<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending April 1, 1995
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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 number 1-3834
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CONTINENTAL MATERIALS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 36-2274391
- - ------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
225 West Wacker Drive, Suite 1800, Chicago, Illinois 60606
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(Address of principal executive office)
(Zip Code)
(312) 541-7200
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(Registrant's telephone number, including area code)
(Former name, former address and former
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
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Number of common shares outstanding at April 26, 1995............... 1,139,278
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NO EXHIBITS ARE FILED WITH THIS REPORT
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONTINENTAL MATERIALS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
APRIL 1, 1995 and DECEMBER 31, 1994
(Unaudited)
(000's omitted except share data)
<TABLE>
<CAPTION>
APRIL 1, DECEMBER 31,
ASSETS 1995 1994
------ ----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 463 $ 2,778
Receivables, net 12,412 11,376
Refundable income taxes 287 --
Inventories:
Finished goods 9,608 8,882
Work in process 2,129 2,208
Raw materials and supplies 4,948 5,407
Prepaid expenses 1,576 1,505
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Total current assets 31,423 32,156
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Property, plant and equipment, net 13,791 13,726
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Other assets:
Investment in mining partnership 1,648 1,539
Other 811 741
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$ 47,673 $ 48,162
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LIABILITIES
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Current liabilities:
Bank loan payable $ 3,200 $ --
Current portion of long-term debt 1,410 1,411
Accounts payable and accrued expenses 11,038 14,710
Income taxes -- 10
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Total current liabilities 15,648 16,131
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Long-term debt 4,012 3,512
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Deferred income taxes 1,730 1,730
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SHAREHOLDERS' EQUITY
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Common shares, $0.50 par value; authorized
3,000,000; issued 1,326,588 663 663
Capital in excess of par value 3,484 3,484
Retained earnings 24,642 25,137
Treasury shares, 187,310, at cost (2,506) (2,495)
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26,283 26,789
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$ 47,673 $ 48,162
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</TABLE>
See accompanying notes
2
<PAGE>
CONTINENTAL MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED APRIL 1, 1995 AND APRIL 2, 1994
(Unaudited)
(000's omitted except per share amounts)
<TABLE>
<CAPTION>
APRIL 1, APRIL 2,
1995 1994
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<S> <C> <C>
Net sales $ 16,191 $ 15,260
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Costs and expenses:
Cost of sales (exclusive of depreciation and
depletion) 13,222 12,380
Depreciation and depletion 591 567
Selling and administrative 3,107 2,938
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16,920 15,885
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Operating loss (729) (625)
Interest (165) (170)
Equity income (loss) from mining partnership 6 (70)
Other income, net 90 20
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Loss before income taxes (798) (845)
Credit for income taxes (303) (287)
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Net loss (495) (558)
Retained earnings, beginning of period 25,137 23,752
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Retained earnings, end of period $ 24,642 $ 23,194
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Net loss per share $ (.43) $ (.49)
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Average shares outstanding 1,140 1,140
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---------- ---------
</TABLE>
See accompanying notes
3
<PAGE>
CONSOLIDATED MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 1, 1995 AND APRIL 2, 1994
(Unaudited)
(000's omitted)
<TABLE>
<CAPTION>
APRIL 1, APRIL 2,
1995 1994
----------- ----------
<S> <C> <C>
Net cash used by operating activities $ (5,260) $ (2,937)
Investing activities:
Capital expenditures (658) (392)
Proceeds from sale of property and equipment 45 8
Investment in mining partnership (103) (183)
Other (27) --
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Net cash used in investing activities (743) (567)
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Financing activities:
Borrowings under revolving credit facility 3,200 2,900
Borrowings (repayment) of long-term debt 499 (15)
Payment to acquire treasury stock (11) --
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Net cash provided by financing activities 3,688 2,885
Net decrease in cash and cash equivalents (2,315) (619)
Cash and cash equivalents:
Beginning of period 2,778 1,067
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End of period $ 463 $ 448
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Supplemental disclosures of cash flow items:
Cash paid during the three months for:
Interest $ 144 $ 146
Income taxes 7 7
</TABLE>
See accompanying notes
4
<PAGE>
CONTINENTAL MATERIALS CORPORATION
SECURITIES AND EXCHANGE COMMISSION FORM 10-Q
NOTES TO THE QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED APRIL 1, 1995
(Unaudited)
1. The unaudited interim consolidated financial statements included herein are
prepared pursuant to the rules and regulations for reporting on Form 10-Q.
Accordingly, certain information and footnote disclosures normally
accompanying the annual financial statements have been omitted. The
interim financial statements and notes should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's latest annual report on Form 10-K. In the opinion of management,
the consolidated financial statements include all adjustments (none of
which were other than normal recurring adjustments) necessary for a fair
statement of the results for the interim periods.
2. As discussed in Note 6 of Notes to Consolidated Financial Statements in the
Company's 1994 Annual Report, the Company retained the exposure, if any,
related to incidents involving Imeco products occurring prior to June 30,
1993. There have been no new incidents nor significant developments in the
claim currently in litigation.
3. In February 1995, the Company amended its credit agreement with two banks
to provide an additional $500,000 of debt. Unrelated to this amendment,
interest rates on both the term debt and the short-term line of credit were
reduced to prime during the first quarter of 1995 since certain 1994
profitability goals, as set forth in the credit agreement, were met.
4. The credit for income taxes is based upon the estimated effective tax rate
for the year.
5. Operating results for the first three months of 1995 are not necessarily
indicative of performance for the entire year. Historically, sales of
construction materials are higher in the second and third quarters. Sales
of heating and air-conditioning products have not shown strong seasonality
in recent years although product mix yields higher gross profit in the
fourth quarter. (See Note 11 of Notes to Consolidated Financial Statements
in the Company's 1994 Annual Report.)
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
FINANCIAL CONDITION (SEE PAGES 2 AND 4)
Operations for the first three months of 1995 used $5,260,000 in cash
compared to $2,937,000 in 1994. As noted in the Financial Condition,
Liquidity and Capital Resources discussion in the 1994 Annual Report, the
increases in accounts payable and accruals at December 31, 1994 were due to
the early purchase of raw materials for 1995 production and timing of
payments, respectively. Further, the reduction in these amounts occurred,
as expected, during the first quarter of 1995 and accounted for
approximately $3,700,000 of the cash used in operations. In March 1995,
the Company settled the suit brought by ConAgra and its insurance carrier.
The amount of the settlement had been fully reserved as of December 31,
1994 and thus had no effect on the operations of the quarter ended April 1,
1995. The settlement was paid in April 1995 from available funds and did
not have a material effect on the financial condition of the Company.
The Company estimates that its short-term line of credit (of which
$3,200,000 was outstanding at April 1, 1995) will be adequate to meet its
cash requirements for the foreseeable future. Historically, the Company's
borrowings against the short-term line have peaked during the second
quarter and decline over the remainder of the year.
OPERATIONS - COMPARISON OF QUARTER ENDED APRIL 1, 1995 TO QUARTER ENDED
APRIL 2, 1994
(SEE PAGE 3)
Consolidated net sales increased $931,000 (6.1%). The construction
materials segment improved slightly, up $122,000 (1.9%), as the residential
building market began to settle. The increase in the heating and air-
conditioning segment, $802,000 (8.9%) was attributed to an increased
customer base at Phoenix Manufacturing as well as increased orders from
several existing accounts.
Consolidated cost of sales (exclusive of depreciation and depletion) as a
percentage of sales increased slightly from 81.1% to 81.7%. Both segments
were affected by increased raw material costs which, due to competitive
pressures, the Company was unable to fully pass through to customers.
Selling and administrative expenses increased by $169,000 (5.8%)
attributable to the increased sales levels.
Interest expense remained fairly constant as the effect of higher average
interest rates was offset by lower overall borrowing levels.
Higher copper prices and improved recoveries lead to the Company's current
year income from its equity investment in a mining partnership compared to
last year's loss.
Historically, the Company has experienced operating losses during the first
quarter. This trend is expected to continue as sales of construction
materials are generally higher in the second and third quarters while sales
of heating and air-conditioning products, though not showing strong
seasonality, experience product mix changes that yield higher gross profits
in the fourth quarter.
6
<PAGE>
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Registrant filed no reports on Form 8-K during the quarter
ended April 1, 1995.
SIGNATURE
Pursuant to the requirement 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.
CONTINENTAL MATERIALS CORPORATION
Date: April 27, 1995 By: /S/ Joseph J. Sum
------------------------ -----------------------------------
Joseph J. Sum, Vice President
and Chief Financial Officer
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> APR-01-1995
<CASH> 463
<SECURITIES> 0
<RECEIVABLES> 12,412<F1>
<ALLOWANCES> 0
<INVENTORY> 16,685
<CURRENT-ASSETS> 31,423
<PP&E> 13,791<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 47,673
<CURRENT-LIABILITIES> 15,648
<BONDS> 0
<COMMON> 663
0
0
<OTHER-SE> 25,620
<TOTAL-LIABILITY-AND-EQUITY> 47,673
<SALES> 16,191
<TOTAL-REVENUES> 16,191
<CGS> 13,222<F3>
<TOTAL-COSTS> 16,920
<OTHER-EXPENSES> 69
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 165
<INCOME-PRETAX> (798)
<INCOME-TAX> (303)
<INCOME-CONTINUING> (495)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (495)
<EPS-PRIMARY> (.43)
<EPS-DILUTED> (.43)
<FN>
<F1>TAG 12 (RECEIVABLES) IS NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS.
<F2>TAG 16 (PP&E) IS NET OF ACCUMULATED DEPRECIATION.
<F3>TAG 28 (CGS) IS EXCLUSIVE OF DEPRECIATION AND DEPLETION.
</FN>
</TABLE>
