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 June 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 June 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
June 30, 1996 and March 31, 1996
Unaudited Consolidated Statements of Operations for
the Three Month Periods Ended June 30, 1996 and 1995
Unaudited Consolidated Statements of Cash Flows for
the Three Month Periods Ended June 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
<TABLE>
PART 1 ITEM 1 FINANCIAL STATEMENTS
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Balance Sheets
Assets
(Unaudited)
<CAPTION>
June 30, 1996 March 31, 1996
<S> <C> <C>
Current assets
Cash $200,397 $ 550,432
Accounts receivable, net
Billed 11,175,679 10,567,409
Unbilled 844,199 1,159,966
Other 537,667 378,436
Total accounts receivable 12,557,545 12,105,811
Inventory 336,204 1,177,691
Deferred income tax benefit 2,005,000 2,005,000
Other prepaid expenses
and current assets 1,494,464 1,540,655
Costs and estimated
earnings in excess
of billings on
uncompleted contracts 1,112,647 1,837,958
Total current assets 17,706,257 19,217,547
Property and equipment:
Land 954,100 964,100
Buildings and improvements 1,085,812 1,422,687
Machinery and equipment 2,325,417 7,573,640
Furniture and fixtures 362,750 1,213,809
Vehicles 428,558 707,995
5,156,637 11,882,231
Less accumulated depreciation 1,269,487 6,277,851
3,887,150 5,604,380
Deferred income taxes 1,007,000 1,007,000
Other assets 200,000 272,370
Total assets $22,800,407 $26,101,297
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Balance Sheets
Liabilities and Shareholders' Equity
(Unaudited)
<CAPTION>
June 30, 1996 March 31, 1996
<S> <C> <C>
Liabilities not subject
to compromise:
Current liabilities:
Notes payable $ 830,049 $1,190,007
Note payable to bank 3,867,932 3,683,354
Current portion of
long-term debt 1,320,000 2,062,524
Accounts payable 2,061,247 1,857,874
Other accrued expenses 5,204,367 5,589,079
Billings in excess of
costs and estimated
earnings on
uncompleted contracts 1,053,964 784,278
Total current liabilities 14,337,559 15,167,116
Liabilities subject to
compromise under
reorganization proceedings 2,347,074 5,262,285
Long-term debt, less
current portion 3,849,543 3,524,000
Total liabilities 20,534,176 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 3,417,672 3,299,337
Treasury stock, at cost: (4,630,137) (4,630,137)
Total shareholders' equity 2,266,231 2,147,896
Total liabilities and
shareholders' equity $22,800,407 $26,101,297
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc).
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended June 30,
1996 1995
<S> <C> <C>
Revenues from services $12,262,864 $22,843,473
Cost of services 10,010,139 19,400,884
Gross margin 2,252,725 3,442,589
General and administrative
expenses 1,912,011 2,560,448
Income from continuing operations 340,714 882,141
Interest expense (234,046) (433,726)
Other income, net 1,105,619 49,282
Total other income, net 871,573 (384,444)
Income before
reorganization costs
and income taxes 1,212,287 497,697
Reorganization costs (993,107) 0
Income from
continuing operations
before income taxes 219,180 497,697
Income tax expense (87,672) (275,391)
Income from
continuing operations 131,508 222,306
Loss from operations of
discontinued subsidiary (13,173) (120,418)
Net earnings (loss) 118,335 101,888
Earnings per share
(Based upon 2,169,190
and 2,169,190
weighted average common
and common equivalent
shares, respectively) $.05 .05
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Service, Inc.)
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Three Months Ended June 30,
1996 1995
<S> <C> <C>
Cash flows from operating
activities:
Net earnings $118,335 $101,888
Adjustments to reconcile net
earnings to net cash
provided by operating
activities:
Depreciation and amortization 198,867 373,150
Deferred income taxes 118,800
Change in assets and liabilities
net of effects from purchases
and sales of subsidiaries:
Increase (decrease) in
accounts receivable (451,734) 598,981
Increase (decrease) in
inventory 8,593 (62,224)
Increase (decrease)in
costs and estimated
earnings in excess of
billings on
uncompleted contracts 725,311 (313,256)
Decrease in other assets 84,039 372,584
Increase in
accounts payable 203,373 1,517,633
Decrease in
accrued expenses (611,675) (558,546)
Increase in
billings in excess of costs
and estimated earnings on
uncompleted contracts 269,686 236,483
Net cash provided by
operating activities (544,795) 2,385,493
Cash flows from
investing activities:
Proceeds from sale of
Henze subsidiary 1,200,000
Net purchase of property
and equipment (320,907)
Net cash used by
investing activities 1,200,000 (320,907)
Cash flows from
financing activities:
Net payments on notes
payable (175,380) (1,179,827)
Principal payments on
long-term debt (1,919,450) (352,057)
Net cash used by
financing activities (2,094,830) (1,531,884)
Net increase (decrease)
in cash (350,035) 532,702
Cash at beginning of period 550,432 363,802
Cash at end of period $200,397 896,504
</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.
As a result of losses recognized during fiscal year 1995, the
Company, as reported, was not in compliance with certain debt
covenants under its lending arrangement. At the end of August
1995, the participating lender and, in turn, the agent lender,
under the Company's financing agreement refused to continue
funding the Company's working capital line. This
resulted in a cessation of cash flow necessary to fund
operations. In the first week of September 1995, the Company and
its subsidiaries filed voluntary bankruptcy petitions under
Chapter 11 reorganization in the U.S. Bankruptcy Court for the
Middle District of Pennsylvania in Harrisburg which were jointly
administered at Case Number 1-95-1767. This action became
necessary for the Company to gain access to its own cash for
continued operations. Subsequently, the Company
obtained a $3,500,000 debtor-in-possession revolving line of credit
and continued operations as debtor-in-possession.
The Company's debtor-in-possession revolving credit
agreement was paid in full and expired on February 28, 1996,
and on March 1, 1996, the Company entered into a cash collateral
stipulation that allowed the use of the Company's own cash
for continued operations.
At June 30, 1996, the Company had paid down its balance
on its revolving credit line of $18,000,000 to approximately
$3,868,000 and had an outstanding principal balance of $3,667,074
on its long term secured term loan obligation.
The Company was in compliance with the covenants of its
cash collateral order.
At June 30, 1996, the Company had working capital of
approximately $3,400,000 compared to working capital of
$4,050,000 for fiscal year 1996. The decrease in
working capital was due primarily to the increase in
accruals for reorganization expenses offset somewhat by the
increase in accounts receivable.
The use of cash collateral continued until July 1, 1996,
when the Company's financing with a new lender,
BNY Financial Corporation became effective. This refinancing
consists of a five year commitment for an $11,000,000 revolving
credit line and $3,900,000 in long term debt.
The Company anticipates that current working capital
and available bank credit will be sufficient to meet cash
needs for the coming year.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996
COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1995
During 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 June 30, 1996 and 1995, from "Revenues
from services" through "Income (loss) 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. Results of operations for the three months
ended June 30, 1995 are restated accordingly. Management's
discussion and analysis focuses on the results and comparison of
continuing operations.
Revenues for the period were Twelve Million Two Hundred Sixty Five
($12,265,000) compared to Twenty Two Million Eight Hundred Forty
Three Thousand ($22,843,000) in the same prior year. The
decrease in revenues is primarily attributable to the sale
of the staff augmentation business of the NSS Numanco subsidiary.
The power generation market accounted for thirty-five percent
(35%) of total revenues compared to fifty-two percent (52%) of
total revenues for the same period last year.
The petro-chemical business accounted for twenty-seven percent
(27%) of 1997 first quarter revenues, compared to seventeen
percent (17%) in the same period for the quarter ended June 30,
1995. The pulp and paper market accounted for twenty-three percent
(23%) of first quarter 1997 revenues compared to seventeen percent
(17%) for 1996 on the strength of several large turn-key
projects. The revenue contribution of all other businesses
collectively was fifteen percent (15%) compared to fourteen
percent (14%) 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 $1,190,000 to
$2,253,000 from the same period last year attributable to the sale
of Numanco. As a percent of revenue, the gross margin for the
current period increased to eighteen percent (18%) compared to
fifteen percent (15%) during the period ended June 30, 1995.
The improvement is driven by the more profitable business services
of the restructured Company. The power market margin contribution was
forty-three percent (43%) versus sixty percent (60%) for the same
period last year which reflects the sale of the staff augmentation
operations of NSS Numanco which primarily relied on the nuclear power
market. The margin contribution for the petro-
chemical business dropped to thirteen percent (13%) from nineteen
percent (19%) a year ago. This decline was attributable to competitive
factors in the marketplace. The pulp and paper industry
accounted for thirty-one percent (31%) of gross margin, up from
fifteen percent (15%) during the same period last year. This
improvement was attributable to several large contract services projects
completed in the period. All other markets contributed thirteen
percent (13%) of gross margin compared to six percent (6%) in the
comparable period.
General and administrative expenses for the quarter decreased
Six Hundred Forty-Eight Thousand ($648,000) to One Million Nine
Hundred Twelve Thousand ($1,912,000) 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 G&A expenses
increased to sixteen percent (16%) from eleven percent (11%) which
was expected under the restructuring plan.
Income from continuing operations was Three Hundred Forty-One Thousand
($341,000) compared to Eight Hundred Eighty-Two Thousand ($882,000)
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.
Interest expense declined approximately forty-six percent (46%)
to Two Hundred Thirty-Four Thousand ($234,000) from the same period
a year ago. This decrease was due to debt reduction. Other income
and expenses net to One Million One Hundred Six Thousand ($1,106,000)
from Forty-Nine Thousand a year ago. This income is primarily
attributable to the settlement of the Westinghouse litigation and
the gain on discounting the liabilities subject to compromise.
Reorganization expenses accrued in the period amounted to Nine
Hundred Ninety-Three Thousand ($993,000). No reorganization expenses
were accrued during the same period a year ago. These expenses were
primarily professional fees incurred in the bankruptcy.
Income taxes of Eighty-Eight Thousand ($88,000) were accrued
for the period compared to Two Hundred Seventy-Five Thousand
($275,000) for the same period in fiscal year 1996.
The net income from continuing operations for the first quarter
of fiscal year 1997 was approximately One Hundred Thirty-One
Thousand ($131,000) or $.06/share compared to $.10/share for the same
period last year. Losses attributable to discontinued operations
were Thirteen Thousand ($13,000) for the first fiscal
quarter of the current year compared to One Hundred Twenty
Thousand ($120,000) for the same period a year ago. Combining
continuing and discontinued operations, the Company posted an
aggregate net income of One Hundred Eighteen Thousand $118,000
or $.05/share which was equivalent to the per share
earnings for the same period in the prior year.
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 expects to move into a
smaller office facility in September.
Operationally, management believes the after-effects of the bankruptcy
have impacted the growth rate of the Company's continuing operations
for the near term. However, our core business is strong and continues
to perform.
PART II ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule for the Three Month Period
Ended June 30, 1996.
SIGNATURES
Date: August 12, 1996 CANISCO RESOURCES, INC.
/s/ Ralph A. Trallo
President and CEO
/s/ Michael J. Olson
Chief Financial Officer
