37,500,000)
------------ ------------
Net cash used in operating activities (41,656,000) (32,012,000)
------------ ------------
Cash Flows From Investing Activities:
Capital expenditures (24,262,000) (2,459,000)
------------ ------------
Net cash used in investing activities (24,262,000) (2,459,000)
------------ ------------
Cash Flows From Financing Activities:
Proceeds from Initial Public Offering 44,312,000 0
Net borrowings on notes payable 42,938,000 37,050,000
Proceeds from issuance of long-term debt 15,500,000 0
Principal payments of long-term debt (3,839,000) (1,893,000)
Payment of loan costs (293,000) 0
Payment of S corporation distributions (32,700,000) (686,000)
------------ ------------
Net cash provided by financing activities 65,918,000 34,471,000
------------ ------------
Net change in cash 0 0
Cash, Beginning of Period 0 0
------------ ------------
Cash, End of Period $ 0 $ 0
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 2,864,000 $ 2,974,000
============ ============
Cash paid during the period for income taxes $ 1,360,000 $ 2,118,000
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
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MEADOWCRAFT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
Unaudited Interim Condensed Consolidated Financial Statements
The accompanying unaudited interim financial statements of Meadowcraft, Inc. and
Subsidiaries, ("the Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and are
presented in accordance with the requirements of Form 10-Q and Article 10 of
Regulation S-X. The financial statements should be read in conjunction with the
audited financial statements and notes thereto in the Company's Annual Report on
form 10-K for the year ended July 31, 1998 as filed with the Securities and
Exchange Commission.
In the opinion of management, the unaudited financial statements included herein
reflect all adjustments, consisting of normal, recurring adjustments, necessary
to present fairly the information set forth therein. The fiscal 1999 interim
results of operations are not necessarily indicative of results for the full
year. Revenues and expenses are subject to material seasonal variations. The
seasonal nature of the Company's business requires an inventory build-up during
the fall and winter months in order to meet customer demand during the spring
and summer selling seasons. The Company relies upon bank borrowings and cash
flow from operations to finance this production.
Principles of Consolidation
The unaudited interim consolidated financial statements include the accounts and
transactions of the Company and its wholly owned subsidiaries, Meadowcraft De
Mexico, S.A. De C.V. and Meadowcraft (UK) Limited. All significant intercompany
accounts and transactions have been eliminated in consolidation.
New Accounting Standards and Statements
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about Segments
of an Enterprise and Related Information." SFAS No. 131, which supersedes SFAS
Nos. 14, 18, 24 and 30, establishes new standards for segment reporting using
the "management approach" in which reportable segments are based on the same
criteria on which management disaggregates a business for making operation
decisions and assessing performance. The new rule becomes effective in fiscal
1999 and is not expected to have significant impact on the Company's financial
reporting.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." SFAS No. 132, which supersedes SFAS
Nos. 87, 88 and 106, standardizes the disclosure requirements for pensions and
other postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis, and eliminates certain disclosures that
are no longer useful as they were when SFAS Nos. 87, 88 and 106 were issued. The
Company will adopt the new rules in fiscal 1999. The new rule is not expected to
have a significant impact on the Company's financial reporting.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments including certain derivative instruments
embedded in other contracts and for hedging activities. This statement is
effective for fiscal years beginning after June 15, 1999. The new rules are not
expected to have a material effect on the Company's results of operations.
2. INITIAL PUBLIC OFFERING
On November 25, 1997, the Company completed an Initial Public Offering (the
"Offering") of 3,225,000 shares of common stock at $13.00 per share. On December
10, 1997, the underwriters exercised their over allotment option to purchase an
additional 483,750 shares of common stock from the Company at $13.00 per share.
6
<PAGE> 7
The net proceeds from the Offering and the over allotment option were
$44,311,787, net of an underwriting discount of $3,374,963 and expenses of
approximately $527,000. The proceeds were used to pay $32,700,000 of the S
Corporation distribution, with the balance of $11,611,787 used to fund capital
expenditures.
Upon completion of the Offering, the Company terminated its S Corporation
election. The Company made an additional S Corporation distribution in the
amount of $16,920,435 in fiscal 1998 and 1999, representing the final S
Corporation distribution based upon the Company's S Corporation earnings
attributable to the period from May 4, 1997 to the date of termination of the S
Corporation election (November 25, 1997).
3. INVENTORIES
Inventories are valued at first-in, first-out ("FIFO") cost, which is not in
excess of market. An analysis of inventories follows:
<TABLE>
<CAPTION>
July 31, May 2, April 30,
1998 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Raw materials and purchased parts $11,533,000 $13,683,000 $13,336,000
Work-in-process 1,075,000 1,305,000 1,275,000
Finished goods 8,991,000 18,312,000 19,127,000
----------- ----------- -----------
$21,599,000 $33,300,000 $33,738,000
=========== =========== ===========
</TABLE>
4. EARNINGS PER SHARE
The Company's Basic and Diluted earnings per share calculations resulted in the
same weighted average shares outstanding as the Company's 403,587 stock options
were not considered.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three months ended April 30, 1999 compared to three months ended May 2, 1998.
NET SALES
Net sales decreased $14.9 million or 18.2% to $66.9 million for the three months
ended April 30, 1999, from $81.8 million in the comparable period in the prior
year. The decrease was due primarily to lower sales of wrought iron furniture,
cushions and umbrellas in the Plantation Patterns product line.
GROSS PROFIT
Gross profit for the three months ended April 30, 1999, declined $7.8 million to
$21.2 million from $29.0 million in the comparable period in the prior year. The
decline in margins is due primarily to later plant start-ups experienced in 1999
versus 1998. This later start-up was a planned event permitted by the additional
production capacity, which was brought on line during the year with the
completion of the west coast production and distribution facilities. The short
fall in sales also contributed to the lower gross profit.
SELLING EXPENSE
Selling expense, which includes commissions, advertising and promotional
expenses, declined $.1 million to $3.1 million for the three months ended April
30, 1999, from $3.2 million for the comparable period in the prior year. The
decrease was due to lower variable expenses related to lower sales volume.
GENERAL AND ADMINISTRATIVE
General and administrative expense, which includes corporate salaries, employee
benefits and professional fees, decreased $.2 million to $1.8 million for the
three months ended April 30, 1999 from $2.0 million for the comparable period in
the prior year primarily due to decreases in salaries and related benefit
expenses and travel and entertainment expenses.
INTEREST EXPENSE
Interest expense, which includes factor fees, decreased by $.3 million to $1.3
million for the three months ended April 30, 1999, from $1.6 million in the
comparable period in the prior year due to lower factor fees on the lower sales
volume and lower debt levels experienced during the quarter.
HISTORICAL AND PRO FORMA PROVISION (CREDIT) FOR INCOME TAXES
Prior to November 25, 1997, the Company elected to be taxed as an S Corporation
and, as a result, the periods prior to November 25, 1997 do not reflect
historical income tax provisions. On November 25, 1997, the Company terminated
its S Corporation election in connection with the offering and became a taxable
C Corporation. The pro forma provision for income taxes gives effect to the
application of income taxes that would have been reported had the Company been a
C Corporation subject to federal and state income taxes. The income tax
provision for the three months ended April 30, 1999 amounted to $5.6 million.
The pro forma income tax provision reflects an overall effective tax rate of 37%
in 1999 and 1998.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Nine months ended April 30, 1999 compared to nine months ended May 2, 1998.
NET SALES
Net sales decreased $19.4 million or 16.5% to $97.9 million for the nine months
ended April 30, 1999, from $117.3 million in the comparable period in the prior
year. The decrease was due primarily to lower sales of wrought iron furniture,
cushions and umbrellas in the Plantation Patterns product line.
GROSS PROFIT
Gross profit for the nine months ended April 30, 1999, declined $14.2 million to
$23.8 million from $38.0 million in the comparable period in the prior year. The
decline in margins is due in part to later plant start-ups experienced in 1999
versus 1998. This later start-up was a planned event permitted by the additional
production capacity, which was brought on line during the year with the
completion of the west coast production and distribution facilities. The lower
sales volume also contributed to the gross profit shortfall.
SELLING EXPENSE
Selling expense, which includes commissions, advertising and promotional
expenses, declined $.2 million to $5.7 million for the nine months ended April
30, 1999, from $5.9 million for the comparable period in the prior year. The
decrease was due to slightly lower advertising, show and travel and
entertainment expense.
GENERAL AND ADMINISTRATIVE
General and administrative expense, which includes corporate salaries, employee
benefits and professional fees, increased $.8 million to $6.3 million for the
nine months ended April 30, 1999 from $5.5 million for the comparable period in
the prior year. The increase was due primarily to higher professional fees
incurred during the second quarter resulting from merger negotiations with a
large New York stock exchange company that were terminated during that quarter.
INTEREST EXPENSE
Interest expense, which includes factor fees, remained even with the prior year
at $3.0 million for the nine months ended April 30, 1999. Overall, debt levels
and interest expense were higher during the period, however, this increase was
offset by lower factor fees due to lower sales levels.
HISTORICAL AND PRO FORMA PROVISION (CREDIT) FOR INCOME TAXES
Prior to November 25, 1997, the Company elected to be taxed as an S Corporation
and, as a result, the periods prior to November 25, 1997 do not reflect
historical income tax provisions. On November 25, 1997, the Company terminated
its S Corporation election in connection with the offering and became a taxable
C Corporation. In conjunction with the conversion from an S Corporation to a C
Corporation, the Company recorded a $3.2 million net deferred tax asset. The pro
forma provision for income taxes gives effect to the application of income taxes
that would have been reported had the Company been a C Corporation subject to
federal and state income taxes. The income tax provision for the nine months
ended April 30,1999 amounted to $3.3 million. The pro forma net income excluding
the tax benefit related to a change in tax status reflects an overall effective
tax rate of 37% in 1999 and 1998, before considering the effect of the one time
credit income tax provision of $3.2 million in fiscal 1998 related to the
initial recording of the net deferred tax asset.
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LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations and growth from seasonal
borrowings under its bank line of credit, from internally generated funds, and
from other term debt. The Company's primary liquidity requirements are for
capital expenditures, working capital and debt service.
The Company's operating activities in the nine month period ended April 30, 1999
used cash of $32.1 million. Cash used by operations reflects a net income of
$5.5 million, an increase in total receivables of $39.5 million, an increase in
inventory of $12.1 million, which was partially funded by an increase in
accounts payable of $5.1 million. This inventory build-up is necessary to meet
the peak selling season, which starts in the second quarter and continues
through the third quarter. The increase in accounts receivable reflects the
seasonal changes in sales volume.
Currently, the Company maintains a $90 million revolving line of credit (the
"Revolving Credit Facility") and term debt facilities (the "Term Debt
Facilities" and, together with the Revolving Credit Facility, the "Credit
Facilities") with a consortium of lenders led by NationsBank, N.A.
("NationsBank"). As a result of the seasonal nature of the Company's business,
the Company utilizes the Revolving Credit Facility to build up inventory levels
during the first half of the Company's fiscal year.
The Revolving Credit Facility is subject to certain borrowing base limitations,
which are related primarily to accounts receivable and inventory balances, and
compliance with customary financial and other covenants. As of April 30, 1999,
the outstanding balance under the Revolving Credit Facility amounted to $51.1
million, and $13.9 million was available to be borrowed at April 30, 1999, based
upon the borrowing base.
The Company's debt agreements contain, among other things, certain restrictions
relating to net worth, capital expenditures, current ratio and debt service
ratio. The Company was in compliance with all covenants at April 30, 1999.
On May 13, 1999, the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement"), with SRB-MWI, L.L.C., a Nevada limited liability company of
which Samuel R. Blount, Chairman of the Board of Directors and 73% controlling
stockholder of the Company, is a member and the sole Manager, and MWI
Acquisition Co., a Delaware corporation and wholly-owned subsidiary of SRB-MWI,
L.L.C. The Merger Agreement provides for the commencement by MWI Acquisition Co.
of a cash tender offer (the "Tender Offer") to purchase all of the issued and
outstanding shares of the Company's common stock not already owned by SRB-MWI,
L.L.C. and its affiliates, including Mr. Blount, for $10.00 per share in cash
(the "Tender Offer Consideration"). The Tender Offer was commenced on May 19,
1999 and will expire on June 17, 1999, unless extended. The Merger Agreement
provides that following completion of the Tender Offer, MWI Acquisition Co. will
be merged with and into the Company, with the Company as the surviving
corporation (the "Merger"), and all outstanding shares of Common Stock (other
than shares owned by MWI Acquisition Co. and its affiliates or shares in respect
of which appraisal rights have been properly exercised) will be converted into
the right to receive the Tender Offer Consideration.
The Company believes that cash flow from operations, together with the Company's
unused borrowing capacity under the Credit Facilities will be sufficient to fund
the Company's debt service requirements, capital expenditures and working
capital needs through the maturity date of the Credit Facilities.
YEAR 2000
The Company has initiated actions to address the year 2000 issue. It is expected
that compliance work will be substantially completed by the end of fiscal year
1999. Total costs associated with these efforts, which are being expensed as
incurred, have not had, and are not expected to have, a material impact on the
Company's financial results.
FORWARD-LOOKING STATEMENTS
The statements contained in this filing that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1993 and Section 21E of the Securities Exchange Act of 1934, including
statements regarding the Company's expectations, hopes, beliefs, intentions or
strategies regarding the future. All forward-looking statements included in this
document are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking
statement. It is important to note that the Company's actual results could
differ materially from those in such forward-looking statements. Factors that
could cause actual results to differ materially from those projected include,
among others, its customer concentration; seasonality; cyclicality; fluctuation
of price of raw materials; risk of business interruption; dependence on key
personnel;
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<PAGE> 11
control by existing stockholders; government regulation; shares
eligible for future sale; dilution; and possible volatility of stock price.
Prospective purchasers of the Common Stock should consult the risk factors
listed from time to time in the Company's Reports on Form 10-Q, 8-K, 10-K, and
Annual Reports to Stockholders.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company has been named, along with certain executive officers and members of
the Board of Directors of the Company (including Mr. Blount and each of the
members of the Special Committee of the Board of Directors which was formed in
connection with the Board's consideration of the Merger Agreement described
herein and the transactions contemplated thereby) and MWI Acquisition Co., as a
defendant in a purported class action lawsuit filed on or about May 14, 1999 by
one alleged stockholder of the Company purportedly on behalf of the stockholders
of the Company in the Court of Chancery in New Castle County, Delaware (the
"Delaware Action"). On or about May 25, 1999, an amended complaint was filed in
the Delaware Action.
The amended complaint alleges, among other things, that the $10.00 per share
consideration to be received by holders of shares in the Tender Offer and the
Merger does not reflect the fair value of the Company's assets and business,
that the Offer to Purchase disseminated to holders of shares of the Company's
common stock in connection with the Tender Offer fails to disclose material
facts, and that the defendants have breached or are breaching their fiduciary
duties. The amended complaint in the Delaware Action seeks, among other things,
injunctive relief barring the consummation or closing of the proposed
transaction; or, in the event the proposed buyout is consummated, equitable
relief rescinding it and setting it aside; and compensatory and/or rescissory
damages in an unspecified amount.
The plaintiff in the Delaware Action also filed a motion for a preliminary
injunction seeking an order preventing the consummation of the Tender Offer and
requiring defendants to supplement the Offer to Purchase and the Schedule 13E-3
filed by the Company, as well as a motion for expedited discovery in connection
therewith. A hearing on the motion for preliminary injunction is currently
scheduled for June 15, 1999. The Company believes that the Delaware Action is
without merit.
In addition, from time to time the Company is involved in routine litigation. In
the opinion of management, no such routine litigation in which the Company is
presently involved is material to its financial position, results of operations,
or liquidity.
Item 5. Other Information
On March 23, 1999, the Company issued a press release announcing that William J.
McCanna retired as the Company's President and Chief Operating Officer and
resigned from the Board of Directors, and that Timothy M. Le Roy would succeed
Mr. McCanna as President and Chief Operating Officer and had been elected to
serve on the Company's Board. In connection with his retirement, the Company
agreed to provide Mr. McCanna with a retirement package consisting of one year's
salary and certain incidental benefits.
On May 13, 1999, the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement"), with SRB-MWI, L.L.C., a Nevada limited liability company of
which Samuel R. Blount, Chairman of the Board of Directors and 73% controlling
stockholder of the Company, is a member and the sole Manager, and MWI
Acquisition Co., a Delaware corporation and wholly-owned subsidiary of SRB-MWI,
L.L.C. The Merger Agreement provides for the commencement by MWI Acquisition Co.
of a cash tender offer (the "Tender Offer") to purchase all of the issued and
outstanding shares of the Company's common stock not already owned by SRB-MWI,
L.L.C. and its affiliates, including Mr. Blount, for $10.00 per share in cash
(the "Tender Offer Consideration"). The Tender Offer was commenced on May 19,
1999 and will expire on June 17, 1999, unless extended. The Merger Agreement
provides that following completion of the Tender Offer, MWI Acquisition Co. will
be merged with and into the Company, with the Company as the surviving
corporation (the "Merger"), and all outstanding shares of Common Stock (other
than shares owned by MWI Acquisition Co. and its affiliates or shares in respect
of which appraisal rights have been properly exercised) will be converted into
the right to receive the Tender Offer Consideration.
12
<PAGE> 13
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
On April 9, 1999, the Company filed a Form 8-K reporting under Item 5 thereof
that the Company had announced that its Board of Directors had met and appointed
a special committee comprised of three independent non-employee directors to
evaluate the buy-out proposal made on such date by Mr. Samuel R. Blount,
Meadowcraft's Chairman and 73% controlling stockholder.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
MEADOWCRAFT, INC.
By
/s/ Steven C. Braswell
--------------------------------------------
Steven C. Braswell
Vice President of Finance,
Chief Financial Officer and Secretary
Date: June 7, 1999
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF MEADOWCRAFT, INC. FOR THE QUARTER ENDED APRIL 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> APR-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 61,036
<ALLOWANCES> 0
<INVENTORY> 33,738
<CURRENT-ASSETS> 99,988
<PP&E> 86,744
<DEPRECIATION> 27,923
<TOTAL-ASSETS> 159,681
<CURRENT-LIABILITIES> 75,428
<BONDS> 0
0
0
<COMMON> 197
<OTHER-SE> 59,436
<TOTAL-LIABILITY-AND-EQUITY> 159,681
<SALES> 97,923
<TOTAL-REVENUES> 97,923
<CGS> 74,129
<TOTAL-COSTS> 74,129
<OTHER-EXPENSES> 11,999
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,027
<INCOME-PRETAX> 8,768
<INCOME-TAX> 3,280
<INCOME-CONTINUING> 5,488
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,488
<EPS-BASIC> .28<F1>
<EPS-DILUTED> .28<F1>
<FN>
<F1>The earnings per share ("EPS") information has been prepared in accordance
with Statement of Financial Accounting Standard No. 128, Earnings Per Share. As
such, basic EPS and diluted EPS have been entered in place of primary and fully
diluted, respectively.
</FN>
</TABLE>
