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 December 31, 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 2,170,540 shares
outstanding as of December 31, 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
December 31, 1996 and March 31, 1996
Unaudited Consolidated Statements of Operations for
the Three Month Periods Ended December 31, 1996 and 1995
Unaudited Consolidated Statement of Operations for
the Nine Month Periods Ended December 31, 1996 and 1995
Unaudited Consolidated Statements of Cash Flows for
the Nine Month Periods Ended December 31, 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>
December 31, 1996 March 31, 1996
<S> <C> <C>
Current assets
Cash $ 677,260 $ 550,432
Accounts receivable, net
Billed 10,408,816 10,567,409
Unbilled 948,534 1,159,966
Other 227,501 378,436
Total accounts receivable 11,584,851 12,105,811
Inventory 419,880 1,177,691
Deferred income tax benefit 1,238,843 2,005,000
Other prepaid expenses
and current assets 982,825 1,540,655
Costs and estimated
earnings in excess
of billings on
uncompleted contracts 723,589 1,837,958
Total current assets 15,627,248 19,217,547
Property and equipment:
Land 954,100 964,100
Buildings and improvements 1,085,812 1,422,687
Machinery and equipment 2,347,479 7,573,640
Furniture and fixtures 461,370 1,213,809
Vehicles 374,801 707,995
5,223,562 11,882,231
Less accumulated depreciation 1,497,367 6,277,851
3,726,195 5,604,380
Deferred income taxes 1,007,000 1,007,000
Other assets 540,963 272,370
Total assets $20,901,406 $26,101,297
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Balance Sheets
Liabilities and Shareholders' Equity
(Unaudited)
<CAPTION>
December 31, 1996 March 31, 1996
<S> <C> <C>
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 2,344,788 1,857,874
Other accrued expenses 2,458,205 5,589,079
Billings in excess of
costs and estimated
earnings on
uncompleted contracts 1,163,336 784,278
Total current liabilities 6,746,329 15,167,116
Other liabilities 2,528,618 5,262,285
Long-term debt, less
current portion 2,730,000 3,524,000
Note payable to Bank
under revolving credit line 6,098,766 0
Total liabilities 18,103,713 23,953,401
Shareholders' equity:
Common stock, $.0025 par
value, authorized
10,000,000 shares;
issued 2,477,592 shares,
outstanding 2,170,540 shares;
and issued 2,476,242 shares,
outstanding 2,169,190 shares,
respectively 6,193 6,190
Additional paid-in-capital 3,478,578 3,472,506
Retained earnings 3,943,059 3,299,337
Treasury stock, at cost: (4,630,137) (4,630,137)
Total shareholders' equity 2,797,693 2,147,896
Total liabilities and
shareholders' equity $20,901,406 $26,101,297
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended December, 31
1996 1995
<S> <C> <C>
Revenues from services $13,249,980 $21,056,009
Cost of services 10,680,547 17,891,289
Gross margin 2,569,433 3,164,720
General and administrative
expenses 1,951,001 2,201,624
Income from continuing operations 618,432 963,096
Interest Expense (372,952) (409,593)
Other income (expense), net (31,990) 37,675
Total other income
(expense), net (404,942) (371,918)
Income before reorganization
costs and income taxes 213,490 591,178
Reorganization costs 0 (67,270)
Income from continuing operations
before income taxes 213,490 523,908
Income tax expense 85,396 209,563
Income from continuing operations 128,094 314,345
Loss from operations of
discontinued subsidiary (6,543) (143,181)
Net earnings 121,551 171,164
Earnings per share
(Based upon 2,170,540 and
2,169,190 weighted average
common and common equivalent
shares, respectively 0.06 0.08
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Nine Months Ended December 31,
1996 1995
<S> <C> <C>
Revenues from services $40,018,812 $67,054,175
Cost of services 32,291,249 56,843,255
Gross margin 7,727,563 10,210,920
General and administrative
expenses 5,872,942 6,959,927
Income from continuing operations 1,854,621 3,250,993
Interest expense (790,918) (1,205,493)
Other income, net 1,083,847 157,426
Total other income (expense),net 292,929 (1,048,067)
Income before
reorganization costs
and income taxes 2,147,550 2,202,926
Reorganization costs (993,107) (252,289)
Income from
continuing operations
before income taxes 1,154,443 1,950,637
Income tax expense 461,777 958,394
Income from
continuing operations 692,666 992,243
Loss from operations of
discontinued subsidiary (48,944) (885,862)
Net earnings 643,722 106,381
Earnings per share
(Based upon 2,170,540
and 2,169,190
weighted average common
and common equivalent
shares, respectively) 0.30 0.05
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Service, Inc.)
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine Months Ended December 31,
1996 1995
<S> <C> <C>
Cash flows from operating
activities:
Net earnings $ 643,722 $ 106,381
Adjustments to reconcile net
earnings to net cash
provided by operating
activities:
Depreciation and amortization 426,747 1,005,319
Deferred income taxes 766,157 659,129
Change in assets and liabilities
net of effects from purchases
and sales of subsidiaries:
Decrease (increase) in
accounts receivable 520,960 (1,392,189)
Decrease (increase) in
inventory (75,083) 24,065
Decrease in costs and
estimated earnings in
excess of billings on
uncompleted contracts 1,114,369 149,768
Decrease in other assets 254,715 758,433
(Decrease) Increase in
accounts payable (3,436,760) 4,175,480
(Decrease) in accrued expenses (1,945,095) (2,457,648)
Increase in billings in
excess of costs
and estimated earnings on
uncompleted contracts 379,058 587,151
Net cash used (provided)
by operating activities (1,351,210) 3,615,889
Cash flows from
investing activities:
Proceeds from sale of
Henze subsidiary 1,200,000 0
Net purchase of property
and equipment (66,925) (767,904)
Net cash provided by
(used in) investing activities 1,133,075 (767,904)
Cash flows from financing activities:
Proceeds from (payments on)
notes payable 2,415,412 (1,599,673)
Proceeds from Long-term debt 3,900,000 0
Principal payments on long-term
debt (5,976,524) (660,000)
Proceeds from exercise of
Stock Options 6,075 0
Net cash provided (used)
by financing activities 344,963 (2,259,673)
Net increase in cash 126,828 588,312
Cash at beginning of period 550,432 363,802
Cash at end of period $677,260 $952,114
</TABLE>
PART 1, ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
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 borrowing. 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.
At December 31, 1996, the Company had borrowed approximately
$6,100,000 on its revolving credit line of $11,000,000 and had an
outstanding principal balance of $3,510,000 on its long term debt
obligation.
At December 31, 1996, the Company has working capital of approximately
$8,900,000 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 its loan 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 nine months ended December 31, 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. Results of operations for the nine months
ended December 31, 1995 are restated accordingly. Management's
discussion and analysis focuses on the results and comparison of
continuing operations.
THREE MONTHS ENDED DECEMBER 31, 1996
COMPARED TO THE THREE MONTHS ENDING DECEMBER 31, 1995
Revenues for the period were Thirteen Million Two Hundred Fifty Thousand
($13,250,000) compared to Twenty One Million Fifty Six Thousand
($21,056,000) 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-eight percent
(28%) of total revenues compared to fifty-two percent (52%) of
total revenues for the same period last year.
The petro-chemical business accounted for sixteen percent
(16%) of 1997 third quarter revenues, compared to seventeen
percent (17%) for the quarter ended December 31, 1995.
The pulp and paper market accounted for thirty-two percent
(32%) of revenues compared to seventeen percent
(17%)in the comparable period a year ago. The increased revenue in the
pulp and paper market sectors was primarily due to several large capital
projects performed in the period which offset reductions experienced in
the maintenance service business in this market sector due to
customer budget restraints. The revenue contribution of all other businesses
collectively was twenty-four percent (24%) 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 was Two Million Five Hundred Sixty Nine
Thousand ($2,569,000) a reduction from the Three Million One Hundred
Sixty Five Thousand ($3,165,000) 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 nineteen percent (19%)
compared to fifteen percent (15%) during the period ended December 31, 1995.
The improvement is driven by the more profitable business services
of the restructured Company. The power market margin contribution was
thirty-eight percent (38%) versus fifty percent (50%) for the same
period last year. The margin contribution for the petro-chemical business
dropped to eight percent (8%) from twenty-three percent (23%) a year ago.
This decline was attributable to competitive factors in the marketplace.
The pulp and paper industry accounted for forty-four percent (44%) of
gross margin, on the results of the capital projects performed
up from twenty percent (20%) during the same period last
year. All other markets contributed ten percent (10%) of gross margin
compared to seven percent (7%) in the comparable period a year ago.
General and administrative expenses for the quarter were One Million
Nine Hundred Fifty One Thousand ($1,951,000) compared to Two Million
Two Hundred Two Thousand ($2,202,000) 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 fifteen percent (15%) from ten percent (10%) the prior year
which was expected under the restructuring plan.
Income from continuing operations was Six Hundred Eighteen Thousand
($618,000) compared to Nine Hundred Sixty Three Thousand ($963,000)
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 business.
Interest expense for the period was Three Hundred Seventy Three Thousand
($373,000) compared to Four Hundred Ten Thousand ($410,000) for the same
period a year ago.
Other expenses, net of miscellaneous income, were Thirty Two Thousand
($32,000) compared to income of Thirty Eight Thousand ($38,000) net of
other expenses for the same period a year ago.
Income taxes of Eighty Five Thousand ($85,000) were accrued in the
period compared to Two Hundred Ten Thousand ($210,000) during the
the same period in 1995.
The net income from continuing operations was approximately One Hundred
Twenty-Eight Thousand ($128,000) or $.06 per share compared to Three Hundred
Fourteen Thousand ($314,000) or $.14 per share for the same period last year.
Losses attributable to discontinued operations were Seven Thousand
($7,000) for the quarter compared to One Hundred Forty Three Thousand
($143,000) for the same period a year ago. Combining continuing and
discontinued operations, the Company posted an aggregate net income of
One Hundred Twenty-One Thousand ($121,000) or $0.06 per share compared to
One Hundred Seventy-One Thousand ($171,000) or $0.08 per share for the same
period in the prior year.
NINE MONTHS ENDED DECEMBER 31, 1996
COMPARED TO THE NINE MONTHS ENDED DECEMBER 31, 1995
Revenues for the period were Forty Million Nineteen Thousand ($40,019,000)
compared to Sixty Seven Million Fifty Four Thousand ($67,054,000) 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 twenty-nine percent (29%)
of total revenues compared to fifty percent (50%) of total revenues
for the same period last year. The petro-chemical business accounted
for twenty-two percent (22%) of revenues compared to seventeen
percent (17%) for the same period last year. The pulp and paper market
accounted for twenty-six percent (26%) 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 sixteen
(16%) 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 Two Million Four Hundred Eighty
Three Thousand ($2,483,000) to Seven Million Seven Hundred Twenty Seven
Thousand ($7,727,000) 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 nine months ended
December 31, 1996 increased to nineteen percent (19%) compared to
fifteen percent (15%) during the nine months ended December 31, 1995.
The improvement is driven by the more profitable business services of
the restructured Company. The power market margin contribution was
thirty-eight percent (38%) versus fifty percent (50%) 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 twelve percent (12%) from twenty-three (23%) a year ago.
This decline was attributable to competitive factors in the marketplace.
The pulp and paper industry accounted for thirty-four percent (34%) of
gross margin, up from twenty percent (20%) during the same period last
year. This improvement was attributable to several large capital projects
completed during the period. All other markets contributed sixteen
percent (16%) of gross margin compared to seven (7%) in the comparable
period a year ago.
General and administrative expenses for the first nine months decreased
One Million, Eighty-Seven Thousand ($1,087,000) to Five Million Eight Hundred
Seventy-Three Thousand ($5,873,000) 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 Eight Hundred Fifty-Five
Thousand ($1,855,000) compared to Three Million Two Hundred Fifty One
Thousand ($3,251,000) for the same period last year.
Interest expense declined approximately Four Hundred Fourteen Thousand
($414,000) or thirty-four percent (34%) to Seven Hundred Ninety-One
Thousand ($791,000) compared to the 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 Eighty-Four
Thousand ($1,084,000) from One Hundred Fifty-Seven Thousand ($157,000)
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 Two
Hundred Fifty-Two Thousand ($252,000) a year ago. These expenses were
primarily professional fees incurred in the bankruptcy.
Income taxes of Four Hundred Sixty-Two Thousand ($462,000) were accrued
for the period compared to Nine Hundred Fifty-Eight Thousand ($958,000)
for the same period a year ago.
The net income from continuing operations for the first nine months of fiscal
year 1997 was approximately Six Hundred Ninety-Three Thousand ($693,000) or
$.32 per share compared to $0.46 per share or Nine Hundred Ninety-Two
Thousand ($992,000) for the same period last year. Losses attributable to
discontinued operations were Forty-Nine Thousand ($49,000) for the first
nine month period of the current year compared to Eight Hundred Eighty-Six
Thousand ($886,000) for the same period a year ago. Combining continuing
and discontiued operations, the Company posted an aggregate net income of
Six Hundred Forty-Four Thousand ($644,000) or $.30 per share compared to
a net income of One Hundred Six Thousand ($106,000) or $.05 per share in the
same period a year ago.
CURRENT TRENDS
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.
Management believes the after effects of bankruptcy have negatively impacted
the growth rate of the company's continuing operations in the near term.
This combined with increased competition in the petro-chemical market will
restrain revenue to the same level as last year for ongoing operations.
The seasonality of the business will have the most severe impact in the
fourth fiscal quarter but for the fiscal year, management does not expect
a significant erosion of profitability.
PART II ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule for the Nine Month Period
Ended December 31, 1996.
SIGNATURES
Date: January 29, 1997
CANISCO RESOURCES, INC.
/s/ Ralph A. Trallo
President and CEO
/s/ Michael J. Olson
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CANISCO
RESOURCES, INC.'S FORM 10Q FOR THE PERIOD ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 667,260
<SECURITIES> 0
<RECEIVABLES> 12,086,741
<ALLOWANCES> 501,890
<INVENTORY> 419,880
<CURRENT-ASSETS> 15,627,248
<PP&E> 5,223,562
<DEPRECIATION> 1,497,367
<TOTAL-ASSETS> 20,901,406
<CURRENT-LIABILITIES> 6,746,329
<BONDS> 0
0
0
<COMMON> 6,193
<OTHER-SE> 14,148,884
<TOTAL-LIABILITY-AND-EQUITY> 20,901,406
<SALES> 40,018,812
<TOTAL-REVENUES> 40,018,812
<CGS> 32,291,249
<TOTAL-COSTS> 5,872,942
<OTHER-EXPENSES> (90,740)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 790,918
<INCOME-PRETAX> 1,154,443
<INCOME-TAX> 461,777
<INCOME-CONTINUING> 692,666
<DISCONTINUED> (48,944)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 643,722
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
