SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 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: 0-3585
-------------------
EVEREST & JENNINGS INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2536185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4203 EARTH CITY EXPRESSWAY, EARTH CITY, MISSOURI 63045
(Address of principal executive offices)
Registrant's telephone number, including area code: 314-512-7000
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
the filing requirements for the past 90 days: Yes X No
Shares of Common Stock outstanding as of May 10, 1996: 72,280,646
<PAGE>
QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 1996
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements included herein have been
prepared by the management of Everest & Jennings International Ltd. (the
"Company") without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) necessary to
state fairly the results for the interim periods presented herein in
accordance with generally accepted accounting principles for interim
financial information have been made (however, the consolidated financial
statements included herewith do not include any adjustments that might
result from the Company's inability to emerge from or complete its ongoing
restructuring activities and continue as a going concern -- see Note 1 to
these Unaudited Consolidated Financial Statements). Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. Management
believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest Annual
Report on Form 10-K for the fiscal year ended December 31, 1995.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per-share data)
Three Months Ended March 31
---------------------------
1996 1995
-------- --------
(Unaudited)
Revenues $17,548 $18,513
Cost of sales 13,665 14,306
______ ______
Gross profit 3,883 4,207
Selling expenses 3,057 3,056
General and administrative expenses 1,508 1,426
______ ______
Total operating expenses 4,565 4,482
______ ______
Loss from operations (682) (275)
Interest expense, BIL (Note 4) 427 375
Interest expense 741 506
______ ______
Loss before income taxes (1,850) (1,156)
Income tax provisions 6 14
______ ______
Net loss $(1,856) $(1,170)
Loss per share (Note 5) $(.03) $(.02)
Weighted average number of Common
Shares outstanding 72,280,646 72,264,718
The accompanying Notes are an integral part of these
Consolidated Financial Statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
March 31 December 31
1996 1995
-------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 25 $ 117
Accounts receivable, less allowance
for doubtful accounts of $1,443
in 1996 and $1,847 in 1995 17,459 16,952
Inventories (Note 6) 19,507 19,570
Other current assets 1,577 1,299
______ ______
Total current assets 38,568 37,938
______ ______
PROPERTY, PLANT AND EQUIPMENT:
Land 261 261
Buildings and improvements 4,502 4,500
Machinery and equipment 15,821 15,380
______ ______
20,584 20,141
Less accumulated depreciation
and amortization (13,250) (12,992)
______ ______
Property, plant and equipment, net 7,334 7,149
NOTES RECEIVABLE (Note 7) 2,352 2,524
INTANGIBLE ASSETS, NET 325 402
OTHER ASSETS 220 217
______ ______
TOTAL ASSETS $48,799 $48,230
The accompanying Notes are an integral part of these
Consolidated Financial Statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' DEFICIT
March 31 December 31
1996 1995
-------- -----------
(Unaudited)
CURRENT LIABILITIES:
Short-term borrowings and current install-
ments of long-term debt of $1,791
in 1996 and $1,089 in 1995 (Note 4) $ 4,512 $ 4,473
Accounts payable 7,584 8,361
Accrued payroll costs 6,077 6,327
Accrued interest, BIL (Note 4) 3,056 2,629
Accrued expenses 5,407 5,310
Accrued restructuring expenses (Note 1) 474 659
______ ______
Total current liabilities 27,110 27,759
______ ______
LONG-TERM DEBT, NET OF CURRENT PORTION
(Note 4) 25,504 22,370
LONG-TERM BORROWINGS FROM BIL (Note 4) 21,103 21,103
OTHER LONG-TERM LIABILITIES 117 130
COMMITMENTS AND CONTINGENCIES (Notes 1 and 8)
STOCKHOLDERS' DEFICIT: (Note 1)
Series A Convertible Preferred Stock 13,175 13,175
Series B Convertible Preferred Stock 1,317 1,317
Series C Convertible Preferred Stock 20,000 20,000
Common Stock, par value: $.01;
authorized 120,000,000 shares 722 722
Additional paid-in capital 105,608 105,608
Accumulated deficit (161,944) (159,793)
Minimum pension liability adjustment (3,264) (3,264)
Cumulative translation adjustments (649) (897)
______ ______
Total stockholders' deficit (25,035) (23,132)
______ ______
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $48,799 $48,230
The accompanying Notes are an integral part of these
Consolidated Financial Statements
<PAGE>
<PAGE>
<TABLE>
EVEREST & JENNINGS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(Dollars in thousands)
<CAPTION>
Series A Series B Series C
Convertible Convertible Convertible
Preferred Stock Preferred Stock Preferred Stock Common Stock
Shares Amt Shares Amt Shares Amt Shares Amt
------ --- ------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C>
<C> <C> <C>
Balance at December 31, 1995 7,867,842 $13,175 786,357 $1,317 20,000,000 $20,000 72,280,646 $722
Accrued Dividends on Series A
Convertible Preferred Stock -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- --
Translation adjustments -- -- -- -- -- -- -- --
--------- ------- ------- ------ --------- ------- ---------- ---
Balance at March 31, 1996 7,867,842 $13,175 786,357 $1,317 20,000,000 $20,000 72,280,646 $722
The accompanying Notes are an integral part of these Consolidated Financial
Statements
</TABLE>
<PAGE>
<TABLE>
EVEREST & JENNINGS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(Dollars in thousands)
(continued)
<CAPTION>
Minimum
Additional Accumu- Pension Cumulative
Paid-in lated Liability Translation
Capital Deficit Adjustments Adjustments Total
---------- ------- ----------- ----------- -----
<S> <C> <C> <C>
<C> <C>
Balance at December 31, 1995 $105,608 $(159,793) $(3,264) $(897) $(23,132)
Accrued Dividends on Series A
Convertible Preferred Stock -- (295) -- -- (295)
Net loss -- (1,856) -- -- (1,856)
Translation adjustments -- -- -- 248 248
------ -------- ------- ----- -----
Balance at December 31, 1995 $105,608 $(161,944) $(3,264) $(649) $(25,035)
The accompanying Notes are an integral part of these Consolidated Financial Statements
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended March 31
-------------------------
1996 1995
-------- --------
(Unaudited)
Cash flows from operating activities:
Net loss $(1,856) $(1,170)
Adjustment to reconcile net loss to
cash used in operating activities:
Depreciation and amortization 335 466
Changes in operating assets and liabilities:
Accounts receivable (507) 1,754
Inventories 63 591
Accounts payable (777) (2,297)
Accrued interest, BIL 427 375
Accrued payroll costs, expenses and
income taxes (448) (1,518)
Accrued restructuring expenses (185) (192)
Other, net (281) 287
______ ______
Cash used in operating activities (3,229) (1,704)
______ ______
Cash flows from investing activities:
Capital expenditures (443) (224)
Cash received in payment of
note receivable 172 --
______ ______
Cash used in investing activities (271) (224)
______ ______
Cash flows from financing activities:
Proceeds from short-term and
long-term borrowings, net 3,173 1,768
Proceeds from exercise of stock options -- 3
Changes in other long-term liabilities (13) (43)
______ ______
Cash provided by financing activities 3,160 1,728
______ ______
Effect of exchange rate changes on cash flow 248 209
______ ______
Increase (decrease) in cash balance (92) 9
Cash and cash equivalents balance at
beginning of year 117 513
______ ______
Cash and cash equivalents balance
at end of period $ 25 $ 522
Supplemental disclosures of cash flow
information:
Cash paid for interest 505 $646
Cash paid for income taxes 87 $43
The accompanying Notes are an integral part of these
Consolidated Financial Statements
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per-share data)
NOTE 1 -- CORPORATE RESTRUCTURING
The Company has incurred substantial financial losses in a continuing
effort to restructure its operations with the objective of improving its
competitive position within the durable medical equipment industry.
Restructuring activities have included asset sales, significant reductions
in headcount, plant closures and consolidations, product line
rationalization, debt to equity conversion and outsourcing of manufacturing
operations.
The Company's 1996 revenues and operating results have been negatively
impacted by ongoing price competition. Management continues to address the
Company's problems with manufacturing and shipment delays. Additionally,
the Company continues to address the rationalization of its production
facilities in the US, Canada and Mexico and the increased outsourcing of
products and product components, the effects of which are expected to lower
the Company's production costs.
The accompanying consolidated financial statements have been prepared
under the going concern concept, which anticipates an entity will continue
in its present form and, accordingly, uses the historical cost basis to
prepare financial statements. The Company has incurred substantial
restructuring expenses and recurring operating losses and has a net capital
deficiency at March 31, 1996. No assurance can be made that the Company
will successfully emerge from or complete its restructuring activities.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies followed for the three month period
ended March 31, 1996 are the same as those disclosed in the Notes to the
Company's December 31, 1995 Consolidated Financial Statements, which were
included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995. All dollar amounts in these Notes to Unaudited
Consolidated Financial Statements are in thousands except per-share data or
as otherwise specified. In the opinion of management, all adjustments,
consisting of normal recurring adjustments necessary for a fair
presentation of (a) the consolidated results of operations for the three
month periods ended March 31, 1996 and 1995; (b) the consolidated financial
position at March 31, 1996 and December 31, 1995; and (c) the consolidated
cash flows for the three month periods ended March 31, 1996 and 1995 have
been made. However, the consolidated financial statements included
herewith do not include any adjustments that might result from the
Company's inability to emerge from or complete its ongoing restructuring
activities and continue as a going concern -- See Note 1 to the Unaudited
Consolidated Financial Statements.
NOTE 3 -- OWNERSHIP
80% of the Company's common shares and all of the Company's Series A, B
and C Preferred shares are owned by a wholly-owned subsidiary of Brierley
Investments Ltd ("BIL"), a New Zealand investment firm.
NOTE 4 -- DEBT
The Company's debt as of March 31, 1996 and December 31, 1995 is as
follows:
March 31 December 31
1996 1995
-------- -----------
Loans payable to HSBC 22,420 18,700
Other domestic debt 2,300 2,622
Foreign debt 5,296 5,521
Long-term loan payable to BIL 21,103 21,103
______ ______
Total debt 51,119 47,946
Less short-term borrowings and current
installments of long-term debt 4,512 4,473
______ ______
Long-term debt, net of current
portion, including Revolving
Promissory Note to BIL $46,607 $43,473
On September 30, 1992 E&J Inc., a wholly-owned subsidiary of the
Company, entered into a Revolving Credit Agreement with The Hongkong and
Shanghai Banking Corporation Limited ("HSBC"). This Agreement hs been
revised and extended several times and currently expires September 30,
1997. Advances under the Revolving Credit Agreement, as amended, bear
interest at the prime rate as announced by Marine Midland Bank, N.A. from
time to time plus 0.25% per annum. The HSBC facility, as amended, provides
up to $6 million for letter of credit availability and, additionally, cash
advances of up to $25 million to E&J Inc. Repayment of existing debt with
BIL is subordinated to the HSBC debt, and an affiliate of BIL has
guaranteed repayment of the HSBC debt.
BIL has provided the Company a revolving credit facility which allows
advances up to $21.1 million. At March 31, 1996 and December 31, 1995 this
facility has been fully utilized to the extent of advances. The BIL
revolving credit facility has been extended to September 30, 1997, bears
interest at the rate of 8% per annum, and is secured by a lien on and
security interest in all assets of the Company and E&J Inc. As of March
31, 1996, $3.1 million of accrued, unpaid interest was due BIL under the
BIL revolving credit facility .
The Company's Canadian subsidiary has credit facilities in the
aggregate of $4.7 million, of which $4.6 million was borrowed as of March
31, 1996 at interest rates ranging from prime plus 1% to prime plus 1.25%.
The loans are secured by the assets of the Canadian subsidiary.
The Company's Mexican subsidiary has a credit facility in the aggregate
of $1.0 million, of which $0.7 million was borrowed as of March 31, 1996 at
interest rates approximating 13%. The loan is secured by the assets of the
Mexican subsidiary.
At March 31, 1996, the Company was contingently liable under existing
letters of credit to HSBC in the aggregate amount of approximately $5.7
million.
NOTE 5 -- LOSS PER SHARE
Loss per share for the three month period ended March 31, 1996 and 1995
is calculated based on the weighted average number of shares of Common
Stock outstanding during the periods.
NOTE 6 -- INVENTORIES
Inventories at March 31, 1996 and December 31, 1995 consist of the
following:
March 31 Dec. 31
1996 1995
-------- --------
Raw materials $10,624 $10,365
Work-in-process 3,148 4,593
Finished goods 5,735 4,612
______ ______
$19,507 $19,570
NOTE 7 -- NOTES RECEIVABLE
The Company received notes of $2.1 million and $0.6 million upon the
sale of its institutional business and oxygen concentrator business,
respectively, in 1995. The $2.1 million note was paid in full on April 2,
1996. The $0.6 million note bears interest at the rate of 6% after August
15, 1996 and requires monthly installments, with the final payment due in
January, 1997.
NOTE 8 -- CONTINGENT LIABILITIES
In July, 1990, a class action suit was filed in the United States
District Court for the Central District of California by a stockholder of
the Company against the Company and certain of its present and former
directors and officers. The suit seeks unspecified damages for alleged non-
disclosure and misrepresentation concerning the Company in violation of
federal securities laws. The Company twice moved to dismiss the complaint
on various grounds. After the first such motion was granted, plaintiff
filed a first amended complaint, which subsequently was dismissed by order
filed on September 20, 1991. Plaintiff then notified the court that it did
not intend to further amend the complaint, and an order dismissing the
complaint was entered in November 1991. Plaintiff filed a notice of appeal
to the Court of Appeals for the Ninth Circuit on December 23, 1991. The
case was briefed and oral argument heard in June, 1993. Because of the
precedent set by a Ninth Circuit decision in another case which was decided
after the district court's order of dismissal but before the Ninth Circuit
decided plaintiff's appeal, the Ninth Circuit reversed the district court's
dismissal of the case and remanded the case to the district court for
further proceedings in an opinion handed down by the Ninth Circuit on
August 24, 1995. The district court directed plaintiff to file a new
motion for class certification and the plaintiff did so on February 29,
1996. This motion was granted on March 25, 1996. The ultimate liability,
if any, cannot be determined at this time.
Die Cast Products, Inc. ("Die Cast Products"), a former subsidiary of
the Company, has been named as a defendant in a lawsuit filed by the State
of California pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act 42 U.S.C. para 9601 et sec. The Company was
originally notified of this action on December 10, 1992. The lawsuit seeks
to recover response and remediation costs in connection with the release or
threatened release of hazardous substances at 5619-21 Randolph Street, in
the City of Commerce, California ("Randolph Street Site"). It is alleged
that the Randolph Street Site was used for the treatment, storage and
disposal of hazardous substances. The Company anticipates being named as a
defendant as a result of its former ownership of Die Cast Products, which
allegedly disposed of hazardous waste materials at the Randolph Street
Site. A settlement in principle between the State of California and the
various potentially responsible parties was reached in October 1995. It is
anticipated that the Company's portion of the settlement will be less than
was originally anticipated. Accordingly, the previously recorded reserve
for this matter was reduced in 1995 to the expected settlement amount.
In March, 1993, E&J Inc. received a notice from the U.S. Environmental
Protection Agency ("EPA") regarding an organizational meeting of generators
with respect to the Casmalia Resources Hazardous Waste Management Facility
("Casmalia Site") in Santa Barbara County, CA. The EPA alleges that the
Casmalia Site is an inactive hazardous waste treatment, storage and
disposal facility which accepted large volumes of commercial and industrial
wastes from 1973 until 1989. In late 1991, the Casmalia Site owner/
operator abandoned efforts to actively pursue site permitting and closure
and is currently conducting only minimal maintenance activities. The EPA
estimates that the Casmalia Site's closure trust fund, approximately $10
million, is substantially insufficient to cover cleanup and closure of the
site. Since August, 1992, the EPA has undertaken certain interim
stabilization actions to control actual or threatened releases of hazardous
substances at the Casmalia Site. The EPA is seeking cooperation from
generators to assist in the cleaning up, and closing of, the Casmalia Site.
E&J Inc. and 64 other entities were invited to the organizational meeting.
E&J Inc. is a member of a manufacturers' group of potentially responsible
parties which has investigated the site and proposed a remediation plan to
the EPA. To reflect E&J Inc.'s estimated allocation of costs thereunder, a
reserve of $1.0 million was recorded, which was included in the
Consolidated Statements of Operations for 1993. During 1995 an agreement
in principle was reached with the EPA for a settlement of the majority of
the Casmalia site liability. The settlement provides for the work to be
completed in three phases. Phase I work, which is estimated to take three
to five years to complete, will require the Company, along with other
responsible parties, to participate in funding the water management,
certain construction projects and completion of the site investigation.
Phase II work, consisting of the remaining remedial construction activities
and the first five years of operation and maintenance, will be funded by
other parties and is estimated to take ten years. Subsequent to Phase II,
additional operation and maintenance will be required for approximately 30
years. The estimated exposure of the Company under this agreement is less
than originally anticipated and the previously recorded reserve has been
reduced to the expected settlement amount.
In 1989, a patent infringement case was initiated against E&J Inc. and
other defendants in the U.S. District Court, Central District of
California. E&J Inc. prevailed at trial with a directed verdict of patent
invalidity and non-infringement. The plaintiff filed an appeal with the
U.S. Court of Appeals for the Federal Circuit. On March 31, 1993, the
Court of Appeals vacated the District Court's decision and remanded the
case for trial. Impacting the retrial of this litigation was a re-
examination proceeding before the Board of Patent Appeals with respect to
the subject patent. A ruling was rendered November 23, 1993 sustaining the
claim of the patent which E&J Inc. has been charged with infringing. Upon
the issuance of a patent re-examination certificate by the U.S. Patent
Office, the plaintiff presented a motion to the District Court requesting a
retrial of the case. The Company presented a Motion for Summary Judgment
of Noninfringement based in part upon the November 23, 1993 decision of the
Board of Patent Appeals. The Motion was granted in follow-up conferences
and an official Judgment was entered November 17, 1994. The plaintiff
filed a Notice of Appeal on November 23, 1994, and a briefing schedule has
been indicated by the Appellate Court. A written opinion was filed March
21, 1995 and the appeal was argued August 8, 1995. The appeal has now been
granted and the case has been remanded to the US District Court, Central
District of California, for further consideration. E&J Inc. believes that
this case is without merit and intends to contest it vigorously. The
ultimate liability of E&J Inc., if any, cannot be determined at this time.
The Company and its subsidiaries are parties to other lawsuits and
other proceedings arising out of the conduct of its ordinary course of
business, including those relating to product liability and the sale and
distribution of its products. While the results of such lawsuits and other
proceedings cannot be predicted with certainty, management does not expect
that the ultimate liabilities, if any, will have a material adverse effect
on the consolidated financial position or results of operations of the
Company.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996
The following table summarizes operating results of the Company for the
three months ended March 31, 1996 and 1995 (dollars in millions):
Three Months Ended March 31
---------------------------
1996 1995
------------ ------------
Amount % Amount %
------ --- ------ ---
Revenue $17.5 100 $18.5 100
Cost of sales 13.6 78 14.3 77
_____ ____ ______ ____
Gross profit 3.9 22 4.2 23
Operating expenses 4.6 26 4.5 24
_____ ____ ______ ____
Operating loss (0.7) (4) (0.3) (1)
Interest expense 1.2 7 0.9 5
_____ ____ ______ ____
Loss before income taxes (1.9) (11) (1.2) (6)
Income tax provisions -- -- -- --
_____ ____ ______ ____
Net loss $(1.9) (11) $(1.2) (6)
First quarter 1996 revenues of $17.5 million decreased $1.0 million, or
5%, from 1995. First quarter revenues during 1996 for the Company's
domestic operations decreased $1.0 million from 1995's revenue levels. The
decline in domestic sales is attributable to the loss of distributor sales
and the sale, effective August 9, 1995, of the Company's oxygen
concentrator product line, which contributed $0.5 million revenue during
the first quarter of 1995.
First quarter 1996 revenues in the Everest & Jennings' Canadian and
Mexican subsidiaries were consistent with 1995 levels.
Total Company first quarter gross profit decreased $0.3 million from
$4.2 million in 1995 to $3.9 million in 1996. As a percentage of sales,
margins decreased from 23% during 1995 to 22% during 1996, due primarily to
discounting related to price competition and poor efficiency at the
Company's primary domestic wheelchair facility. Additional production
relocation and facility rationalizations are planned during 1996 and beyond
intended to improve the Company's cost structure.
Total Company first quarter operating expenses increased $0.1 million
from $4.5 million in 1995 to $4.6 million in 1996. Research and
development spending was $0.2 million during 1996 compared to spending of
$0.3 million during 1995.
Interest expense of $1.2 million in the first quarter of 1996 increased
from the comparable period in the prior year due to increases in the
average outstanding debt during the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash provided from
operations, borrowings from BIL and affiliates, proceeds from notes
received in the 1995 sales of the Company's Institutional and Oxycon
businesses, and cash on hand. At March 31, 1996 the Company had $25
thousand in cash, and at December 31, 1995 the Company had $117 thousand in
cash. At March 31, 1996, total debt of $51.1 million was $3.2 million
higher than the $47.9 million in debt at December 31, 1995. The increase
was due to increased borrowings from HSBC of approximately $3.7 million,
offset by repayments of foreign borrowings. Additionally, the Company
received $1.8 million in April 1996 from the payment of a note receivable,
which was used to reduce debt. See Note 4--Debt of the Notes to the
Unaudited Consolidated Financial Statements included in Item 1 of this Form
10-Q. The $3.7 million borrowed from HSBC during 1996 was used to fund the
Company's operations. Remaining borrowing availability under the Company's
existing credit facilities was $3 million at March 31, 1996.
The Company's 1996 revenues and operating results have been negatively
impacted by ongoing price competition, liquidity constraints and loss of
market share due to the relocation of the Company's primary domestic
wheelchair manufacturing facility from California to Missouri. Management
is implementing plans which are intended to address the Company's problems
with manufacturing and shipment delays. The plans also address the
rationalization of the Company's production facilities and the increased
outsourcing of products and product components, the effects of which are
intended to lower the Company's production costs.
Management believes that the Company's domestic and international
manufacturing capacity is sufficient to meet anticipated demand for the
foreseeable future.
The accompanying consolidated financial statements have been prepared
under the going concern concept. The going concern concept anticipates an
entity will continue in its present form and, accordingly, uses the
historical cost basis to prepare financial statements. The Company has
incurred substantial restructuring expenses and recurring operating losses
and has a net capital deficiency at March 31, 1996. No assurance can be
made that the Company will successfully emerge from or complete its
restructuring activities.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 8--Contingent Liabilities to the Notes to the Unaudited
Consolidated Financial Statements in Item 1 of this Form 10-Q for a
description of certain pending lawsuits and proceedings.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: May 15, 1996 EVEREST & JENNINGS INTERNATIONAL LTD.
(Registrant)
By TIMOTHY W. EVANS
Senior Vice President and
Chief Financial Officer
By BEVIL J. HOGG
President and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 25
<SECURITIES> 0
<RECEIVABLES> 17,459
<ALLOWANCES> 1,443
<INVENTORY> 19,507
<CURRENT-ASSETS> 38,568
<PP&E> 20,584
<DEPRECIATION> 13,250
<TOTAL-ASSETS> 48,799
<CURRENT-LIABILITIES> 27,110
<BONDS> 46,607
<COMMON> 722
0
34,492
<OTHER-SE> (60,249)
<TOTAL-LIABILITY-AND-EQUITY> 48,799
<SALES> 17,548
<TOTAL-REVENUES> 17,548
<CGS> 13,665
<TOTAL-COSTS> 13,665
<OTHER-EXPENSES> 4,565
<LOSS-PROVISION> 1,443
<INTEREST-EXPENSE> 1,168
<INCOME-PRETAX> (1,850)
<INCOME-TAX> 6
<INCOME-CONTINUING> (1,856)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,856)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
