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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 2000
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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[LOGO]
MFC BANCORP LTD.
2000 SECOND QUARTER REPORT
TO SHAREHOLDERS
JUNE 30, 2000
FORWARD-LOOKING STATEMENTS
The statements in this report that are not based on historical facts are
called "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 can be
identified by words such as "estimates", "projects", "expects", "intends",
"believes", "plans", or their negatives or other comparable words. Also
look for discussions of strategy that involve risks and uncertainties.
Forward-looking statements include statements regarding the outlook for
our 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. You are cautioned that any
such forward-looking statements are not guarantees and may involve risks
and uncertainties. Our actual results may differ materially from those in
the forward-looking statements due to risks facing us or due to actual
facts differing from the assumptions underlying our predictions. Some of
these risks and assumptions include:
* general economic and business conditions, including changes in
interest rates;
* prices and other economic conditions;
* 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;
* our ability to execute prospective business plans; and
* misjudgments in the course of preparing forward-looking
statements.
We advise you that these cautionary remarks expressly qualify in their
entirety all forward-looking statements attributable to us or persons
acting on our behalf.
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MFC BANCORP LTD.
2000 SECOND QUARTER REPORT
President's Letter to Shareholders:
We are pleased to enclose our results for the second quarter of 2000. Our
net earnings in the second three months of 2000 increased by approximately
12.2% compared to the same period in 1999. The following table is a
summary of our selected financial information for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, June 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
(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 $ 28,600 $ 17,482 $ 42,209 $ 25,787
Net income 5,514 4,910 8,147 7,262
Net income per share:
Basic 0.46 0.41 0.68 0.60
Fully diluted 0.40 0.36 0.59 0.53
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31, June 30, December 31,
2000 1999 2000 1999
-------- ------------ -------- ------------
(U.S. Dollars in thousands) (Canadian Dollars in
Information Only thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 34,474 $ 34,343 $ 50,997 $ 49,567
Securities 44,662 46,981 66,069 67,808
Total assets 193,074 187,145 285,613 270,107
Debt 23,811 21,421 35,223 30,917
Shareholders' equity 125,851 118,348 186,171 170,811
</TABLE>
MFC is a financial services company that focuses on merchant banking. We
provide specialized banking and corporate finance services
internationally. We advise clients on corporate strategy and structure,
including mergers and acquisitions and capital raising. These activities
are principally conducted through our wholly-owned subsidiary, MFC
Merchant Bank S.A., which is a licensed full-service Swiss bank based in
Geneva, Switzerland. We also commit our own capital to promising
enterprises and invest and trade to capture investment opportunities for
our own account. We seek to invest in businesses or assets whose
intrinsic value is not properly reflected in their share price or value.
Our proprietary investing is generally not passive and we seek investments
where our financial expertise and management can either add or unlock
value. Our operations are primarily conducted in Europe and North America.
Our banking operations require 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 us to generate fee income without tying up
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significant amounts of capital. This is in contrast to most North American
banks, which generate revenue from the spread between the cost of funds
and the credit received.
At our shareholders' meeting in June 2000, shareholders approved a 100-
for-one share consolidation and a one-for-100 share split. As a result,
approximately 1,500 registered shareholders who held 99 shares or less
(representing approximately two-thirds of the total number of registered
shareholders) will receive cash for their shares without incurring any
selling commissions or expenses, while shareholders holding 100 or more
shares will be unaffected.
In August 2000, our banking operations were extended by the opening of an
office in Zurich, Switzerland, which will specialize in merchant and
investment banking.
We have established a solid foundation for our financial services business
and look forward to continued growth during the remainder of 2000.
Respectfully submitted,
/s/ M.J. Smith
M.J. Smith
August 2000 President
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MFC BANCORP LTD.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
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MFC BANCORP LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, 2000 June 30,
---------------
(U.S. Dollars) 2000 1999
-------- --------
Information Only (Canadian Dollars)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 34,474 $ 50,997 $ 38,449
Securities 44,662 66,069 85,528
Loans 62,815 92,922 71,275
Receivables 19,324 28,586 17,869
Due from investment dealers 10,294 15,228 16,806
Property held for sale 3,744 5,538 5,358
Excess cost of net assets acquired 11,923 17,637 17,974
Premises and equipment 750 1,109 2,575
Prepaid and other 5,088 7,527 3,441
-------- -------- --------
$193,074 $285,613 $259,275
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 33,366 $ 49,358 $ 49,494
Accounts payable and accrued expenses 7,593 11,232 12,038
Debt 23,811 35,223 39,851
-------- -------- --------
64,770 95,813 101,383
Minority interests 2,453 3,629 2,300
Shareholders' equity
Common stock 44,343 65,597 65,706
Cumulative translation adjustment (2,259) (3,342) (663)
Retained earnings 83,767 123,916 90,549
-------- -------- --------
125,851 186,171 155,592
-------- -------- --------
$193,074 $285,613 $259,275
======== ======== ========
</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 Six Months Ended June 30, 2000 and 1999
(Unaudited)
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
2000
-------------
(U.S. Dollars) 2000 1999
-------- --------
Information Only (Canadian Dollars)
<S> <C> <C> <C>
Financial services revenue $ 47,631 $ 69,870 $ 49,248
Expenses
Financial services 29,051 42,615 26,088
General and administrative 6,620 9,711 8,407
Interest 1,676 2,458 2,235
-------- -------- --------
37,347 54,784 36,730
-------- -------- --------
Income before income taxes 10,284 15,086 12,518
Provision for income taxes (48) (71) (192)
-------- -------- --------
10,236 15,015 12,326
Minority interests (479) (703) 8
-------- -------- --------
Net income $ 9,757 $ 14,312 $ 12,334
======== ======== ========
Earnings per share
Basic $ 0.80 $ 1.19 $ 1.02
======== ======== ========
Fully diluted $ 0.71 $ 1.05 $ 0.92
======== ======== ========
Weighted average number of shares
outstanding (in thousands) 15,205 15,205 15,276
======== ======== ========
</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 June 30, 2000 and 1999
(Unaudited)
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
2000
-------------
(U.S. Dollars) 2000 1999
-------- --------
Information Only (Canadian Dollars)
<S> <C> <C> <C>
Financial services revenue $ 28,600 $ 42,209 $ 25,787
Expenses
Financial services 18,622 27,456 13,485
General and administrative 3,258 4,824 3,872
Interest 698 1,036 1,090
-------- -------- --------
22,578 33,316 18,447
-------- -------- --------
Income before income taxes 6,022 8,893 7,340
Provision for income taxes (42) (62) (96)
-------- -------- --------
5,980 8,831 7,244
Minority interests (466) (684) 18
-------- -------- --------
Net income $ 5,514 $ 8,147 $ 7,262
======== ======== ========
Earnings per share
Basic $ 0.46 $ 0.68 $ 0.60
======== ======== ========
Fully diluted $ 0.40 $ 0.59 $ 0.53
======== ======== ========
Weighted average number of shares
outstanding (in thousands) 15,252 15,252 15,276
======== ======== ========
</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 Six Months Ended June 30, 2000 and 1999
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
June 30,
--------------------
2000 1999
-------- --------
<S> <C> <C>
Inflow (outflow) of cash and cash equivalents
related to the following activities:
Operating
Net income $ 14,312 $ 12,334
Adjustments to reconcile net income to net cash
provided by operating activities:
Items not affecting cash
Depreciation and amortization 840 1,030
Changes in current assets and liabilities
Securities 1,550 (11,662)
Receivables (6,641) 5,929
Due from investment dealers 1,748 (10,385)
Properties held for sale 2,363 60
Accounts payable and accrued expenses (6,100) (4,401)
Other (3,321) 2,234
-------- --------
4,751 (4,861)
Financing
Net increase in deposits 1,850 31,210
Debt repayments (3,028) (116)
Borrowings 7,271 -
Issuance of shares 99 -
Other (36) (41)
-------- --------
6,156 31,053
Investing
Net increase in loans (11,070) (21,400)
Sale and purchases of subsidiaries, net of
cash acquired (disposed) 1,216 (280)
Other (160) (467)
-------- --------
(10,014) (22,147)
Exchange rate effect on cash and cash equivalents 537 (4,467)
-------- --------
Decrease (increase) in cash and cash equivalents 1,430 (422)
Cash and cash equivalents:
Beginning of period 49,567 38,871
-------- --------
End of period $ 50,997 $ 38,449
======== ========
</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, 2000
(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 merchant 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 $1.4793 for period end purposes
and U.S.$1.00 = Canadian $1.4669 for the six months ended June 30, 2000.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In this document, please note the following:
* references to "we", "our", "us" or "MFC" mean MFC Bancorp
Ltd. and its subsidiaries unless the context of the sentence
clearly suggests otherwise;
* all references to monetary amounts are in Canadian dollars unless
otherwise indicated; and
* selected financial information has been provided in U.S. dollars
for informational purposes using an exchange rate of one Canadian
dollar being equal to U.S.$0.6760, being the Federal Reserve Bank
of New York rate of conversion for Canadian dollars to U.S.
dollars as at June 30, 2000.
The following discussion and analysis of the financial condition and
results of our operations for the six months ended June 30, 2000 should be
read in conjunction with the consolidated financial statements and related
notes included elsewhere herein. Certain reclassifications have been made
to our prior period financial statements to conform to the current period
presentation.
RESULTS OF OPERATIONS - Six Months Ended June 30, 2000
In the six months ended June 30, 2000, revenues increased to $69.9 million
from $49.2 million in the comparable period of 1999, primarily due to
increased merchant banking activities. Expenses increased to $54.8 million
in the six months ended June 30, 2000 from $36.7 million in the comparable
period of 1999, primarily as a result of higher revenues. General and
administrative expenses increased to $9.7 million in the six months ended
June 30, 2000 from $8.5 million in the comparable period of 1999.
Interest expense increased slightly to $2.5 million in the six months
ended June 30, 2000 from $2.2 million in the comparable period of 1999.
In the six months ended June 30, 2000, our net earnings were $14.3 million
or $1.19 per share on a basic basis ($1.05 per share on a fully diluted
basis). 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).
RESULTS OF OPERATIONS - Three Months Ended June 30, 2000
In the second quarter of 2000, revenues increased to $42.2 million from
$25.8 million in the comparable period of 1999, primarily due to increased
merchant banking activities. Expenses increased to $33.3 million in the
quarter ended June 30, 2000 from $18.4 million in the comparable period of
1999, primarily as a result of higher revenues. General and administrative
expenses increased slightly to $4.8 million in the quarter ended June 30,
2000 from $3.9 million in the comparable period of 1999. Interest expense
was $1.0 million in the quarter ended June 30, 2000 and $1.1 million in
the comparable period of 1999.
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In the quarter ended June 30, 2000, our net earnings were $8.1 million or
$0.68 per share on a basic basis ($0.59 per share on a fully diluted
basis). 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).
Liquidity and Capital Resources
The following table is a summary of selected financial information
concerning MFC for the periods indicated:
<TABLE>
<CAPTION>
U.S. Dollars Canadian Dollars
------------------ ------------------
June 30, June 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
(in thousands) (in thousands)
Information Only
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 34,474 $ 26,120 $ 50,997 $ 38,449
Securities 44,662 58,103 66,069 85,528
Total assets 193,074 176,138 285,613 259,275
Debt 23,811 27,073 35,223 39,851
Shareholders' equity 125,851 105,700 186,171 155,592
</TABLE>
We maintain 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 us with flexibility in managing our
business and financing. This liquidity is used by us in client related
services where we act as a financial intermediary for third parties and in
our own proprietary investing activities.
At June 30, 2000, our cash and cash equivalents were $51.0 million,
compared to $38.4 million at June 30, 1999. At June 30, 2000, we had
securities of $66.1 million, compared to $85.5 million at June 30, 1999.
Operating Activities
Operating activities provided cash of $4.8 million in the six months ended
June 30, 2000, compared to using cash of $4.9 million in the comparable
period of 1999. In the six months ended June 30, 2000, an increase in
receivables from dispositions used cash of $6.6 million, compared to a
decrease in receivables providing cash of $5.9 million in the comparable
period of 1999. A decrease in amounts due from investment dealers as a
result of securities trading activities provided cash of $1.7 million in
the six months ended June 30, 2000, compared to an increase which used
$10.4 million in the comparable period of 1999. A decrease in accounts
payable and accrued expenses used cash of $6.1 million in the six months
ended June 30, 2000, compared to $4.4 million in the comparable period of
1999. Net sales of securities provided cash of $1.6 million in the current
period, compared to net purchases of securities using $11.7 million in the
comparable period of 1999. We expect to generate sufficient cash flow from
operations to meet our working capital requirements.
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Investing Activities
Investing activities in the six months ended June 30, 2000 used cash of
$10.0 million, compared to $22.1 million in the comparable period of 1999,
primarily as a result of a smaller net increase in loans outstanding.
Financing Activities
Financing activities provided cash of $6.2 million in the six months ended
June 30, 2000, compared to $31.1 million in the comparable period of 1999,
primarily as a result of a smaller increase in customer deposits. During
the current period, net borrowings increased by approximately $4.3
million.
The appreciation of the Swiss franc relative to the Canadian dollar by
approximately 0.03% over the period resulted in an unrealized foreign
exchange translation gain of $0.5 million on cash and cash equivalents,
which is included as shareholder's equity in our balance sheet and does
not affect our net earnings.
We continue to explore potential acquisition opportunities as a means of
expanding our business. Such opportunities may involve acquisitions which
are material in size and may require the raising of additional capital.
Foreign Currency
Substantially all of our operations are conducted in international markets
and our consolidated financial results are subject to foreign currency
exchange rate fluctuations, in particular, those in Switzerland.
We translate foreign assets and liabilities into Canadian dollars at the
rate of exchange on the balance sheet date. Revenues and expenses are
translated at the average rate of exchange prevailing during the period.
Unrealized gains or losses from these translations are recorded as
shareholders' equity on the balance sheet and do not affect our net
earnings.
As a substantial amount of our revenues are received in Swiss francs, our
financial position for any given period, when reported in Canadian
dollars, can be significantly affected by the exchange rate for Swiss
francs prevailing during that period. In the period ended June 30, 2000,
we reported an approximately net $0.9 million foreign exchange translation
gain and, as a result, our cumulative foreign exchange translation loss at
June 30, 2000 was $3.3 million, compared to $0.7 million at June 30, 1999.
We use derivatives to hedge our foreign exchange exposure.
Based upon the period average exchange rate in the second quarter of 2000,
the Canadian dollar increased by approximately 10.0% in value against the
Swiss franc, over the comparative period in 1999.
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Certain Factors
Our results of operations may be materially affected by market
fluctuations and economic factors. In addition, our results of operations
have been and may continue to be affected by many factors of a global
nature, including economic and market conditions, the availability of
capital, the level and volatility of equity prices and interest rates,
currency values and other market indices, technological changes, the
availability of credit, inflation and legislative and regulatory
developments. Our results of operations may also be materially affected
by competitive factors. Competition includes firms traditionally engaged
in financial services such as banks, broker-dealers and investment
dealers, along with other sources such as insurance companies, mutual fund
groups, on-line service providers and other companies offering financial
services in Europe and globally.
Inflation
We do not believe that inflation has had a material impact on revenues or
income during the second quarter of 2000. Because our assets to a large
extent are liquid in nature, they are not significantly affected by
inflation. However, increases in inflation could result in increases in
our expenses, which may not be readily recoverable in the price of
services provided to our clients. To the extent inflation results in
rising interest rates and has other adverse effects on capital markets, it
could adversely affect our financial position and profitability.
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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 28, 2000
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