<PAGE> 1
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 June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File No. 0-9220
METATEC CORPORATION
(Exact name of Registrant as specified in its charter)
FLORIDA 59-1698890
(State of Incorporation) (IRS Employer Identification No.)
7001 Metatec Boulevard
Dublin, Ohio 43017
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (614) 761-2000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ----
Number of Common Shares outstanding as of July 27, 1995: 7,010,964
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METATEC CORPORATION AND SUBSIDIARIES
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<TABLE>
<CAPTION>
INDEX PAGE
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Part I : Financial Information
Item 1 - Financial Statements
<S> <C>
Consolidated Balance Sheets as of June 30,
1995 (unaudited) and December 31, 1994 3
Consolidated Statements of Earnings
for the three months ended June 30, 1995
and 1994 (unaudited) 4
Consolidated Statements of Earnings
for the six months ended June 30, 1995
and 1994 (unaudited) 5
Consolidated Statement of Stockholders'
Equity for the six months ended
June 30, 1995 (unaudited) 6
Consolidated Statements of Cash Flows
for the six months ended June 30,
1995 and 1994 (unaudited) 7
Notes to Consolidated Financial
Statements (unaudited) 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
Part II: Other Information
Items 1-6 12
Signatures 12
</TABLE>
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<PAGE> 3
<TABLE>
METATEC CORPORATION AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
As of June 30, 1995 and December 31, 1994
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<CAPTION>
ASSETS 1995 1994
------ ---- ----
(unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 9,030,710 $ 2,167,518
Accounts receivable, net of allowance for
doubtful accounts of $295,000 and $269,000 3,953,414 4,092,038
Inventory 853,478 602,773
Current portion of long-term notes receivable 11,797 11,597
Prepaid expenses 828,764 460,258
Deferred income taxes 535,000 522,000
----------- -----------
Total current assets 15,213,163 7,856,184
----------- -----------
Long-Term Notes Receivable, Less Current Portion 220,320 226,225
----------- -----------
PROPERTY, PLANT AND EQUIPMENT- Net 26,431,357 24,081,612
----------- -----------
OTHER ASSETS:
Goodwill 290,523 314,283
Other 77,700 77,700
----------- -----------
Total other assets 368,223 391,983
----------- -----------
TOTAL ASSETS $42,233,063 $32,556,004
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------------------------ ---- ----
(unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Current maturities of long-term debt and
capital lease obligations $ 86,235 $ 975,335
Accounts payable 1,661,565 2,462,243
Accrued royalties 730,233 559,157
Accrued personal property taxes 380,914 378,210
Accrued payroll 301,570 359,400
Accrued income taxes 320,559 285,371
Other accrued expenses 467,973 411,585
Unearned income 645,673 888,940
----------- -----------
Total current liabilities 4,594,722 6,320,241
Long-Term Debt and Capital Lease Obligations,
Less Current Maturities 150,617 7,644,634
Deferred income taxes 340,000 315,000
----------- -----------
Total liabilities 5,085,339 14,279,875
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value; authorized 10,083,500
shares; issued,1995-7,013,719 shares;1994-5,272,219 shares 701,372 527,222
Additional paid-in capital 33,430,845 15,643,913
Retained Earnings 6,952,048 6,041,535
Less: Common stock held in treasury - 1995 & 1994-2,755 shares (36,541) (36,541)
Unamortized restricted stock (3,900,000) (3,900,000)
----------- -----------
Total stockholders' equity 37,147,724 18,276,129
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $42,233,063 $32,556,004
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 4
<TABLE>
METATEC CORPORATION AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
For The Three Months Ended June 30, 1995 and 1994 (Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
1995 1994
---- -----
<S> <C> <C>
REVENUES $8,754,016 $6,538,579
---------- ----------
COST AND EXPENSES:
Cost of products sold 5,092,568 3,735,849
Selling, general and administrative 3,004,232 2,359,505
---------- ----------
Total costs and expenses 8,096,800 6,095,354
---------- ----------
OPERATING INCOME 657,216 443,225
Interest and other income - net 60,860 19,933
Interest expense (123,581) (6,033)
---------- ----------
EARNINGS BEFORE INCOME TAXES 594,495 457,125
INCOME TAXES 226,600 148,500
---------- ----------
NET EARNINGS $ 367,895 $ 308,625
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 6,130,347 5,070,717
========== ==========
NET EARNINGS PER COMMON SHARE $ 0.06 $ 0.06
========== ==========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 5
<TABLE>
METATEC CORPORATION AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
For The Six Months Ended June 30, 1995 and 1994 (Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
1995 1994
---- -----
<S> <C> <C>
REVENUES $17,932,638 $12,545,516
----------- -----------
COST AND EXPENSES:
Cost of products sold 10,226,522 7,348,333
Selling, general and administrative 5,996,087 4,634,374
----------- -----------
Total costs and expenses 16,222,609 11,982,707
----------- -----------
OPERATING INCOME 1,710,029 562,809
Interest and other income - net 78,136 80,654
Interest expense (314,452) (14,314)
----------- -----------
EARNINGS BEFORE INCOME TAXES 1,473,713 629,149
INCOME TAXES 563,200 200,100
----------- -----------
NET EARNINGS $ 910,513 $ 429,049
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 5,776,707 5,046,156
=========== ===========
NET EARNINGS PER COMMON SHARE $ 0.16 $ 0.08
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 6
<TABLE>
METATEC CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For The Six Months Ended June 30, 1995 (unaudited)
------------------------------------------------------------------------------------------------------------------------------------
Additional Unamortized
Common Paid-in Retained Treasury Restricted
Stock Capital Earnings Stock Stock Total
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 $527,222 $15,643,913 $6,041,535 $(36,541) $(3,900,000) $18,276,129
Stock options exercised 250 3,500 3,750
Net earnings three months ended
March 31, 1995 542,618 542,618
-------- ----------- ---------- -------- ----------- -----------
BALANCE, MARCH 31, 1995 527,472 15,647,413 6,584,153 (36,541) (3,900,000) 18,822,497
Stock options exercised 1,400 41,150 42,550
Shares issued pursuant to a
public offering, net costs of
$283,968 172,500 17,742,282 17,914,782
Net earnings three months ended
June 30, 1995 367,895 367,895
-------- ----------- ---------- -------- ----------- -----------
BALANCE JUNE 30, 1995 $701,372 $33,430,845 $6,952,048 $(36,541) $(3,900,000) $37,147,724
======== =========== ========== ======== =========== ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 7
METATEC CORPORATION AND SUBSIDIARIES
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1995 and 1994 (Unaudited)
----------------------------------------------------------------------------------------------------------------------------
1995 1994
---- ----
<S> <C> <C>
Net earnings $ 910,513 $ 429,049
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 2,047,428 1,352,286
Net loss (gain) on sales of assets 11,816 (6,986)
Changes in assets and liabilities:
Accounts receivable 138,624 (99,972)
Inventory (250,705) (146,365)
Prepaid expenses and other current assets (381,506) 66,336
Accounts payable, deferred income tax liability and other current liabilities (568,152) 380,741
Unearned income (243,267) (265,835)
------------- -------------
Net cash provided by operating activities 1,664,751 1,709,254
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in long-term notes receivable and other assets 5,705 25,336
Purchase of property, plant and equipment (4,683,529) (6,912,415)
Proceeds from the sale of fixed assets 298,300 150,000
------------- -------------
Net cash used in investing activities (4,379,524) (6,737,079)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock 17,914,782 0
Increase in long-term debt 0 950,000
Payment of notes and leases payable (8,383,117) (39,581)
Stock options exercised 46,300 128,223
------------- -------------
Net cash provided by financing activities 9,577,965 1,038,642
------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,863,192 (3,989,183)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,167,518 4,849,710
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,030,710 $ 860,527
============= =============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 314,452 $ 14,314
============== =============
Income taxes paid $ 529,619 $ 109,000
============== =============
</TABLE>
See note to consolidated financial statements.
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<PAGE> 8
METATEC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION - The consolidated balance sheet as of June
30, 1995, the consolidated statements of earnings for the three months and six
months ended June 30, 1995 and June 30, 1994, the consolidated statement of
stockholders' equity for the six months ended June 30, 1995, and the
consolidated statements of cash flows for the six month periods then ended have
been prepared by the Company, without audit. In the opinion of management, all
adjustments, which consist solely of normal recurring adjustments, necessary to
present fairly, in accordance with generally accepted accounting principles,
the financial position, results of operations and changes in cash flows for all
periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's December 31, 1994 annual
report on Form 10-K. The results of operations for the period ended June 30,
1995 are not necessarily indicative of the results for the full year.
2. PROPERTY, PLANT AND EQUIPMENT COMMITMENTS - The Company has commitments
under contracts for the purchase of property and equipment. Portions of such
contracts not completed as of June 30, 1995 are not reflected in the
consolidated financial statements. The unrecorded commitments amounted to
approximately $1,250,000 at June 30, 1995.
3. COMMON STOCK OFFERING - The Company completed a secondary public stock
offering of 1,725,000 common shares during the three months ended June 30, 1995
generating net proceeds to the company of $17,914,782. Of the total net
proceeds approximately $8,100,000 was used during the three month period ended
June 30, 1995 to reduce bank indebtedness with the balance invested in
short-term money market obligations, commercial paper and U.S. Treasury bills.
8 of 12
<PAGE> 9
METATEC CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total revenues increased by approximately 34% from $6,539,000 for the
three months ended June 30, 1994 to approximately $8,754,000 for the three
months ended June 30, 1995. This increase resulted from CD-ROM Manufacturing
Services and Software Services, with revenues of approximately $5,867,000 and
$1,040,000 respectively, increasing approximately a combined $2,405,000 or 53%.
This increase was partially offset by an approximate $159,000 decrease, or 26%,
in Publishing Services revenues which were approximately $458,000 for the three
months ended June 30, 1995. Manufacturing Services also produced radio
syndication revenues which totaled approximately $1,389,000 for the three
months ended June 30, 1995, as compared to approximately $1,419,000 for the
three months ended June 30, 1994. CD-ROM Manufacturing Services and Software
Services revenue increases resulted from the Company's continued focus on the
business and information services CD-ROM market. Publishing Services revenues
decreased as a result of a drop in NautilusCD subscription revenue and related
retail product sales.
Total revenues increased by approximately 43% from $12,546,000 for the
six months ended June 30, 1994 to approximately $17,933,000 for the six months
ended June 30, 1995. This increase resulted from CD-ROM Manufacturing Services
and Software Services, with revenues of approximately $12,186,000 and
$1,994,000 respectively, increasing approximately a combined $5,726,000 or 68%.
This increase was partially offset by an approximate $322,000 decrease, or 25%,
in Publishing Services revenues which were approximately $994,000 for the six
months ended June 30, 1995. Manufacturing Services also produced radio
syndication revenues which totaled approximately $2,760,000 for the six months
ended June 30, 1995, as compared to approximately $2,776,000 for the six months
ended June 30, 1994. CD-ROM Manufacturing Services and Software Services
revenue increases resulted from the Company's continued focus on the business
and information services CD-ROM market. Publishing Services revenues decreased
as a result of a drop in NautilusCD subscription revenue and related retail
product sales.
The number of subscribers to NautilusCD increased from approximately
11,300 as of June 30, 1994 to approximately 16,200 as of June 30, 1995. This
resulted in a decrease in subscription revenue for the three months ended June
30, 1995 as compared to the same period of the prior year due to a decrease in
the domestic per-issue price of NautilusCD from $9.95 to $6.95 which became
effective in the second quarter of 1994.
Cost of products sold was 58% of revenues for the three months ended
June 30, 1995 as compared to 57% of revenues for the same period of the prior
year. Cost of products sold was 57% of revenues for the six months ended June
30, 1995 as compared to 59% of revenues for the same period of the prior year.
This decrease in the cost of products sold for the six months is primarily
attributed to greater manufacturing efficiencies and increased production
volumes.
9 of 12
<PAGE> 10
METATEC CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
Selling, general and administrative expenses increased to $3,004,232,
or 34% of revenues, for the three months ended June 30, 1995 as compared to
$2,359,505, or 36% of revenues, for the three months ended June 30, 1994.
Selling, general and administrative expenses increased to $5,996,087, or 33% of
revenues, for the six months ended June 30, 1995 as compared to $4,634,374, or
37% of revenues, for the six months ended June 30, 1994. This increase for the
six month period of $1,361,713 is primarily attributed to increased personnel
costs, higher outside sales office costs, increased depreciation, and higher
facility occupancy costs as a result of the Company's increased corporate
office space. Increased personnel costs resulted primarily from increased
staffing in the sales and administrative functions.
Interest and other income for the three months ended June 30, 1995 was
$60,860 as compared to $19,933 for the three months ended June 30, 1994. This
increase is attributed to higher cash balances available for investment
purposes in the three months ended June 30, 1995 as compared to the same period
of the prior year. The increased cash balances are primarily as a result of
funds generated through the secondary public stock offering completed during
the three month period ended June 30, 1995, as more fully discussed below.
Interest and other income for the six months ended June 30, 1995 was $78,136 as
compared to $80,654 for the six months ended June 30, 1994. The six months
ended June 30, 1994 included gains on the sale of property, plant and
equipment.
Interest expense for the three months ended June 30, 1995 was $123,581
as compared to $6,033 for the three months ended June 30, 1994. Interest
expense for the six months ended June 30, 1995 was $314,452 as compared to
$14,314 for the six months ended June 30, 1994. This increase is attributed to
higher long-term debt balances (including current maturities) which were
incurred as a result of the purchase and expansion of the Company's primary
manufacturing and office facility. These debt balances were paid off during
the three months ended June 30, 1995 with a portion of the previously noted
public stock offering proceeds.
For the three months and six months ended June 30, 1995 an income tax
provision of $226,600 and $563,200 respectively, was applied to earnings before
income taxes based upon management's estimate of the full year 1995 expected
income tax rate of approximately 38%. For the three months and six months
ended June 30, 1994 an income tax provision of $148,500 and $200,100 was
applied to earnings before income taxes based upon management's estimate of the
full year 1994 expected income tax rate of approximately 30%. The 1994 expected
income tax rate was lower than the 1995 expected income tax rate primarily due
to the use of the net operating loss carryforwards in 1994.
For the three months ended June 30, 1995 net earnings were $367,895
compared to $308,625 for the three months ended June 30, 1994. Net earnings
per common share was $0.06 for the three months ended June 30, 1995 as compared
to $0.06 for the same period of the prior year. The increase in the weighted
average number of shares from 5,070,717 for the three months ended June 30,
1994 to 6,130,347 for the three months ended June 30, 1995 is primarily a
result of the secondary public stock offering of 1,725,000 common shares, which
occurred during the three months ended June 30, 1995 and shares earned under the
Restricted Share Agreement with an executive officer of the Company.
10 of 12
<PAGE> 11
METATEC CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
For the six months ended June 30, 1995 net earnings were $910,513
compared to $429,049 for the six months ended June 30, 1994. Net earnings per
common share was $0.16 for the six months ended June 30, 1995 as compared to
$0.08 for the same period of the prior year. The increase in the weighted
average number of shares from 5,046,156 for the six months ended June 30, 1994
to 5,776,707 for the six months ended June 30, 1995 is primarily a result of
the secondary public stock offering of 1,725,000 common shares, which occurred
during the three months ended June 30, 1995 and shares earned under the
Restricted Share Agreement with an executive officer of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $9,030,710 as of June 30, 1995 as
compared to $2,167,518 as of December 31, 1994. The Company financed its
business in 1994 through cash generated from operations, long-term debt, and
available cash balances. For the six months ended June 30, 1995, the Company
financed its business through cash generated from operations of $1,664,751, the
issuance of 1,725,000 common shares through a public stock offering which
generated $17,914,782 and with available cash balances.
The Company has initiated a 1995 capacity expansion program through the
placement of purchase orders for mastering and replication equipment. The
Company's obligation under these purchase commitments as of June 30, 1995
totalled approximately $1,250,000. The mastering and replication equipment was
delivered and installed in July of 1995. For the six months ended June 30,
1995 the Company has invested $4,683,529 in new property, plant and equipment
the majority of which relates to capacity expansion.
The Company completed the sale of 1,725,000 common shares during the
three months ended June 30, 1995 generating net proceeds to the Company of
$17,914,782. A portion of the proceeds were used to repay approximately
$8,100,000 in bank indebtedness with the balance to be used for the purchase of
approximately $5,000,000 in mastering and replication equipment and for general
corporate and working capital purposes. As of June 30, 1995 the funds are
invested in short-term money market obligations, commercial paper and U.S.
Treasury bills.
With its current cash balances, the availability of the $4,000,000 line
of credit under the Company's revolving loan agreement (which matures in April
1996) and funds generated from operations, the Company believes that it has
sufficient liquidity and capital resources to meet its capital expenditure
requirements and operating needs for the foreseeable future.
11 of 12
<PAGE> 12
PART II - OTHER INFORMATION
----------------------------
Items 1-3. Inapplicable
------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
a,b & c) The results of the April 27, 1995 stockholders meeting were reported
in the Form 10Q filed for the quarterly period ended March 31, 1995.
d) Inapplicable
------------
Item 5. Inapplicable
------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) No exhibits are filed as a part of this report on Form 10-Q.
b) No reports on Form 8-K have been filed during the quarter ended June 30,
1995.
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.
Metatec Corporation
BY: William H. Largent
Date: July 31, 1995 Executive Vice President,
Finance and
Chief Financial Officer
(authorized signatory-
principal financial and
accounting officer)
12 of 12
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 9,030,710
<SECURITIES> 0
<RECEIVABLES> 4,248,414
<ALLOWANCES> 295,000
<INVENTORY> 853,478
<CURRENT-ASSETS> 15,213,163
<PP&E> 35,549,071
<DEPRECIATION> (9,117,714)
<TOTAL-ASSETS> 42,233,063
<CURRENT-LIABILITIES> 4,594,722
<BONDS> 490,617
<COMMON> 701,372
0
0
<OTHER-SE> 36,446,352
<TOTAL-LIABILITY-AND-EQUITY> 42,233,063
<SALES> 17,932,638
<TOTAL-REVENUES> 17,932,638
<CGS> 10,226,522
<TOTAL-COSTS> 16,222,609
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 36,599
<INTEREST-EXPENSE> 314,452
<INCOME-PRETAX> 1,473,713
<INCOME-TAX> 563,200
<INCOME-CONTINUING> 910,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 910,513
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
