<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X
- - ---- Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 26, 1995
----------------
- - ---- Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------------------ ------------------
Commission file number 0-8555
--------
CFI INDUSTRIES, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3831068
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
935 West Union Avenue, Wheaton, Illinois 60187
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708)668-2838
-----------------------------
The Registrant's fiscal year formerly ended on the last Sunday of June.
- - --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
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
----- -----
(APPLICABLE ONLY TO CORPORATE ISSUERS:)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
1,991,407 shares of Common Stock, $1.00 Par Value, as of April 30, 1995.
<PAGE> 2
CFI INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C>
Part 1. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of March 26, 1995
and June 26, 1994 (Unaudited).......................................
Consolidated Statements of Operations for the Periods Ended
March 26, 1995 and March 27, 1994 (Unaudited) ......................
Consolidated Statements of Cash Flows for the Nine Months
Ended March 26, 1995 and March 27, 1994 (Unaudited) ................
Notes to Consolidated Interim Financial Statements (Unaudited) .....
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 .......................
</TABLE>
2
<PAGE> 3
CFI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 26, 1995 AND JUNE 26, 1994
(Amounts in thousands, except par value per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
March 26, June 26,
1995 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash & cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,020 $ 267
Marketable securities, available for sale . . . . . . . . . . . . . . . . . - 1,524
Trade and other receivables,
net of allowance for doubtful accounts of
$3 in March and $9 in June . . . . . . . . . . . . . . . . . . . . . . . 3,265 3,432
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,140 2,442
Prepayments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . 411 622
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 762 762
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 8,598 9,049
Property and equipment, at cost, less
accumulated depreciation of $7,022 in March
and $6,203 in June . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,016 7,509
Intangible assets, at cost, net of accumulated
amortization of $748 in March and
$686 in June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,552 2,614
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 42
-------- --------
$ 18,215 $ 19,214
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,600 $ 2,000
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . 664 687
Current portion of other long-term liabilities . . . . . . . . . . . . . . 62 76
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,047 2,273
Accrued liabilities:
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . 787 932
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642 634
Provision for soil remediation . . . . . . . . . . . . . . . . . . . . . 1,214 1,271
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 870 907
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 7,886 8,780
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,998 2,618
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 203 232
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 762 762
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 10,849 12,392
-------- --------
Commitments and contingent liabilities (Note 7)
Stockholders' Equity:
Common stock, $1.00 par value, 10,000
shares authorized, 1,991 shares issued
and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,991 1,991
Paid-in surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,374 16,374
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,999) (11,543)
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 7,366 6,822
-------- --------
$ 18,215 19,214
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
CFI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED MARCH 26, 1995 AND MARCH 27, 1994
(Amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- ----------------------------------
March 26, March 27, March 26, March 27,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 8,032 $ 7,339 $ 22,306 $ 21,287
Cost of sales 6,008 5,576 16,800 16,597
---------- ---------- ---------- ----------
Gross profit 2,024 1,763 5,506 4,690
Selling expenses 1,020 1,033 2,969 3,250
General & administrative expenses 558 542 1,650 1,717
Non-recurring severance costs - 220 - 295
---------- ---------- ---------- ----------
Operating income (loss) 446 (32) 887 (572)
Interest expense 87 80 312 278
Interest income - (17) - (58)
Other (income) expense 30 22 31 76
---------- ---------- ---------- ----------
Income (loss) before
income taxes 329 (117) 544 (868)
Income taxes - - - -
---------- ---------- ---------- ----------
Net income (loss) $ 329 $ (117) $ 544 $ (868)
========= ========== ========= ==========
Per common share:
Net income (loss) $ 0.16 $ (0.06) $ 0.26 $ (0.44)
============= ============== ============= ============
Weighted average common shares
outstanding 2,134 1,991 2,103 1,991
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 5
CFI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 26, 1995 AND MARCH 27, 1994
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION> Restated
1995 1994
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 544 $ (868)
Adjustments to reconcile net income (loss) to net
cash flows from operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 928 832
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . - 9
Provision for losses, asset write-offs and other . . . . . . . . . . . . 237 220
Deferred taxes and other . . . . . . . . . . . . . . . . . . . . . . . . - 7
Changes in assets and liabilities:
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . 167 (339)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (935) 37
Prepayments and other current assets . . . . . . . . . . . . . . . . . . 211 105
Accounts payable and accrued liabilities . . . . . . . . . . . . . . (465) (92)
Deferred severance and compensation . . . . . . . . . . . . . . . . . . . - 295
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45) (43)
-------- -------
Net cash flows from (used in) operating activities . . . . . . . . . . 642 163
-------- -------
Cash Flows From Investing Activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . (601) (732)
Disposals of property and equipment . . . . . . . . . . . . . . . . . . . . . 231 -
Proceeds from sale of marketable securities . . . . . . . . . . . . . . . . . 1,524 426
-------- -------
Net cash flows from (used in) investing activities . . . . . . . . . . . 1,154 (306)
-------- -------
Cash Flows From Financing Activities:
Net (payments) borrowings under line of credit . . . . . . . . . . . . . . . . (400) 800
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . (643) (420)
-------- -------
Net cash flows from (used in) financing activities . . . . . . . . . . (1,043) 380
-------- -------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . 753 237
Beginning cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . 267 53
-------- -------
Ending cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $ 1,020 $ 290
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest . . . . . . . . . . . . . . . . . . $ 310 $ 251
Cash paid during the period for income taxes . . . . . . . . . . . . . . . . $ 5 $ -
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 157
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 6
CFI INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
MARCH 26, 1995 AND JUNE 26, 1994
(Unaudited)
1. GENERAL
The unaudited financial information furnished herein includes all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results of the periods presented. All such adjustments are
of a normal and recurring nature. The financial results for interim periods may
not be indicative of financial results for a full year. These statements should
be read in conjunction with the financial statements and notes thereto included
with the 1994 Form 10-K filed by CFI Industries, Inc. (the "Company") with the
Securities and Exchange Commission.
2. RESTATEMENT
The consolidated statement of cash flows for the nine months ending
March 27, 1994 has been restated to reflect the classification of certain assets
as marketable securities which had previously been reported as cash equivalents.
The marketable securities were carried at cost, which approximated market.
3. RECLASSIFICATIONS
Certain items in the financial statements for fiscal 1994 have been
reclassified to conform with the fiscal 1995 presentation.
4. INVENTORIES
Inventories consisted of the following (amounts in thousands):
<TABLE>
<CAPTION>
March 26, June 26,
1995 1994
------------ ------------
<S> <C> <C>
Raw materials $ 1,289 $ 822
Work in process 198 172
Finished goods 1,653 1,448
------------ --------
$ 3,140 $ 2,442
============ ========
</TABLE>
5. CHANGES IN STOCKHOLDERS' EQUITY
Changes in stockholders' equity for the nine-month period ended March
26, 1995 are shown below (amounts in thousands):
<TABLE>
<CAPTION>
Capital Paid-in
Stock Surplus Deficit Total
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance, June 26, 1994 $ 1,991 $16,374 $(11,543) $ 6,822
Net income -0- -0- 544 544
------- ------- -------- --------
Balance, March 26, 1995 $ 1,991 $16,374 $(10,999) $ 7,366
======= ======= ======== ========
</TABLE>
<PAGE> 7
6. STOCK OPTIONS
Transactions concerning the Company's 1991 Stock Option plan for the
nine-month period ended March 26, 1995 are shown below:
<TABLE>
<CAPTION>
Price Range Number of Shares
------------- ----------------
<S> <C> <C>
Outstanding, June 26, 1994 $2.63 - $4.00 236,167
Granted $2.75 106,500
Canceled $3.00 (1,667)
Exercised -
-------
Outstanding, March 26, 1995 $2.63 - $4.00 341,000
=======
Exercisable, March 26, 1995 193,001
Reserved for future option grants 259,000
</TABLE>
7. CONTINGENT LIABILITIES
During fiscal 1991, soil conditions at the Plastofilm Industries, Inc.
("Plastofilm"), a wholly owned subsidiary of the Company, facility located in
Wheaton, Illinois were discovered which need remediation. At June 30, 1991, a
pre-tax provision of $1.0 million was recorded for the estimated costs of
testing and remediation. At June 28, 1992, an additional pre-tax provision of
$1.0 million was recorded to reflect the then currently estimated costs to
complete the soil remediation. Expenditures during fiscal 1994 and prior years
were approximately $730,000. Expenditures to date during fiscal 1995 have been
approximately $57,000. During fiscal 1993, the Illinois Environmental
Protection Agency requested certain additional testing to be performed before
approval of the Company's voluntary clean-up plan. These tests were completed
in fiscal 1994 and the results and a plan for remediation are pending.
The Company has received a demand for payment of withdrawal liability in
the amount of $358,657 from a multiemployer pension plan to which the Company
made contributions in connection with a discontinued business. The Company
disputes that it has any withdrawal liability and, in accordance with the
applicable provisions of the Employee Retirement Income Security Act, has
demanded that this dispute be resolved through arbitration. The Company is
making quarterly contributions of approximately $10,000, as required by law,
pending arbitration. Through March 26, 1995, the Company has made payments of
approximately $85,000. These payments will be returned to the Company, with
interest, if it is ultimately determined that the Company has no liability.
The Company, in connection with a discontinued business, has been named
by the United States Environmental Protection Agency ("US-EPA") as a potentially
responsible party in a Superfund Proceeding. The US-EPA has determined the
Company to be a de minimus contributor and has offered a settlement agreement to
all de minimus parties which, if accepted by the Company, will require total
payments by the Company of approximately $90,000. It is management's intention
to accept the settlement agreement subject to ratification by a majority of all
de minimus contributors. An adequate reserve has been established.
<PAGE> 8
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Sales for the third quarter of fiscal 1995 were $8.0 million compared to $7.3
million for the third quarter of fiscal 1994. For the first nine months of
fiscal 1995 sales were $22.3 million as compared to $21.3 million in the
comparable period of fiscal 1994. The sales increase for the third quarter and
first nine months of fiscal 1995 was a result of improved market conditions,
particularly in the medical supply market, the Company's principal market.
The gross profit percentage was 25.2% and 24.7% for the third quarter and first
nine months of fiscal 1995, respectively, as compared to gross profit
percentages of 24.0% and 22.0% in the third quarter and first nine months of
fiscal 1994, respectively. The improvements were primarily the result of
reduced labor costs and reductions in manufacturing overhead.
Selling expenses were $1.0 million in both the third quarter of fiscal 1995 and
fiscal 1994. Selling expenses were $3.0 million for the first nine months of
fiscal 1995 as compared to $3.3 million in the first nine months of fiscal
1994. The year-to-date decrease in fiscal 1995 as compared to fiscal 1994 was a
direct result of reduced expenses for sales support and travel and continued
cost control efforts.
General and administrative expenses of $558,000 in the third quarter of fiscal
1995 were substantially unchanged from the comparable period of fiscal 1994.
For the first nine months of fiscal 1995, general and administrative expenses
were $1,650,000 as compared to $1,717,000 for the first nine months of fiscal
1994. The reduction for the first nine months of fiscal 1995 as compared to
fiscal 1994 was primarily due to reduced administrative staff.
Operating income was $446,000 and $887,000 for the third quarter and first nine
months of fiscal 1995, respectively, as compared to operating losses of
$32,000 for the third quarter and $572,000 for the first nine months of fiscal
1994. The improvements in operating income were primarily due to increased
gross profit and the on-going effect of cost reduction programs.
Net interest expense was $87,000 for the third quarter of fiscal 1995 as
compared to $63,000 in the third quarter of fiscal 1994. For the first nine
months of fiscal 1995, net interest expense was $312,000 as compared to
$220,000 in the comparable period of fiscal 1994. The increase for the first
nine months of fiscal 1995 as compared to 1994 was a result of lower investment
earnings due to lower investable balances coupled with an increase in interest
expense resulting from the increase in the prime interest rate.
The Company's consolidated income before taxes was $329,000 and $544,000 for
the third quarter and first nine months, respectively, of fiscal 1995 as
compared to losses before taxes of $117,000 and $868,000, respectively, in the
comparable periods of fiscal 1994. The increases in income before taxes were a
result of improved operating income. The Company had available unrecognized net
operating loss and tax credit carry forwards of $8.1 million and
$700,000, respectively, at June 26, 1994, therefore no provision or benefit for
income taxes was required.
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
Net working capital increased to $712,000 at March 26, 1995 as compared to
$269,000 as of June 26, 1994. The increase was primarily the result of
earnings, partially offset by expenditures for capital equipment.
Plastofilm's liquidity and capital needs through fiscal 1995 include
expenditures to upgrade and replace existing equipment as well as to finance
the soil remediation expenditures at its Wheaton, Illinois facility. The funds
required to finance these items are expected to be provided by operating cash
flows and Plastofilm's $1.0 million capital expenditure facility. In addition,
Plastofilm has a short-term credit facility with a financial institution which
is renewable on November 30, 1996 at the option of such institution. As of
March 26, 1995, $900,000 was available under this credit arrangement and
Plastofilm was in compliance with all covenants.
<PAGE> 10
CFI INDUSTRIES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
None
b) Reports on Form 8-K:
None
<PAGE> 11
SIGNATURE
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.
CFI INDUSTRIES, INC.
--------------------
(Registrant)
May 5, 1995
- - ------------------- ------------------------------
Date Robert W. George
Principal Executive Officer
May 5, 1995
- - -------------------- -------------------------------
Date Robert W. Zimmer
Treasurer, Principal Accounting
and Financial Officer
<PAGE> 12
Exhibit Index
Exhibit
Number Description
- - ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CFI
INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND RELATED
NOTES AND SCHEDULES THERETO INCLUDED IN THIS QUARTERLY REPORT ON FORM 10-Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-26-1995
<CASH> 1020
<SECURITIES> 0
<RECEIVABLES> 3265
<ALLOWANCES> 3
<INVENTORY> 3140
<CURRENT-ASSETS> 8598
<PP&E> 14038
<DEPRECIATION> 7022
<TOTAL-ASSETS> 18215
<CURRENT-LIABILITIES> 7886
<BONDS> 1998
<COMMON> 1991
0
0
<OTHER-SE> 5375
<TOTAL-LIABILITY-AND-EQUITY> 18215
<SALES> 8032
<TOTAL-REVENUES> 8032
<CGS> 6008
<TOTAL-COSTS> 6008
<OTHER-EXPENSES> 1608
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87
<INCOME-PRETAX> 329
<INCOME-TAX> 0
<INCOME-CONTINUING> 329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 329
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
