<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO 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
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Commission file number 0-9607
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CENTRUM INDUSTRIES, INC.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-1654011
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6135 Trust Drive, Suite 104A, Holland, Ohio 43528
- - ------------------------------------------- -----
(Address of principal executive offices) (Zip code)
(419) 868-3441
--------------
(Registrant's telephone number, including area code)
5580 Monroe Street. Suite 100, Sylvania, Ohio 43560
-----------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 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 .
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING at June 30, 1996
----- ----------------------------
Common Stock - $.05 Par Value 6,578,527
1
<PAGE> 2
CENTRUM INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
COVER 1
INDEX 2
PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
Condensed Consolidated Balance Sheets
as of June 30, 1996 and March 31,1996. 3
Condensed Consolidated Statements of
Income for the three months ended
June 30, 1996 and 1995. 5
Condensed Consolidated Statements of
Cash Flows for the three months ended
June 30, 1996 and 1995. 6
Notes to Condensed Consolidation
Financial Statements 7
ITEM 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
Not Applicable
SIGNATURES 10
</TABLE>
2
<PAGE> 3
PART 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTRUM INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(unaudited)
June 30, March 31,
1996 1996
---- ----
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $2,183,132 $2,100,749
Accounts receivable, less allowances of $103,676
and $93,761, respectively 10,259,211 10,979,166
Cost and estimated earnings in excess of billings
on uncompleted contracts 831,812 372,699
Inventories:
Raw materials 5,609,103 4,756,954
Work in process 4,200,610 4,332,492
Finished goods 612,638 305,798
Prepaid expense and other 368,203 347,307
------- -------
Total Current Assets 24,064,709 23,195,165
Fixed Assets:
Oil and gas properties 88,908 88,908
Property, plant and equipment, net 10,883,308 11,062,201
---------- ----------
Total Fixed Assets 10,972,216 11,151,109
Other Assets:
Deferred income tax benefits 2,111,583 2,066,393
Goodwill, less accumulated amortization of $440,198
and $404,494, respectively 2,403,912 2,439,616
Debt issuance costs 1,184,196 1,133,412
Other 548,341 626,053
------- -------
Total Other Assets 6,248,032 6,265,474
--------- ---------
Total Assets $41,284,957 $40,611,748
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
CENTRUM INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(unaudited)
June 30, March 31,
1996 1996
---- ----
<S> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities:
Bank line of credit $9,249,163 $7,886,486
Current portion of long-term debt $2,452,090 2,976,425
Accounts payable $8,368,663 9,506,022
Accrued employee costs 1,095,555 1,012,655
Accrued interest 78,661 138,055
Deposits 520,616 268,394
Income taxes payable 131,300 251,143
Deferred income taxes 280,551 122,974
Accrued expense and other 1,475,897 2,057,523
--------- ---------
Total Current Liabilities 23,652,496 24,219,677
Long-term debt, less current portion 12,263,707 11,982,409
Other liabilites 654,147 826,670
Commitments and Contingent Liabilities (Note B)
Shareholders' Equity:
Preferred stock - $.05 par value, 1,000,000 shares authorized,
70,000 shares issued and outstanding (liquidation
preference of $10 per share) 3,500 3,500
Common stock - $.05 par value, 15,000,000 authorized
6,578,527 and 6,170,860 issued and outstanding 328,927 308,543
Additional paid-in capital 5,853,734 5,318,767
Accumulated deficit (1,471,554) (2,047,818)
---------- -----------
Total Shareholders' Equity 4,714,607 3,582,992
--------- ---------
Total Liabilities and Shareholders' Equity $41,284,957 $40,611,748
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
CENTRUM INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the three
months ended
June 30, June 30,
1996 1995
---- ----
<S> <C> <C>
Sales $17,579,196 $5,039,874
Cost of sales 12,754,415 3,727,295
----------- ----------
Gross profit 4,824,781 1,312,579
Depreciation 311,578 24,364
Selling, general and administrative expenses 3,195,837 1,007,860
----------- ----------
Operating income 1,317,366 280,355
----------- ----------
Other income and (expenses)
Interest income 44,253 4,736
Interest expenses (574,355) (95,361)
Amortization (119,428) (36,496)
Miscellaneous 10,428 (391)
----------- -----------
(639,102) (127,512)
----------- -----------
Income before income taxes 678,264 152,843
Provision for income taxes 102,000 41,268
----------- -----------
Net income $ 576,264 $ 111,575
=========== ===========
Net income per common and common equivalent share $0.08 $0.02
===== =====
Weighted average number of common and common equivalent shares outstanding 7,114,299 5,695,140
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
CENTRUM INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
For the three
months ended
June 30, June 30,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $576,264 $111,575
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 431,006 60,860
Deferred income taxes 112,387
Changes in assets and liabilites that provide (use) cash:
Accounts receivable 719,955 381,193
Cost and estimated earnings in excess of billings
on uncompleted contracts (459,113) 133,344
Inventory (1,027,107) (237,276)
Prepaid expenses and other (280,465) (7,581)
Accounts payable (1,137,359) (177,505)
Accrued expenses and other (850,486) (275,379)
Customer deposits 252,222 48,017
------- ------
Net cash provided by (used in) operating activities (1,662,696) 37,248
----------- ------
Cash flows from investing activities:
Purchase of property and equipment (132,685) (17,499)
--------- --------
Net cash used in investing activities (132,685) (17,499)
--------- --------
Cash flows from financing activities:
Net proceeds (repayments) on short-term debt 1,362,677 (285,000)
Repayments of notes payable (243,037) (20,000)
Proceeds from the issuance of notes payable 150,000
Proceeds from the issuance of common stock 555,351
Repurchase of common stock (60,000)
Other financing activities 202,773 77
------- --
Net cash provided by (used in) financing activities 1,877,764 (214,923)
--------- ---------
Increase (decrease) in cash and cash equivalents 82,383 (195,174)
Cash and cash equivalents at beginning of period 2,100,749 472,673
--------- -------
Cash and cash equivalents at end of period $2,183,132 $277,499
========== ========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
CENTRUM INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting principally of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair statement of the results of operations for the three month periods ended
June 30, 1996 and 1995. Accounting policies followed by the Company are
described in Note 1 to the financial statements in its Annual Report on Form
10-K for the year ended March 31, 1996.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The condensed financial statements should be
read in conjunction with the financial statements, including notes thereto,
contained in the Company's Annual Report on Form 10-K for the year ended March
31, 1996.
The results of operations for the three months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full year. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
NOTE B: COMMITMENTS AND CONTINGENT LIABILITIES
There has been no significant change from the prior year-end audited
statements.
NOTE C: INCOME PER COMMON AND COMMON EQUIVALENT SHARE
The computation of income per common and common equivalent share is based on
the weighted average number of shares of common stock outstanding during the
respective periods. Common equivalent shares, including shares that would be
issued upon the exercise of outstanding warrants and options, have been
included in the calculations to the extent that they are dilutive in nature.
7
<PAGE> 8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The changes in sales and operating income for the period ended June 30, 1996
over the comparable period of a year ago were due primarily to the inclusion of
the metal forming subsidiary in the current period results. As discussed in
the Form 10-K filed for the year-end March 31, 1996, the metal forming
operations were acquired on March 8, 1996 and, accordingly, the results of
these operations were not included in the comparable prior year period. The
metal forming operations have contributed significantly to growth in
consolidated sales and operating income for the current year as a result of
increased product demand and management's emphasis on cost control. Revenue
for the material handling subsidiary has increased in the current period,
however, there has been a reduction in operating income due to the mix of
products sold. Revenues at the motor production subsidiary have increased due
to stronger customer demand and resulting increased order activity. The
corporate and oil and gas segments did not record any sales in either period.
The Company's operations have been classified into five business segments:
metal forming operations, material handling systems, motor production systems,
oil and gas, and corporate office. The metal forming operations segment
manufactures steel forgings for the power generation, compressor and bearing
markets along with nonferrous castings for the glass container and pump and
valve industries. The material handling segment involves the design,
manufacture and installation of material handling equipment for warehouse and
distribution applications. The motor production systems segment involves the
manufacture of armature winding machines and complete production systems for
numerous complex manufacturing processes. The oil and gas segment includes the
operations of an oil and gas development company.
Summarized unaudited results of operations by business segment for the three
month period ended June 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Quarter ended
June 30, 1996 June 30, 1995
Dollars Percent Dollars Percent
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales
Metal forming $11,689,731 66.50% $0 0.00%
Material handling 3,924,990 22.33% 3,626,508 71.96%
Motor production 1,964,475 11.17% 1,413,366 28.04%
Oil and gas 0 0.00% 0 0.00%
Corporate 0 0.00% 0 0.00%
- ----- - -----
Total sales $17,579,196 100.00% $5,039,874 100.00%
=========== ======= ========== =======
Operating income (loss)
Metal forming $1,260,561 95.69% $0 0.00%
Material handling 119,233 9.05% 281,650 100.46%
Motor production 123,062 9.34% 118,574 42.29%
Oil and gas (11,109) -0.84% (7,508) -2.68%
Corporate (174,381) -13.24% (112,361) -40.08%
--------- ------- --------- -------
Total operating income (loss) $1,317,366 100.00% $280,355 100.00%
=========== ======= ========== =======
</TABLE>
8
<PAGE> 9
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - CONTINUED
The increase in interest expense for the period ended June 30, 1996 over the
comparable period of a year ago is primarily due to the issuance of debt at the
corporate office level and the metal forming subsidiary. The proceeds were
used primarily in connection with the acquisition of the metal forming
operations in March of this year. Both depreciation and amortization expense
have increased significantly as a result of the acquisition of the metal
forming operations and the inclusion of their financial results in the current
quarter.
The effective income tax rate for the company has been reduced from 27% in the
prior year to 15% in the current quarter results. The primary cause of the
reduction in this rate is the utilization of previously reserved federal net
operating loss carryforwards at the parent company level. Management has
concluded that the current earning trend would not result in the reversal of
these tax valuation reserves in their entirety at this time.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities for the three month period ended June 30,
1996 totaled $1,662,696 as opposed to cash provided by operating activities of
$37,248 in the prior year period. Although net income was a significant source
of operating cash flow in the current year, the accumulation of additional
inventories and the timing of certain payments resulted in the use of
additional capital resources. Inventories increased primarily at the metal
forming operations due to increased backlogs and customer demand. Accounts
payable were reduced at the material handling segment primarily due to the
timing of vendor payments. Reductions in the accrued expense category were a
result of tax and certain benefit payments.
The cash absorbed in operating activities was financed primarily through the
$15,500,000 bank line of credit facility maintained by the metal forming
subsidiary and the sale of stock through a Confidential Private Placement
Memorandum (Private Placement) issued on November 15, 1995. Management
believes that sufficient availability exists in the bank line of credit to
finance future operating activities at the metal forming subsidiary. In
addition, cash and cash equivalents at June 30,1996 coupled with additional
funds forecasted to be raised during the ensuing quarter through the Private
Placement will be sufficient to fund the operating and financial needs of the
parent and its other subsidiaries.
9
<PAGE> 10
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.
CENTRUM INDUSTRIES, INC.
--------------------------
(Registrant)
Date August 14, 1996 By: /s/ Anthony J. DiVita III
--------------------- --------------------------
Anthony J. DiVita III
Chief Financial Officer
10
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- - ------- ----------- ------------
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> JUN-30-1995
<CASH> 277,499
<SECURITIES> 0
<RECEIVABLES> 2,959,226
<ALLOWANCES> 66,700
<INVENTORY> 1,348,472
<CURRENT-ASSETS> 87,969
<PP&E> 1,205,073
<DEPRECIATION> 156,738
<TOTAL-ASSETS> 9,039,121
<CURRENT-LIABILITIES> 3,829,108
<BONDS> 0
0
3,500
<COMMON> 284,269
<OTHER-SE> 1,269,555
<TOTAL-LIABILITY-AND-EQUITY> 9,039,121
<SALES> 5,039,874
<TOTAL-REVENUES> 5,044,610
<CGS> 3,727,295
<TOTAL-COSTS> 4,796,015
<OTHER-EXPENSES> 391
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95,361
<INCOME-PRETAX> 152,843
<INCOME-TAX> 41,268
<INCOME-CONTINUING> 111,575
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 111,575
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 2,183,132
<SECURITIES> 0
<RECEIVABLES> 10,362,887
<ALLOWANCES> 103,676
<INVENTORY> 10,422,351
<CURRENT-ASSETS> 368,203
<PP&E> 11,598,351
<DEPRECIATION> 626,135
<TOTAL-ASSETS> 41,284,957
<CURRENT-LIABILITIES> 23,652,496
<BONDS> 0
0
3,500
<COMMON> 328,927
<OTHER-SE> 4,328,180
<TOTAL-LIABILITY-AND-EQUITY> 41,284,957
<SALES> 17,579,196
<TOTAL-REVENUES> 17,633,877
<CGS> 12,754,415
<TOTAL-COSTS> 16,381,258
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 574,355
<INCOME-PRETAX> 678,264
<INCOME-TAX> 102,000
<INCOME-CONTINUING> 576,264
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 576,264
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
