UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
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 0-12293
CANISCO RESOURCES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 54-0952207
(State of Incorporation) (IRS Employer Identification No.)
300 Delaware Ave. Suite 714, Wilmington, DE 19801
(Address of Principal Executive Offices) (Zip Code)
(302) 777-5050
(Registrant's Telephone Number, Including Area Code)
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, par value $.0025 per share 2,169,190 shares
outstanding as of September 30, 1996.
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
PART I ITEM 1
FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets as of
September 30, 1996 and March 31, 1996
Unaudited Consolidated Statements of Operations for
the Six Month Periods Ended September 30, 1996 and 1995
Unaudited Consolidated Statements of Operations for
the Three Month Periods Ended September 30, 1996 and 1995
Unaudited Consolidated Statements of Cash Flows for
the Six Month Periods Ended September 30, 1996 and 1995
PART I ITEM 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II ITEM 6
Exhibits and Reports on Form 8-K
PART 1 ITEM 1 FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Balance Sheets
Assets
(Unaudited)
September 30, 1996 March 31, 1996
<S> <C> <C>
Current assets
Cash $ 379,441 $ 550,432
Accounts receivable, net
Billed 12,461,132 10,567,409
Unbilled 920,203 1,159,966
Other 875,210 378,436
Total accounts receivable 14,256,545 12,105,811
Inventory 304,488 1,177,691
Deferred income tax benefit 1,238,843 2,005,000
Other prepaid expenses
and current assets 1,099,556 1,540,655
Costs and estimated
earnings in excess
of billings on
uncompleted contracts 1,176,476 1,837,958
Total current assets 18,455,349 19,217,547
Property and equipment:
Land 954,100 964,100
Buildings and improvements 1,085,812 1,422,687
Machinery and equipment 2,335,074 7,573,640
Furniture and fixtures 367,233 1,213,809
Vehicles 433,058 707,995
5,175,277 11,882,231
Less accumulated depreciation 1,373,787 6,277,851
3,801,490 5,604,380
Deferred income taxes 1,007,000 1,007,000
Other assets 563,864 272,370
Total assets $23,827,703 $26,101,297
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Balance Sheets
Liabilities and Shareholders' Equity
(Unaudited)
<CAPTION>
September 30, 1996 March 31, 1996
<S> <C> <C>
Liabilities not subject
to compromise:
Current liabilities:
Notes payable $ 0 $1,190,007
Note payable to bank 0 3,683,354
Current portion of
long-term debt 780,000 2,062,524
Accounts payable 2,832,703 1,857,874
Other accrued expenses 4,430,550 5,589,079
Billings in excess of
costs and estimated
earnings on
uncompleted contracts 1,138,677 784,278
Total current liabilities 9,181,930 15,167,116
Liabilities subject to
compromise under
reorganization proceedings 2,876,543 5,262,285
Long-term debt, less
current portion 2,925,000 3,524,000
Note payable to Bank
under revolving credit line 6,174,164 0
Total liabilities 21,157,637 23,953,401
Shareholders' equity:
Common stock, $.0025 par
value, authorized
10,000,000 shares;
issued 2,476,242 shares,
outstanding 2,169,190 shares 6,190 6,190
Additional paid-in-capital 3,472,506 3,472,506
Retained earnings 3,821,507 3,299,337
Treasury stock, at cost: (4,630,137) (4,630,137)
Total shareholders' equity 2,670,066 2,147,896
Total liabilities and
shareholders' equity $23,827,703 $26,101,297
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc).
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Six Months Ended September 30,
1996 1995
<S> <C> <C>
Revenues from services $26,768,832 $45,998,166
Cost of services 21,610,702 38,951,966
Gross margin 5,158,130 7,046,200
General and administrative
expenses 3,921,941 4,758,303
Income from continuing operations 1,236,189 2,287,897
Interest expense (417,966) (795,900)
Other income, net 1,115,836 119,751
Total other income
(expense) net 697,870 (676,149)
Income before
reorganization costs
and income taxes 1,934,059 1,611,748
Reorganization costs (993,107) (185,019)
Income from
continuing operations
before income taxes 940,952 1,426,729
Income tax expense 376,381 748,831
Income from
continuing operations 564,571 677,898
Loss from operations of
discontinued subsidiary (42,401) (742,681)
Net earnings (loss) 522,170 (64,783)
Earnings per share
(Based upon 2,169,190
and 2,169,190
weighted average common
and common equivalent
shares, respectively) 0.24 (0.03)
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended September 30,
1996 1995
<S> <C> <C>
Revenues from services $14,505,968 $23,154,693
Cost of services 11,600,563 19,551,082
Gross margin 2,905,405 3,603,611
General and administrative
expenses 2,009,930 2,197,855
Income from continuing opertions 895,475 1,405,756
Interest expense (183,920) (362,174)
Other income, net 10,218 70,469
Total other income
(expense) net (173,702) (291,705)
Income before reorganization
costs and income taxes 721,773 1,114,051
Reorganization costs 0 (185,019)
Income from continuing operations
before income taxes 721,773 929,032
Income tax expense 288,708 473,440
Income from continuing operations 433,065 455,592
Loss from operations of
discontinued subsidiary (29,228) (622,263)
Net earnings (loss) 403,837 (166,671)
Earnings per share
(Based upon 2,169,190 and
2,169,190 weighted average
common and common equivalent
shares, respectively) 0.19 (0.08)
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Service, Inc.)
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Six Months Ended September 30,
1996 1995
<S> <C> <C>
Cash flows from operating
activities:
Net earnings (loss) $522,170 $(64,783)
Adjustments to reconcile net
earnings (loss) to net
cash (used in)
provided by operating
activities:
Depreciation and amortization 303,167 675,960
Deferred income taxes 766,157 659,129
Change in assets and liabilities
net of effects from purchases
and sales of subsidiaries:
Increase in accounts receivable (2,150,734) (4,064,214)
Decrease (increase) in inventory 40,309 (6,475)
Decrease (increase) in
costs and estimated
earnings in excess of
billings on
uncompleted contracts 661,482 (1,270,800)
Decrease in other assets 115,083 283,027
Increase in
accounts payable 216,544 7,339,459
Decrease in
accrued expenses (1,417,582) (1,353,271)
Increase (decrease) in
billings in excess of costs
and estimated earnings on
uncompleted contracts 354,399 (77,499)
Net cash (used in) provided by
operating activities (589,005) 2,120,533
Cash flows from
investing activities:
Proceeds from sale of
Henze subsidiary 1,200,000 0
Net purchase of property
and equipment (18,640) (766,196)
Net cash provided by
(used in)
investing activities 1,181,360 (766,196)
Cash flows from
financing activities:
Proceeds from notes payable 1,118,178 809,694
Proceeds from Long-term debt 3,900,000 0
Principal payments on
long-term debt (5,781,524) (678,566)
Net cash (used in)
provided by
financing activities (763,346) 131,128
Net (decrease) increase
in cash (170,991) 1,485,465
Cash at beginning of period 550,432 363,802
Cash at end of period $379,441 $1,849,267
</TABLE>
PART 1, ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY
The Company's ability to generate cash adequate to meet its needs
depends primarily upon payments for its services and periodic
bank borrowings. These sources of liquidity are reduced by the
payment of direct costs, taxes, purchase of property and
equipment and periodic repayment of the Company's revolving line
of credit and term debt.
During the first quarter the Company operated utilizing its own cash
from operations under an agreed order with its lenders. The Company
was not required to make principal payments on its outstanding debt.
At July 1, 1996, the Company completed the refinancing of its short term
and long term debt and entered into a multi-year agreement for an
$11,000,000 revolving credit line and $3,900,000 in long term debt
with a new lender, BNY Financial Corporation.
At September 30, 1996, the Company had borrowed approximately $6,300,000
on its revolving credit line of $11,000,000 and had an outstanding principal
balance of $3,705,000 on its long term debt obligation.
At September 30, 1996, the Company had working capital of approximately
$9,400,000 compared to working capital of $4,050,000 at March 31, 1996.
The improvement in working capital was due primarily to the refinancing
of the Company's short-term debt subsequent to the fiscal year ended March
31, 1996.
The Company anticipates that current working capital and available bank credit
will be sufficient to meet cash needs for the coming year.
The Company is in compliance with debt covenants under the new agreement.
RESULTS OF OPERATIONS
During Fiscal Year 1995, the Company determined that the valve repair
business as then currently conducted by its Henze subsidiary, did
not fit the Company's future strategy. Steps were taken to
divest of this activity and it is identified in the financial
statements as a discontinued operation. As a result, the line
items on the Company's Consolidated Statement of Operations for
the three months ended September 30, 1996 and 1995, from "Revenues
from services" through "Income from continuing operations"
(inclusive) are presented absent the effects of Henze's
operations (which are identified as discontinued operations and
presented as a separate line item on a net basis). Results from
continuing and discontinued operations are then combined to
produce net earnings (loss). Results of operations for the three months
ended September 30, 1995 are restated accordingly. Management's
discussion and analysis focuses on the results and comparison of
continuing operations.
THREE MONTHS ENDED SEPTEMBER 30, 1996
COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 1995
Revenues for the period were Fourteen Million Five Hundred Six Thousand
($14,506,000) compared to Twenty Three Million One Hundred Fifty
Five Thousand ($23,155,000) in the prior year. The
decrease in revenues is primarily attributable to the sale
of the staff augmentation business of the NSS Numanco subsidiary during 1996.
The power generation market accounted for twenty-five percent
(25%) of total revenues compared to forty-two percent (42%) of
total revenues for the same period last year.
The petro-chemical business accounted for twenty-two percent
(22%) of 1997 second quarter revenues, compared to twenty
percent (20%) in the same period for the quarter ended September 30,
1995. The pulp and paper market accounted for twenty-three percent
(23%) of second quarter 1997 revenues compared to nineteen percent
(19%) for 1996. The revenue contribution of all other businesses
collectively was thirty percent (30%) compared to nineteen percent (19%)
for the same period last year. The balancing of the Company's market
mix is primarily driven by its restructuring plan.
The gross margin for the period was Two Million Nine Hundred Five Thousand
($2,905,000) a reduction from the Three Million Six Hundred Four Thousand
($3,604,000) for the same period last year. The decrease is attributable
to the sale of Numanco. As a percent of revenue, the gross margin for the
current period increased to twenty percent (20%) compared to
sixteen percent (16%) during the period ended September 30, 1995.
The improvement is driven by the more profitable business services
of the restructured Company. The power market margin contribution was
thirty-five percent (35%) versus thirty-seven percent (37%) for the same
period last year. The margin contribution for the petro-chemical
business dropped to fourteen percent (14%) from thirty percent
(30%) a year ago. This decline was attributable to competitive
factors in the marketplace. The pulp and paper industry
accounted for twenty-eight percent (28%) of gross margin, up from
twenty-three percent (23%) during the same period last year. All other
markets contributed twenty-three percent (23%) of gross margin compared
to ten percent (10%) in the comparable period a year ago.
General and administrative expenses for the quarter were Two Million
Ten Thousand ($2,010,000) compared to Two Million One Hundred Ninety-Eight
Thousand ($2,198,000) the same period last year. This decrease is mainly
attributable to the divestiture of the NSS Numanco operations. As
a percentage of revenue General & Administrative expenses
increased to fourteen percent (14%) from ten percent (10%)
the prior year which was expected under the restructuring plan.
Income from continuing operations was Eight Hundred Ninety-Five Thousand
($895,000) compared to One Million Four Hundred Six Thousand ($1,406,000)
for the same period last year. The decrease is attributable to
the divestiture of the NSS Numanco staff augmentation business
offset somewhat by higher margins of the remaining business.
Interest expense declined approximately One Hundred Seventy-Eight Thousand
($178,000) or forty-nine percent (49%) to One Hundred Eighty-Four Thousand
($184,000) from the same period a year ago. This decrease was due to
debt reduction and decreased interest rates associated with the company's
new credit facility. Other income and expenses net to Ten Thousand Dollars
($10,000) from Seventy Thousand ($70,000) a year ago. There were no
Reorganization expenses accrued in the period.
Income taxes of Two Hundred Eighty-Nine Thousand ($289,000) were accrued
for the period compared to Four Hundred Seventy-Three Thousand
($473,000) for the same period a year ago.
The net income from continuing operations was approximately Four Hundred
Thirty-Three Thousand ($433,000) or $.19/share compared to Four Hundred
Fifty Six Thousand ($456,000) or $.21/share for the same period last year.
Losses attributable to discontinued operations were Twenty-Nine Thousand
($29,000) for the quarter compared to Six Hundred Twenty-Two Thousand
($622,000) for the same period a year ago. The decrease was due to the
sale of the Henze subsidiary. Combining continuing and discontinued
operations, the Company posted an aggregate net income of
Four Hundred Four Thousand ($404,000) or $.19/share compared to a loss of
One Hundred Sixty-Seven Thousand ($167,000) or $.08/share loss for same
period in the prior year.
SIX MONTHS ENDED SEPTEMBER 30, 1996
COMPARED TO THE SIX MONTHS ENDED SEPTEMBER 30, 1995
Revenues for the period were Twenty-Six Million Seven Hundred Sixty-Nine
Thousand ($26,769,000) compared to Forty-Five Million Nine Hundred Ninety-
Eight Thousand ($45,998,000) for the prior year. The decrease in revenues
is primarily attributable to the sale of the staff augmentation business
of the NSS Numanco subsidiary and slowing of the growth of continuing
operations due to the bankruptcy filing. The power generation market
accounted for thirty percent (30%) of total revenues compared to forty-nine
percent (49%) of total revenues for the same period last year. The petro-
chemical business accounted for twenty-four percent (24%) of revenues compared
to seventeen percent (17%) in the same period for the quarter ended September
1995. The pulp and paper market accounted for twenty-three percent (23%)
of revenues compared to seventeen percent (17%) for the same period last
year on the strength of several large turn-key projects. The revenue
contribution of all other businesses collectively was twenty-three
percent (23%) compared to seventeen (17%) for the same period last year.
The balancing of the Company's market mix is primarily driven by its
restructuring plan.
The gross margin for the period decreased One Million Eight Hundred Eighty-
Eight Thousand ($1,888,000) to Five Million One Hundred Eighty-Eight Thousand
($5,188,000) when compared to the same period a year ago. This decrease
is attributable to lower revenues offset somewhat by higher margins.
As a percent of revenue, the gross margin for the current period increased
to nineteen percent (19%) compared to fifteen percent (15%) during the six
months ended September 30, 1995. The improvement is driven by the more
profitable business services of the restructured Company. The power market
margin contribution was thirty-eight (38%) versus forty-eight percent (48%)
for same period last year during which the divested operations of NSS Numanco
contributed significantly. The margin contribuion of the petro-chemical
business dropped to fourteen percent (14%) from twenty-five (25%) a year
ago. This decline was attributable to competitive factors in the
marketplace. The pulp and paper industry accounted for twenty-nine percent
(29%) of gross margin, up from nineteen-percent (19%) during the same
period last year. This improvement was attributable to several large
contract services projects completed in the first quarter. All other markets
contributed nineteen percent (19%) of gross margin compared to eight
percent (8%) in the comparable period.
General and administrative expenses for the first six months decreased Eight
Hundred Thirty-Six Thousand ($836,000) to Three Million Nine Hundred
Twenty-Two Thousand ($3,922,000) compared to the same period last year. This
decrease is mainly attributable to the divestiture of the NSS Numanco
operations. As a percentage of revenue General & Administrative expenses
increased to fifteen percent (15%) from ten percent (10%) which
was expected under the restructuring plan.
Income from continuing operations was One Million Two Hundred Thirty-Six
Thousand ($1,236,000) compared to Two Million Two Hundred Eighty-Eight
Thousand ($2,288,000) for the same period last year.
Interest expense declined approximately Three Hundred Seventy-Eight
Thousand ($378,000) or forty-seven percent (47%) to Four Hundred Eighteen
Thousand ($418,000) compared to same period a year ago. This decrease was
due to debt reduction and lower interest rates associated with the new credit
facility. Other income and expenses net to One Million One Hundred
Sixteen Thouand ($1,116,000) from One Hundred Twenty Thousand ($120,000)
a year ago. This income is primarily attributable to the settlement
of the Westinghouse litigation and a gain on discounting the liabilities
subject to compromise. Reorganization expenses accrued in the period
amounted to Nine Hundred Ninety-Three Thousand ($993,000) compared to One
Hundred Eighty-Five Thousand ($185,000) a year ago. These expenses were
primarily professional fees incurred in the bankruptcy.
Income taxes of Three Hundred Seventy-Six Thousand ($376,000) were accrued
for the period compared to Seven Hundred Forty-Nine Thousand ($749,000)
for the same period a year ago.
The net income from continuing operations for the first six months of fiscal
year 1997 was approximately Five Hundred Sixty-Five Thousand ($565,000) or
$.26/share compared to $.31/share or Six Hundred Seventy-Eight Thousand
($678,000) for the same period last year. Losses attributable to
discontinued operations were Forty-Two Thousand ($42,000) for the first
six month period of the current year compared to Seven Hundred Forty-Three
Thousand ($743,000) for the same period a year ago. The decrease was due
to the sale of the Henze subsidiary. Combining continuing and discontinued
operations, the Company posted an aggregate net income of
Five Hundred Twenty-Two Thousand ($522,000) or $.24/share compared to a loss
of Sixty-Five Thousand ($65,000) or ($.03)/share in the same period a year
ago.
CURRENT TRENDS
On July 1, 1996 the Company's Plan of Reorganization became Effective.
The corporate consolidations and divestitures anticipated by the
Plan have been accomplished and the Company has moved into a
smaller corporate office facility.
Operationally, management believes the after-effects of the bankruptcy
have negatively impacted the growth rate of the Company's continuing operations
for the near term. However, our core business is strong and continues
to perform.
Earnings for the last half of the year are expected to be lower due to the
seasonality of the business.
PART II ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule for the Six Month Period
Ended September 30, 1996.
SIGNATURES
Date: November 1, 1996
CANISCO RESOURCES, INC.
/s/ Ralph A. Trallo
President and CEO
/s/ Michael J. Olson
Chief Financial Officer
