<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, 1998
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 August 11, 1998: 6,043,224
Page 1 of 13
<PAGE> 2
METATEC CORPORATION
-------------------
INDEX PAGE
----- ----
Part I : Financial Information
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of June 30,
1998 (unaudited) and December 31, 1997 3
Condensed Consolidated Statements of Earnings
for the three months ended June 30, 1998
and 1997 (unaudited) 4
Condensed Consolidated Statements of Earnings
for the six months ended June 30, 1998
and 1997 (unaudited) 5
Condensed Consolidated Statement of Shareholders'
Equity for the six months ended
June 30, 1998 (unaudited) 6
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30,
1998 and 1997 (unaudited) 7
Notes to Condensed Consolidated Financial
Statements (unaudited) 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-12
Item 3 - Quantitative and Qualitative Disclosures about
Market Risk 12
Part II: Other Information
Items 1-6 13
Signatures 13
Page 2 of 13
<PAGE> 3
PART I - FINANCIAL INFORMATION
<TABLE>
ITEM I. FINANCIAL STATEMENTS
<CAPTION>
METATEC CORPORATION (Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS June 30 December 31,
1998 1997
- -------------------------------------------------------- ----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 344,717 $ 1,381,057
Accounts receivable, net of allowance for doubtful
accounts of $309,000 and $301,000 8,137,497 7,215,178
Inventory 1,354,551 1,155,519
Prepaid expenses 675,174 362,801
Current portion of long-term note receivable 14,087 364,087
Deferred income taxes 417,000 327,000
----------- -----------
Total current assets 10,943,026 10,805,642
Long-term note receivable, less current portion 179,633 186,562
Property, plant and equipment - net 41,071,124 38,629,006
Goodwill - net 3,021,664 3,250,683
----------- -----------
TOTAL ASSETS $55,215,447 $52,871,893
=========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,359,649 $ 2,058,587
Accrued royalties 1,043,625 1,109,257
Accrued personal property taxes 874,138 809,399
Other accrued expenses 831,249 814,569
Accrued payroll 897,548 567,315
Accrued income taxes 213,409 249,747
Unearned income 64,869 73,778
Current maturities of long-term debt and capital lease obligations 100,654 101,778
----------- -----------
Total current liabilities 6,385,141 5,784,430
Long-term debt and capital lease obligations, less current maturities 6,036,674 4,578,410
Deferred income taxes 1,305,000 1,315,000
Other long-term liabilities 16,472 --
----------- -----------
Total liabilities 13,743,287 11,677,840
----------- -----------
Shareholders' equity:
Common stock, $.10 par value; authorized 10,083,500 shares;
issued 1998 - 7,118,479 shares; 1997 - 7,108,479 711,848 710,848
Additional paid-in capital 34,116,325 34,102,325
Retained earnings 12,436,522 11,382,777
Treasury stock, at cost; 1998 - 1,075,255 shares;
1997 - 912,755 shares (5,792,535) (5,001,897)
----------- -----------
Total shareholders' equity 41,472,160 41,194,053
----------- -----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $55,215,447 $52,871,893
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
Page 3 of 13
<PAGE> 4
<TABLE>
METATEC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<CAPTION>
Three Months Ended June 30,
-----------------------------
1998 1997
- ----------------------------------------------- ----------- -----------
<S> <C> <C>
NET SALES $14,085,060 $12,007,932
Cost of sales 9,198,161 8,016,322
----------- -----------
Gross profit 4,886,899 3,991,610
Selling, general and administrative expenses 4,008,839 3,366,100
----------- -----------
OPERATING EARNINGS 878,060 625,510
Other income and (expense):
Investment income 10,354 12,550
Other - net 48,896 (4,577)
Interest expense (72,475) (9,455)
----------- -----------
EARNINGS BEFORE INCOME TAXES 864,835 624,028
Income taxes 389,159 256,500
----------- -----------
NET EARNINGS $ 475,676 367,528
=========== ===========
NET EARNINGS PER COMMON SHARE
Basic $ 0.08 $ 0.05
=========== ===========
Diluted $ 0.08 $ 0.05
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 6,040,037 6,935,727
=========== ===========
Diluted 6,106,865 7,033,018
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 13
<PAGE> 5
<TABLE>
METATEC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<CAPTION>
Six Months Ended June 30,
-------------------------
1998 1997
- ----------------------------------------------------- ----------- -----------
<S> <C> <C>
NET SALES $28,802,117 $23,686,507
Cost of sales 19,028,536 16,068,909
----------- -----------
Gross profit 9,773,581 7,617,598
Selling, general and administrative expenses 7,885,407 7,079,635
Restructuring expenses 0 206,000
----------- -----------
OPERATING EARNINGS 1,888,174 331,963
Other income and (expense):
Investment income 24,980 23,312
Other - net 149,358 (43,619)
Interest expense (138,767) (11,639)
----------- -----------
EARNINGS BEFORE INCOME TAXES 1,923,745 300,017
Income taxes 870,000 136,500
----------- -----------
NET EARNINGS $ 1,053,745 $ 163,517
=========== ===========
NET EARNINGS PER COMMON SHARE
Basic $ 0.17 $ 0.02
=========== ===========
Diluted $ 0.17 $ 0.02
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 6,055,008 7,099,384
=========== ===========
Diluted 6,110,375 7,196,675
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
Page 5 of 13
<PAGE> 6
<TABLE>
METATEC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
<CAPTION>
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
- ------------------------------ ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997 $ 710,848 $34,102,325 $11,382,777 $(5,001,897) $41,194,053
Net earnings 1,053,745 1,053,745
Stock options exercised 1,000 14,000 15,000
Treasury shares acquired (790,638) (790,638)
---------- ----------- ----------- ----------- -----------
BALANCE AT JUNE 30, 1998 $ 711,848 $34,116,325 $12,436,522 $(5,792,535) $41,472,160
========== =========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
Page 6 of 13
<PAGE> 7
<TABLE>
METATEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
For the six months ended June 30, 1998 1997
- ---------------------------------------------------------------- ----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,053,745 $ 163,517
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization 4,266,508 3,874,808
Net loss on sales of property, plant and equipment 69,394 43,618
Changes in assets and liabilities:
Accounts receivable (922,312) 1,353,547
Inventory (199,030) 98,118
Prepaid expenses and other assets (402,368) 18,325
Accounts payable and accrued expenses 781,894 (307,995)
Unearned income (8,908) (136,333)
----------- -----------
Net cash provided by operating activities 4,638,923 5,107,605
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in long-term note receivable 356,929 6,494
Purchase of property, plant and equipment (6,713,992) (6,655,845)
Proceeds from the sales of property, plant and equipment 300 63,300
----------- -----------
Net cash used in investing activities (6,356,763) (6,586,051)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt (2,292,862) 928,576
Payment of long-term debt and capital lease obligations 3,750,000 (55,695)
Stock options exercised 15,000 10,004
Treasury stock acquired (790,638) (1,063,877)
Stock awards for employees 0 18,965
----------- -----------
Net cash used in financing activities 681,500 (162,027)
----------- -----------
Decrease in cash and cash equivalents (1,036,340) (1,640,473)
Cash and cash equivalents at beginning of period 1,381,057 2,214,755
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 344,717 $ 574,282
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 122,965 $ 7,036
=========== ===========
Income taxes paid $ 1,072,339 $ 120,100
=========== ===========
Assets purchased for the assumption of a liability $ 202,449 $ 536,462
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
Page 7 of 13
<PAGE> 8
METATEC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of presentation - The consolidated balance sheet as of June 30, 1998,
the consolidated statements of earnings for the three and six months ended June
30, 1998 and 1997, the consolidated statement of shareholders' equity for the
six months ended June 30, 1998, 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, 1997 annual report on Form 10-K.
The results of operations for the period ended June 30, 1998 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, plant, and equipment. Portions of such
contracts not completed as of June 30, 1998 are not reflected in the
consolidated financial statements. The unrecorded commitments amounted to
approximately $5,553,778 at June 30, 1998. This amount represents manufacturing
equipment on order.
3. Subsequent Events - On July 29, 1998, the Company entered into an asset
purchase agreement with Imation to purchase Imation's CD-ROM services business
assets for a purchase price of $39,800,000 which price is subject to a
post-closing adjustment based upon the closing date working capital statement
related to working capital assets transferred by Imation. The Company plans to
finance this asset purchase through a $30,000,000 term loan facility and a
portion of a $25,000,000 revolving loan facility. The transaction will be
accounted for using the purchase method of accounting.
4. Recently Issued Accounting Standard - In June 1997, the FASB issued Statement
of Financial Accounting Standards No. 130 ("SFAS 130") "Reporting Comprehensive
Income," which is effective for periods beginning after December 15, 1997. This
new statement defines comprehensive income as "all changes in equity during a
period, with the exception of stock issuances and dividends". Under SFAS 130,
comprehensive income for June 30, 1998 is $1,053,745 and $163,517 for the six
months ended June 30, 1997.
In June 1997, the FASB also issued Statement of Financial Accounting Standards
No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information", which will require adoption no later than December 31, 1998. SFAS
131 requires companies to report financial and descriptive information about its
reportable operating segments. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
Based on current operations, the Company does not believe the Statement will be
applicable.
METATEC CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RECENT ACQUISITION DEVELOPMENTS
On July 29, 1998, Metatec Corporation (the "Company" or "Metatec") entered into
an asset purchase agreement with Imation Corporation ("Imation") to purchase
Page 8 of 13
<PAGE> 9
Imation's CD-ROM services business assets. Completion of the transaction, which
is expected to occur during the third quarter of 1998, remains subject to
certain conditions.
The asset purchase includes Imation's plant operations in Fremont, California,
Breda, The Netherlands, and Menomonie, Wisconsin. Metatec anticipates that the
Menomonie plant operations will be transferred to Metatec's Dublin, Ohio,
manufacturing plant by the end of the fourth quarter of 1998 after
completion of a transitional operations period in Menomonie. A client services
center providing customer and technical support will be maintained in Menomonie.
The purchase price for the Imation assets is $39.8 million, which price is
subject to a post-closing adjustment based upon the closing date working capital
statement related to working capital assets transferred by Imation. The Company
plans to finance the asset purchase through a $30.0 million term loan facility
and a portion of a $25.0 million revolving loan facility. It is anticipated that
these credit facilities will be obtained through a participation arrangement
between The Huntington National Bank and Bank One, NA. See "Liquidity and
Capital Resources" for a further discussion of these credit facilities.
RESULTS OF OPERATIONS
Net sales for the three months ended June 30, 1998 were $14,085,000, an increase
of $2,077,000, or 17% over the same period of the prior year. This increase
resulted from the Manufacturing Services Group, which includes CD-ROM, DVD, and
Radio Syndication manufacturing, increasing $2,077,000 to $14,081,000 for the
three months ended June 30, 1998, or 22% over the same period of the prior year.
Net sales for the Company's Access Services Group were $439,000 for the three
months ended June 30, 1997. Because the Company exited this business segment
during 1997, there were no sales for this segment for the three months ended
June 30, 1998. The net sales increase was primarily as a result of a continued
growing CD-ROM manufacturing market which resulted in an increase in volume. The
Company continued its focus on the business and information services CD-ROM and
DVD market.
Net sales for the six months ended June 30, 1998 were $28,802,000, an increase
of $5,116,000, or 22% over the same period of the prior year. This increase
resulted from the Manufacturing Services Group, which includes CD-ROM, DVD, and
Radio Syndication manufacturing, increasing $5,948,000 to $28,786,000 for the
six months ended June 30, 1998, or 26% over the same period of the prior year.
Net sales for the Company's Access Services Group were $848,000 for the six
months ended June 30, 1997. Because the Company exited this business segment
during 1997, there were no sales for this segment for the six months ended June
30, 1998. The net sales increase was primarily as a result of a continued
growing CD-ROM manufacturing market which resulted in an increase in volume. The
Company continued its focus on the business and information services CD-ROM and
DVD market.
Page 9 of 13
<PAGE> 10
Gross profit was 35% of net sales for the three months ended June 30, 1998 as
compared to 33% of net sales for the same period of the prior year. This
increase is primarily attributed to improved manufacturing capacity utilization
during the three month period ended June 30, 1998. Gross profit was 34% of net
sales for the six months ended June 30, 1998 as compared to 32% of net sales for
the same period of the prior year. Gross profit for the three and six months
ended June 30, 1998 also reflected a $372,000 one-time royalty credit to record
an agreement reached with a disc technology licensor.
Selling, general and administrative ("SG&A") expenses were $4,009,000, or 28% of
net sales, for the three months ended June 30, 1998 as compared to $3,366,000,
or 28% of net sales, for same period of the prior year. SG&A expenses were
$7,885,000, or 27% of net sales, for the six months ended June 30, 1998 as
compared to $7,080,000, or 30% of net sales, for same period of the prior year.
The six months ended June 30, 1997 included a restructuring charge of $206,000
related to continuing operations. This charge related to a reorganization and
downsizing of the Access Services Group.
Investment income was $10,000 and $13,000 for the three month periods ended June
30, 1998 and 1997, respectively. Investment income was $25,000 and $23,000 for
the six month periods ended June 30, 1998 and 1997, respectively.
Interest expense for the three months ended June 30, 1998 was $72,000 as
compared to $9,000 for the same period of the prior year. Interest expense for
the six months ended June 30, 1998 was $139,000 as compared to $12,000 for the
same period of the prior year. The increase in interest expense was due to
borrowing under a revolving line of credit.
The income tax expense was $389,000 for the three months ended June 30, 1998, or
an effective tax rate of 45%, as compared to a tax expense of $257,000 for the
same period of the prior year, or an effective tax rate of 41%. The income tax
expense was $870,000 for the six months ended June 30, 1998, as compared to a
tax expense of $137,000 for the same period of the prior year.
Net earnings for the three months ended June 30, 1998 were $476,000, or net
earnings per common share of $.08, as compared to net earnings in the same
period of the prior year of $368,000, or net earnings per common share of $.05.
Net earnings for the six months ended June 30, 1998 were $1,054,000, or net
earnings per common share of $.17, as compared to net earnings in the same
period of the prior year of $164,000, or net earnings per common share of $.02.
The net earnings increase was primarily a result of improved profit margins
because of exiting the Access Services Group business segment during 1997,
strong revenue growth in the core Manufacturing Services Group, and the $372,000
royalty credit utilized during the six months ended June 30, 1998.
FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES
The Company financed its business during the six months ended June 30, 1998
through cash generated from operations and available cash balances and through
the use of debt. Cash flow from operating activities was $4,639,000 for the six
months ended June 30, 1998, as compared to $5,108,000 for the six months ended
June 30, 1997.
The Company, in the six month period ended June 30, 1998, continued to increase
its manufacturing capacity over the 1997 level. The capacity increase along with
recurring capital needs resulted in the purchase of $6,714,000 in property,
plant and equipment during the six months ended June 30, 1998.
The Company has commitments under contracts for the purchase of manufacturing
equipment on order. The unrecorded commitments amounted to approximately
$5,553,778 at June 30, 1998. The Company plans to finance the purchase of this
manufacturing equipment from funds available under the Company's new $25,000,000
revolving loan facility, discussed below.
Page 10 of 13
<PAGE> 11
On July 29, 1998, the Company entered into an asset purchase agreement with
Imation to purchase Imation's CD-ROM services business assets for a purchase
price of $39,800,000, which price is subject to a post-closing adjustment based
upon the closing date working capital statement related to working capital
assets transferred by Imation. See "Recent Acquisition Developments." The
Company plans to finance this asset purchase through a $30,000,000 term loan
facility and a portion of a $25,000,000 revolving loan facility, discussed
below.
The Company had cash and cash equivalents of $345,000 as of June 30, 1998.
Additionally, the Company has a $15,000,000 revolving line of credit available
to it, of which $6,000,000 was outstanding as of June 30, 1998.
The Company has entered into a commitment letter with The Huntington National
Bank and Bank One, NA pursuant to which such banks have agreed to provide a
$30,000,000 term loan facility and a $25,000,000 revolving loan facility to the
Company (the "Credit Facilities"). The banks' commitment is subject to a number
of conditions, including the closing of the Imation asset purchase transaction.
The following is a summary of the terms of the Credit Facilities. The revolving
loan facility will be available for five years and will replace the Company's
current $15,000,000 line of credit. The term loan facility will be payable over
five years in quarterly principal payments which escalate over the term of the
loan. The term loan facility and a portion of the revolving loan facility will
be used to finance the Imation asset purchase. The remaining portion of the
revolving loan facility will be available for general corporate purposes,
including payment in full of the current line of credit. Borrowings under the
Credit Facilities will bear interest, at the Company's option, at either the
federal funds rate plus 50 basis points or prime rate (whichever of the two are
higher) or the LIBOR rate plus a margin based upon the Company's debt coverage
ratio (which ranges from not less than 75 basis points to not more than 150
basis points). The Credit Facilities will be secured by a first lien on all
non-real estate business assets of the Company and a pledge of the stock of the
Company's subsidiaries. The Company also will be required to comply with certain
financial and other covenants.
Management believes that the current cash balances, plus the funds available
under its current and anticipated credit facilities, plus cash generated from
operations, should provide sufficient capital to complete the purchase of
Imation's CD-ROM services business assets and meet the current business needs of
the Company, including the business needs of the Company after the completion of
such purchase.
YEAR 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the year. Any of the Company's computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than 2000. This could result in a system failure or
miscalculations causing disruptions of uncertain duration in operations
including, among other things, a temporary inability to process transactions, or
engage in similar normal business activities.
The company created a task force during 1997 to address the Year 2000 issues. As
of December 31, 1997, all of the Company's in-house developed systems and
applications are Year 2000 compliant. The Company's task force is working with
third party vendors to verify that they are also Year 2000 compliant, and
currently believes that all issues will be resolved. The Company currently
believes that all systems will be Year 2000 compliant by December 31, 1998.
Page 11 of 13
<PAGE> 12
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information in this report, this report includes
forward-looking statements that involve risks and uncertainties, including, but
not limited to, economic and competitive uncertanties affecting the Company's
operations, markets, products, prices, technological changes, and manufacturing
efficiencies. Certain factors that might cause such a difference include, among
others, the company's product concentration, competition, pricing, technological
change, dependence on key personnel, and single site manufacturing facility.
These and other risk factors are discussed from time to time in the Company's
Security and Exchange Commission filings, including the Company's Form 10-K for
the year ended December 31, 1997. The Company's actual results could differ
materially from those set forth in the forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. Disclosure
not currently required.
12 of 13
<PAGE> 13
PART II - OTHER INFORMATION
---------------------------
Items 1-3. Inapplicable.
-------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The annual meeting of shareholders was held April 23, 1998.
(b) Jerry D. Miller, Gregory T. Tillar, and James V. Pickett were
elected as Directors. Jeffrey M. Wilkins, A. Grant Bowen,
Joseph F. Keeler, Jr., and Peter J. Kight continued as
Directors.
(c) The following three directors were elected to three year
terms: Jerry D. Miller with 5,588,963 votes for and 25,815
votes withheld; Gregory T. Tillar with 5,593,579 votes for and
21,199 votes withheld; and James V. Pickett with 5,590,423
votes for and 24,355 votes withheld.
(d) Inapplicable.
Item 5. Inapplicable.
-------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
The exhibits on to this report begin on page ______.
(b) No reports on Form 8-K were filed during the quarter ended
June 30, 1998.
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/ Julia A. Pollner
BY: Julia A. Pollner
Date: August 11, 1998 Vice President, Finance
and Treasurer
(authorized signatory-
principal financial and
accounting officer)
13 of 13
<PAGE> 14
Form 10-Q
Exhibit Index
Exhibit Number Exhibit Description Page Number
- -------------- ------------------- -----------
27 Financial Data Schedule --
99 Press release issued July 30, 1998 regarding --
definitive agreement with Imation Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 344,717
<SECURITIES> 0
<RECEIVABLES> 8,446,497
<ALLOWANCES> 309,000
<INVENTORY> 1,354,551
<CURRENT-ASSETS> 10,943,026
<PP&E> 64,958,910
<DEPRECIATION> (23,887,786)
<TOTAL-ASSETS> 55,215,447
<CURRENT-LIABILITIES> 6,385,141
<BONDS> 7,358,146
0
0
<COMMON> 711,848
<OTHER-SE> 40,760,312
<TOTAL-LIABILITY-AND-EQUITY> 55,215,447
<SALES> 28,802,117
<TOTAL-REVENUES> 28,802,117
<CGS> 19,028,536
<TOTAL-COSTS> 26,913,943
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 80,000
<INTEREST-EXPENSE> 138,767
<INCOME-PRETAX> 1,923,745
<INCOME-TAX> 870,000
<INCOME-CONTINUING> 1,053,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,053,745
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
<PAGE> 1
Exhibit 99
METATEC CORPORATION NEWS RELEASE
- --------------------------------------------------------------------------------
7001 Metatec Blvd.
Dublin, OH 43017
FOR IMMEDIATE RELEASE
METATEC REACHES DEFINITIVE AGREEMENT TO PURCHASE IMATION CD-ROM
SERVICES BUSINESS
CONTACT: RICHARD BAKER
CORPORATE COMMUNICATIONS
METATEC CORPORATION
(614) 766-3184
DUBLIN, Ohio, July 30, 1998 -- Metatec Corporation today announced that it has
reached a definitive agreement with Imation Corp. on the purchase of Imation's
CD-ROM services business assets. Metatec had announced on June 15 that it had
signed a letter of intent to purchase Imation's CD-ROM services business assets.
The Imation CD-ROM services business generated revenues of approximately $60
million in 1997.
Completion of the transaction, which is expected in the third quarter
of 1998, remains subject to certain conditions.
Purchase of Imation's CD-ROM services business will give Metatec
expanded capacity and coverage in the U.S. and new capabilities in Europe. The
asset purchase and other planned equipment purchases will almost double
Metatec's manufacturing and fulfillment capacity.
The asset purchase includes Imation plant operations in Fremont,
Calif., Breda, The Netherlands and Menomonie, Wisc. Metatec anticipates that the
Menomonie plant operations will be transferred to Metatec's Dublin, Ohio,
manufacturing plant by the end of the fourth quarter of 1998 after completion of
a transitional operations period in Menomonie. A client services center
providing customer and technical support will be maintained in Menomonie.
Metatec, a leading information services company, helps customers
utilize CD-ROM, DVD-ROM and related communication technologies to publish and
distribute information and software. From its ISO 9002-certified manufacturing
and distribution headquarters in the Columbus, Ohio metropolitan area, Metatec
offers its customers a variety of services including data preparation and
mastering, disc replication, printing, fulfillment, warehousing, distribution,
electronic tracking and inventory management. Metatec maintains sales and
support offices throughout the United States. Metatec common stock is traded
over NASDAQ under the symbol "META." The company's web site is www.metatec.com.
# # #
