<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 September 30, 1995
--------------------------
________Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-8555
------
CFI INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 53-0174114
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification 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
--------------
- --------------------------------------------------------------------------------
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 ISSUES:)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
1,997,332 share of Common Stock, $1.00 Par Value, as of October 31,
1995.
<PAGE> 2
CFI INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
No.
---
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1995
and June 30, 1995 (Unaudited).................................................. 3
Consolidated Statements of Operations for the Three Months
Ended September 30, 1995 and September 25, 1994 (Unaudited).................... 4
Consolidated Statements of Cash Flows for the Three Months
Ended September 30, 1995 and September 25, 1994 (Unaudited).................... 5
Notes to Consolidated Interim Financial Statements (Unaudited)................. 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 8-9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K........................................ 10
</TABLE>
2
<PAGE> 3
CFI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND JUNE 30, 1995
(Amounts in thousands, except par value per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash...................................................... $ 1,520 $ 1,211
Trade and other receivables,
net of allowance for doubtful accounts of
$15 in September and June.............................. 3,458 3,706
Inventories.............................................. 2,931 2,818
Prepayments and other.................................... 478 486
Deferred income taxes.................................... 1,173 1,173
------- -------
Total current assets................................... 9,560 9,394
Property and equipment, at cost, less
accumulated depreciation of $7,595 in September
and $7,306 in June........................................ 6,940 7,043
Intangible assets, at cost, net of accumulated
amortization of $788 in September and
$768 in June.............................................. 2,511 2,531
Other assets................................................ 55 55
------- -------
$19,066 $19,023
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt .......................................... $ 1,100 $ 800
Current maturities of long-term debt...................... 742 742
Current portion of other long-term liabilities............ 55 55
Accounts payable.......................................... 1,965 2,388
Accrued liabilities:
Salaries and wages...................................... 830 867
Insurance............................................... 417 417
Provision for soil remediation.......................... 1,183 1,193
Other................................................... 871 859
------- -------
Total current liabilities............................. 7,163 7,321
Long-term debt............................................ 2,063 2,229
Other long-term liabilities............................... 180 200
Deferred income taxes..................................... 643 643
------- -------
Total liabilities..................................... 10,049 10,393
------- -------
Commitments and contingent liabilities (Note 5)
Stockholders' Equity:
Common stock, $1.00 par value, 10,000 shares
authorized, 1,997 and 1,991 shares issued
and outstanding in September and June respectively........ 1,997 1,991
Paid-in surplus........................................... 16,393 16,374
Deficit................................................... (9,373) (9,735)
------- -------
Total stockholders' equity............................ 9,017 8,630
------- -------
$19,066 $19,023
======= =======
</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 THREE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 25, 1994
(Amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Net sales $7,872 $7,190
Cost of sales 5,780 5,451
------ ------
Gross profit 2,092 1,739
Selling expenses 987 981
General & administrative
expenses 636 518
------ ------
Operating income 469 240
Interest expense 98 103
Interest income 13 --
Other expense 22 25
------ ------
Income before
income taxes 362 112
Income taxes -- --
------ ------
Net income $ 362 $112
====== ======
Earnings per common share:
Net Earnings $ 0.16 $ 0.05
====== ======
Weighted average number of common
shares and common share
equivalents outstanding: 2,194 2,046
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
CFI INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 25, 1994
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income ......................................... $ 362 $ 112
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization....................... 309 296
Provision for losses, asset write-offs and other.... 60 95
Stock distribution to employees..................... 25 --
Changes in assets and liabilities:
Trade and other receivables......................... 248 565
Inventories......................................... (173) (76)
Prepayments and other current assets................ 8 76
Accounts payable and accrued liabilities............ (458) (993)
Other - net......................................... -- (14)
------- -------
Net cash flows from operating activities......... 381 61
------- -------
Cash Flows From Investing Activities:
Capital expenditures.................................. (190) (35)
Disposals of property and equipment................... 4 --
Proceeds from sale of marketable securities........... -- 463
------- -------
Net cash flows from (used in) investing activities (186) 428
------- -------
Cash Flows From Financing Activities:
Net (payments) borrowings under line of credit...... 300 (550)
Payments on long-term debt.......................... (186) (171)
------- -------
Net cash flows from (used in) financing activities 114 (721)
------- -------
Net increase (decrease) in cash....................... 309 (232)
Beginning cash........................................ 1,211 267
-------- --------
Ending cash........................................... $ 1,520 $ 35
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest............ $ 96 $ 106
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
CFI INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND JUNE 30, 1995
(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 the financial results for a full year. These statements
should be read in conjunction with the financial statements and notes thereto
included with the 1995 Form 10-K filed by the Company with the Securities and
Exchange Commission.
2. INVENTORIES
Inventories consisted of the following (amounts in thousands):
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
----- -----
<S> <C> <C>
Raw materials $ 1,234 $1,018
Work in process 181 158
Finished Goods 1,516 1,642
------- -------
$ 2,931 $ 2,818
======= =======
</TABLE>
3. CHANGES IN STOCKHOLDERS' EQUITY
Changes in stockholders' equity for the three month period ended September
30, 1995 are shown below (amounts in thousands):
<TABLE>
<CAPTION>
Capital Paid-in
Stock Surplus Deficit Total
----- ------- ------- -----
<S> <C> <C> <C> <C>
Balance, June 30, 1995
$1,991 $ 16,374 $ (9,735) $ 8,630
Stock distribution to employees 6 19 25
Net income 362 362
------ --------- --------- --------
Balance, September 30, 1995 $1,997 $ 16,393 $ (9,373) $ 9,017
====== ========= ========= ========
</TABLE>
6
<PAGE> 7
4. STOCK OPTIONS
Transactions concerning the Company's 1991 Stock Option plan for the
three-month period ended September 30, 1995 are shown below:
<TABLE>
<CAPTION>
Price Range 1995
------------- ----
<S> <C> <C>
Outstanding, June 30, 1995 $ 2.63 - $ 4.38 380,500
Granted ----
Canceled $ 2.63 - $ 3.00 (20,000)
Exercised ----
-------
Outstanding,
September 30, 1995 $ 2.63 - $ 4.38 360,500
=======
Exercisable, September 30, 1995 258,666
Reserved for future option grants 239,500
</TABLE>
5. CONTINGENT LIABILITIES
During fiscal 1991 soil conditions at Plastofilm's Wheaton, Illinois
facility 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 1995 and prior years were
approximately $807,000. Expenditures to date during fiscal 1996 have been
approximately $10,000. 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 conducted in fiscal
1994 and submitted to the Illinois Environmental Protection Agency in fiscal
1995 for approval. The approval of the Company's voluntary clean-up is pending.
The Company has received a demand for the payment of withdrawal liability
in the amount of approximately $360,000 from a multi-employer 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 September 30, 1995 the Company has
made payments of approximately $105,000. 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. The Company has accepted the settlement agreement
which will require total payments of $80,586. Payments will be made in two
equal installments on January 16, 1996 and July 16, 1996. The settlement amount
has been provided for in the financial statements.
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Sales for the first quarter of fiscal 1996 were $7.9 million compared to $7.2
million for the first quarter of fiscal 1995. This sales increase was a result
of improved market conditions, particularity in the medical supply market, the
Company's principal market and the pass through of raw material prices
increases which were experienced over the past year.
The gross profit percentage was 26.6% for the first quarter of fiscal 1996 as
compared to the gross profit percentage of 24.2% experienced in the comparable
quarter of fiscal 1995. This increase was due to reductions in direct labor
costs, continued improvement in operating efficiencies and the reallocation of
personnel and related expenses.
Selling expense was $987,000 or 12.5% of sales for the first quarter of fiscal
1995 which is comparable to $981,000 or 13.6% of sales for the first quarter of
fiscal 1995.
General and administrative expenses were $636,000 for the first quarter of
fiscal 1996 as compared to $518,000 for the first quarter of fiscal 1995. This
increase of $118,000 was a result of the reallocation of personnel and related
expenses, formally included as part of manufacturing cost and expenses,
relating to the evaluation of strategic market opportunities in Europe, Puerto
Rico and Texas.
Operating income for the first quarter of fiscal 1996 was $469,000 as compared
to $240,000 for the comparable period in fiscal 1995. This increase in
operating income of $229,000 was due to gross profits on increased sales and
reduced operating expenses offset by expenses relating to the evaluation of
future market opportunities.
Net interest expense was $85,000 in the first quarter of fiscal 1996 compared
to $103,000 in the first quarter of fiscal 1995. This decrease in net interest
expense was due to lower outstanding balances on the Company's line of credit
and an increase in interest income from higher investable balances.
The Company's consolidated net income was $362,000 in the first quarter of
fiscal 1996 as compared to $112,000 in the comparable period of fiscal 1995.
This $250,000 improvement was due to increased operating earnings and reduced
net interest expense.
8
<PAGE> 9
Liquidity and Capital Resources
Net working capital increased to $2.4 million as of September 30, 1995,
compared to $2.1 million as of June 30, 1995. This increase in working capital
of $0.3 million was primarily attributed to earnings and the related cash
flows of $760,000 offset by capital expenditures of $190,000 and repayments of
long-term debt of $186,000.
Plastofilm has a short-term credit facility with a financial institution which
is renewable on November 30, 1995 at the option of such institution. As of
September 30, 1995, $1.4 million was available under this credit arrangement
and Plastofilm was in compliance with all covenants. Management expects this
facility to be renewed and to be sufficient to meet its working capital needs
through fiscal 1996.
Plastofilm's liquidity and capital needs through fiscal 1996 include the
anticipated establishment of additional production facilities in East Central
Texas and Northern Ireland, a potential joint venture arrangement in Puerto
Rico, the upgrade and replacement of existing equipment, as well as the soil
remediation expenditures at its Wheaton, Illinois facility. The funds required
to finance these items are expected to be provided from operating cash flow,
the Company's existing credit facilities, grants which are expected to be made
available from the Industrial Development Board of Northern Ireland and/or from
other credit facilities which may become available to the Company.
9
<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
10
<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)
October 31, 1995 /s/ Robert W. George
- ---------------- ---------------------
Date Robert W. George
Principal Executive Officer
October 31, 1995 /s/ Robert W. Zimmer
- ---------------- ---------------------
Date Robert W. Zimmer, Treasurer
Principal Financial and
Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUN-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,520
<SECURITIES> 0
<RECEIVABLES> 3,458
<ALLOWANCES> 15
<INVENTORY> 2,931
<CURRENT-ASSETS> 9,560
<PP&E> 14,535
<DEPRECIATION> 7,595
<TOTAL-ASSETS> 19,066
<CURRENT-LIABILITIES> 7,163
<BONDS> 2,063
<COMMON> 1,997
0
0
<OTHER-SE> 7,020
<TOTAL-LIABILITY-AND-EQUITY> 19,066
<SALES> 7,872
<TOTAL-REVENUES> 7,872
<CGS> 5,780
<TOTAL-COSTS> 5,780
<OTHER-EXPENSES> 1,645
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 98
<INCOME-PRETAX> 362
<INCOME-TAX> 0
<INCOME-CONTINUING> 362
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 362
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
