<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 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 0-10068
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: 9,027,361 shares
outstanding as of May 14, 1996
<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 Six Months
Ended March 31, 1996 and 1995 2
Consolidated Balance Sheets as of
March 31, 1996 and September 30, 1995 3
Consolidated Statements of Cash Flows
for the Six Months Ended March 31, 1996
and 1995 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
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 11
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
__________________ _________________
1996 1995 1996 1995
_______ _______ ______ ______
Revenues:
Exploration sales
and services $8,231,000 $8,176,000 $16,686,000 $15,804,000
Production sales
and services 7,715,000 6,956,000 14,923,000 14,344,000
Corrosion Control
sales and services 5,505,000 4,896,000 10,942,000 9,281,000
Other sales and
services 670,000 828,000 1,321,000 1,662,000
__________ __________ __________ __________
22,121,000 20,856,000 43,872,000 41,091,000
__________ __________ __________ __________
Cost and expenses:
Cost of sales and
services 15,523,000 14,108,000 30,668,000 28,400,000
Selling, general
and administrative 3,722,000 4,513,000 7,775,000 8,280,000
Depreciation and
amortization 1,337,000 1,245,000 2,676,000 2,468,000
__________ __________ __________ __________
20,582,000 19,866,000 41,119,000 39,148,000
__________ __________ __________ __________
Operating income 1,539,000 990,000 2,753,000 1,943,000
Interest income, net 329,000 332,000 705,000 614,000
__________ __________ __________ __________
Income before income
taxes 1,868,000 1,322,000 3,458,000 2,557,000
Provision for federal
income taxes 95,000 148,000 184,000 178,000
__________ __________ __________ __________
Net income $1,773,000 $1,174,000 $3,274,000 $2,379,000
__________ __________ __________ __________
__________ __________ __________ __________
Earnings per common and
common equivalent
share:
Net income $ .14 $.07 $ .25 $.15
Weighted average
shares outstanding 8,927,361 8,648,218 8,918,028 8,628,984
__________ __________ __________ __________
__________ __________ __________ __________
The accompanying notes are an integral part of
these financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
ASSETS
(unaudited)
March 31, September 30,
1996 1995
_____________ _____________
Current assets:
Cash and equivalents $22,415,000 $24,991,000
Trade receivables
(less allowance for
doubtful accounts of
$882,000 and $828,000,
respectively) 15,952,000 18,050,000
Inventories 5,915,000 4,873,000
Prepaid expenses and other 2,894,000 2,035,000
___________ ___________
Total current assets 47,176,000 49,949,000
___________ ___________
Property, plant and
equipment, at cost 82,440,000 83,461,000
Less - accumulated
depreciation and
amortization (50,903,000) (53,637,000)
___________ ___________
31,537,000 29,824,000
___________ ___________
Other assets:
Goodwill, net 4,371,000 4,474,000
Deferred tax asset 1,989,000 1,633,000
Patents and licenses, net 214,000 229,000
Other 2,317,000 2,074,000
___________ ___________
$87,604,000 $88,183,000
___________ ___________
___________ ___________
The accompanying notes are an integral part of
these financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(unaudited)
March 31, September 30,
1996 1995
___________ ___________
Current liabilities:
Current portion of long-term
debt and short-term
note payable $ 619,000 $ 635,000
Accounts payable 6,283,000 5,622,000
Accrued insurance 1,581,000 1,731,000
Accrued salaries and wages 510,000 1,351,000
Income taxes payable 70,000 1,209,000
Accrued expenses 1,553,000 2,117,000
___________ ___________
Total current liabilities 10,616,000 12,665,000
___________ ___________
Long-term debt,
net of current portion 1,101,000 1,047,000
___________ ___________
Stockholders' equity:
Preferred stock, without
par value - 500,000 shares
authorized; 322,500 shares
issued and outstanding with
a liquidation preference
of $32,250,000 13,000 13,000
Common stock,
without par value -
50,000,000 shares authorized;
8,927,361 and 8,883,911
shares issued and
outstanding, respectively 35,237,000 35,042,000
Additional paid in capital 55,987,000 56,058,000
Accumulated deficit (15,350,000) (16,642,000)
___________ __________
75,887,000 74,471,000
___________ ___________
$87,604,000 $88,183,000
___________ ___________
___________ ___________
The accompanying notes are an integral part of
these financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
March 31
_____________________________
1996 1995
______________ _____________
Cash flows from operating activities:
Cash received from customers $46,073,000 $40,478,000
Cash paid to suppliers and employees (41,023,000) (33,585,000)
Interest received net of interest paid 705,000 610,000
Income taxes paid (1,679,000) ---
____________ ____________
Net cash provided by operating activities 4,076,000 7,503,000
____________ ____________
Cash flows from investing activities:
Capital expenditures (4,196,000) (3,604,000)
Acquisitions (301,000) (922,000)
Dispositions of property,
plant and equipment 61,000 1,000
____________ ____________
Net cash used for investing activities (4,436,000) (4,525,000)
Cash flows from financing activities:
Net proceeds from sale of stock 195,000 121,000
Payment of dividend on preferred stock (1,088,000) (1,088,000)
Payment of dividend on common stock (894,000) ---
Borrowings --- 142,000
Reduction of cash overdraft (393,000) (730,000)
Reductions of debt (36,000) (321,000)
____________ ____________
Net cash used for financing activities (2,216,000) (1,876,000)
____________ ____________
Net increase (decrease) in cash (2,576,000) 1,102,000
Cash and cash equivalents at
beginning of period 24,991,000 24,763,000
____________ ____________
Cash and cash equivalents at end of period $22,415,000 $25,865,000
____________ ____________
____________ ____________
The accompanying notes are an integral part of
these financial statements.
(continued on next page)
<PAGE>
(continued from prior page)
Six Months Ended
March 31,
_____________________________
1996 1995
_______________ ____________
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 3,274,000 $ 2,379,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,676,000 2,468,000
Gain on disposition of property, plant,
and equipment (44,000) ---
Change in assets and liabilities:
(Increase) decrease in receivables 2,244,000 (665,000)
(Increase) decrease in inventories (905,000) (108,000)
(Increase) decrease in prepaid expenses
& other current assets (859,000) 161,000
(Increase) decrease in other assets (587,000) (146,000)
Increase (decrease) in accounts payable 1,041,000 2,520,000
Increase (decrease) in accrued expenses (2,764,000) 894,000
___________ __________
Total adjustments 802,000 5,124,000
___________ __________
___________ __________
Net cash provided by operating activities $4,076,000 $7,503,000
___________ __________
___________ __________
Non-cash investing and financing activities:
Non-cash aspects of acquisitions
Liabilities assumed or incurred 83,000 308,000
Common stock issued --- 333,000
Assets acquired by incurring
directly related liabilities 80,000 500,000
The accompanying notes are an integral part of
these financial statements.
<PAGE>
ICO, INC.
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, 1995. 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 March 31, 1996, the
results of its operations for the three months and six months
ended March 31, 1996 and 1995 and the changes in its cash
position for the six months ended March 31, 1996 and 1995.
Results of operations for the three month and six month periods
ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the year ending September 30,
1996. 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, 1995.
Certain revenue reclassifications have been made for the six
month period ended March 31, 1995 to enhance comparability with
the same period of 1996.
NOTE 2. EARNINGS (LOSS) PER SHARE AND STOCKHOLDERS EQUITY
__________________________________________________
Cumulative foreign translation adjustment of $(120,000) has been
included as an addition to additional paid in capital.
Earnings per share is based on earnings (loss) applicable to
common shareholders and is calculated using the weighted-average
number of common and common equivalent shares. At March 31, 1996
and 1995, outstanding options and warrants did not have a
materially dilutive effect.
During fiscal year 1995, the Company made three acquisitions
which included: R.J. Dixon, Inc. - Spinco (June 1995), the
operating assets of Kebco Pipe Inspection, Inc. (March 1995) and
B&W Equipment Sales and Mfg., Inc. (October 1994). During fiscal
year 1996, the Company acquired the operating assets of Rainbow
Inspection Company of Mississippi, Inc. (March 1996). The pro
forma effects of the above acquisitions are not material and, as
such, are not presented.
The Company and Wedco Technology, Inc. entered into a definitive
merger agreement dated December 8, 1995 and amended March 13,
1996. The merger was consummated on April 30, 1996 and will be
accounted for as a purchase. As consideration, Wedco
shareholders will receive the choice of either (i) 2.2 ICO common
shares and $3.50 cash or (ii) 2.84 ICO common shares for each
Wedco share. Each holder of Wedco common stock has been
furnished with a letter of transmittal upon which to make their
merger consideration election. If a holder of Wedco common stock
fails to make an election regarding the merger consideration
within 30 days after the date the letter of transmittal was
mailed, the holder will be deemed to have elected to receive the
all stock consideration. As of April 30, 1996, Wedco had
approximately 3,706,000 common shares outstanding.
<PAGE>
The following condensed unaudited pro forma combined results of
operations have been presented as if the acquisition of Wedco had
occurred on the first day of the indicated period. These pro
forma statements are in preliminary form as certain procedures
related to the purchase price allocation have not been completed
at this time.
Three Months Six Months
ended March 31, ended March 31,
1996 1996
_______________ _______________
Revenues $32,984,000 $64,727,000
Net Income 710,000 1,936,000
Net Income per Common Share .01 .05
Weighted Average Shares
Outstanding 18,729,000 18,720,000
During the six months ended March 31, 1996 $.15 of ICO's $.25 earnings
per share were attributable to the recognition of certain tax benefits,
including the utilization of net operating loss carryforwards. During
the quarter ended March 31, 1996 these tax benefits were $.08 of the
Company's $.14 earnings per share. While ICO will continue to realize
a cash savings from approximately $5.4 million (i.e., a tax benefit of
approximately $1.9 million) in net operating loss carryforwards (at
March 31, 1996) for tax purposes after the merger, future benefits
resulting from the utilization of these loss carryforwards will no
longer be recognized in the income statements prepared in accordance
with generally accepted accounting principles.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources:
_______________________________
For the six months ended March 31, 1996 cash provided by
operating activities decreased $3,427,000 compared to the six
months ended March 31, 1995. Despite net income of $3,274,000
for the six months ended March 31, 1996 compared to $2,379,000
for the six months ended March 31, 1995, the decrease resulted
from the payment of income taxes and various accrued liabilities
during the six months ended March 31, 1996. The Company had
working capital of $36,560,000 at March 31, 1996.
Expenditures for property, plant and equipment totaled $4.2
million during the six months ended March 31, 1996. The
expenditures were primarily incurred for major repairs, for
enhancement of existing facilities and for manufacture of
equipment currently under a mill inspection services contract.
For the remainder of fiscal 1996, capital expenditures related to
the enhancement of existing oilfield services facilities are
planned to be approximately $2.0 million and are expected to be
financed through cash generated from operations and existing
cash.
Credit Arrangement:
__________________
Effective April 17, 1996, the company established a $15,000,000
revolving line of credit to be repaid on or before the facility s
expiration date of April 17, 1998. Borrowings under the line of
credit bear interest at prime or Libor + 1.25%. As of May 10,
1996, there were no borrowings outstanding under this credit
facility.
Results of Operations:
_____________________
For the six months ended March 31, 1996 the Company had revenues
of $43,872,000 compared to $41,091,000 for the six months
ending March 31, 1995, an increase of 6.8%. Net income for the
six months ended March 31, 1996 was $3,274,000 compared to net
income of $2,379,000 for the same period last year.
For the three months ended March 31, 1996 the Company had net
income of $1,773,000 compared to net income of $1,174,000 during
the corresponding period of the prior year. The Company s
earnings before interest, taxes, depreciation and amortization
for the quarter ended March 31, 1996 were $2,876,000 compared to
$2,235,000 for the quarter ended March 31, 1995, an increase of
28.7%.
Revenues increased 6.1% in the three months ended March 31, 1996
as compared to the same period last year from $20,856,000 to
$22,121,000.
<PAGE>
Revenues from exploration services increased $55,000 or less than
1% from the quarter ended March 31, 1995 to the same quarter in
1996. The increase resulted from increased mill inspection
services and increased new pipe inspecting revenues in the
Louisiana market, offset by a shift in the classification of the
services provided to customers within the Company s Lone Star,
Texas facility. Historically, the Lone Star facility primarily
provided new pipe inspection. Recently, the Company has provided
mostly used pipe inspection in this area. Accordingly, in fiscal
year 1996, Lone Star revenues (which are up 22% for the six
months ended March 31, 1996 versus the same period in 1995) are
considered production services revenues versus fiscal year 1995,
where these revenues were included in exploration services
revenues.
Revenues from production services, which include used tubular and
sucker rod services, increased $759,000 or 10.9% from the quarter
ended March 31, 1995 to the same quarter in 1996. The increase
is due primarily to the reclassification of Lone Star revenues to
production services revenues in fiscal year 1996, as discussed
above.
Revenues from corrosion control, which include internal coating
and lining services, increased $609,000 or 12.4% for the quarter
ended March 31, 1996 when compared to the same quarter in 1995.
The change is due to increased coating revenues in the West Texas
and Louisiana markets.
<PAGE>
Revenues from other sales and services consist primarily of
revenues generated by Shearer Supply Ltd. 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
70.2% for the three months ended March 31, 1996 compared to 67.6%
for the three months ended March 31, 1995. Approximately 1% of
the 2.6% increase is the result of reclassifying employee
expenses to costs of sales for employees who were previously
included in sales, general and administrative expenses. The
reclassifications were made based upon these employees job
functions. The remaining gross margin decline is based upon the
differing mix of products and services provided by the Company
during the two quarters.
Selling, general and administrative expenses decreased from
$4,513,000 for the quarter ended March 31, 1995 to $3,722,000 for
the quarter ended March 31, 1996. Selling, general and
administrative costs as a percentage of net revenues were 16.8%
for the quarter ended March 31, 1996 compared to 21.6% for the
quarter ended March 31, 1995. Approximately 1% of the 4.8%
decrease in SG&A expenses as a percentage of net revenues is the
result of reclassifying certain employee expense as discussed
above. A significant portion of the remaining decline relates to
non-recurring expenses related to relocation and severance cost
during the quarter ended March 31, 1995 in connection with the
Company s ongoing cost control efforts.
Depreciation and amortization expense increased from $1,245,000
for the quarter ended March 31, 1995 to $1,337,000 for the
quarter ended March 31, 1996. The increase resulted from
additions of property, plant and equipment during the twelve
months ended March 31, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
On December 18, 1995 the Company filed a Form 8-K Current Report
to announce that the Company had entered into a definitive merger
agreement for the merger of Wedco Technology, Inc. into a
subsidiary of ICO.
<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)
/s/ Asher O. Pacholder
______________________
May 10, 1996 Asher O. Pacholder
Chairman and Chief
Financial Officer
(Principal Financial
Officer)
/s/ Jon C. Biro
_________________________
Jon C. Biro, Controller
& Treasurer
(Principal Accounting
Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
quarterly filing on Form 10-Q for the period ended March 31, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1995
<CASH> 22,415,000
<SECURITIES> 0
<RECEIVABLES> 16,834,000
<ALLOWANCES> 882,000
<INVENTORY> 5,915,000
<CURRENT-ASSETS> 47,176,000
<PP&E> 82,440,000
<DEPRECIATION> 50,903,000
<TOTAL-ASSETS> 87,604,000
<CURRENT-LIABILITIES> 10,616,000
<BONDS> 0
0
13,000
<COMMON> 35,237,000
<OTHER-SE> 40,637,000
<TOTAL-LIABILITY-AND-EQUITY> 87,604,000
<SALES> 43,872,000
<TOTAL-REVENUES> 44,577,000
<CGS> 60,668,000
<TOTAL-COSTS> 41,119,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,458,000
<INCOME-TAX> 184,000
<INCOME-CONTINUING> 3,274,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,274,000
<EPS-PRIMARY> .25
<EPS-DILUTED> 0
</TABLE>
