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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
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)
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FLORIDA 59-1698890
(State of Incorporation) (IRS Employer Identification No.)
7001 Metatec Boulevard
Dublin, Ohio 43017
(Address of principal executive offices) (Zip code)
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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
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Number of Common Shares outstanding as of April 27, 1995: 5,271,964
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METATEC CORPORATION AND SUBSIDIARIES
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INDEX PAGE
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Part I: Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets as of March 31,
1995 (unaudited) and December 31, 1994 3
Consolidated Statements of Earnings
for the three months ended March 31, 1995
and 1994 (unaudited) 4
Consolidated Statement of Stockholders'
Equity for the three months ended
March 31, 1995 (unaudited) 5
Consolidated Statements of Cash Flows
for the three months ended March 31,
1995 and 1994 (unaudited) 6
Notes to Consolidated Financial
Statements (unaudited) 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 -10
Part II: Other Information
Items 1-6 11
Signatures 11
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METATEC CORPORATION AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
As of March 31, 1995 and December 31, 1994
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ASSETS 1995 1994
- ------ ---- ----
(unaudited)
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CURRENT ASSETS:
Cash and cash equivalents $ 807,001 $2,167,518
Accounts receivable, net of allowance for
doubtful accounts of $291,000 and $269,000 4,075,987 4,092,038
Inventory 786,916 602,773
Current portion of long-term notes receivable 11,797 11,597
Prepaid expenses 604,150 460,258
Deferred income taxes 532,000 522,000
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Total current assets 6,817,851 7,856,184
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Long-Term Notes Receivable, Less Current Portion 223,195 226,225
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PROPERTY, PLANT AND EQUIPMENT - Net 24,689,100 24,081,612
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OTHER ASSETS:
Goodwill 302,403 314,283
Other 77,700 77,700
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Total other assets 380,103 391,983
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TOTAL ASSETS $32,110,249 $32,556,004
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LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
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(unaudited)
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CURRENT LIABILITIES:
Current maturities of long-term debt and
capital lease obligations $ 975,635 $ 975,335
Accounts payable 1,406,485 2,462,243
Accrued royalties 573,552 559,157
Accrued personal property taxes 467,985 378,210
Accrued payroll 511,060 359,400
Accrued income taxes 445,459 285,371
Other accrued expenses 395,141 411,585
Unearned income 766,606 888,940
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Total current liabilities 5,541,923 6,320,241
Long-Term Debt and Capital Lease Obligations,
Less Current Maturities 7,410,829 7,644,634
Deferred income taxes 335,000 315,000
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Total liabilities 13,287,752 14,279,875
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STOCKHOLDERS' EQUITY:
Common stock, $.10 par value; authorized 10,083,500
shares; issued, 1995-5,274,719 shares; 1994-5,272,219 shares 527,472 527,222
Additional paid-in capital 15,647,413 15,643,913
Retained Earnings 6,584,153 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)
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Total stockholders' equity 18,822,497 18,276,129
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $32,110,249 $32,556,004
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See notes to consolidated financial statements
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METATEC CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF EARNINGS
For The Three Months Ended March 31, 1995 and 1994
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1995 1994
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REVENUES $ 9,178,622 $ 6,006,937
COSTS AND EXPENSES:
Cost of products sold 5,133,954 3,612,484
Selling, general and administrative 2,991,855 2,274,869
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Total costs and expenses 8,125,809 5,887,353
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OPERATING INCOME 1,052,813 119,584
Interest and other income - net 17,276 60,721
Interest expense (190,871) (8,281)
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EARNINGS BEFORE INCOME TAXES 879,218 172,024
INCOME TAXES 336,600 51,600
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NET EARNINGS $ 542,618 $ 120,424
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 5,408,670 5,021,595
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NET EARNINGS PER COMMON SHARE $ 0.10 $ 0.02
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See notes to consolidated financial statements
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METATEC CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For The Three Months Ended March 31, 1995 (unaudited)
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Additional Unamortized
Common Paid-in Retained Treasury Restricted
Stock Capital Earnings Stock Stock Total
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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
========= ============ =========== ========= ============ ===========
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See notes to consolidated financial statements
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METATEC CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1995 and 1994
(Unaudited)
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1995 1994
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Net earnings $ 542,618 $ 120,424
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 1,022,520 613,006
Net loss (gain) on sales of assets 12,435 (6,986)
Changes in assets and liabilities:
Accounts receivable 16,051 71,281
Inventory (184,143) (186,453)
Prepaid expenses and other current assets (153,892) (18,227)
Accounts payable, deferred income tax liability and other current liabilities (636,284) 276,841
Unearned income (122,334) (131,020)
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Net cash provided by operating activities 496,971 738,866
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CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in long-term notes receivable and other assets 2,830 2,646
Purchase of property, plant and equipment (1,927,763) (8,810,848)
Proceeds from the sale of fixed assets 297,200 150,000
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Net cash used in investing activities (1,627,733) (8,658,202)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable 0 4,800,000
Payment of notes and leases payable (233,505) (18,408)
Stock options exercised 3,750 88,051
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Net cash provided by (used in) financing activities (229,755) 4,869,643
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DECREASE IN CASH AND CASH EQUIVALENTS (1,360,517) (3,049,693)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,167,518 4,849,710
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 807,001 $ 1,800,017
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SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 190,871 $ 8,281
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Income taxes paid $ 180,119 $ 4,000
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See notes to consolidated financial statements
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METATEC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION - The consolidated balance sheet as of March 31, 1995,
the consolidated statements of earnings for the three-months ended March 31,
1995 and March 31, 1994, the consolidated statement of stockholders' equity for
the three months ended March 31, 1995, and the consolidated statements of cash
flows for the three 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 March 31,
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 March 31, 1995 are not reflected in the
consolidated financial statements. The unrecorded commitments amounted to
approximately $2,762,152 at March 31, 1995.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total revenues increased by approximately 53% from $6,007,000 for the
three months ended March 31, 1994 to approximately $9,179,000 for the three
months ended March 31, 1995. This increase resulted from CD-ROM Manufacturing
Services and Software Services, with revenues of approximately $6,318,000 and
$954,000 respectively, increasing approximately a combined $3,320,000 or 84%.
This increase was partially offset by an approximate $162,000 decrease, or 23%,
in Publishing Services revenues. Included in Manufacturing Services are radio
syndication revenues of approximately $1,371,000, which remained constant for
the three months ended March 31, 1995 as compared to the same period of the
prior year. 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 revenue decreased
primarily as a result of a drop in sales of a product consisting of six
different back issues of NautilusCD.
The number of subscribers to NautilusCD increased from approximately
11,300 as of March 31, 1994 to approximately 17,800 as of March 31, 1995. This
resulted in minimal revenue growth in subscription sales due to a decrease in
the domestic per-issue price of NautilusCD from $9.95 to $6.95 in the second
quarter of 1994.
Cost of products sold was 56% of revenues for the three months ended
March 31, 1995 as compared to 60% of revenues for the same period of the prior
year. This decrease in the cost of products sold is primarily attributed to
greater manufacturing efficiencies and increased production volumes.
Selling, general and administrative expenses increased to $2,991,855, or
33% of revenues, for the three months ended March 31, 1995 as compared to
$2,274,869, or 38% of revenues, for the three months ended March 31, 1994.
This increase of $716,986 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 March 31, 1995 was
$17,276 as compared to $60,721 for the three months ended March 31, 1994. This
decrease is attributed to lower cash balances available for investment purposes
in the three months ended March 31, 1995 as compared to the same period of the
prior years.
Interest expense for the three months ended March 31, 1995 was $190,871
as compared to $8,281 for the three months ended March 31, 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.
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METATEC CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
For the three months ended March 31, 1995 an income tax provision of
$336,600 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 ended March 31, 1994 an income tax provision of $51,600
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 March 31, 1995 net earnings were $542,618
compared to $120,424 for the three months ended March 31, 1994. Net earnings
per common share was $0.10 for the three months ended March 31, 1995 as
compared to $0.02 for the same period of the prior year. The increase in the
weighted average number of shares from 5,021,595 for the three months ended
March 31, 1994 to 5,408,670 for the three months ended March 31, 1995 is
primarily a result of Shares earned under the Restricted Share Agreement with
an executive officer of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $807,001 as of March 31, 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 three months ended March 31, 1995, the Company financed its
business through cash generated from operations of $496,971 and available cash
balances.
The Company has initiated a 1995 capacity expansion program through the
placement of mastering and replication equipment purchase orders. The
Company's obligation under these purchase commitments as of March 31, 1995
totalled approximately $2,762,000. The mastering and replication equipment is
scheduled for delivery and installation in the second half of 1995.
The Company filed a Form S-1 registration statement with the Securities
and Exchange Commission on April 21, 1995 for the sale of 1,500,000 additional
common shares of the Company (such registration statement is not yet
effective). The proceeds are to be used to repay approximately $8,128,000 in
bank indebtedness, purchase approximately $5,000,000 in mastering and
replication equipment and the balance of the proceeds for general corporate and
working capital purposes.
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METATEC CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (Continued)
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), the net proceeds of the pending 1,500,000 share offering, 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.
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METATEC CORPORATION AND SUBSIDIARIES
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PART II - OTHER INFORMATION
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Items 1-3. Inapplicable
------------
Item 4. Submission of Matters to a Vote of Security Holders
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(a) The annual meeting of stockholders was held April 27, 1995.
(b) Jerry D. Miller, Gregory T. Tillar and James V. Pickett were
elected as Directors. A. Grant Bowen, Jeffrey M. Wilkins,
William H. Largent, E. David Crockett and Peter J. Kight
continue as Directors. Dan R.E. Thomas resigned as a Director
effective at the end of the Company's 1995 annual meeting of
stockholders held on April 27, 1995.
(c) The proposal to amend the Company's 1992 Directors' Stock Option
Plan was adopted with 3,481,481 votes for, 68,671 votes
against and 61,606 votes abstained/withheld. The following
three Directors were elected to three year terms, Jerry D.
Miller with 3,578,038 votes for and 34,000 votes withheld,
Gregory T. Tillar with 3,583,688 votes for and 28,350 votes
withheld and James V. Pickett with 3,589,214 votes for and
22,824 votes withheld.
(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) On March 28, 1995, a current report on Form 8-K, dated September 1,
1994, was filed with the Securities and Exchange Commission
reporting under items 2 and 7.
SIGNATURES
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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
William H. Largent
BY: William H. Largent
Date: May 9, 1995 Executive Vice President,
Finance and
Chief Financial Officer
(authorized signatory-
principal financial and
accounting officer)
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S BALANCE SHEETS DATED AS OF DECEMBER 31, 1994 AND MARCH 31, 1995,
AND ITS CONSOLIDATED STATEMENT OF OPERATIONS, CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY, AND CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR
ENDED DECEMBER 31, 1994 AND THREE MONTHS ENDED MARCH 31, 1995, WHICH
FINANCIAL STATEMENTS ARE INCLUDED IN ITEM 8 OF THIS REPORT, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 807,001
<SECURITIES> 0
<RECEIVABLES> 4,366,562
<ALLOWANCES> 290,575
<INVENTORY> 786,916
<CURRENT-ASSETS> 6,817,851
<PP&E> 32,793,950
<DEPRECIATION> 8,104,850
<TOTAL-ASSETS> 32,110,249
<CURRENT-LIABILITIES> 5,541,923
<BONDS> 8,386,464
<COMMON> 527,472
0
0
<OTHER-SE> 18,295,025
<TOTAL-LIABILITY-AND-EQUITY> 32,110,249
<SALES> 9,178,622
<TOTAL-REVENUES> 9,178,622
<CGS> 5,133,954
<TOTAL-COSTS> 8,125,809
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 31,140
<INTEREST-EXPENSE> 190,871
<INCOME-PRETAX> 879,218
<INCOME-TAX> 336,600
<INCOME-CONTINUING> 542,618
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 542,618
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
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