SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarterly Period Ended August 31, 1995
[ ] 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 1-8381
WELDOTRON CORPORATION
(Exact name of Registrant as specified in its charter)
NEW JERSEY 22-1602728
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
1532 South Washington Avenue
Piscataway, New Jersey 08855
(Address of Principal Exec. Offices) (Zip Code)
Registrant's Telephone Number, Including
Area Code (908) 752-6700
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, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
2,300,173 Shares of Common Stock were outstanding as of
October 9, 1995.
<PAGE>
<TABLE>
WELDOTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($000'S OMITTED EXCEPT SHARE DATA)
<CAPTION>
Three Months Ended
August 31,
1995 1994
(Unaudited) (Unaudited)
___________ ___________
<S> <C> <C>
NET SALES $5,255 $4,505
COST AND EXPENSES:
Cost of Sales 3,424 3,147
Selling, General & Administrative Expenses 1,928 1,983
Depreciation and Amortization 124 127
______ ______
5,476 5,257
______ ______
LOSS FROM OPERATIONS (221) (752)
______ ______
OTHER INCOME/(EXPENSES):
Foreign Currency Translation Gain (Loss) (9) 162
Other Income 165 165
Interest Expense (170) (211)
_______ _______
(14) 116
_______ _______
LOSS FROM CONTINUING OPERATIONS BEFORE
TAXES AND MINORITY INTEREST $ (235) $ (636)
_______ _______
INCOME TAX PROVISION $ (91) $ --
_______ _______
MINORITY INTEREST: SHARE OF INCOME (52) (13)
LOSS FROM CONTINUING OPERATIONS $ (378) $ (649)
_______ _______
DISCONTINUED OPERATIONS:
INCOME FROM OPERATIONS $ -- $ 38
_______ _______
NET LOSS $ (378) $ (611)
_______ _______
EARNINGS(LOSS) PER COMMON SHARE:
CONTINUING OPERATIONS $ (.16) $ (.28)
DISCONTINUED OPERATIONS -- .02
_______ _______
NET LOSS PER COMMON SHARE $ (.16) $ (.26)
_______ _______
DIVIDEND PER SHARE NONE NONE
WEIGHTED AVERAGE OF
COMMON SHARES OUTSTANDING 2,300,173 2,300,173
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
WELDOTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($000'S OMITTED EXCEPT SHARE DATA)
<CAPTION>
Six Months Ended
August 31,
1995 1994
(Unaudited) (Unaudited)
___________ ___________
<S> <C> <C>
NET SALES $9,528 $9,270
COST AND EXPENSES:
Cost of Sales 5,977 6,461
Selling, General & Administrative Expenses 3,627 3,741
Depreciation and Amortization 247 256
______ ______
9,851 10,458
______ ______
LOSS FROM OPERATIONS (323) (1,188)
______ ______
OTHER INCOME/(EXPENSES):
Foreign Currency Translation Gain 29 216
Other Income 300 330
Interest Expense (339) (340)
_______ _______
(10) 206
_______ _______
LOSS FROM CONTINUING OPERATIONS BEFORE
TAXES AND MINORITY INTEREST $ (333) $ (982)
_______ _______
INCOME TAX PROVISION $ (96) $ --
_______ _______
MINORITY INTEREST: SHARE OF (INCOME) LOSS (125) 4
LOSS FROM CONTINUING OPERATIONS $ (554) $ (978)
_______ _______
DISCONTINUED OPERATIONS:
INCOME FROM OPERATIONS $ -- $ 80
_______ _______
NET LOSS $ (554) $ (898)
_______ _______
EARNINGS(LOSS) PER COMMON SHARE:
CONTINUING OPERATIONS $ (.24) $ (.42)
DISCONTINUED OPERATIONS -- .03
_______ _______
NET LOSS PER COMMON SHARE $ (.24) $ (.39)
_______ _______
DIVIDEND PER SHARE NONE NONE
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING 2,300,173 2,300,173
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
WELDOTRON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($000'S OMITTED)
<CAPTION>
August 31, February 28,
1995 1995
(Unaudited) (Audited)
<S> <C> <C>
________ _______
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 72 $ 438
Accounts Receivable (Net) 2,378 2,461
Inventories (Note B) 9,305 9,025
Prepaid Expenses and Other Current Assets 555 303
________ _______
TOTAL CURRENT ASSETS 12,310 12,227
Property and Equipment at Cost 12,259 12,076
Less Accumulated Depreciation & Amort. (9,397) (9,162)
________ _______
2,862 2,914
Other Assets 137 145
________ _______
TOTAL ASSETS $ 15,309 $ 15,286
________ _______
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES & STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Short Term Borrowings (Note C) $ 2,388 $ 2,215
Notes Payable: Related Party (Note C) 1,000 --
Accounts Payable 2,701 2,022
Other Current Liabilities 2,238 2,381
________ _______
TOTAL CURRENT LIABILITIES 8,327 6,618
________ _______
Long-Term Debt-Net of Current Maturities
(Note C) -- 750
Long Term Debt: Related Party (Note C) -- 500
Notes Payable - Non-Current 10 --
Deferred Compensation 1,072 1,088
Deferred Income 20 --
Minority Interests in Subsidiary 864 754
Stockholders' Equity 5,016 5,576
________ _______
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 15,309 $ 15,286
________ _______
<FN>
The Balance Sheet at February 28, 1995, has been taken from the
audited financial statements at that date, condensed and reclassified.
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
WELDOTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000'S OMITTED)
<CAPTION>
Six Months Ended
August 31,
1995 1994
(Unaudited) (Unaudited)
________ _______
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (554) $ (898)
Adjustments to reconcile net loss to
net cash flows provided by (used in)
operating activities:
Depreciation and amortization 247 256
Foreign currency translation gain (29) (216)
Bad debt provision 13 13
Equity income from discontinued operations -- 80
Deferred compensation expense 68 28
Minority interest in subsidiary net income (loss) 125 (4)
Gain on sale of property, plant and equipment (11) --
Changes in operating assets and liabilities
(Increase) decrease in assets
Accounts receivable 12 267
Inventories (273) 133
Prepaid expenses and other current assets (189) (160)
Other assets 4 33
Increase in current liabilities 535 709
Decrease in other long-term liabilities (84) (24)
_______ _______
Total adjustments 418 955
_______ _______
Net cash provided by (used in)
operating activities (136) 57
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (202) (186)
Proceeds from the sales of
property, plant and equipment 11 --
_______ _______
Net cash used in investing activities (191) (186)
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds under short-term borrowings 182 352
Proceeds from short-term debt - Related Party 500 500
Principal payments under capital lease obligations -- (33)
Reduction of long term debt (750) (750)
_______ _______
Net cash provided by (used in)
financing activities (68) 69
_______ _______
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 29 (15)
_______ _______
NET DECREASE IN CASH AND CASH EQUIVALENTS (366) (75)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 438 501
______ ______
CASH AND CASH EQUIVALENTS, END OF PERIOD 72 426
______ ______
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
WELDOTRON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A: Basis of Preparation
The unaudited, condensed Consolidated Financial Statements as of
August 31, 1995 for the three and six month periods ended August 31,
1995 and 1994, included herein, have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01.
The information reflects all adjustments which are of a normal
recurring nature and which are, in the opinion of management,
necessary to a fair statement of the results for the period.
Certain financial information and footnote disclosures normally
included in financial statements prepared in accordance with the
generally accepted accounting principles have been condensed or
omitted. The reader is referred to the consolidated financial
statements and notes thereto included in the Registrant's annual
report on Form 10-K for the year ended February 28, 1995.
Results of operations for the interim period are not necessarily
indicative of the operating results for the full year.
Note B: Inventories
Inventories at August 31, 1995, and February 28, 1995, are as follows:
($000's - Omitted)
August 31, February 28,
1995 1995
__________ ________
Finished Goods $ 4,206 $ 3,858
Work in Process 3,072 2,852
Raw Materials 2,027 2,315
__________ ________
$ 9,305 $ 9,025
__________ ________
<PAGE>
Note C: Long-Term Debt and Short-Term Borrowings
In June 1991, the Registrant entered into a credit facility (the
Credit Facility) with Congress Financial Corporation, ("Congress") to
provide a revolving line of credit and term loan for working capital
purposes not to exceed $5,000,000. The interest rate is 3.75% over
the CoreStates floating base rate which was 8.75% at August 31,1995.
The Credit Facility further requires that the Registrant pay fees on
the unused line of credit, for administration, and upon early
termination of the Credit Facility. The Credit Facility was amended on
May 19,1995 to decrease the line of credit and the term loan to
$3,500,000 and extend the maturity date to June 25, 1996.
The Credit Facility is collateralized by substantially all of the
assets of the Registrant and its domestic subsidiaries. Borrowings
under the Credit Facility are limited to certain percentages of
eligible inventory and accounts receivable including stipulations as
to the ratio of advances collateralized by receivables compared to
advances collateralized by inventory.
The Company was in compliance with all financial covenants and terms
of the Credit Facility as of August 31, 1995.
On August 31, 1994, the Registrant borrowed Five Hundred Thousand
($500,000) Dollars from Lyford Corp. "Lyford", a related company that
owns 19.56% of the issued and outstanding common stock of the
registrant. The Company executed and delivered to Lyford a promissory
note, a security agreement and a Common Stock Purchase Warrant.
On May 5, 1995, the Registrant concluded the rolling of this note into
a new note in the amount of One Million ($1,000,000) Dollars. The new
obligation is evidenced by a certain Amended, Extended and Restated
Promissory Note dated as of March 1, 1995 (the "Restated Note"). In
consideration for the new loan, the Company executed and delivered to
Lyford the Restated Note and an additional Common Stock Purchase
Warrant. The new loan is secured by a junior lien on all of the
Company's assets. The new warrant grants to Lyford the right to
purchase up to 1,000,000 shares of the Company's common stock at an
initial exercise price of One ($1.00) Dollar per share. The market
price of the Company's common stock was $.875 on the date of the
warrant grant. The new warrant expires by its terms on April 12,
2005. Although an independent appraisal has not been obtained, the
Company management considered the application of APB 14 to the value
of these warrants and believes that they are of no value at this time.
The loan transaction closed pursuant to documents dated as of
March 1, 1995 and in the case of the Warrant, April 13, 1995. These
loan documents were contingent on the Company's obtaining the consent
of its senior lender, which consent was obtained on May 5, 1995.
<PAGE>
WELDOTRON CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition
___________________
The Registrant's net working capital decreased from $5,609,000 at
February 28, 1995 to $3,983,000 at August 31, 1995. The current ratio
decreased from 1.85 at February 28,1995 to 1.48 at August 31, 1995.
The changes in net working capital during the first half of this year
were primarily related to the following:
- - accounts receivable decreased 3% due to lower sales in the second
quarter of this year compared to the fourth quarter of last year.
- - inventories increased due to a buildup at our Brazilian subsidiary.
- - prepaid expenses and other current assets increased due to insurance
policy renewals and increased trade show expenditures.
- - accounts payable increased due to extended payment terms with
vendors.
- - notes payable from a related party increased at August 31, 1995 due
to the reclassification of $500,000 from long-term to short-term as
well as an additional $500,000 received in the first quarter of this
year.
At August 31, 1995 the Registrant had used approximately $2,344,000 of
the Congress Credit Facility (See Note C to the consolidated financial
statements). Based on the advance percentages of eligible receivables
and inventories the Registrant had unused borrowing availability of
approximately $82,000 at August 31, 1995. Other short term borrowings
include capitalized leases of approximately $44,000.
The availability of future borrowings depends upon the Company's
compliance with the covenants contained in the Credit Facility
agreement and the level of eligible receivables and inventories.
The Registrant's primary and secondary sources of liquidity at August
31, 1995 were the Congress Credit Facility and the note from a related
party, respectively. There can be no assurances that an extended
economic recession will not adversely impact the Registrant's future
financial condition and liquidity.
<PAGE>
The major adverse components affecting the unfavorable period to
period change in cash flow from operating activities were: (1) The
increase in inventory at our Brazilian subsidiary by $431,000 or 44%
in the first six months of this year compared to an increase there of
$64,000 or 18% in the first six months of last year. (2) A smaller
decrease in accounts receivable due to sales activity which had
experienced a greater decline last year between the fiscal year end
and half year periods than between the fiscal year end and half year
periods this year. (3) A smaller increase in current liabilities this
year versus the similar six month period last year due to a
combination of reduced commissions, lower escrow deposits from
customers and the "remeasurement" of Brazilian Cruzeiros to U.S.
dollars.
The Registrant increased its note obligation to a related party this
year by $500,000 to liquidate accounts payable and other current
liabilities.
The effect of exchange rate changes on cash and cash equivalents for
the six months ended August 31, 1995 and for the same period last year
was $29,000 and $(15,000), respectively. This is attributable to
Brazil's inflationary economy and the "remeasurement method" used for
foreign currency translation to be measured into U.S. dollars as
required by SFAS No. 52.
<PAGE>
Results of Continuing Operations for the Six Month Period Ended August
31, 1995 and 1994
______________________________________________________________________
For the second quarter ended August 31, 1995 sales from continuing
operations were $5,255,000 with loss from continuing operations of
$378,000 or $.16 per share. This compares to sales from continuing
operations of $4,505,000 with loss from continuing operations of
$649,000 or $.28 per share in the second quarter last year.
Loss From Operations
____________________
Second Quarter
______________
Sales for the second quarter were approximately 16.6% higher than the
same period last year. This is primarily due to an increase in sales
at our Brazilian subsidiary from $690,000 to $1,568,000, or 127%
between these quarters. Sales of domestic packaging systems increased
by 2.2%, while our control segment's sales declined 23.8% in the
second quarter this year compared to the same quarter last year.
Cost of sales for the second quarter this year was 65.2% of sales
compared to 69.9% for the prior year. The decrease in cost of sales
is due to sales of higher margin products as well as better
utilization of fixed overhead dollars.
Selling, general and administrative expense decreased by $55,000 in
the second quarter of this year compared to the same quarter last year
due to staff reductions made in the latter part of fiscal 1995. These
savings were partially offset by increases at our Brazilian
subsidiary; a direct result of their increased sales volume.
First Half
__________
Sales for the first half of this year increased approximately 2.7%
compared to last year. Sales at our Brazilian subsidiary increased
from $1,211,000 to $2,610,000, or 116%, while sales in the domestic
packaging group and controls segment declined 14.4% and 12.9%
respectively, from last year's similar six month period.
Cost of sales for the first half of this year was 62.7% of sales
compared to 69.7% of sales for the same period last year, reflecting
sales of higher margin products as well as better utilization of fixed
overhead dollars.
Selling, general and administrative expenses decreased in the first
half of this year by $114,000 compared to the same period last year
due to staff reductions which took place in the latter part of fiscal
1995. These savings were partially offset by certain professional
fees and increases at our Brazilian subsidiary due to increased sales
volume.
The gain from foreign currency translation decreased by $187,000 for
the first half of this year compared to the same period last year due
to slower movement this year in the Brazilian currency exchange rate.
Other Income and Expense
________________________
Second Quarter
______________
Other income in the second quarter this year was unchanged from the
second quarter last year.
Interest expense decreased $41,000 in the second quarter this year
compared to the second quarter last year due to reductions in short
term financial expenses at our Brazilian subsidiary, which were
partially offset by increased interest expense domestically, arising
from higher average borrowings and higher interest rates.
The provision for income taxes was $91,000 in the second quarter this
year versus no provision in the second quarter last year. The
provision is based solely on taxable income from our Brazilian
subsidiary of $169,000 for the quarter.
First Half
__________
Other income in the first half of this year decreased by $30,000 due
primarily to a reduction in commission income at our Brazilian
subsidiary.
Interest expense decreased by $1,000 in the first half of this year
compared to the same period last year. Whereas domestic interest
expense increased $106,000 due to higher average borrowings and higher
interest rates, our Brazilian subsidiary experienced a $107,000
offsetting reduction.
The provision for income taxes was $96,000 in the first half of this
year versus no provision in the first half last year. The provision
is based solely on taxable income from our Brazilian subsidiary of
$284,000 for the first half.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
MTD Service Corp. V. Weldotron Corporation
Information with respect to this litigation is incorporated by
reference to PART I, Item 3, Legal Proceedings, on page 13 of the
Registrant's Report on Form 10-K for the fiscal year ended February
28, 1995, filed with the Securities and Exchange Commission on June 7,
1995.
In July 1994 the Company and its co-defendants filed a motion for
summary judgment to dismiss the amended complaint. The motion was
granted by the Judge in the United State District Court for the
Southern District of New York. The Court's order, which dismissed
MTD's complaint with prejudice, was signed on July 29, 1994.
Subsequently MTD filed an appeal in the matter with the U.S. Court of
Appeals, 2nd Judicial Circuit. On May 5, 1995 this appeal was
dismissed by the Court by affirming the decision of the U.S.
District Court granting the Company's motion for the summary judgment.
Martin Siegel v. Weldotron Corporation
Information with respect to this litigation is incorporated by
reference to PART I, Item 3, Legal Proceedings, on page 13 of the
Registrant's Report on Form 10-K for the fiscal year ended February
28, 1995, filed with the Securities and Exchange Commission on June 7,
1995.
On April 13, 1995, the Company reached a full and final
settlement with Martin Siegel. Under the terms of the settlement,
which was approved by the Court: (1) all claims and counterclaims by,
between and among Mr. Siegel, the Company and the other parties to the
litigation were dismissed, with prejudice, (2) Mr. Siegel and the
Company exchanged mutual releases, (3) Mr. Siegel's Employment
Agreement with the Company dated March 1, 1988, as amended, was
terminated, and (4) Mr. Siegel was awarded a life secured obligation
of the Company.
Item 2. Changes in Securities
On August 31, 1994, the Registrant borrowed Five Hundred Thousand
($500,000) Dollars from Lyford Corp. "Lyford", a related company that
owns 19.56% of the issued and outstanding common stock of the
registrant. The Company executed and delivered to Lyford a promissory
note, a security agreement and a Common Stock Purchase Warrant.
<PAGE>
On August 31, 1994, the Registrant borrowed Five Hundred Thousand
($500,000) Dollars from Lyford Corp. "Lyford", a related company that
owns 19.56% of the issued and outstanding common stock of the
registrant. The Company executed and delivered to Lyford a promissory
note, a security agreement and a Common Stock Purchase Warrant.
On May 5, 1995, the Registrant concluded the rolling of this note
into a new note in the amount of One Million ($1,000,000) Dollars.
The new obligation is evidenced by a certain Amended, Extended and
Restated Promissory Note dated as of March 1, 1995 (the "Restated
Note"). In consideration for the new loan, the Company executed and
delivered to Lyford the Restated Note and an additional Common Stock
Purchase Warrant. The new loan is secured by a junior lien on all of
the Company's assets. The new warrant grants to Lyford the right to
purchase up to 1,000,000 shares of the Company's common stock at an
initial exercise price of One ($1.00) Dollar per share. The market
price of the Company's common stock was $.875 on the date of the
warrant grant. The new warrant expires by its terms on April 12,
2005. Although an independent appraisal has not been obtained, the
Company management considered the application of APB 14 to the value
of these warrants and believes that they are of no value at this time.
The loan transaction closed pursuant to documents dated as of
March 1, 1995 and in the case of the Warrant, April 13, 1995. These
loan documents were contingent on the Company's obtaining the consent
of its senior lender, which consent was obtained on May 5, 1995. The
new note in the amount of one million ($1,000,000) dollars is due and
payable on March 31, 1996.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
One press release issued by the Registrant on
April 18, 1995 regarding settlement with former chairman.
(b) Report on Form 8-K
Two reports on Form 8K were filed in the quarter ended
May 31, 1995 as follows
Date Item Reported
________ __________
April 13, 1995 Settlement with former chairman
May 5, 1995 Loan from related party
<PAGE>
S I G N A T U R E
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.
WELDOTRON CORPORATION
Registrant
By: Michael McKee
Michael McKee
Vice President of Finance
Date: October 16, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> AUG-31-1995
<CASH> 72
<SECURITIES> 0
<RECEIVABLES> 2378
<ALLOWANCES> 0
<INVENTORY> 9305
<CURRENT-ASSETS> 12310
<PP&E> 12259
<DEPRECIATION> 9397
<TOTAL-ASSETS> 15309
<CURRENT-LIABILITIES> 8327
<BONDS> 0
<COMMON> 118
0
0
<OTHER-SE> 5016
<TOTAL-LIABILITY-AND-EQUITY> 15309
<SALES> 5255
<TOTAL-REVENUES> 5255
<CGS> 3424
<TOTAL-COSTS> 5476
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170
<INCOME-PRETAX> (235)
<INCOME-TAX> (91)
<INCOME-CONTINUING> (378)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (378)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> 0
</TABLE>
