<PAGE> 1
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Month of August 1999
MFC BANCORP LTD.
(Exact Name of Registrant as specified in its charter)
6 Rue Charles-Bonnet, 1206 Geneva, Switzerland
(41 22) 818 2999
(Address and telephone number of Registrant's executive office)
(Indicate by check mark whether the Registrant files or will file annual
reports under cover of Form 20-F or Form 40-F).
[ X ] Form 20-F [ ] Form 40-F
(Indicate by check mark whether the Registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934).
Yes No X
------- -------
(If "Yes" is marked, indicate below the file number assigned to the Registrant
in connection with Rule 12g3-2(b): 82- ).
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<PAGE> 2
MFC BANCORP LTD.
1999 SECOND QUARTER REPORT
TO SHAREHOLDERS
JUNE 30, 1999
FORWARD-LOOKING STATEMENTS
Statements in this report, to the extent that they are not based on historical
events, constitute forward-looking statements within the meaning of the United
States Private Securities Litigation Reform Act of 1995. These statements
appear in a number of different places in this report and include statements
regarding the intent, belief or current expectations of MFC Bancorp Ltd., and
its directors and officers, primarily with respect to the future market size
and future operating performance of MFC Bancorp Ltd. and its subsidiaries.
Forward-looking statements include, without limitation, statements regarding
the outlook for future operations, forecasts of future costs and expenditures,
evaluation of market conditions, the outcome of legal proceedings, the
adequacy of reserves, or other business plans. Investors are cautioned that
any such forward-looking statements are not guarantees and may involve risks
and uncertainties, and that actual results may differ from those in the
forward-looking statements as a result of various factors such as general
economic and business conditions, including changes in interest rates, prices
and other economic conditions; actions by competitors; natural phenomena;
actions by government authorities, including changes in government regulation;
uncertainties associated with legal proceedings; technological development;
future decisions by management in response to changing conditions; the ability
to execute prospective business plans; and misjudgments in the course of
preparing forward-looking statements.
<PAGE> 3
MFC BANCORP LTD.
1999 SECOND QUARTER REPORT
President's Letter to Shareholders:
We are pleased to enclose the Company's second quarter results for 1999.
Revenues and earnings increased during the quarter, as the Company realized
growth in its financial services business. The following table is a summary
of selected financial information concerning the Company for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, June 30,
-------------------------- ----------------------
1999 1998 1999 1998
------------- ------------ ---------- ----------
(U.S. Dollars in thousands (Canadian Dollars in
except per share amounts) thousands except per
Information Only share amounts)
<S> <C> <C> <C> <C>
Revenue $ 17,577 $ 14,541 $ 25,929 $ 21,100
Net income 4,910 4,739 7,262 6,852
Net income per share:
Basic 0.41 0.39 0.60 0.56
Fully diluted 0.36 0.35 0.53 0.51
June 30, December 31, June 30, December 31,
1999 1998 1999 1998
------------ ------------- ---------- ------------
(U.S. Dollars in thousands) (Canadian Dollars in
Information Only thousands)
Cash and cash equivalents $ 26,120 $ 25,398 $ 38,449 $ 38,871
Securities 58,103 50,309 85,528 76,998
Total assets 176,138 163,203 259,275 249,782
Debt 27,073 26,195 39,851 40,091
Shareholders' equity 105,700 100,878 155,592 154,396
</TABLE>
The Company is in the financial services business specializing in private and
investment banking internationally. The Company's banking business is
conducted by its wholly-owned subsidiary, MFC Merchant Bank S.A. (the "Bank"),
a licensed full-service Swiss bank based in Geneva Switzerland. The Bank does
not engage in commercial or real estate lending.
Private banking focuses on asset management, securities trading services and
servicing the Bank's worldwide base of clients, including corporations, small
to mid-sized institutions and high net-worth individuals. Investment banking
services include providing finance and advisory services to clients with
respect to corporate finance transactions and underwriting issuances of
securities. The Company's personalized approach to client development for both
its private and investment banking activities has continued to increase its
client base. The Company will continue to focus on providing its clients with
creative solutions through both its existing operations and strategic
acquisitions and alliances.
2
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The Bank requires substantially less regulatory capital than traditional North
American banks as the majority of its customer deposits are placed in the
European fiduciary market. Such placements are off-balance sheet items which
allow the Bank to generate fee income without tying up significant amounts of
its capital. On the other hand, the traditional method of placing deposits,
whereby income is generated on the spread between deposits and return on
investments, requires significant amounts of capital, which will hinder
growth.
The Company also conducts proprietary investing activities, which consist of
the Company using its own resources and expertise to invest for its own
account. These activities concentrate on the identification and acquisition
of control of undervalued assets and the development and realization of the
full potential thereof. The Company invests globally with the objective of
maximizing total return measured through both long-term appreciation and
recognized gains.
The Company has established a solid foundation for its financial services
business and looks forward to continued growth in 1999.
Respectfully submitted,
M.J. Smith
August 1999 President
3
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MFC BANCORP LTD.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
4
<PAGE> 6
MFC BANCORP LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
June 30,
June 30, 1999 --------------------------
---------------- 1999 1998
(U.S. Dollars) ------------ ------------
Information Only (Canadian Dollars)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 26,120 $ 38,449 $ 46,045
Securities 58,103 85,528 68,819
Loans 48,421 71,275 38,575
Receivables 23,556 34,675 37,270
Property held for sale 3,640 5,358 5,980
Notes receivable - - 2,438
Excess cost of net assets
acquired 12,211 17,974 18,341
Premises and equipment 1,749 2,575 2,626
Prepaid and other 2,338 3,441 6,159
------------ ------------ ------------
$ 176,138 $ 259,275 $ 226,253
============ ============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits $ 33,624 $ 49,494 $ 14,181
Accounts payable and accrued
expenses 8,178 12,038 35,845
Debt 27,073 39,851 45,047
------------ ------------ ------------
68,875 101,383 95,073
Minority interest 1,563 2,300 2,523
Shareholders' equity:
Common stock 44,637 65,706 65,632
Cumulative translation
adjustment (451) (663) 1,233
Retained earnings 61,514 90,549 61,792
------------ ------------ ------------
105,700 155,592 128,657
------------ ------------ ------------
$ 176,138 $ 259,275 $ 226,253
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 7
MFC BANCORP LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
June 30,
June 30, 1999 --------------------------
---------------- 1999 1998
(U.S. Dollars) ------------ ------------
Information Only (Canadian Dollars)
<S> <C> <C> <C>
Financial services revenue $ 33,101 $ 49,390 $ 53,895
Expenses
Financial services 17,484 26,088 25,992
General and administrative 5,730 8,549 11,819
Interest 1,498 2,235 2,274
------------ ------------ ------------
24,712 36,872 40,085
------------ ------------ ------------
Income before income taxes 8,389 12,518 13,810
Provision for income taxes (129) (192) (242)
------------ ------------ ------------
8,260 12,326 13,568
Minority interest 5 8 244
------------ ------------ ------------
Net income $ 8,265 $ 12,334 $ 13,812
============ ============ ============
Earnings per share:
Basic $ 0.68 $ 1.02 $ 1.12
============ ============ ============
Fully diluted $ 0.62 $ 0.92 $ 1.03
============ ============ ============
Weighted average number of shares
outstanding (in thousands) 15,276 15,276 14,367
============ ============ ============
Dividends paid on:
Common shares $ - $ - $ 369
============ ============ ============
Preferred shares $ - $ - $ -
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 8
MFC BANCORP LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 1999 and 1998
(Unaudited)
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
June 30,
June 30, 1999 --------------------------
---------------- 1999 1998
(U.S. Dollars) ------------ ------------
Information Only (Canadian Dollars)
<S> <C> <C> <C>
Financial services revenue $ 17,577 $ 25,929 $ 21,100
Expenses
Financial services 9,145 13,485 7,173
General and administrative 2,729 4,014 6,119
Interest 740 1,090 1,040
------------ ------------ ------------
12,614 18,589 14,332
------------ ------------ ------------
Income before income taxes 4,963 7,340 6,768
Provision for income taxes (65) (96) (144)
------------ ------------ ------------
4,898 7,244 6,624
Minority interest 12 18 228
------------ ------------ ------------
Net income $ 4,910 $ 7,262 $ 6,852
============ ============ ============
Earnings per share:
Basic $ 0.41 $ 0.60 $ 0.56
============ ============ ============
Fully diluted $ 0.36 $ 0.53 $ 0.51
============ ============ ============
Weighted average number of shares
outstanding (in thousands) 15,276 15,276 14,776
============ ============ ============
Dividends paid on:
Common shares $ - $ - $ 369
============ ============ ============
Preferred shares $ - $ - $ -
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 9
MFC BANCORP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
June 30,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
Inflow (outflow) of cash and cash equivalents
related to the following activities:
Operating
Net income $ 12,334 $ 13,812
Adjustments to reconcile net income to
net cash (used in) provided by operating
activities:
Items not affecting cash
Depreciation and amortization 1,030 825
Gain on debt - (7,689)
Changes in current assets and liabilities
(Increase) decrease in securities (11,662) 6,890
Increase in receivables (4,456) (17,676)
Decrease in properties held for sale 60 539
(Decrease) increase in accounts payable
and accrued expenses (4,401) 6,938
Other 2,234 (614)
------------ ------------
(4,861) 3,025
Financing
Net increase (decrease) in deposits 31,210 (16,652)
Debt repayments (116) (21)
Borrowings - 17,207
Issuance of shares, net - (4,736)
Dividends paid - (369)
Other (41) (39)
------------ ------------
31,053 (4,610)
Investing
Net (increase) decrease in loans (21,400) 5,775
Purchases of subsidiaries, net of
cash acquired (280) (370)
Other (467) (55)
------------ ------------
(22,147) 5,350
Exchange rate effect on cash and
cash equivalents (4,467) 58
------------ ------------
(Decrease) increase in cash and
cash equivalents (422) 3,823
Cash and cash equivalents, beginning
of period 38,871 42,222
------------ ------------
Cash and cash equivalents, end
of period $ 38,449 $ 46,045
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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MFC BANCORP LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1999
(Unaudited)
NOTE 1. Basis of Presentation
---------------------
The consolidated financial statements contained herein include the accounts of
MFC Bancorp Ltd. and its subsidiaries (the "Company").
The interim period consolidated financial statements have been prepared by the
Company in accordance with Canadian generally accepted accounting principles.
All financial summaries included are presented on a comparative and consistent
basis showing the figures for the corresponding period in the preceding year.
The preparation of financial data is based on accounting principles and
practices consistent with those used in the preparation of annual financial
statements. Certain information and footnote disclosure normally included in
consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These interim
period statements should be read together with the audited consolidated
financial statements and the accompanying notes included in the Company's
latest annual report on Form 20-F. In the opinion of the Company, its
unaudited interim consolidated financial statements contain all adjustments
necessary in order to present a fair statement of the results of the interim
periods presented.
Certain reclassifications have been made to the prior period financial
statements to conform with the current period presentation.
NOTE 2. Nature of Business
------------------
The Company is in the financial services business and its principal activities
focus on private and investment banking.
NOTE 3. Earnings Per Share
------------------
Basic earnings per share is computed on the weighted average number of shares
outstanding during the period. For the calculation of fully diluted earnings
per share, under Canadian generally accepted accounting principles, options
are deemed to be exercised at the date of grant and convertible securities are
deemed to be converted at the date of issuance.
Under U.S. generally accepted accounting principles, options affect diluted
earnings per share when "in-the-money."
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NOTE 4. Reporting Currency
------------------
The Company reports its results in Canadian dollars. Certain amounts herein
have also been reported in U.S. dollars for reference purposes. Amounts
reported in U.S. dollars have been translated from Canadian dollars at a rate
of U.S.$1.00 = Canadian $1.4720 for period end purposes and U.S.$1.00 =
Canadian $1.4921 for the six months ended June 30, 1999.
10
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results
of operations of the Company for the six months ended June 30, 1999 should be
read in conjunction with the consolidated financial statements and related
notes included elsewhere herein. In this document, unless the context
otherwise requires, the "Company" refers to MFC Bancorp Ltd. and its
subsidiaries and all references to monetary amounts are in Canadian dollars
unless otherwise indicated. Selected financial data has also been provided in
U.S. dollars for information purposes using an exchange rate of one U.S.
dollar being equal to Canadian $1.4720 for the current period and Canadian
$1.4716 for the comparative period of 1998.
Certain reclassifications have been made to the prior period financial
statements to conform to the current period presentation.
RESULTS OF OPERATIONS - Six Months Ended June 30, 1999
------------------------------
In the six months ended June 30, 1999, revenues decreased to $49.4 million
from $53.9 million in the comparable period of 1998, primarily due to reduced
activities. Expenses decreased to $36.9 million in the six months ended June
30, 1999 from $40.1 million in the comparable period of 1998, primarily as a
result of lower general and administrative expenses. General and
administrative expenses decreased to $8.5 million in the six months ended June
30, 1999 from $11.8 million in the comparable period of 1998, primarily due to
the consolidation and streamlining of operations. Interest expense decreased
marginally to $2.2 million in the six months ended June 30, 1999 from $2.3
million in the comparable period of 1998.
In the six months ended June 30, 1999, net earnings were $12.3 million or
$1.02 per share on a basic basis ($0.92 per share on a fully diluted basis).
In the six months ended June 30, 1998, net earnings were $13.8 million or
$1.12 per share on a basic basis ($1.03 per share on a fully diluted basis).
RESULTS OF OPERATIONS - Three Months Ended June 30, 1999
--------------------------------
In the second quarter of 1999, revenues increased to $25.9 million from $21.1
million in the comparable period of 1998, primarily due to increased sales of
securities. Expenses increased to $18.6 million in the quarter ended June 30,
1999 from $14.3 million in the comparable period of 1998, primarily as a
result of higher revenues. General and administrative expenses decreased to
$4.0 million in the quarter ended June 30, 1999 from $6.1 million in the
comparable period of 1998, primarily due to the consolidation and streamlining
of operations. Interest expense increased marginally to $1.1 million in the
quarter ended June 30, 1999 from $1.0 million in the comparable period of
1998.
In the quarter ended June 30, 1999, net earnings were $7.3 million or $0.60
per share on a basic basis ($0.53 per share on a fully diluted basis). In the
quarter ended June 30, 1998, net earnings were $6.9 million or $0.56 per share
on a basic basis ($0.51 per share on a fully diluted basis).
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<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
The following table is a summary of selected financial information concerning
the Company for the periods indicated:
<TABLE>
<CAPTION>
U.S. Dollars Canadian Dollars
---------------------- ----------------------
June 30, June 30,
---------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(in thousands) (in thousands)
Information Only
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 26,120 $ 31,289 $ 38,449 $ 46,045
Securities 58,103 46,765 85,528 68,819
Total assets 176,138 153,746 259,275 226,253
Debt 27,073 30,611 39,851 45,047
Shareholders' equity 105,700 87,426 155,592 128,657
</TABLE>
The Company maintains a high level of liquidity, with a substantial amount of
assets held in cash and cash equivalents, highly liquid marketable securities
and customer loans collateralized by marketable securities. The highly liquid
nature of these assets provides the Company with flexibility in managing its
business and financing. This liquidity is used by the Company in client
related services where the Company acts as a financial intermediary for third
parties and in the Company's own proprietary investing activities.
At June 30, 1999, the Company's cash and cash equivalents were $38.4 million,
compared to $46.0 million in the comparable period of 1998. At June 30, 1999,
the Company had securities of $85.5 million, compared to $68.8 million in the
comparable period of 1998.
Operating Activities
- --------------------
Operating activities used cash of $4.9 million in the six months ended June
30, 1999, compared to providing cash of $3.0 million in the comparable period
of 1998. In the six months ended June 30, 1999, an increase in receivables
used cash of $4.5 million, compared to $17.7 million in the comparable period
of 1998, primarily as a result of securities trading activities. A decrease
in accounts payable and accrued expenses used cash of $4.4 million in the six
months ended June 30, 1999, compared to an increase in same providing cash of
$6.9 million in the comparable period of 1998. Net purchases of securities
used cash of $11.7 million in the current period, compared to net sales of
securities providing cash of $6.9 million in the comparable period of 1998.
The Company expects to generate sufficient cash flow from operations to meet
its working capital requirements.
Investing Activities
- --------------------
Investing activities in the six months ended June 30, 1999 used cash of $22.1
million, compared to providing cash of $5.4 million in the comparable period
of 1998, primarily as a result of an increase in loans for customers'
securities trading accounts during the current period.
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Financing Activities
- --------------------
Financing activities provided cash of $31.1 million in the six months ended
June 30, 1999, compared to using cash of $4.6 million in the comparable period
of 1998, primarily as a result of a net increase in deposits for customers'
securities trading accounts during the current period.
The devaluation of the Swiss franc relative to the Canadian dollar by
approximately 15.1% over the period resulted in an unrealized foreign exchange
translation loss of $4.5 million on cash and cash equivalents, which is
included as shareholder's equity in the Company's balance sheet and does not
affect the net earnings of the Company.
The Company continues to explore potential acquisition opportunities as a
means of expanding its business. Such opportunities may involve acquisitions
which are material in size and may require the raising of additional capital.
Year 2000
- ---------
Many of the world's computer systems currently record years in two-digit
format. If not addressed, these computer systems may be unable to properly
interpret dates beyond the year 1999, which could lead to business disruptions
and is commonly referred to as the "Year 2000" issue. The Company has
conducted a comprehensive review and testing of all significant applications
that may require modification to ensure Year 2000 compliance.
The Company's systems have been determined to be Year 2000 compliant. The
Company's Year 2000 testing has been audited and confirmed by a third-party
auditor. The Company is in the process of finalizing a contingency action
plan in the event of non-compliance on January 1, 2000, which is expected to
be completed in the third quarter of 1999.
In addition, the Company is closely monitoring the Year 2000 compliance status
of its most critical business relationships with customers and other
counterparties. The Company surveys and communicates with counterparties,
intermediaries and vendors with whom it has important financial and
operational relationships to determine the extent to which they are vulnerable
to the Year 2000 issue.
There are a number of risks associated with the Year 2000 issue, including the
failure of the Company's computer and non-information technology systems.
Such failures could have a material adverse effect on the Company and could
result in system malfunctions, incorrect or incomplete transaction processing
and the inability to reconcile financial records and trading positions and
balances with counterparties. Further, even if the Company addresses all of
its Year 2000 issues, it can be adversely affected by failures of third
parties to address their own Year 2000 issues. The failure of third parties,
with whom the Company has financial operational relationships, to remediate
their computer and non-information technology systems in a timely matter could
result in a material adverse effect to the Company, including through business
interruptions or shutdown or financial losses.
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Based upon its current information, management of the company has determined
that the Year 2000 issue will not pose significant operational problems for
its computers. The total cost to the Company of Year 2000 compliance
activities has not been and is not currently anticipated to be material to its
financial position or results of operations in any given year. The costs and
the dates on which the Company plans to complete Year 2000 modification and
testing are based on management's best estimates, which were derived utilizing
numerous assumptions of future events. The Company's expectations are based
on the assumption that there will be no general failure of external, local or
international systems (such as power, communication systems, securities
exchanges, central banks and various governmental regulatory bodies) necessary
for the ordinary conduct of business. However, there can be no assurance that
these estimates will be achieved and actual results could differ materially
from those anticipated.
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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.
Registrant MFC BANCORP LTD.
------------------------------
By /s/ Michael J. Smith
------------------------------
MICHAEL J. SMITH, PRESIDENT
Date August 30, 1999
------------------------------
