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, 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, DE 19801
(Address of Principal Executive Office) (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 2,215,540
shares outstanding as of December 31, 1997.
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, 1997 and March 31, 1997
Unaudited Consolidated Statements of Operations
for the Three Month Periods Ended December 31,
1997 and 1996
Unaudited Consolidated Statements of Operations
for the Nine Month Periods Ended December 31, 1997
and 1996
Unaudited Consolidated Statements of Cash Flows
for the Nine Month Periods Ended December 31, 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 I ITEM 1 FINANCIAL STATEMENTS
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Balance Sheets
Assets
<CAPTION>
December 31, 1997 March 31, 1997
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 722,400 $1,308,225
Accounts receivable, net
Billed 8,088,711 8,637,956
Unbilled 461,957 222,193
Other 218,341 209,885
Total accounts receivable 8,769,009 9,070,034
Inventory 413,234 407,166
Deferred income taxes 176,000 391,000
Other prepaid expenses and
current assets 1,068,911 1,590,187
Costs and estimated earnings
in excess of billings on
uncompleted contracts 1,464,259 924,075
Total current assets 12,613,813 13,690,687
Property and equipment
Land 954,100 954,100
Buildings and improvements 1,085,812 1,085,812
Machinery and equipment 2,479,231 2,378,759
Furniture and fixtures 404,811 374,803
Vehicles 413,296 419,921
Total property and equipment 5,337,250 5,213,395
Less accumulated depreciation 1,920,395 1,543,280
Property and equipment, net 3,416,855 3,670,115
Intangible pension asset 931,822 1,009,474
Deferred income taxes 2,037,000 2,297,000
Other assets 544,989 633,675
Total assets $19,544,479 $21,300,951
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc.)
Consolidated Balance Sheets
Liabilities and Shareholders Equity
<CAPTION>
December 31, 1997 March 31, 1997
(Unaudited)
<S> <S> <S>
Current Liabilities:
Notes payable $ 0 $ 756,969
Current portion of long-term debt 2,053,314 2,053,314
Accounts payable 2,174,892 2,092,506
Other accrued expenses 1,907,727 3,002,626
Billings in excess of costs
and estimated earnings on
uncompleted contracts 411,306 516,617
Total current liabilities 6,547,239 8,422,032
Long-term debt,less current portion 2,316,863 3,808,314
Accrued pension cost 968,950 1,052,197
Notes payable to Bank 6,320,007 5,412,020
Total liabilities 16,153,059 18,694,563
Shareholders' equity:
Common stock, $.0025 par
value, authorized
10,000,000 shares; issued
2,477,592 shares,
outstanding 2,215,540 shares 6,194 6,194
Additional paid-in-capital 2,873,101 3,478,576
Retained earnings 4,463,662 3,751,755
Treasury stock, at cost (3,951,537) (4,630,137)
Total shareholders' equity 3,391,420 2,606,388
Total liabilities and
shareholders' equity $19,544,479 $21,300,951
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc).
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended December 31,
1997 1996
<S> <C> <C>
Revenues from services $ 14,007,229 $13,249,980
Cost of services 11,439,532 10,680,547
Gross margin 2,567,697 2,569,433
General and administrative expenses 1,967,244 1,951,001
Income from continuing operations 600,453 618,432
Interest expense (259,973) (372,952)
Other income (expense), net 2,599 (31,990)
Income from continuing operations
before income taxes 343,079 213,490
Income tax expense 137,232 85,396
Income from continuing operations 205,847 128,094
Loss from operations of
discontinued subsidiary 0 (6,543)
Net earnings $205,847 $121,551
Earnings per share $0.09 $0.06
Weighted average common shares 2,215,540 2,169,845
Earnings per share (diluted) $0.09 $0.05
Weighted average
common shares (diluted) 2,398,474 2,420,098
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc).
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Nine Months Ended December 31,
1997 1996
<S> <C> <C>
Revenues from services $ 41,716,752 $40,018,812
Cost of services 33,882,988 32,291,249
Gross margin 7,833,764 7,727,563
General and administrative expenses 5,851,204 5,872,942
Income from continuing operations 1,982,560 1,854,621
Interest expense (785,857) (790,918)
Other net (expense) income (10,189) 1,083,847
Income before reorganization costs
and income taxes 1,186,514 2,147,550
Reorganization costs 0 (993,107)
Income from continuing operations
before income taxes 1,186,514 1,154,443
Income tax expense 474,607 461,777
Income from continuing operations 711,907 692,666
Loss from operations of
discontinued subsidiary 0 (48,944)
Net earnings $711,907 $643,722
Earnings per share $0.32 $0.30
Weighted average common shares 2,193,040 2,169,845
Earnings per share (diluted) $0.30 $0.27
Weighted average
common shares (diluted) 2,398,474 2,420,098
</TABLE>
<TABLE>
CANISCO RESOURCES, INC.
(formerly Nuclear Support Services, Inc).
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine Months Ended December 31,
1997 1996
<S> <C> <C>
Cash flows from operating
activities:
Net earnings $711,907 $643,722
Adjustments to reconcile net
earnings to net cash provided by
(used in) operating activities:
Depreciation and amortization 488,940 489,297
Deferred income taxes 475,000 766,157
Change in assets and liabilities
net of effects from purchases
and sales of subsidiaries:
Decrease in accounts receivable 301,025 520,960
(Increase) in inventory (6,068) (75,083)
(Increase) decrease in costs
and estimated earnings in excess
of billings on uncompleted
contracts (540,184) 1,114,369
Decrease in other assets 575,789 192,165
(Decrease) in accounts payable (674,583) (3,436,760)
(Decrease) in accrued expenses (1,178,144) (1,945,095)
(Decrease) increase in billings
in excess of costs and
estimated earnings on
uncompleted contracts (105,311) 379,058
Net cash provided by (used in)
operating activities 48,371 (1,351,210)
Cash flows from investing activities:
Proceeds from sale of Henze
subsidiary 0 1,200,000
Net purchase of property
and equipment (123,855) (66,925)
Net cash (used in) provided by
investing activities (123,855) 1,133,075
Cash flows from financing activities:
Net borrowings on notes payable 907,987 2,415,412
Proceeds from long term debt 0 3,900,000
Principal Payments on
long-term debt (1,491,451) (5,976,524)
Proceeds from reissue of
Treasury Stock 73,123 0
Exercise of Stock options 0 6,075
Net cash provided by (used in)
financing activities (510,341) 344,963
Net (Decrease) increase in cash (585,825) 126,828
Cash at beginning of period 1,308,225 550,432
Cash at end of period $722,400 $677,260
</TABLE>
PART I, 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.
In June, 1997, the FASB issued Statement of
Financial Accounting Standards No. 130, Reporting
Comprehensive Income. Statement No. 130
established standards for reporting and display of
comprehensive income and its components in a full
set of general purpose financial statements.
Statement No. 130 is effective for periods
beginning after December 15, 1997. This Statement
affects reporting in financial statements only and
will not have impact upon results of operations,
financial condition or long-term liquidity. The
Company is in compliance with the standards
established by this Statement as required.
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, 1997, the Company had borrowed
approximately $6,300,000 on its revolving credit
line of $11,000,000 and had an outstanding
principal balance of $2,730,000 on its long-term
debt obligation to the bank and approximately
1,600,000 on its debt obligation to the unsecured
creditors.
At December 31, 1997 the Company has working
capital of approximately $6,100,000 compared to
working capital of $5,300,000 at March 31, 1997.
The improvement in working capital was due
primarily to the reduction of notes payable and
other accrued expenses offset somewhat by
reduction in prepaid expenses and other current
assets.
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 credit 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, 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
continuing operations.
THREE MONTHS ENDED DECEMBER 31, 1997
COMPARED TO THE THREE MONTHS ENDING DECEMBER 31,
1996
Revenues for the period were Fourteen Million
Seven Thousand ($14,007,000) compared to Thirteen
Million Two Hundred Fifty Thousand ($13,250,000)
in the prior year.
The power generation market accounted for thirty-
three percent (33%) of total revenues compared to
twenty-eight percent (28%) of total revenues for
the same period last year. The increase was
driven on the strength of several maintenance
projects performed in the period. The petro-
chemical business accounted for twenty-one percent
(21%) of 1997 third quarter revenues, compared to
sixteen percent (16%) for the quarter ended
December 31, 1996. The prior year revenues in
this market sector were abnormally low whereas the
revenues in the current period are more reflective
of the company's business mix. The pulp and paper
market accounted for twenty-one percent (21%) of
revenues compared to thirty-two percent (32%) in
the comparable period a year ago. The decrease in
revenue in the pulp and paper market sectors was
primarily due to the completion of several large
capital projects performed in the prior year. The
revenue contribution of all other businesses
collectively was twenty-five percent (25%)
compared to twenty-four percent (24%) for the same
period last year.
The gross margin for the period was essentially
unchanged at Two Million Five Hundred Sixty Eight
Thousand ($2,568,000) compared to Two Million Five
Hundred Sixty Nine Thousand ($2,569,000) for the
same period last year. As a percent of revenue,
the gross margin for the current period decreased
to eighteen percent (18%) compared to nineteen
percent (19%) during the period ended December 31,
1996. The power market margin contribution was
thirty-four percent (34%) versus thirty-eight
percent (38%) for the same period last year. The
margin contribution for the petro-chemical
business increased to sixteen percent (16%) from
eight percent (8%) a year ago. The pulp and paper
industry accounted for twenty-six percent (26%) of
gross margin, down from forty-four percent (44%)
during the same period last year. All other
markets contributed twenty-four percent (24%) of
gross margin compared to ten percent (10%) in the
comparable period a year ago. Changes in margin
contribution were related to shifts in revenues
between market sectors.
General and administrative expenses for the
quarter were One Million Nine Hundred Sixty Seven
Thousand ($1,967,000) compared to One Million Nine
Hundred Fifty One Thousand ($1,951,000) the same
period last year. As a percentage of revenue
General & Administrative expenses decreased to
fourteen percent (14%) from fifteen percent (15%)
the prior year.
Income from continuing operations was Six Hundred
Thousand ($600,000) compared to Six Hundred
Eighteen Thousand ($618,000) for the same period
last year.
Interest expense for the period was Two Hundred
Sixty Thousand ($260,000) compared to Three
Hundred Seventy Three Thousand ($373,000) for the
same period a year ago. The expenses in the
comparable period last year included the initial
interest payment for the prepetition debt which
covered a 12-month period.
Other Income, net of expenses, was Three Thousand
($3,000) compared to other expense, net of income,
of Thirty Two Thousand ($32,000) for the same
period a year ago.
Income taxes of One Hundred Thirty Seven Thousand
($137,000) were accrued for the period compared to
Eighty Five Thousand ($85,000) for the same period
a year ago.
The net income from continuing operations was
approximately Two Hundred Six Thousand ($206,000)
or $0.09 per share compared to One Hundred Twenty
Eight Thousand ($128,000) or $0.06 per share for
the same period last year. There were no losses
attributable to discontinued operations in the
period compared to Seven Thousand ($7,000) for the
same quarter a year ago. Combining continuing and
discontinued operations, the Company posted an
aggregate net income of Two Hundred Six Thousand
($206,000) or $0.09 per share compared to One
Hundred Twenty One Thousand ($121,000) or $0.06
per share for the same period in the prior year.
NINE MONTHS ENDED DECEMBER 31, 1997
COMPARED TO THE NINE MONTHS ENDED DECEMBER 31,
1996
Revenues for the period were Forty One Million
Seven Hundred Seventeen Thousand ($41,717,000)
compared to Forty Million Nineteen Thousand
($40,019,000) for the prior year.
The power generation market accounted for thirty-
three percent (33%) of total revenues compared to
twenty-nine percent (29%) of total revenues for
the same period last year. The petro-chemical
business was unchanged at twenty-two percent (22%)
of revenues compared to the same period last year.
The pulp and paper market accounted for twenty-one
percent (21%) of revenues compared to twenty-six
percent (26%) for the same period last year. The
decline was due to several large turnkey projects
performed last year. The revenue contribution of
all other businesses collectively was twenty-four
percent (24%) compared to twenty-three percent
(23%) for the same period last year.
The gross margin when compared to the same period
a year ago increased One Hundred Six Thousand
($106,000) to Seven Million Eight Hundred Thirty
Four Thousand ($7,834,000). As a percent of
revenue, the gross margin for the nine months
ended December 31, 1997 remained constant at
nineteen percent (19%) compared to the prior year.
The power market margin contribution was thirty-
seven percent (37%) versus thirty-eight percent
(38%) for the same period last year. The margin
contribution of the petro-chemical business
increased to eighteen percent (18%) from twelve
percent (12%) a year ago. The pulp and paper
industry accounted for twenty-four percent (24%)
of gross margin, down from thirty-four percent
(34%) during the same period last year. This
decline was attributable to several large capital
projects completed during the prior year. All
other markets contributed twenty-one percent (21%)
of gross margin compared to sixteen (16%) in the
comparable period a year ago.
General and administrative expenses compared to
the first nine months last year decreased Twenty
Two Thousand ($22,000) to Five Million Eight
Hundred Fifty One Thousand ($5,851,000) compared
to the same period last year. As a percentage of
revenue General & Administrative expenses
decreased to fourteen percent (14%) from fifteen
percent (15%).
Income from continuing operations was One Million
Nine Hundred Eighty Three Thousand ($1,983,000)
compared to One Million Eight Hundred Fifty Five
Thousand ($1,855,000) for the same period last
year.
Interest expense remained relatively constant at
Seven Hundred Eighty Six Thousand ($786,000)
compared to Seven Hundred Ninety One Thousand
($791,000) the same period a year ago.
Other expenses, net of income, was Ten Thousand
Dollars ($10,000) compared to other income, net of
expenses, of One Million Eighty Four Thousand
($1,084,000) a year ago. The prior year gain was
due to litigation settlement and the gain recorded
due to discounting prepetition debt. There were
no reorganization expenses accrued in the period
compared to Nine Hundred Ninety-Three Thousand
($993,000) a year ago.
Income taxes of Four Hundred Seventy Four Thousand
($474,000) were accrued for the period compared to
Four Hundred sixty-two Thousand ($462,000) for the
same period a year ago.
The net income from continuing operations for the
first nine months of fiscal year 1997 was
approximately Seven Hundred Twelve Thousand
($712,000) compared to Six Hundred Ninety Three
Thousand ($693,000) for the same period last year.
The earnings per share were $0.32 in both periods.
There were no losses attributable to discontinued
operations in the current period compared to a
loss of Forty Nine Thousand ($49,000) for the same
period a year ago. Combining continuing and
discontinued operations, the Company posted an
aggregate net income of Seven Hundred Eleven
Thousand ($711,000) or $0.32 per share compared to
a net income of Six Hundred Forty Four Thousand
($644,000) or ($.30) 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. Certain factors such as competitive
market pressures, material changes in demand from
larger customers, availability of labor, changes
in government policies and changes in economic
conditions could cause actual results to differ
materially from those in the forward-looking
statements.
The Company enters it fourth fiscal quarter with a
substantial backlog of business. The seasonality
of our business, as in the past, will have
greatest impact in the fourth fiscal quarter.
Overall, management anticipates continued
profitability at year-end.
PART II
ITEM 6 EXHIBITS AND REPORTS ON
FORM 8-K
Exhibit 27 Financial Data Schedule for the Nine-
Month
Period Ended December 31, 1997.
SIGNATURES
Pursuant to the requirements of the
Securities and Exchange Act of 1934, the
registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto
duly authorized.
DATE: CANISCO RESOURCES,
INC.
February 5, 1998 /s/ Ralph A. Trallo
Ralph A. Trallo
President
Chief Executive Officer
Director
February 5, 1998 /s/ Michael J. Olson
Michael J. Olson
Vice President, Finance
Secretary/Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM CANISCO RESOURCES, INC.'S FORM 10-Q FOR THE PERIOD ENDED
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 722,400
<SECURITIES> 0
<RECEIVABLES> 8,987,258
<ALLOWANCES> (218,241)
<INVENTORY> 413,234
<CURRENT-ASSETS> 12,613,813
<PP&E> 5,337,250
<DEPRECIATION> 1,920,395
<TOTAL-ASSETS> 19,544,479
<CURRENT-LIABILITIES> 6,547,239
<BONDS> 9,605,820
0
0
<COMMON> 6,194
<OTHER-SE> 3,385,226
<TOTAL-LIABILITY-AND-EQUITY> 19,544,479
<SALES> 41,716,752
<TOTAL-REVENUES> 41,716,752
<CGS> 33,882,988
<TOTAL-COSTS> 33,882,988
<OTHER-EXPENSES> 5,861,393
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 785,857
<INCOME-PRETAX> 1,186,514
<INCOME-TAX> 474,607
<INCOME-CONTINUING> 711,907
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 711,907
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.30
</TABLE>
