FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 29, 1995
Commission file number 1-6072
LATSHAW ENTERPRISES, INC.
Name of Registrant
Delaware 44-0427150
State of Incorporation Employer's I.D. Number
2533 S. West Street
Wichita, Kansas 67217
Address of principal executive offices
(316) 942-7266
Registrant's telephone number
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Common Stock, $2 Par Value-496,193 Shares Outstanding at 4-29-95
<PAGE>
INDEX
LATSHAW ENTERPRISES, INC.
Part I. Financial Information
Item 1. Condensed Financial Statements (Unaudited).
Consolidated Balance Sheets - April 29, 1995 and October
29, 1994.
Consolidated Statements of Income - For the three months
and six months ended April 29, 1995 and April 30, 1994.
Notes to Consolidated Financial Statements.
Consolidated Statements of Cash Flows - For the six months
ended April 29, 1995 and April 30, 1994.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.
Signatures
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (In thousands)
<TABLE>
April 29, October 29,
1995 1994
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 255 $ 184
Marketable equity securities,
at lower of cost or market 450 415
Accounts and notes receivable-net 7,384 5,939
Inventories, at lower of cost
(LIFO) or market 7,824 7,721
Deferred income taxes 663 663
Prepaid expenses 203 405
Total current assets 16,779 15,327
Property, plant and equipment at cost 18,182 17,497
Less accumulated depreciation
and amortization (11,659) (11,086)
6,523 6,411
Other assets 233 226
$23,535 $21,964
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 2,428 $ 2,099
Accounts payable 2,887 2,828
Current portion of long-term debt 49 49
Accrued expenses 1,713 1,924
Income taxes payable 158 -
Total current liabilities 7,235 6,900
Long-term debt, less current portion 2,803 2,827
Pensions and deferred compensation 1,567 1,571
Postretirement benefit obligation 303 288
Deferred income taxes 172 172
Shareholders' equity
Preferred stock, no par value:
Authorized shares - 500,000,
none issued - -
Common stock, $2 par value:
Authorized shares - 1,500,000
Issued shares - 1,002,162 2,004 2,004
Class C common stock, $2 par
value: Authorized shares -
1,000,000 in 1992, none issued - -
Additional paid-in capital 5,015 5,015
Unrealized gains on available-
for-sale securities 22 -
Retained earnings 14,870 13,636
21,911 20,655
Less cost of common stock
held in treasury,
505,969 shares in 1995
and 505,058 in 1994 (10,456) (10,449)
11,455 10,206
$23,535 $21,964
(This is an unaudited statement)
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LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
</TABLE>
<TABLE>
Three Months Ended Six Months Ended
April 29, April 30, April 29, April 30,
1995 1994 1995 1994
______________________________________________________________________
<S> <C> <C> <C> <C>
Net sales $11,682 $10,422 $22,754 $19,770
Cost of sales 8,762 7,687 17,323 14,762
Gross Profit 2,920 2,735 5,431 5,008
Selling, general and
administrative expenses 1,566 1,458 3,200 2,869
Interest expense 131 117 244 190
Loss on sale of marketable
equity securities - 529 - 997
Unrealized gain on marketable
equity securities - (218) - (712)
Lease termination - 250 - 250
Other - net 12 23 24 16
Income before income taxes 1,211 576 1,963 1,398
Income tax provision 450 242 729 522
Net income $ 761 $ 334 $1,234 $ 876
Net income per common and common equivalent share:
Primary $ 1.48 $ .65 $ 2.39 $ 1.72
Fully Diluted $ .79 $ .36 $ 1.28 $ .92
Common and common equivalent shares outstanding:
Primary 515 511 517 510
Fully Diluted 1,015 1,014 1,017 1,015
(This is an unaudited statement)
Notes to Consolidated Financial Statements:
The condensed financial statements included herein have been prepared
by the Company without audit, and in the opinion of management, reflect
all the adjustments necessary to fairly present the Company's results
of operations for the period. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. Although the Company believes that the disclosures
are adequate to make the information presented not misleading, it is
suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto
included in the Company's latest annual report.
Net Income Per Share
The computation of primary earnings per common and common
equivalent share is based on the weighted average number of
outstanding common shares and additional shares assuming the
exercise of dilutive stock options. The computation of fully
diluted earnings per share further assumes conversion of the
variable interest rate convertible debentures.
<PAGE>
LATSHAW ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
</TABLE>
<TABLE>
Six Months Ended
April 29, April 30,
1995 1994
Operating activities
<S> <C> <C>
Net income $1,234 $876
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 573 474
Deferred compensation (4) (5)
Postretirement benefits 15 12
Loss on sale of marketable equity
securities - 997
Unrealized gain on marketable equity
securities - (712)
Provision for loss on accounts
receivable 2 30
Changes in operating assets and
liabilities affecting cash and
cash equivalents:
Accounts and notes receivable (1,447) (1,306)
Inventories (103) (462)
Refundable income taxes - 138
Deferred income taxes - (51)
Prepaid expenses 202 221
Accounts payable 59 (310)
Accrued expenses (211) 179
Accrued income taxes 145 -
Net cash provided by operating activities 465 81
Investing activities
Purchases of property, plant and equipment (685) (755)
Proceeds from sale of marketable equity
securities - 158
Other (7) 50
Net cash used in investing activities (692) (547)
Financing activities
Payments of notes payable (1,045) (1,011)
Proceeds from the issuance of notes
payable 1,374 1,705
Payments of long-term debt (24) (308)
Proceeds from the issuance of
long-term debt - 198
Purchase of treasury stock (7) (6)
Net cash provided by financing activities 298 578
Increase in cash and cash equivalents 71 112
Cash and cash equivalents at beginning of period 184 174
Cash and cash equivalents at end of period $ 255 $ 286
(This is an unaudited statement)
<PAGE>
1
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Sales revenue for the second quarter as well as for the six
months of 1995 were higher than the same periods in 1994. For
the first six months of 1995, all divisions experienced sales
growth compared to 1994. Improved conditions in the general
economy seem to be the contributing factor to the increased
demand for the Company's products. Net sales for the second
quarter of 1995 were $11,682,000, an increase of 12.1 percent
from the $10,422,000 level in 1994. Net sales for the six months
of 1995 were $22,754,000 which represents a 15.1 percent increase
over the same period in 1994 of $19,770,000.
Gross profit in the second quarter of 1995 was 25.0 percent
versus 26.2 percent in the second quarter of 1994. For the six
months of 1995, gross profit was 23.9 percent compared to 25.3
percent in 1994. Operating efficiencies resulting from the
higher sales volume did not offset higher material costs that
were experienced by all the Company's divisions for 1995.
Latshaw's material suppliers have experienced increased demand
for their products and as a result have increased their prices.
Latshaw continues to be confronted with competitive pricing
pressure which reduces its ability to pass these price increases
along.
Selling, general and administrative expenses for the second
quarter and the six months of 1995 were higher compared to the
same periods in 1994. However, as a percent of sales for the
six month period, these costs amounted to 14.1 percent in 1995
compared to 14.5 percent in 1994. The higher cost in 1995
resulted primarily from increased commissions and performance
bonuses due to the higher sales volume.
Interest expense was $131,000 for the second quarter of 1995
compared to $117,000 for the same period a year earlier. For
the six months in 1995, interest expense was $244,000 versus
$190,000 in 1994. These increases were due to additional debt
incurred to meet the working capital requirements of the higher
sales volume. Borrowing costs in 1995 were also higher because
of an increase in interest rates the Company paid on its
outstanding convertible subordinated debentures and bank
borrowings.
In the second quarter of 1994, the Company sold 40,000
shares of Standard Brands Paint common stock for $83,000. This
resulted in a realized loss of approximately $529,000. This
sale combined with the sale of 35,458 shares of Standard Brands
Paint common stock earlier in the year for $75,000 resulted in a
realized loss of $997,000 for the six months of 1994. Proceeds
from these sales were used to pay down bank debt. During the
same period in 1995 there were no such sales.
<PAGE>
In 1994, the Company recorded an unrealized gain on
marketable equity securities of $218,000 for the second quarter and a
$712,000 unrealized gain for the six months. These unrealized
gains were the result of Latshaw's policy of carrying its marketable equity
securities at the lower of aggregate cost or market value.
Effective October 30, 1994, the Company adopted the provisions
of Statement of Financial Accounting Standards (SFAS), No. 115
on "Accounting for Certain Investments in Debt and Equity
Securities." In accordance with SFAS No. 115, the Company has
determined that its marketable equity securities are considered
to be "available-for-sale" and that any unrealized gains or
losses are to be reported net of tax, as a separate component of
shareholders' equity. At October 30, 1994 and April 29, 1995,
the pretax unrealized gain on marketable equity securities was
$14,000 and $35,000, respectively.
The Company was the assignee of leases on certain plant
facilities in Minnesota originally leased directly by a former
subsidiary of the Company. At the time of the sale of the
subsidiary in 1983, the Company subleased the facilities to the
buyer of the subsidiary. These leases were to expire in 1998.
In 1993, the lessor of the properties brought an action against
the Company, the subtenant and several other parties for the
costs of repairing the roof of certain of the facilities.
Subsequent to the end of the second quarter of 1994, the Company
entered into a settlement agreement with the lessor, pursuant to
which the lessor agreed to release the Company from any past,
present, or future liability associated with this lease and the
Company has agreed to make future payment(s) to the lessor of
approximately $250,000. As a result, the Company expensed $250,000
in the second quarter of 1994.
The effective income tax rate was 37.1 percent in 1995 and
37.3 percent in 1994 for the six month period.
The Company had net income for the second quarter of 1995 of
$761,000 or $1.48 per share (primary) and $.79 per share (fully
diluted) compared to a net profit of $.65 per share (primary)
and $.36 per share (fully diluted) for the second quarter of
1994. For the six months of 1995, there was a per share net
profit of $2.39 (primary) and $1.28 (fully diluted) on total net
profit of $1,234,000. This compares to a $1.72 per share
profit (primary) and $.92 per share (fully diluted) on total net
profit of $876,000 for the same period in 1994.
The computation of primary earnings per common and common
equivalent share is based on the weighted average number of
outstanding common shares and additional shares assuming the
exercise of dilutive stock options. The computation of fully
diluted earnings per share assumes conversion of the variable
rate convertible debentures.
For the six months of 1995 and 1994, the Company used net
cash in investing activities of $692,000 and $547,000, respectively.
These uses were funded by operating activities and drawing on
the available bank lines of credit.
<PAGE>
As of April 29, 1995, the Company, through its subsidiary,
Wescon Products Company, had an unused line of credit for
short-term bank borrowings of $3,000,000 remaining on the
$5,000,000 available, providing for interest at prime. The
Company, through its subsidiary, Helton, Inc., also has
outstanding borrowings of $322,000 at April 29, 1995 on a
$350,000 bank line of credit. Management believes that the
combination of funds available through its bank lines of credit
along with the anticipated cash flow from operations will
provide the capital resources necessary to meet the Company's
working capital needs. Despite the Company's existing capital
resources, opportunities may arise that Management believes
would enhance the value of the Company that could require
financing not currently provided for. There were no
significant capital expenditure commitments outstanding at April
29, 1995 that have not been previously disclosed.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Primary and Fully Diluted Net Income
per Common Share Computation
(27) Financial Data Schedule
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
LATSHAW ENTERPRISES, INC.
/s/Michael E. Bukaty
Michael E. Bukaty
President
/s/David G. Carr
David G. Carr
Sr. Vice President, C.F.O.
June 12, 1995
Date
<PAGE>
EXHIBIT INDEX
Assigned
Exhibit Number Description of Exhibit
(11) Primary and Fully Diluted Net Income
per Common Share Computation
(27) Financial Data Schedule
</TABLE>
EXHIBIT 11
Latshaw Enterprises, Inc.
Primary and Fully Diluted Net Income
per Common Share Computation
Three Months Ended Six Months Ended
April 29, April 30, April 29, April 30,
1995 1994 1995 1994
(In thousands except per share data)
Primary
Net income applicable to
common shareholders $761 $334 $1,234 $876
Weighted average number
of common shares
outstanding during
the period 497 493 497 493
Add - common equivalent
shares (determined using
the "treasury stock
method") representing
shares issuable upon the
exercise of stock
options granted 18 18 20 17
Weighted average number
of common and common
equivalent shares
outstanding 515 511 517 510
Net income per share $1.48 $ .65 $2.39 $1.72
Fully Diluted
Net income $ 761 $ 334 $1,234 $876
Add - interest expense
of convertible
subordinated debentures 37 29 72 58
Net income applicable to
common shareholders $798 $ 363 $1,306 $934
Weighted average number
of common shares
outstanding during
the period 497 493 497 493
Add - common equivalent
shares (determined using
the "treasury stock
method") representing
shares issuable upon the
exercise of stock options
granted 18 21 20 22
Add - dilutive convertible
subordinated debentures 500 500 500 500
Weighted average number of
common and common
equivalent shares
outstanding 1,015 1,014 1,017 1,015
Net income per share $ .79 $. 36 $1.28 $ .92
<TABLE> <S> <C>
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<NAME> LATSHAW ENTERPRISES, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-28-1995
<PERIOD-START> OCT-30-1994
<PERIOD-END> APR-29-1995
<EXCHANGE-RATE> 1
<CASH> 255
<SECURITIES> 450
<RECEIVABLES> 7384
<ALLOWANCES> 0
<INVENTORY> 7,824
<CURRENT-ASSETS> 16,779
<PP&E> 18,182
<DEPRECIATION> 11,659
<TOTAL-ASSETS> 23,535
<CURRENT-LIABILITIES> 7,235
<BONDS> 2,500
<COMMON> 2,004
0
0
<OTHER-SE> 5,015
<TOTAL-LIABILITY-AND-EQUITY> 23,535
<SALES> 22,754
<TOTAL-REVENUES> 22,754
<CGS> 17,323
<TOTAL-COSTS> 20,791
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 1,963
<INCOME-TAX> 729
<INCOME-CONTINUING> 1,234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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<EPS-PRIMARY> 2.39
<EPS-DILUTED> 1.28
</TABLE>
