<PAGE>
UNITED STATES
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 June 30, 1995
_____________
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 0-10068
_______
ICO, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
Texas 75-1619554
_______________________ _______________________
(State of incorporation) (IRS Employer
Identification Number)
100 Glenborough Drive, Suite 250, Houston, Texas 77067
________________________________________________ _________
(Address of principal executive offices) (Zip Code)
(713) 872-4994
__________________
(Telephone Number)
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, without par value: 8,838,954 shares
outstanding as of August 9, 1995
<PAGE>
INDEX TO QUARTERLY REPORT FORM 10-Q
Part I. Financial Information
Page
Item 1. Financial Statements
Consolidated Statements of Operations for
the Three Months and Nine Months Ended
June 30, 1995 and 1994 . . . . . . . . . . . . . 2
Consolidated Balance Sheets as of
June 30, 1995 and September 30, 1994 . . . . . . 3
Consolidated Statements of Cash Flows
for the Nine Months Ended
June 30, 1995 and 1994 . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . 8
Part II. Other Information
Item 1. Legal Proceedings (no response required) . . . -
Item 2. Changes in Securities (no response required) . -
Item 3. Defaults upon Senior Securities
(no response required) . . . . . . . . . . . . -
Item 4. Submission of Matters to a Vote of
Security Holders (no response required) . . . -
Item 5. Other Information (no response required) . . . -
Item 6. Exhibits and Reports on Form 8-K
(no response required) . . . . . . . . . . . . -
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
________________________ _______________________
1995 1994 1995 1994
__________ ____________ __________ ____________
Revenues:
Exploration services $ 7,715,000 $ 6,694,000 $22,804,000 $20,679,000
Production services 4,903,000 5,017,000 14,381,000 14,320,000
Corrosion Control
services 5,334,000 3,826,000 14,181,000 10,254,000
Product sales 3,604,000 2,917,000 9,502,000 9,166,000
Other sales and services 408,000 763,000 2,187,000 1,253,000
__________ ___________ ___________ ___________
21,964,000 19,217,000 63,055,000 55,672,000
__________ ___________ ___________ ___________
Cost and expenses:
Cost of sales and
services 14,917,000 13,646,000 43,317,000 40,076,000
Selling, general
and administrative 4,356,000 3,890,000 12,636,000 11,037,000
Non-recurring charges - 230,000 - 230,000
Depreciation and
amortization 1,339,000 1,133,000 3,807,000 3,090,000
Interest, net (353,000) (200,000) (967,000) (197,000)
__________ ___________ ___________ ___________
20,259,000 18,699,000 58,793,000 54,236,000
__________ ___________ ___________ ___________
Income before taxes
and extraordinary item 1,705,000 518,000 4,262,000 1,436,000
Federal income taxes 254,000 - 432,000 -
__________ ___________ ___________ ___________
Income before extraordinary
item 1,451,000 518,000 3,830,000 1,436,000
Extraordinary item - loss on
extinguishment of debt - - - (1,371,000)
__________ ___________ ___________ ___________
Net income (loss) $1,451,000 $518,000 $3,830,000 $65,000
__________ ___________ ___________ ___________
__________ ___________ ___________ ___________
Earnings (loss) per common
and equivalent share:
Income before
extraordinary item $ .10 $ - $ .25 $ .02
Extraordinary item - - - (.18)
__________ ___________ ___________ ___________
Net income (loss) $ .10 $ - $ .25 $ (.16)
__________ ___________ ___________ ___________
__________ ___________ ___________ ___________
Weighted average shares
outstanding 8,740,463 8,386,749 8,666,143 7,811,003
__________ ___________ ___________ ___________
__________ ___________ ___________ ___________
The accompanying notes are an integral part of
these financial statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
ASSETS
(unaudited)
June 30, September 30,
1995 1994
_________ _____________
Current assets:
Cash and cash equivalents $24,274,000 $24,763,000
Trade receivables (less allowance
for doubtful accounts of $438,000
and $576,000) 16,409,000 14,307,000
Inventories 5,065,000 4,642,000
Prepaid expenses and other 2,722,000 3,253,000
___________ ___________
Total current assets 48,470,000 46,965,000
___________ ___________
Property, plant and equipment, at cost 82,928,000 76,374,000
Less - accumulated depreciation and
amortization (52,412,000) (48,861,000)
30,516,000 27,513,000
____________ ___________
Other assets:
Goodwill, net 4,520,000 3,663,000
Patents and licenses, net 238,000 264,000
Other 764,000 564,000
____________ ___________
$84,508,000 $78,969,000
____________ ___________
____________ ___________
The accompanying notes are an integral part of
these financial statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(unaudited)
June 30, September 30,
1995 1994
_________ _____________
Current liabilities:
Current portion of long-term debt $ 739,000 $ 437,000
Accounts payable 5,395,000 5,122,000
Accrued salaries and wages 539,000 553,000
Accrued expenses 4,157,000 3,197,000
___________ ___________
Total current liabilities 10,830,000 9,309,000
___________ ___________
Long-term debt, net of current portion 1,030,000 456,000
___________ ___________
Stockholders' equity:
Preferred stock, without par value -
500,000 shares authorized;
322,500 and 0 shares issued,
respectively, with a liquidation
preference of $32,250,000 and 0,
respectively 13,000 13,000
Common stock, without par value-
50,000,000 shares authorized;
8,819,056 and 8,551,574 shares
issued, respectively 34,734,000 33,394,000
Additional paid-in capital 56,106,000 56,053,000
Accumulated deficit (18,205,000) (20,256,000)
___________ ___________
72,648,000 69,204,000
___________ ___________
$84,508,000 $78,969,000
___________ ___________
___________ ___________
The accompanying notes are an integral part of
these financial statements
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
June 30,
_____________________________
1995 1994
____________ ___________
Increase (decrease) in cash
and cash equivalents:
Cash flows from operating activities:
Cash received from customers $61,863,000 $53,188,000
Cash paid to suppliers and employees (55,690,000) (51,522,000)
Interest received (paid) 964,000 (143,000)
___________ ___________
Net cash provided by operating
activities 7,137,000 1,523,000
___________ ___________
Cash flows from investing activities:
Capital expenditures (5,106,000) (3,522,000)
Acquisitions (895,000) (3,280,000)
Proceeds from dispositions of
property, plant and equipment 30,000 292,000
___________ ___________
Net cash provided by (used for)
investing activities (5,971,000) (6,510,000)
___________ ___________
Cash flows from financing activities:
Net proceeds from sale of stock 497,000 31,329,000
Payment of dividends on preferred stock (1,632,000) (1,282,000)
Current maturities and long-term debt:
Additions 142,000
Reductions (662,000) (11,408,000)
___________ ___________
Net cash provided by (used for)
financing activities (1,655,000) 18,639,000
___________ ___________
Net increase (decrease) in cash (489,000) 13,652,000
Cash and cash equivalents at
beginning of period 24,763,000 9,450,000
___________ ___________
Cash and cash equivalents
at end of period $24,274,000 $23,102,000
___________ ___________
___________ ___________
(continued on next page)
The accompanying notes are an integral part of
these financial statements
<PAGE>
(continued from prior page)
Nine Months Ended
June 30,
__________________________
1995 1994
__________ _________
Reconciliation of net income to net cash
provided by operating activities:
Net income $3,830,000 $65,000
__________ __________
Adjustments:
Depreciation and amortization 3,807,000 3,090,000
Loss on extinguishment of debt 1,371,000
Change in assets and liabilities:
Receivables (1,354,000) (1,224,000)
Inventories 9,000 (376,000)
Prepaid expenses 154,000 (884,000)
Other assets (254,000) 56,000
Accounts payable 177,000 (697,000)
Accrued expenses 768,000 122,000
__________ __________
Total adjustments 3,307,000 1,458,000
__________ __________
Net cash provided by operating activities $7,137,000 $1,523,000
__________ __________
__________ __________
Non-cash investing and financing activities:
Non-cash aspects of acquisitions
Liabilities assumed or incurred $1,153,000 $2,163,000
Common stock issued 843,000 4,685,000
Assets acquired by incurring
directly related liabilities 500,000 450,000
The accompanying notes are an integral part of
these financial statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1. BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have
been prepared in accordance with Rule 10-01 of Regulation S-X,
"Interim Financial Statements," and accordingly do not include
all information and footnotes required under generally accepted
accounting principles for complete financial statements. The
financial statements have been prepared in conformity with the
accounting principles and practices as disclosed in the ICO, Inc.
(the "Company") Annual Report on Form 10-K for the year ended
September 30, 1994. In the opinion of management, these interim
financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation
of the Company's financial position as of June 30, 1995, the
results of its operations for the three months and nine months
ended June 30, 1995 and 1994 and the changes in its cash position
for the nine months ended June 30, 1995 and 1994. Results of
operations for the three month and nine month periods ended June
30, 1995 are not necessarily indicative of the results that may
be expected for the year ending September 30, 1995. For
additional information, refer to the consolidated financial
statements and footnotes included in the Company's Annual Report
on Form 10-K for the year ended September 30, 1994.
NOTE 2. EARNINGS (LOSS) PER SHARE AND STOCKHOLDERS' EQUITY
In October 1994 the Company purchased all of the outstanding
capital stock of B&W Equipment Sales and Mfg., Inc. ("B&W") for
approximately $700,000, consisting of $350,000 cash and 66,666
shares of ICO common stock. B&W designs and manufacturers parts
and components for nondestructive testing and inspection of
equipment for use in the tubular market. The Company accounted
for this acquisition under the purchase method of accounting.
For the nine months ended September 30, 1994, (unaudited) B&W
generated revenues of approximately $1,000,000 and net income of
$116,000. B&W sales to ICO during such nine month period totaled
approximately $635,000.
In March 1995 the Company acquired substantially all of the
operational assets (excluding real estate) of Kebco Pipe
Services, Inc. ("Kebco"), which provides testing, inspecting and
reconditioning services for oil country tubular goods in the West
Texas area. Kebco was acquired for a total consideration of
approximately $616,000, excluding acquisitions costs, consisting
of approximately $574,000 cash and a $42,000 note. The Company
accounted for this acquisition under the purchase method of
accounting. For the year ended June 30, 1994, (unaudited) Kebco
generated revenues of approximately $730,000 and net income of
approximately $37,000.
In June 1995 the Company purchased all of the outstanding capital
stock of R.J. Dixon, Inc. (DBA Spinco) for approximately
$1,000,000, consisting of a $490,000 note and 94,884 shares of
ICO common stock. R.J. Dixon, Inc. ("R.J. Dixon") provides
inspection and reclamation services for drill pipe and other oil
country tubular goods in the Gulf Coast area. The Company
accounted for the acquisition under the purchase method of
accounting. For the nine months ended April 30, 1995,
(unaudited) R.J. Dixon generated approximately $741,000 in
revenues and net income of $207,000.
<PAGE>
Cumulative foreign currency translation adjustment of $147,000
has been included in accumulated deficit.
Earnings (loss) per share is based on earnings (loss) applicable
to common shareholders and is calculated using the weighted-
average number of common and equivalent shares outstanding
including stock options and warrants which have a dilutive
effect. At June 30, 1995 and 1994 outstanding options and
warrants had no dilutive effect. Reacquired shares are excluded
from the weighted average calculation from the date of their
acquisition.
NOTE 3. CONDENSED PRO FORMA INFORMATION
In November 1993 the Company acquired substantially all of the
property, plant and equipment of Tubular Ultrasound Corporation,
Inc. ("TUC"). In February 1994 the Company purchased all of the
outstanding capital stock of Shearer Supply Ltd. ("Shearer"). In
April 1994, the Company acquired all of the outstanding capital
stock of Permian Enterprises, Inc. ("Permian") and Frontier
Inspection Services, Inc. ("Frontier"). In October 1994 the
Company purchased all of the outstanding capital stock of B&W
Equipment Sales and Mfg., Inc. ("B&W"). In March 1995 the
Company acquired substantially all of the operational assets of
Kebco, and in June 1995 the Company purchased all of the
outstanding stock of R.J. Dixon. The following condensed
unaudited pro forma combined results of operations have been
presented as if the acquisitions of TUC, Shearer, Permian,
Frontier, B&W, Kebco and R.J. Dixon had occurred on the first
day of the indicated period.
Pro Forma
________________________________________________
Three Months Ended Nine Months Ended
June 30, June 30,
_____________________ ______________________
1995 1994 1995 1994
___________ ___________ ___________ ___________
Revenues $22,092,000 $18,699,000 $63,797,000 $63,055,000
Income before
extraordinary income 1,486,000 623,000 4,008,000 2,494,000
Income before
extraordinary items
per common share $ .11 $ .01 $ .27 $ .15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources:
In June 1995 the Company purchased all of the outstanding capital
stock of R.J. Dixon, Inc. (DBA Spinco) for approximately
$1,000,000, consisting of a $490,000 note and 94,884 shares of
ICO common stock. R.J. Dixon, Inc. ("R.J. Dixon") provides
inspection and reclamation services for drill pipe and other oil
country tubular goods in the Gulf Coast area. The Company
accounted for the acquisition under the purchase method of
accounting. For the nine months ended April 30, 1995 (unaudited)
R.J. Dixon generated approximately $741,000 in revenues and net
income of $207,000.
For the nine months ended June 30, 1995 cash provided by
operating activities increased
<PAGE>
$5,614,000 compared to the nine months ended June 30, 1994. The
increase resulted primarily from net income of $3,830,000 for the
nine months ended June 30, 1995 compared to net income of $65,000
for the nine months ended June 30, 1994. Changes in the
Company's levels of accounts receivable and accounts payable due
to timing of cash receipts and cash disbursements for the nine
months ended June 30, 1995 also affected the net increase in cash
provided by operating activities. The Company had working
capital of $37,640,000 at June 30, 1995.
Expenditures for property, plant and equipment totaled $1,502,000
during the quarter and related to the manufacture of inspection
equipment currently under contract for sale or lease, major
repairs and enhancement of existing facilities. For the
remainder of fiscal 1995 capital expenditures are planned to be
approximately $1,500,000 and are expected to be financed through
cash generated from operations and existing cash.
Results of Operations:
For the nine months ended June 30, 1995 the Company had revenues
of $63,055,000 compared to $55,672,000 for the nine months ended
June 30, 1994, an increase of 13.3%. Net income for the nine
months ended June 30, 1995 was $3,830,000 compared to net income
of $65,000 for the same period last year. Net income for the
nine months ended June 30, 1994 included an extraordinary loss of
$1,371,000 resulting from the retirement of indebtedness recorded
on the consolidated balance sheet at a discounted value.
For the three months ended June 30, 1995 the Company had net
income of $1,451,000 compared to net income of $518,000 during
the corresponding period of the prior year. The Company's
earnings before interest, taxes, depreciation and amortization
and non-recurring charges for the quarter ended June 30, 1995
were $2,691,000 compared to $1,681,000 for the quarter ended June
30, 1994, an increase of 60.1%.
Revenues increased 14.3% in the three months ended June 30, 1995
as compared to the same period last year from $19,217,000 to
$21,964,000 despite a drop of 7.8% in the average rig count in
the 1995 quarter compared to the 1994 quarter.
Revenues from exploration services increased $1,021,000 or 15.3%
from the quarter ended June 30, 1994 to the same quarter in 1995.
The increase in revenues was primarily due to an increase in mill
inspection services relating to additional contracts awarded to
the Company since the quarter ended June 30, 1994.
Revenues from corrosion control, which include internal coating
and lining services, increased $1,508,000 or 39.4% for the
quarter ended June 30, 1995 when compared to the same quarter in
1994. This increase was due to increased revenues in all of the
Company's coating facilities, particularly the Amelia, Louisiana
and Houston, Texas facilities.
Revenues from production services, which include used tubular and
sucker rod services, decreased $114,000 or 2.3% from the quarter
ended June 30, 1994 to the same quarter in 1995. The decrease in
revenues was primarily the result of a shift toward the inclusion
of revenue for production services performed to recondition
tubulars and sucker rods in product sales revenue.
Product sales increased $687,000 or 23.6% from the quarter ended
June 30, 1994 to the same quarter in 1995. Sales for the quarter
ended June 30, 1995 include revenues from B&W which was
<PAGE>
acquired in October 1994. Product sales revenue then also
includes revenue for service performed to recondition tubulars
and sucker rods which were purchased by the Company and
subsequently resold.
Revenues from other sales and services consist primarily of
revenues generated by Shearer related to reconditioning engines
utilized in connection with pumping units of oil wells.
Cost of sales and services as a percentage of net revenues was
67.9% for the three months ended June 30, 1995 compared to 71.0%
for the three months ended June 30, 1994 reflecting improved
operating efficiencies due to the Company's cost control programs
and higher volumes. Selling, general and administrative expenses
increased from $3,890,000 for the quarter ended June 30, 1994 to
$4,356,000 for the quarter ended June 30, 1995 due to the
additional costs associated with the acquisitions during fiscal
1994 and 1995 and costs incurred during the quarter associated
with relocation and severance in connection with the Company's
ongoing cost control efforts. Selling, general and
administrative costs as a percentage of net revenues were 19.8%
for the quarter ended June 30, 1995 compared to 20.2% for the
quarter ended June 30, 1994.
Depreciation and amortization expense increased from $1,133,000
for the quarter ended June 30, 1994 to $1,339,000 for the quarter
ended June 30, 1995. The increase resulted from the property,
plant and equipment and goodwill related to the acquisitions of
Permian, Frontier, B&W, Kebco and R.J. Dixon as well as additions
of property, plant and equipment during the quarter. Net
interest income was $200,000 during the quarter ended June 30,
1994 compared to $353,000 for the quarter ended June 30, 1995.
This increase resulted from increased yields on the Company's
investments in cash equivalents due to the rise in short-term
interest rates since the 1994 quarter.
<PAGE>
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.
ICO, Inc.
____________________________________
(Registrant)
August 10, 1995 Asher O. Pacholder
____________________________________
Asher O. Pacholder
Chairman and Chief Financial Officer
Vicki J. Baum
_____________________________________
Vicki J. Baum, Vice President &
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 24,274
<SECURITIES> 0
<RECEIVABLES> 16,847
<ALLOWANCES> 438
<INVENTORY> 5,065
<CURRENT-ASSETS> 48,470
<PP&E> 82,928
<DEPRECIATION> 52,412
<TOTAL-ASSETS> 84,508
<CURRENT-LIABILITIES> 10,830
<BONDS> 0
<COMMON> 34,734
0
13
<OTHER-SE> 37,901
<TOTAL-LIABILITY-AND-EQUITY> 84,508
<SALES> 11,689
<TOTAL-REVENUES> 63,055
<CGS> 58,793
<TOTAL-COSTS> 58,793
<OTHER-EXPENSES> 16,443
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (967)
<INCOME-PRETAX> 4,262
<INCOME-TAX> 432
<INCOME-CONTINUING> 3,830
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,830
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
