<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-7170
IMCO Recycling Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
75-2008280
(I.R.S. Employer Identification No.)
5215 North O'Connor Blvd.
Suite 940
Central Tower at Williams Square
Irving, Texas 75039
(Address of principal executive offices)
(214) 869-6575
(Registrant's telephone number, including area code)
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 (or for such shorter period that the
Registrant was required to file such reports),and (2) has
been subject to such filing requirements for the past 90
days.
Yes __X_ No____
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of April 28, 1995.
COMMON STOCK, $0.10 PAR VALUE, 11,519,694
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
---- ----
ASSETS (UNAUDITED) (AUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 7,405 $ 2,854
Accounts receivable 19,499 19,239
Inventories 3,662 3,186
Deferred income tax 1,704 1,978
Other current assets 898 598
-------- -------
TOTAL CURRENT ASSETS 33,168 27,855
PROPERTY AND EQUIPMENT, NET 61,447 61,046
INTANGIBLE ASSETS
Excess acquisition cost over the fair
value of net assets acquired, net of
amortization of $3,346 and $3,219,
respectively 5,938 6,056
Patents 280 296
-------- -------
TOTAL INTANGIBLE ASSET 6,218 6,352
OTHER ASSETS, NET 659 1,538
-------- -------
$101,492 $96,791
======== =======
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,802 $ 4,150
Accrued liabilities 5,340 4,063
Current maturities of long-term
debt 1,000 1,094
Dividends payable -- 1,152
Accrued interest 306 93
-------- -------
TOTAL CURRENT LIABILITIES 12,448 10,552
LONG-TERM DEBT 11,500 11,860
OTHER LONG-TERM LIABILITIES 1,412 1,232
DEFERRED INCOME TAX 4,894 4,857
STOCKHOLDERS' EQUITY
Preferred Stock; par value $.10;
8,000,000 shares authorized; none
issued -- --
Common Stock; par value $.10
20,000,000 shares authorized;
11,756,698 issued at March 31,
1995; and December 31, 1995 1,176 1,176
Additional paid in capital 23,584 23,511
Retained earnings 48,315 45,421
Treasury stock, at cost;
238,845 shares at March 31,
1995; 244,910 shares at
December 31, 1994 (1,837) (1,818)
-------- -------
71,238 68,290
-------- -------
$101,492 $96,791
======== =======
</TABLE>
<PAGE>
IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(dollars in thousands, except per share)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------
MARCH 31,
---------
1995 1994
---- ----
<S> <C> <C>
REVENUES
Cost of sales $ 30,746 $ 21,682
23,311 16,863
-------- --------
GROSS PROFIT 7,435 4,819
Selling, general and
administrative expense 2,395 1,277
Litigation expense -- 141
Interest expense 280 240
Interest income (64) (26)
-------- --------
INCOME BEFORE PROVISION
FOR INCOME TAXES 4,824 3,187
Provision for income taxes 1,930 1,155
-------- -------
NET EARNINGS $ 2,894 $ 2,032
======== =======
Net earnings per common
share $ 0.24 $ 0.18
======== =======
Weighted average common and
common equivalent shares
outstanding 11,914,910 11,523,496
</TABLE>
<PAGE>
IMCO RECYCLING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
--------------------------
MARCH 31,
---------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 2,894 $ 2,032
Depreciation and amortization 2,208 1,643
Provision for deferred income taxes 310 267
Other noncash charges 279 129
(Gain) on sale of property and
equipment (29) (1)
Changes in noncash components of
working capital excluding investing
and financing transactions)
Accounts receivable (272) (949)
Inventories (476) (1,960)
Other current assets (299) (426)
Accounts payable and accrued
liabilities 3,142 2,881
------- -------
NET CASH FLOWS FROM OPERATING
ACTIVITIES 7,757 3,616
INVESTING ACTIVITIES:
Purchase of property and equipment (1,643) (1,110)
Proceeds from sale of property
and equipment 62 10
Purchase of other businesses (9) (93)
Other (64) (244)
------- ------
NET CASH USED BY INVESTING
ACTIVITIES (1,654) (1,437)
FINANCING ACTIVITIES:
Net (decrease) in short-term
borrowings -- (1,800)
Principal payments of long-term
debt (454) --
Dividends paid (1,151) --
Tax benefit from the exercise of
stock options 26 138
Treasury stock activity 27 (88)
------- ------
NET CASH USED BY FINANCING
TRANSACTIONS (1,552) (1,750)
------- -------
Net increase in Cash and Cash
Equivalents 4,551 429
Cash and Cash Equivalents at
January 1 2,854 1,665
------- -------
Cash and Cash Equivalents at
March 31 $ 7,405 $ 2,094
======= =======
SUPPLEMENTARY INFORMATION:
Cash payments for interest $ 97 $ 9
Cash payments for income taxes $ 234 $ 65
</TABLE>
<PAGE>
IMCO RECYCLING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
three-month period ended March 31, 1995 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1995. The accompanying financial
statements include the accounts of IMCO Recycling Inc. and
all of its subsidiaries (the "Company"). All significant
intercompany accounts and transactions have been eliminated.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's
annual report on Form 10-K for the year ended December 31,
1994. Certain reclassifications have been made to prior
year statements to conform to the current year presentation.
NOTE B - INVENTORIES
The components of inventories are:
(dollars in thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
<S> <C> <C>
Finished goods $1,705 $1,391
Raw materials 1,502 1,440
Supplies 455 355
------ ------
$3,662 $3,186
====== ======
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is in the resource recovery industry and
provides recycling services for primary manufacturers of
metal. The Company's principal activity involves the
recycling of aluminum and aluminum scrap and by-products.
The Company also recycles magnesium and zinc. The Company's
financial performance is largely determined by the volume of
metal it processes. The largest portion of the Company's
business is the processing of customer-owned material for a
fee (a service called "tolling"). In addition to tolling,
the Company to a lesser extent also purchases material for
processing and resale ("buy/sell business"). Both the
Company's tolling fees per pound recycled and the selling
price of metal it owns, recycles and sells for its own
account are included in revenues. Variations in the mix
between these two types of transactions, which have occurred
in the past, can cause revenue amounts to change
significantly from period to period while generally not
significantly affecting total gross profit, because both
types of transactions have approximately the same gross
profit value per pound of metal processed.
<PAGE>
The following table shows the total pounds of metal
processed, the percentage of total pounds processed
represented by tolled metal, total revenues and total gross
profit in the three month periods ended March 31:
<TABLE>
<CAPTION>
1995 1994
------- -------
(In thousands, except percentages)
<S> <C> <C>
Pounds of Metal Processed 304,531 229,369
Percentage of Pounds Tolled 96% 95%
Revenues $30,746 $21,682
Gross Profit $ 7,435 $ 4,819
</TABLE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS
ENDED MARCH 31, 1994
The Company processed 33% more metal in the three month
period ended March 31, 1995 than it did in the same period
of 1994. Aluminum processing at the Company's newest
facility in Loudon, Tennessee, which was purchased in
September, 1994 along with large increases in processing at
both the Corona, California plant and the Uhrichsville, Ohio
plant were the major factors contributing to this increase.
The Corona plant processing reflected favorable market
conditions for recycling used beverage containers. The
Uhrichsville plant increases are the result of a capacity
addition put in place in the third quarter of 1994 which is
being fully utilized. In addition to these factors, all of
the Company's other plants processed more material in the
three months ending March 31, 1995 than they did in the
same period of 1994.
Revenues increased 42% in 1995's first quarter compared to
1994's first quarter. This increase in revenues exceeded
the percentage increase in volume as discussed above,
because of strengthened toll revenues and because selling
prices for the products the Company buys and sells for its
own account were above levels received in 1994. Tolling
activity represented 96% of the Company's processing in the
first quarter of 1995 compared to 95% for the first quarter
of 1994.
Magnesium revenues and volumes processed were about equal in
the first quarter of 1995 compared to 1994. Zinc revenues
in the first quarter of 1995 were 72% above last year's
total, while zinc processing volume increased 8%.
Virtually all of the increase in zinc revenue in 1995
compared to 1994 was due to buy/sell business, since some
customers which were previously tolling their material opted
to change to a buy/sell basis. Zinc dross receipts reached
record levels in 1995's first quarter.
Gross profit increased to $7,435,000 in the first quarter of
1995 compared to $ 4,819,000 for the first quarter of 1994,
or an increase of about 54%. This increase was mostly due
to the increased volume and increased prices as previously
discussed. Gross profit was negatively impacted in the
first quarter of 1994 by the California plant, which
operated at a loss. As noted above, the California plant's
processing rates increased in 1995's first quarter, and the
plant was profitable.
<PAGE>
Selling, general and administrative expenses of $ 2,395,000
were $ 1,118,000 higher in 1995's first quarter compared to
1994. Increased employee costs due to additional staff
hired at the Company's headquarters location necessitated by
the Company's rapid recent growth and severance pay to a
retired executive employee were the principal contributors
to this increase.
In 1994 the Company incurred $141,000 of litigation expense
related to a lawsuit it eventually settled in the second
quarter of 1994. In April, 1995 the Company reached a
negotiated settlement in certain litigation it had initiated
in 1991 related to protecting its technology. See "PART II
OTHER INFORMATION".
Interest expense of $280,000 and interest income of $64,000
for the three months ended March 31, 1995 were similar
compared to first quarter 1994 amounts of $240,000 for
interest expense and $26,000 for interest income.
Income before the provision for tax of $4,824,000 in 1995's
first quarter was 51% or $1,637,000 above 1994's first
quarter, and was similar to the relative increase in gross
profit. The Company's effective income tax rate increased
to 40% for the first three months of 1995 compared to about
36% for the first quarter of 1994, due mostly to higher
effective state income tax rates.
As a result of all of the above, the Company reported net
earnings of $ 2,894,000 for the first quarter of 1995, or
42% more than $ 2,032,000 for the comparable 1994 period.
LIQUIDITY AND CAPITAL RESOURCES
Operations provided cash of $ 7,757,000 during the first
quarter of 1995, compared to providing $ 3,616,000 in the
same period of 1994. Increases in earnings as discussed
above, and non-cash charges such as depreciation and
deferred income taxes along with a positive contribution to
cash provided by working capital items accounted for the
variance between the two periods. Working capital other
than cash decreased $2,095,000 in the first quarter of 1995
and increased $454,000 during 1994's first quarter. A
decrease in working capital is a source of cash. The main
reason for the working capital decline was an increase in
accrued taxes payable, which was paid in April.
The Company's total capital spending in the first quarter of
1995 was $1,643,000, compared to $1,110,000 spent in the
first quarter of 1994. Capital expenditures for 1995 are
expected to be approximately $14,000,000. A salt cake
processing plant to be constructed adjacent to the Company's
Morgantown, Kentucky plant is expected to be the largest
capital item in 1995 and is projected to cost about
$6,300,000.
Financing activities in the first quarter of 1995 included
the repayment of $454,000 in long-term debt and the payment
of $1,151,000 in dividends previously declared.
The Company feels that its cash on hand, the availability of
funds under its lines of credit and its anticipated
internally generated funds will be sufficient to fund its
current needs and meet its obligations.
At March 31, 1995, the relationship of current assets to
current liabilities, or current ratio, was 2.66 to 1, which
was about the same as December 31, 1994. Working capital
will fluctuate as the mix of buy/sell business and tolling
business changes relative to the total business, for the
reasons discussed above.
<PAGE>
REVIEW BY INDEPENDENT ACCOUNTANTS
The Company's independent accountants, Ernst & Young LLP,
have reviewed the Company's consolidated financial
statements at March 31, 1995, and for the three months then
ended prior to filing and their report is included herein.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In April 1995, the Company reached a settlement in
a lawsuit it had filed in 1991 against Garney Scott and
Scepter Industries Inc. ("Scepter") regarding the Company's
recycling process. The settlement agreement dismisses all
claims in the litigation each party had against the other
parties, and contains mutual releases. The order of
dismissal was entered by the Court on May 2, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are included herein:
15.1 Acknowledgment letter regarding unaudited
financial information from Ernst & Young LLP.
(b) Reports on Form 8-K - None.
SIGNATURE
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.
IMCO Recycling Inc.
Date: May 12, 1995 By: /s/ Robert R. Holian
-------------------------------
Robert R. Holian
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
Independent Accountants' Report
Stockholders and
Board of Directors
IMCO Recycling Inc.
We have reviewed the accompanying consolidated balance sheet of IMCO
Recycling Inc. as of March 31, 1995, and the related consolidated statements
of earnings and cash flows for the three-month periods ended March 31, 1995
and 1994. These financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of IMCO Recycling Inc. as of
December 31, 1994, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for the year then ended, (not presented
herein), and in our reports dated February 9, 1995, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1994, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has
been derived.
ERNST & YOUNG LLP
------------------------
ERNST & YOUNG LLP
April 25, 1995
Dallas, Texas
<PAGE>
Stockholders and
Board of Directors
IMCO Recycling Inc.
We are aware of the incorporation by reference in the Registration Statement
(Form S-8 No. 33-26641) pertaining to the Nonqualified Stock Option Plan of
IMCO Recycling Inc. and the related Prospectus, in the Registration Statement
(Form S-8 No. 33-34745) pertaining to the IMCO Recycling Inc. Amended and
Restated Stock Option Plan, and in the Registration Statement (Form S-8
No. 33-76780) pertaining to the IMCO Recycling Inc. 1992 Stock Option Plan of
our report dated April 25, 1995 relating to the unaudited condensed
consolidated interim financial statements of IMCO Recycling Inc. which are
included in its Form 10-Q for the quarter ended March 31, 1995.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a
part of the registration statements prepared or certified by accountants
within the meaning of Section 7 or 11 of the Securities Act of 1933.
ERNST & YOUNG LLP
----------------------
ERNST & YOUNG LLP
May 12, 1995
Dallas, Texas
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 7,405
<SECURITIES> 0
<RECEIVABLES> 19,499
<ALLOWANCES> 0
<INVENTORY> 3,662
<CURRENT-ASSETS> 33,168
<PP&E> 88,304
<DEPRECIATION> 26,857
<TOTAL-ASSETS> 101,492
<CURRENT-LIABILITIES> 12,448
<BONDS> 11,500
<COMMON> 1,176
0
0
<OTHER-SE> 70,062
<TOTAL-LIABILITY-AND-EQUITY> 101,492
<SALES> 30,746
<TOTAL-REVENUES> 30,746
<CGS> 0
<TOTAL-COSTS> 23,311
<OTHER-EXPENSES> 2,395
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 280
<INCOME-PRETAX> 4,824
<INCOME-TAX> 1,930
<INCOME-CONTINUING> 2,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,894
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
