<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 November 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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MFC BANCORP LTD.
1999 THIRD QUARTER REPORT
TO SHAREHOLDERS
SEPTEMBER 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 THIRD QUARTER REPORT
President's Letter to Shareholders:
We are pleased to enclose the Company's results for the third quarter and
first nine months of 1999. Net earnings in the first nine months of 1999
increased by approximately 21% compared to the same period in 1998. The
following table is a summary of selected financial information concerning the
Company for the periods indicated:
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
---------------------- ----------------------
September 30, September 30,
---------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(U.S. Dollars in (Canadian Dollars in
thousands except per thousands except per
share amounts) share amounts)
Information Only
<S> <C> <C> <C> <C>
Revenue $ 49,281 $ 54,733 $ 73,428 $ 80,125
Net income 15,275 12,880 22,759 18,858
Net income per share:
Basic 1.26 1.05 1.88 1.54
Fully diluted 1.11 0.95 1.65 1.39
September 30, December 31, September 30, December 31,
1999 1998 1999 1998
------------- ------------ ------------- ------------
(U.S. Dollars (Canadian Dollars
in thousands) in thousands)
Information Only
Cash and cash equivalents $ 33,974 $ 25,398 $ 49,942 $ 38,871
Securities 56,972 50,309 83,749 76,998
Total assets 185,964 163,203 273,369 249,782
Debt 27,107 26,195 39,847 40,091
Shareholders' equity 114,208 100,878 167,887 154,396
</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.
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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.
In the fourth quarter of 1999, the Bank began conducting business over the
Internet through its SwissNetBanking.com Web site and is the first to provide
international residents with the opportunity to open on-line banking and
trading accounts with a Swiss bank where permitted. Prior to the offering of
this service on-line, opening a bank account in Switzerland was required to be
done in person, which is not practical for non-residents of the country. Hits
on the Web site have grown steadily since coming on-line, which has been
reflected in growing account opening document requests.
Currently, the Web site offers trading on U.S. based exchanges and, prior to
year-end, will offer trading on Swiss based exchanges. In 2000, the Company
plans to add the ability to trade on other European, Latin and South American
and certain Asian based exchanges. In addition, in 2000 the Company plans to
expand the site to offer multi-currency foreign exchange accounts and make the
Web site multilingual.
The Company has established a solid foundation for its financial services
business and looks forward to continued growth in the last quarter of 1999.
Respectfully submitted,
M.J. Smith
November 1999 President
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MFC BANCORP LTD.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
4
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MFC BANCORP LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, 1999 September 30,
------------------ ----------------------
(U.S. Dollars) 1999 1998
Information Only ---------- ----------
(Canadian Dollars)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 33,974 $ 49,942 $ 64,872
Securities 56,972 83,749 73,491
Loans 46,288 68,044 37,832
Receivables 17,401 25,580 20,858
Due from investment dealers 11,845 17,411 29,593
Property held for sale 3,648 5,363 6,251
Notes receivable - - 7,239
Excess cost of net assets acquired 12,299 18,080 18,740
Premises and equipment 1,805 2,654 2,926
Prepaid and other 1,732 2,546 4,778
---------- ---------- ----------
$ 185,964 $ 273,369 $ 266,580
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 34,807 $ 51,167 $ 28,196
Accounts payable and accrued expenses 8,268 12,154 53,829
Debt 27,107 39,847 40,241
---------- ---------- ----------
70,182 103,168 122,266
Minority interest 1,574 2,314 2,477
Shareholders' equity
Common stock 44,716 65,732 65,666
Cumulative translation adjustment 802 1,181 9,331
Retained earnings 68,690 100,974 66,840
---------- ---------- ----------
114,208 167,887 141,837
---------- ---------- ----------
$ 185,964 $ 273,369 $ 266,580
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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MFC BANCORP LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
1999 1999 1998
---------------- ---------- ----------
(U.S. Dollars) (Canadian Dollars)
Information Only
<S> <C> <C> <C>
Financial services revenue $ 49,281 $ 73,428 $ 80,125
Expenses
Financial services 22,631 33,720 41,036
General and administrative 9,063 13,504 16,735
Interest 2,138 3,186 3,553
---------- ---------- ----------
33,832 50,410 61,324
---------- ---------- ----------
Income before income taxes 15,449 23,018 18,801
Provision for income taxes (173) (258) (257)
---------- ---------- ----------
15,276 22,760 18,544
Minority interest (1) (1) 314
---------- ---------- ----------
Net income $ 15,275 $ 22,759 $ 18,858
========== ========== ==========
Earnings per share
Basic $ 1.26 $ 1.88 $ 1.54
========== ========== ==========
Fully diluted $ 1.11 $ 1.65 $ 1.39
========== ========== ==========
Weighted average number of shares
outstanding (in thousands) 15,276 15,276 14,835
========== ========== ==========
Dividends paid on:
Common shares $ - $ - $ 369
========== ========== ==========
Preferred shares $ - $ - $ -
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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MFC BANCORP LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 1999 and 1998
(Unaudited)
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
1999 1999 1998
---------------- ---------- ----------
(U.S. Dollars) (Canadian Dollars)
Information Only
<S> <C> <C> <C>
Financial services revenue $ 16,180 $ 24,038 $ 26,230
Expenses
Financial services 5,147 7,632 15,044
General and administrative 3,333 4,955 4,916
Interest expense 640 951 1,279
---------- ---------- ----------
9,120 13,538 21,239
---------- ---------- ----------
Income before income taxes 7,060 10,500 4,991
Provision for income taxes (44) (66) (15)
---------- ---------- ----------
7,016 10,434 4,976
Minority interest (6) (9) 70
---------- ---------- ----------
Net income $ 7,010 $ 10,425 $ 5,046
========== ========== ==========
Earnings per share
Basic $ 0.58 $ 0.86 $ 0.42
========== ========== ==========
Fully diluted $ 0.50 $ 0.74 $ 0.39
========== ========== ==========
Weighted average number of shares
outstanding (in thousands) 15,277 15,277 14,617
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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MFC BANCORP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
September 30,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Inflow (outflow) of cash and cash equivalents
related to the following activities:
Operating
Net income $ 22,759 $ 18,858
Adjustments to reconcile net income to
net cash provided by operating
activities:
Items not affecting cash
Depreciation and amortization 1,573 1,397
Gain on debt securities - (7,660)
Changes in current assets
and liabilities
Securities (6,765) 5,361
Receivables 2,217 (1,195)
Due from investment dealers (10,269) (26,594)
Properties held for sale 48 507
Accounts payable and accrued expenses (4,210) 21,857
Other (915) 29
---------- ----------
4,438 12,560
Financing
Net increase (decrease) in deposits 32,767 (6,539)
Loan repayments (116) (3,719)
Borrowings - 15,515
Issuance of shares, net of repurchase - (4,703)
Dividends paid - (369)
Other (40) (40)
---------- ----------
32,611 145
Investing
Net (increase) decrease in loans (16,108) 5,585
Purchases of subsidiaries, net of cash acquired (521) (760)
Purchase of long-term investments (4,741) -
Other (725) (224)
---------- ----------
(22,095) 4,601
Exchange rate effect on cash and
cash equivalents (3,883) 5,344
---------- ----------
Increase in cash and cash equivalents 11,071 22,650
Cash and cash equivalents:
Beginning of period 38,871 42,222
---------- ----------
End of period $ 49,942 $ 64,872
========== ==========
</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 NINE MONTH PERIOD ENDED SEPTEMBER 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 to 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 $1.4700 for period end purposes and U.S. $1.00 =
Canadian $1.4900 for the nine months ended September 30, 1999.
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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 nine months ended September 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 $1.4700 for the current period and Canadian
$1.5259 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 - Nine Months Ended September 30, 1999
------------------------------------
In the nine months ended September 30, 1999, revenues decreased to $73.4
million from $80.1 million in the comparable period of 1998, primarily due to
reduced activities in investment banking. Expenses decreased to $50.4 million
in the nine months ended September 30, 1999 from $61.3 million in the
comparable period of 1998, primarily as a result of lower revenues. General
and administrative expenses decreased to $13.5 million in the nine months
ended September 30, 1999 from $16.7 million in the comparable period of 1998,
primarily due to the consolidation and streamlining of operations. Interest
expense decreased to $3.2 million in the nine months ended September 30, 1999
from $3.6 million in the comparable period of 1998, primarily due to lower
indebtedness during the current period.
In the nine months ended September 30, 1999, net earnings were $22.8 million
or $1.88 per share on a basic basis ($1.65 per share on a fully diluted
basis). In the nine months ended September 30, 1998, net earnings were $18.9
million or $1.54 per share on a basic basis ($1.39 per share on a fully
diluted basis).
RESULTS OF OPERATIONS - Three Months Ended September 30, 1999
-------------------------------------
In the third quarter of 1999, revenues decreased to $24.0 million from $26.2
million in the comparable period of 1998, primarily as a result of lower sales
of securities. Expenses decreased to $13.5 million in the third quarter of
1999 from $21.2 million in the comparable period of 1998, primarily as a
result of lower revenues. General and administrative expenses increased
marginally to $5.0 million in the quarter ended September 30, 1999 from $4.9
million in the comparable period of 1998. Interest expense decreased to $1.0
million in the quarter ended September 30, 1999 from $1.3 million in the
comparable period of 1998, primarily due to lower indebtedness during the
current quarter.
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In the quarter ended September 30, 1999, net earnings were $10.4 million or
$0.86 per share on a basic basis ($0.74 per share on a fully diluted basis).
In the quarter ended September 30, 1998, net earnings were $5.0 million or
$0.42 per share on a basic basis ($0.39 per share on a fully diluted basis).
Liquidity and Capital Resources
- -------------------------------
The following table is a summary of selected financial information concerning
the Company for the periods indicated:
<TABLE>
<CAPTION>
U.S. Dollars Canadian Dollars
---------------------- ----------------------
September 30, September 30,
---------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(in thousands) (in thousands)
Information Only
<S> <C> <C> <C> <C>
Cash and cash equivalents. . .$ 33,974 $ 42,514 $ 49,942 $ 64,872
Securities . . . . . . . . . . 56,972 48,162 83,749 73,491
Total assets . . . . . . . . . 185,964 174,703 273,369 266,580
Debt . . . . . . . . . . . . . 27,107 26,372 39,847 40,241
Shareholders' equity . . . . . 114,208 92,952 167,887 141,837
</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 September 30, 1999, the Company's cash and cash equivalents were $49.9
million, compared to $64.9 million at September 30, 1998. At September 30,
1999, the Company had securities of $83.7 million, compared to $73.5 million
at September 30, 1998.
Operating Activities
- --------------------
Operating activities provided cash of $4.4 million in the nine months ended
September 30, 1999, compared to $12.6 million in the comparable period of
1998. In the nine months ended September 30, 1999, a decrease in receivables
provided cash of $2.2 million, compared to an increase in same using cash of
$1.2 million in the comparable period of 1998. An increase in amounts due
from investment dealers as a result of securities trading activities used cash
of $10.3 million in the nine months ended September 30, 1999, compared to
$26.6 million in the comparable period of 1998. A decrease in accounts payable
and accrued expenses used cash of $4.2 million in the nine months ended
September 30, 1999, compared to an increase in same providing cash of $21.9
million in the comparable period of 1998. Net purchases of securities used
cash of $6.8 million in the current period, compared to net sales of
securities providing cash of $5.4 million in the comparable period of 1998.
The Company expects to generate sufficient cash flow from operations to meet
its working capital requirements.
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The Company recently began conducting business over the Internet whereby it is
offering on-line banking and trading services. The Company expects to spend a
significant amount of cash on marketing its on-line services, including on
television, radio, magazine and Internet advertising, and capital expenditures
relating to the technology for its Web site. The Company expects that such
expenditures will negatively impact its short-term cash flows and earnings.
Investing Activities
- --------------------
Investing activities in the nine months ended September 30, 1999 used cash of
$22.1 million, compared to providing cash of $4.6 million in the comparable
period of 1998, primarily as a result of a net increase of approximately $16.1
million in loans for customers' securities trading accounts during the current
period. These are margin loans secured by securities deposited by customers.
In the fourth quarter of 1999, the Bank began conducting business over the
Internet through its SwissNetBanking.com Web site. The project is being
financed from cash flow from operations and, other than costs for hardware,
costs and expenses associated with the project are being expensed in the
quarter incurred.
Financing Activities
- --------------------
Financing activities provided cash of $32.6 million in the nine months ended
September 30, 1999, compared to $0.1 million in the comparable period of 1998,
primarily as a result of a net increase of approximately $32.8 million in
deposits for customers' securities trading accounts during the current period.
The devaluation of the Swiss franc relative to the Canadian dollar by
approximately 12.2% over the period resulted in an unrealized foreign exchange
translation loss of $3.9 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
- ---------
The Year 2000 issue results from computer applications written to use two
digits rather than four to define the applicable year, which could lead to
business disruptions in the Year 2000. 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
also has finalized a contingency action plan in the event of non-compliance on
January 1, 2000 designed to safeguard the interests of the Company and its
customers. The Company believes the plan significantly reduces the risk of a
Year 2000 issue serious enough to cause a business disruption. The total cost
to the Company of Year 2000
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compliance activities has not been and is not currently anticipated to be
material to its financial position or results of operations.
In addition, the Company has closely monitored the Year 2000 compliance status
of its most important business relationships with customers and other
counterparties. Communications with these parties indicate that the Company
faces no serious risks in areas outside of its control. However, there can be
no assurance that the failure of these parties to remediate their computer and
non-information technology systems in a timely manner would not materially
adversely affect the Company. The Company will continue to monitor the Year
2000 compliance status of these parties and, in the event that a party is not
ready, the Company will work with other affected parties to plan an
appropriate course of action.
Although there can be no certainty that all aspects of the Year 2000 issue
potentially affecting the Company, its customers and other counterparties have
been fully resolved, management believes that the Year 2000 issue will not
pose significant operational problems for its computers. 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 November 29, 1999
------------------------------
