<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 September 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
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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 October 30, 1995: 7,040,754
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<PAGE> 2
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 September 30,
1995 (unaudited) and December 31, 1994 3
Consolidated Statements of Earnings
for the three months ended September 30, 1995
and 1994 (unaudited) 4
Consolidated Statements of Earnings
for the nine months ended September 30, 1995
and 1994 (unaudited) 5
Consolidated Statement of Stockholders'
Equity for the nine months ended
September 30, 1995 (unaudited) 6
Consolidated Statements of Cash Flows
for the nine months ended September 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
2 of 12
<PAGE> 3
METATEC CORPORATION AND SUBSIDIARIES
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
As of September 30, 1995 and December 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS 1995 1994 LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- ------ ---- ---- ------------------------------------ ---- ----
(unaudited) (unaudited)
<S> <C> <C> <S> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $ 6,794,858 $ 2,167,518 Current maturities of long-term debt and
Accounts receivable, capital lease obligations $ 80,268 $ 975,335
net of allowance for
doubtful accounts of $297,000 4,671,566 4,092,038 Accounts payable 1,393,093 2,462,243
and $269,000
Inventory 910,426 602,773 Accrued royalties 828,410 559,157
Current portion of long-term 11,797 11,597 Accrued personal property taxes 324,077 378,210
notes receivable
Prepaid expenses 684,256 460,258 Accrued payroll 624,357 359,400
Deferred income taxes 490,000 522,000 Accrued income taxes 623,238 285,371
--------- --------- Other accrued expenses 490,572 411,585
Total current assets 13,562,903 7,856,184 Unearned income 391,009 888,940
---------- --------- --------- --------
Total current liabilities 4,755,024 6,320,241
Long-Term Notes Receivable, 217,398 226,225
Less Current Portion ---------- ---------
Long-Term Debt and Capital Lease Obligations,
Less Current Maturities 135,025 7,644,634
PROPERTY, PLANT AND EQUIPMENT- Net 28,997,476 24,081,612 Deferred income taxes 360,000 315,000
---------- ----------
---------- --------
Total liabilities 5,250,049 14,279,875
OTHER ASSETS: ---------- ----------
Goodwill 278,643 314,283 STOCKHOLDERS' EQUITY:
Other 0 77,700 Common stock, $.10 par value;
---------- --------- authorized 10,083,500 shares;
issued,1995-7,025,164 shares;
1994-5,272,219 shares 702,793 527,222
Total other assets 278,643 391,983 Additional paid-in capital 33,461,591 15,643,913
--------- --------
Retained Earnings 7,578,528 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 37,806,371 18,276,129
------------ ----------
TOTAL ASSETS $ 43,056,420 $ 32,556,004 TOTAL LIABILITIES AND STOCKHOLDERS'
============= ============ EQUITY $ 43,056,420 $32,556,004
============ ===========
</TABLE>
See notes to consolidated financial statements.
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<PAGE> 4
METATEC CORPORATION AND SUBSIDIARIES
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
For The Three Months Ended September 30, 1995 and 1994 (Unaudited)
- -------------------------------------------------------------------------------------------------
1995 1994
---- ----
<S> <C> <C>
REVENUES $ 9,434,662 $ 7,694,259
------------- --------------
COSTS AND EXPENSES:
Cost of products sold 5,690,866 4,316,107
Selling, general and administrative 2,866,952 2,786,939
------------- --------------
Total costs and expenses 8,557,818 7,103,046
------------- --------------
OPERATING INCOME 876,844 591,213
Interest and other income - net 152,430 11,716
Interest expense (4,294) (37,567)
------------- --------------
EARNINGS BEFORE INCOME TAXES 1,024,980 565,362
INCOME TAXES 398,500 180,400
------------- --------------
NET EARNINGS $ 626,480 $ 384,962
============= ==============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 7,192,542 5,122,810
============= ==============
NET EARNINGS PER COMMON SHARE $ 0.09 $ 0.08
============= ==============
</TABLE>
See notes to consolidated financial statements.
4 of 12
<PAGE> 5
METATEC CORPORATION AND SUBSIDIARIES
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
For The Nine Months Ended September 30, 1995 and 1994 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------
1995 1994
---- ----
<S> <C> <C>
REVENUES $ 27,367,300 $ 20,239,775
------------- -------------
COSTS AND EXPENSES:
Cost of products sold 15,917,388 11,664,440
Selling, general and administrative 8,863,039 7,421,313
------------- -------------
Total costs and expenses 24,780,427 19,085,753
------------- -------------
OPERATING INCOME 2,586,873 1,154,022
Interest and other income - net 230,566 92,370
Interest expense (318,746) (51,881)
------------- -------------
EARNINGS BEFORE INCOME TAXES 2,498,693 1,194,511
INCOME TAXES 961,700 380,500
-------------- -------------
NET EARNINGS $ 1,536,993 $ 814,011
============== =============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 6,261,198 5,071,707
============== =============
NET EARNINGS PER COMMON SHARE $ 0.25 $ 0.16
============== =============
</TABLE>
See notes to consolidated financial statements.
5 of 12
<PAGE> 6
METATEC CORPORATION AND SUBSIDIARIES
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For The Nine Months Ended September 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 542,618 542,618
March 31, 1995
-------- ------------- ------------ ---------- ------------- -----------
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 of
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
Stock options exercised 1,421 30,746 32,167
Net earnings three months
ended September 30, 1995 626,480 626,480
----------- ----------- ---------- --------- ------------- -----------
BALANCE, SEPTEMBER 30, 1995 $ 702,793 $33,461,591 $7,578,528 $ (36,541) $ (3,900,000) $37,806,371
=========== =========== ========== ========= ============= ===========
</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 nine months ended September 30, 1995 and 1994 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
1995 1994
---- ----
<S> <C> <C>
Net earnings $ 1,536,993 $ 814,011
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 3,229,865 2,256,898
Net loss (gain) on sales of assets (19,819) (29,633)
Changes in assets and liabilities:
Accounts receivable (579,528) (919,256)
Inventory (307,653) (243,594)
Prepaid expenses and other current assets (191,998) (132,254)
Accounts payable, deferred income tax liability and other current liabilities (127,219) 920,337
Unearned income (475,810) (90,435)
------------ ----------
Net cash provided by operating activities 3,064,831 2,576,074
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in long-term notes receivable and other assets 112,227 208,366
Purchase of property, plant and equipment (8,486,591) (10,010,966)
Proceeds from the sale of fixed assets 348,300 150,000
------------ ------------
Net cash used in investing activities (8,026,064) (9,652,600)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock 17,914,782 0
Increase in long-term debt 0 2,590,288
Payment of notes and leases payable (8,404,676) (517,521)
Stock options exercised 78,467 181,224
------------ -----------
Net cash provided by financing activities 9,588,573 2,253,991
------------ -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,627,340 (4,822,535)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,167,518 4,849,710
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,794,858 $ 27,175
============ ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 318,746 $ 51,210
============ ===========
Income taxes paid $ 575,440 $ 248,000
============ ===========
</TABLE>
See notes to consolidated financial statements.
7 of 12
<PAGE> 8
METATEC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION - The consolidated balance sheet as of September 30,
1995, the consolidated statements of earnings for the three months and nine
months ended September 30, 1995 and September 30, 1994, the consolidated
statement of stockholders' equity for the nine months ended September 30, 1995,
and the consolidated statements of cash flows for the nine 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 September
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 September 30, 1995 are not reflected in the
consolidated financial statements. The unrecorded commitments amounted to
approximately $3,250,000 at September 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, a portion of which
has been used to acquire property and equipment, 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 23% from $7,694,000 for the
three months ended September 30, 1994 to approximately $9,435,000 for the three
months ended September 30, 1995. This increase resulted from CD-ROM
Manufacturing Services and Software Services, with revenues of approximately
$6,330,000 and $1,106,000 respectively, increasing approximately a combined
$1,742,000 or 31%. Publishing Services revenues also increased approximately
$22,000, or 4%, with revenues of approximately $594,000 for the three months
ended September 30, 1995. Manufacturing Services also produced radio
syndication revenues which totaled approximately $1,405,000 for the three
months ended September 30, 1995, as compared to approximately $1,428,000 for
the three months ended September 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.
Total revenues increased by approximately 35% from $20,240,000 for the
nine months ended September 30, 1994 to approximately $27,367,000 for the nine
months ended September 30, 1995. This increase resulted from CD-ROM
Manufacturing Services and Software Services, with revenues of approximately
$18,516,000 and $3,100,000 respectively, increasing approximately a combined
$7,468,000 or 53%. This increase was partially offset by an approximate
$300,000 decrease, or 16%, in Publishing Services revenues which were
approximately $1,588,000 for the nine months ended September 30, 1995.
Manufacturing Services also produced radio syndication revenues which totaled
approximately $4,163,000 for the nine months ended September 30, 1995, as
compared to approximately $4,204,000 for the nine months ended September 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 decreased from approximately 15,000 as
of September 30, 1994 to approximately 13,700 as of September 30, 1995.
Cost of products sold was 60% of revenues for the three months ended
September 30, 1995 as compared to 56% of revenues for the same period of the
prior year. Cost of products sold was 58% of revenues for the nine months
ended September 30, 1995 and 1994.
Selling, general and administrative expenses increased to $2,866,952, or
30% of revenues, for the three months ended September 30, 1995 as compared to
$2,786,939, or 36% of revenues, for the three months ended September 30, 1994.
Selling, general and administrative expenses increased to $8,863,039, or 32% of
revenues, for the nine months ended September 30, 1995 as compared to
$7,421,313 or 37% of revenues, for the nine months ended September 30, 1994.
This increase for the
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)
nine month period of $1,441,726 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 information services functions.
Interest and other income for the three months ended September 30, 1995
was $152,430 as compared to $11,716 for the three months ended September 30,
1994. This increase is attributed to higher cash balances available for
investment purposes in the three months ended September 30, 1995 as compared to
the same period of the prior year and included a one time gain on the sale of
an asset of $25,900. 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 nine months ended September 30, 1995 was
$230,566 as compared to $92,370 for the nine months ended September 30, 1994.
The nine months ended September 30, 1994 included gains on the sale of
property, plant and equipment.
Interest expense for the three months ended September 30, 1995 was $4,294
as compared to $37,567 for the three months ended September 30, 1994.
Interest expense for the nine months ended September 30, 1995 was $318,746 as
compared to $51,881 for the nine months ended September 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 nine months ended September 30, 1995 an income
tax provision of $398,500 and $961,700 respectively, was applied to earnings
before income taxes based upon management's estimate of the full year 1995
expected income tax rate of approximately 39%. For the three months and nine
months ended September 30, 1994 an income tax provision of $180,400 and
$380,500 was applied to earnings before income taxes based upon management's
estimate of the full year 1994 expected income tax rate of approximately 32%.
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 September 30, 1995 net earnings were $626,480
compared to $384,962 for the three months ended September 30, 1994. Net
earnings per common share was $0.09 for the three months ended September 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 5,122,810 for the three months
ended September 30, 1994 to 7,192,542 for the three months ended September 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 nine months ended September 30, 1995 net earnings were $1,536,993
compared to $814,011 for the nine months ended September 30, 1994. Net
earnings per common share was $0.25 for the nine months ended September 30,
1995 as compared to $0.16 for the same period of the prior year. The increase
in the weighted average number of shares from 5,071,707 for the nine months
ended September 30, 1994 to 6,261,198 for the nine months ended September 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 $6,794,858 as of September 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 nine months ended September 30, 1995, the
Company financed its business through cash generated from operations of
$3,064,831, 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 initiated a capacity expansion program in mid 1995 through
the placement of purchase orders for equipment. The Company's obligation
under purchase commitments as of September 30, 1995 for the equipment not yet
delivered or installed totalled approximately $3,250,000. The equipment is to
be delivered and installed in the fourth quarter of 1995. For the nine months
ended September 30, 1995 the Company has invested $8,486,591 in new property,
plant and equipment, not including the previously noted approximate $3,250,000
under purchase commitment, the majority of which relates to the current
capacity expansion program.
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
mastering and replication equipment and for general corporate and working
capital purposes. As of September 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 1-5. 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
September 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
/s/ William H. Largent
BY: William H. Largent
Date: October 30, 1995 Executive Vice President,
Finance and
Chief Financial Officer
(authorized signatory-
principal financial and
accounting officer)
12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 6,794,858
<SECURITIES> 0
<RECEIVABLES> 4,968,566
<ALLOWANCES> 297,000
<INVENTORY> 910,426
<CURRENT-ASSETS> 13,562,903
<PP&E> 38,805,168
<DEPRECIATION> (9,807,692)
<TOTAL-ASSETS> 43,056,420
<CURRENT-LIABILITIES> 4,755,024
<BONDS> 495,025
<COMMON> 702,793
0
0
<OTHER-SE> 37,103,578
<TOTAL-LIABILITY-AND-EQUITY> 43,056,420
<SALES> 27,367,300
<TOTAL-REVENUES> 27,367,300
<CGS> 15,917,388
<TOTAL-COSTS> 24,780,427
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 42,755
<INTEREST-EXPENSE> 318,746
<INCOME-PRETAX> 2,498,693
<INCOME-TAX> 961,700
<INCOME-CONTINUING> 1,536,993
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,536,993
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
