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, 1997
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 Avenue, Suite 714, Wilmington, Delaware 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 2,170,540 shares outstanding as of
June 30, 1997.
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
PART I ITEM 1
FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 1997 and March 31, 1997
Consolidated Statements of Operations for the Three Month Periods Ended
June 30, 1997 and 1996
Consolidated Statements of Cash Flows for the Three Month Periods Ended
June 30, 1997 and 1996
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
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Balance Sheets
Assets
Assets June 30, 1997 March 31, 1997
(Unaudited)
Current assets
Cash $378,348 $1,308,225
Accounts receivable, net
Billed 9,466,203 8,637,956
Unbilled 433,054 222,193
Other 179,665 209,885
Total accounts receivable 10,078,922 9,070,034
Inventory 383,102 407,166
Deferred income taxes 391,000 391,000
Other prepaid expenses and
current assets 748,389 1,590,187
Costs and estimated earnings
in excess of billings on
uncompleted contracts 1,128,112 924,075
Total current assets 13,107,873 13,690,687
Property and equipment
Land 954,100 954,100
Buildings and improvements 1,085,812 1,085,812
Machinery and equipment 2,396,943 2,378,759
Furniture and fixtures 380,882 374,803
Vehicles 419,921 419,921
Total property and equipment 5,237,658 5,213,395
Less accumulated depreciation 1,668,720 1,543,280
Property and equipment, net 3,568,938 3,670,115
Intangible pension asset 1,009,474 1,009,474
Deferred income taxes 2,297,000 2,297,000
Other assets 603,278 633,675
Total assets $20,586,563 $21,300,951
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Balance Sheets
Liabilities and Shareholders' Equity
June 30, March 31,
Liabilities and Shareholders Equity 1997 1997
(unaudited)
Current liabilities:
Notes payable $ 0 $ 756,969
Current portion of long-term debt 2,053,314 2,053,314
Accounts payable 2,134,316 2,092,506
Other accrued expenses 2,488,159 3,002,626
Billings in excess of costs
and estimated earnings on
uncompleted contracts 580,049 516,617
Total current liabilities 7,255,838 8,422,032
Long-term debt, less current portion 3,286,714 3,808,314
Accrued pension cost 1,052,197 1,052,197
Notes payable to Bank 6,224,879 5,412,020
Total liabilities 17,819,628 18,694,563
Shareholders' equity:
Common stock, $.0025 par
value, authorized
10,000,000 shares;
issued 2,477,592 shares,
outstanding 2,170,540 shares 6,194 6,194
Additional paid-in-capital 3,478,576 3,478,576
Retained earnings 3,912,302 3,751,755
Treasury stock, at cost (4,630,137) (4,630,137)
Total shareholders' equity 2,766,935 2,606,388
Total liabilities and
shareholders' equity $20,586,563 $21,300,951
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc).
Consolidated Statements of Operations
(Unaudited)
Three Months Ended June 30,
1997 1996
Revenues from services $ 12,807,833 $12,262,864
Cost of services 10,328,040 10,010,139
Gross margin 2,479,793 2,252,725
General and administrative expenses 1,950,295 1,912,011
Income from continuing operations 529,498 340,714
Interest expense (261,346) (234,046)
Other (expense) income, net (573) 1,105,619
Income before reorganization costs
and income taxes 267,579 1,212,287
Reorganization costs - (993,107)
Income from continuing operations
before income taxes 267,579 219,180
Income tax expense 107,032 87,672
Income from continuing operations 160,547 131,508
Loss from operations of
discontinued subsidiary - (13,173)
Net earnings (loss) 160,547 118,335
Earnings per share
(Based upon 2,170,540
and 2,169,190 weighted average common
and common share equivalents, respectively) $0.07 $0.05
CANISCO RESOURCES, INC.
(formerly Nuclear Support Service, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended June 30,
1997 1996
Cash flows from operating activities:
Net earnings (loss) $160,547 $118,335
Adjustments to reconcile net
earnings to net cash provided
by (used in) operating activities:
Depreciation and amortization 125,440 198,867
Deferred income taxes - -
Change in assets and liabilities
net of effects from purchases
and sales of subsidiaries:
(Increase) in accounts receivable (1,008,888) (451,734)
Decrease in inventory 24,064 8,593
(Increase) Decrease in costs and
estimated earnings
in excess of billings
on uncompleted contracts (204,037) 725,311
Decrease in other assets 872,195 84,039
Increase in accounts payable 41,810 203,373
Decrease in accrued expenses (514,467) (611,675)
Increase in billings in
excess of costs
and estimated earnings on
uncompleted contracts 63,432 269,686
Net cash provided (used) by
operating activities (439,904) 544,795
Cash flows from investing activities:
Proceeds from sale of Henze subsidiary - 1,200,000
Purchase of property and equipment (24,263) -
Net cash provided in (used in)
by investing activities (24,263) 1,200,000
Cash flows from financing activities:
Net borrowings (payments) on notes payable 55,890 (175,380)
Principal payments on long-term debt (521,600) (1,919,450)
Net cash provided used in
financing activities (465,710) (2,094,830)
Net Decrease in cash (929,877) (350,035)
Cash at beginning of period 1,308,225 550,432
Cash at end of period $378,348 $200,397
PART 1, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997
COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1996
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, 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.
Management's discussion and analysis focuses on the results and comparison of
operations absent the effect of Henze. The Henze business was sold in June,
1996.
Revenues for the period were Twelve Million Eight Hundred and Eight Thousand
($12,808,000) compared to Twelve Million Two Hundred Sixty Three Thousand
($12,263,000) in the same prior year, an increase of 4.4%.
For the first quarter of fiscal year 1998, the power generation market
accounted for thirty-eight percent (38%) of total revenues compared to
thirty-five percent (35%) of total revenues for the same period last year.
The petro-chemical business accounted for twenty-one percent (21%) of 1998
first quarter revenues, compared to twenty-seven percent (27%) in the same
period for the quarter ended June 30, 1996. The pulp and paper market
accounted for twenty-five percent (25%) of first fiscal quarter. 1998
revenues compared to twenty-three percent (23%) for the same period a year ago
on the strength of several large turn-key projects. The revenue contribution
of all other businesses collectively was sixteen percent (16%) compared to
fifteen percent (15%) for the same period last year. Overall the market mix
is within the range of that expected.
The gross margin for the first quarter of fiscal year 1998 increased $225,000
to $2,480,000 from the same period last year. As a percent of revenue, the
gross margin for the current period increased to nineteen percent (19%)
compared to eighteen percent (18%) during the period ended June 30, 1996. The
power generation market margin contribution was forty-four percent (44%)
versus forty-three (43%) for the same period last year. The margin
contribution of the petro-chemical business increased to twenty percent (20%)
from thirteen percent (13%) a year ago on the strength of several capital
projects performed in the period. The pulp and paper industry accounted for
twenty-six percent (26%) of gross margin, down from thirty-one percent (31%)
during the same period last year. The current level of margin contribution is
consistent with that expected in the market place. The higher contribution in
the same period a year ago was due to several large capital projects performed
in that period. All other markets contributed ten percent (10%) of gross
margin compared to thirteen percent (13%) in the comparable period a year ago.
General and administrative expenses for the quarter were One Million Nine
Hundred Fifty Thousand ($1,950,000) compared to One Million Nine Hundred
Twelve Thousand ($1,913,000) for the same period last year. As a percentage
of revenue G&A expenses decreased to fifteen percent (15%) from sixteen
percent (16%) a year ago.
Income from continuing operations was Five Hundred Twenty-Nine Thousand
($529,000) compared to Three Hundred Forty One Thousand, ($341,000) for the
same period last year. The increase was attributable to higher revenues and
gross margin achieved in the period.
For the first quarter fiscal year 1998, interest expense increased
approximately Twenty-Seven Thousand ($27,000) to Two Hundred Sixty-One
Thousand ($261,000) compared to the same period a year ago. This increase was
due to interest expense to unsecured creditors.
The Company had other expenses, net of income, of One Thousand ($1,000)
compared to other income net of expense and reorganization expenses of One
Hundred Thirteen Thousand ($113,000) for the same period a year ago. Last
year significant items were reorganization expenses, gain on the discount of
compromised liabilities and settlement of the ligation against Westinghouse.
Income taxes of One Hundred Seven Thousand, ($107,000) were accrued for the
period compared to Eighty-Eight Thousand ($88,000) for the same period in
fiscal year 1997.
The net income for the first quarter of fiscal year 1998 was approximately One
Hundred Sixty-One Thousand, ($161,000) or $0.07/share compared to
approximately One Hundred Thirty-One Thousand ($131,000) or $0.06/share for
continuing operations and One Hundred Eighteen Thousand ($118,000) or
$0.05/share aggregate net income including discontinued operations in the same
period a year ago.
Currently, the Company foresees no trends which will adversely affect its
progress going forward.
LIQUIDITY AND CAPITAL RESOURCES
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 lines of credit and long term debt.
The Company was operating as a Debtor-In-Possession under the terms of Chapter
11 Reorganization of the United States Bankruptcy Code, Case Number 1-95-01767
prior to its emergence from bankruptcy on July 1, 1996. As of March 1, 1996
the company entered into a cash collateral stipulation allowing it to use its
own cash for continued operations.
The use of cash collateral continued through July 1, 1996, when the Company
secured financing with a new lender, BNY Financial Corporation. This
refinancing consists of a five year commitment for an $11,000,000 revolving
credit line and $3,900,000 in long term debt.
At June 30, 1997, the Company had borrowed approximately $6,200,000 on its
revolving credit line of $11,000,000 and had an outstanding principal balance
of $3,120,000 on its long term secured loan obligation. The Company is in
compliance with the debt covenants as amended from time to time.
At June 30, 1997, the Company had working capital of approximately $5,852,000
compared to working capital of $5,269,000 at March 31, 1997. The increase in
working capital was due primarily to the increase in accounts receivable.
The Company anticipates that working capital and available bank credit will be
sufficient to meet cash needs for the coming year.
CAUTIONARY STATEMENT
Statements in this Report on Form 10Q which express the "belief",
"anticipation" or "expectation", as well as other statements which are not
historical fact, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Action of 1995 and involve risks and
uncertainties that could cause actual results to differ materially from those
projected.
PART II ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule for the Three Month Period
Ended June 30, 1997.
SIGNATURES
Date: August 13, 1997 CANISCO RESOURCES, INC.
/s/ Ralph A. Trallo
Ralph A. Trallo
President and CEO
/s/ Michael J. Olson
Michael J. Olson
Chief Financial Officer
<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CANISCO RESOURCES, INC.'S FORM 10Q FOR THE PERIOD ENDED JUNE 30, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<ALLOWANCES> 195,369
<INVENTORY> 383,102
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<SALES> 12,807,833
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