UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 September 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 __________________
Commission file number 0-2977
------
General Magnaplate Corporation
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-1641813
------------------------------- ------------------
(State or other jurisdiction of IRS Employer
incorporation or organization) Identification No.
1331 U.S. Route 1, Linden, New Jersey 07036
------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 862-6200
--------------
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 6, 1996 :
Common Stock, No Par Value 2,593,297
- -------------------------- ------------------
(Class) (Number of Shares)
<PAGE>
INDEX OF DOCUMENTS
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Accountants' Report
Balance Sheet - End of Current Quarter
Balance Sheet - End of Prior Fiscal Year
Statement of Income
Statement of Changes in Financial Position
Notes to Consolidated Financial Statements
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
In the registrant's Form 10-Q for the quarter ended March 31, 1996 it was
stated:
In April, 1991, a claim was served on the Canadian subsidiary, General
Magnaplate Canada, Ltd., by Dynasurf International, Inc. for $170,000
representing the unpaid contract liability for the net assets acquired
by the Canadian subsidiary from the sellers, Carrigan Industries, Ltd.
and Dynasurf International, Inc. on January 2, 1990. The Subsidiary has
filed a counterclaim for environmental and other costs which resulted
from the seller not resolving certain environmental issues warranted in
the contract of purchase. Further, a shareholder of Dynasurf
International, Inc. has also filed a claim for breach of oral contract
of employment of $119,000 which the Company has denied in their related
statement of defense.
The company reached an out of court agreement with the plaintiffs on
September 9, 1996 wherein the plaintiffs were paid the sum of $65,000
U.S. dollars in full settlement of their claim. Such settlement did not
have an adverse effect on the Company's financial statements.
ITEM 4 - Submission of Matters to a Vote of Security Holders - None
ITEM 5 - Other Information - Press Release - Enclosed
ITEM 6 - Exhibits and Reports on Form 8-K - None
<PAGE>
ACCOUNTANTS' REVIEW REPORT
To The Board of Directors of
General Magnaplate Corporation:
We have reviewed the accompanying balance sheet of General Magnaplate
Corporation and Wholly-Owned Subsidiaries as of September 30, 1996 and the
related consolidated statement of stockholders' equity for the three months
ended September 30, 1996 and the related consolidated statements of income and
cash flows for the three months ended September 30, 1996 and 1995, in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information included in
these financial statements is the representation of management of General
Magnaplate Corporation.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion on
the September 30, 1996 and 1995 statements.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements in order for them
to be in conformity with generally accepted accounting principles.
Our review was made for the purpose of expressing limited assurance
that there are no material modifications that should be made to the financial
statements in order for them to be in conformity with generally accepted
accounting principles. The supplementary information for the three months ended
September 30, 1996 and 1995 included in the accompanying supplementary
information is presented for supplementary analysis purposes. Such information
has been subjected to the inquiry and analytical procedures applied in the
review of the basic financial statements, and we are not aware of any material
modifications that should be made thereto.
The balance sheet for the year ended June 30, 1996 was audited by us,
and we expressed an unqualified opinion on it in our report dated August 9,
1996. We have not performed any auditing procedures on the balance sheet since
August 9, 1996.
/s/Mauriello, Franklin & LoBrace
October 25, 1996
<PAGE>
<TABLE>
<CAPTION>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
ASSETS 1996 1996
------ ----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents .............. $ 998,647 $ 680,570
Marketable securities (Note 1) ......... 4,158,206 4,192,421
Accounts receivable--trade, net of
allowance for doubtful accounts of
$145,000 (June 30, 1996-$137,000) .... 1,215,479 1,254,845
Inventories (Note 1) ................... 273,116 273,073
Prepaid expenses ....................... 130,853 177,321
Other current assets ................... 165,510 158,287
----------- -----------
Total current assets ............... $ 6,941,811 $ 6,736,517
Property, plant, and equipment, at
cost, net of accumulated
depreciation (Notes 1 and 2) ........... 5,389,864 5,432,330
Cash surrender value of officers' life
insurance, net ......................... 664,162 664,162
Other assets (Note 3) .................... 509,998 500,707
----------- -----------
Total assets ......................... $13,505,835 $13,333,716
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1996
- ------------------------------------ ------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable ......................... $ 240,654 $ 437,113
Accrued liabilities (Note 5) ............. 438,609 559,903
Corporate income taxes payable ........... 220,405 70,560
Dividends payable ........................ 184,436 -0-
------------ ------------
Total current liabilities .............. $ 1,084,104 $ 1,067,576
------------ ------------
Long-term liabilities:
Rent security deposit .................... $ 9,194 $ 7,877
Accrued deferred compensation (Note 6) ... 1,016,010 977,831
------------ ------------
Total long-term liabilities ............ $ 1,025,204 $ 985,708
------------ ------------
Total liabilities ...................... $ 2,109,308 $ 2,053,284
------------ ------------
Contingencies (Note 7)
Stockholders' equity:
Common stock--no par value
Authorized--5,000,000 shares
Issued and outstanding--2,634,797 shares $ 223,180 $ 223,180
Retained earnings ........................ 11,293,990 11,178,589
Foreign currency translation adjustment
(Note 1) ............................... (120,643) (121,337)
------------ ------------
Total stockholders' equity ............. $ 11,396,527 $ 11,280,432
------------ ------------
Total liabilities and
stockholders' equity ................. $ 13,505,835 $ 13,333,716
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 1996
Foreign
Currency
Common Retained Translation
Stock Earnings Adjustment
--------- ------------ ------------
<S> <C> <C> <C>
Balance,
July 1, 1996 ............... $ 223,180 $ 11,178,589 $ (121,337)
Add--net income .............. -0- 299,837 -0-
Less--foreign currency
translation adjustment ...... -0- -0- 694
Less--dividends declared ..... -0- (184,436) -0-
--------- ------------ ------------
Balance,
September 30, 1996 ......... $ 223,180 $ 11,293,990 $ (120,643)
========= ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
1996 1995
---------- ----------
<S> <C> <C>
Gross revenue:
Sales ........................................ $2,431,060 $2,426,331
Royalty income ............................... 65,187 41,398
Investment and other income, net ............. 104,771 144,336
---------- ----------
$2,601,018 $2,612,065
---------- ----------
Costs and expenses:
Cost of sales ................................ $1,055,473 $ 986,569
Selling and administration ................... 926,802 936,107
Depreciation and amortization ................ 141,972 155,306
Interest ..................................... 234 4,128
---------- ----------
$2,124,481 $2,082,110
---------- ----------
Income before corporate income taxes ........... $ 476,537 $ 529,955
Corporate income taxes (Notes 1 and 4) ......... 176,700 194,400
---------- ----------
Net income ..................................... $ 299,837 $ 335,555
========== ==========
Earnings per share (Note 1) .................... $ .11 $ .12
========== ==========
Weighted average shares outstanding ............ 2,634,797 2,742,656
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 299,837 $ 335,555
----------- -----------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ....................... $ 141,972 $ 155,306
Reserve for unrealized gain ......................... (14,064) (73,249)
Deferred tax credits ................................ (12,400) (16,600)
Allowance for doubtful accounts ..................... 8,000 34,293
Accrued deferred compensation ....................... 37,672 27,000
Foreign exchange translation adjustment ............. 694 (3,861)
Increase (decrease) in cash resulting from changes in
current assets and liabilities:
Marketable securities ............................ 48,279 429,185
Accounts receivable .............................. 31,366 (6,144)
Inventories ...................................... (43) (566)
Other current assets ............................. 52,487 26,837
Accounts payable and accrued liabilities ........ (317,753) (35,579)
Corporate income taxes payable ................... 149,845 64,276
Rent security deposit ............................ 1,317 -0-
----------- -----------
Total adjustments ........................... $ 127,372 $ 600,898
----------- -----------
Net cash provided by operating activities ............ $ 427,209 $ 936,453
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment, net ........ $ (98,583) $ (79,791)
Additions to patents and trademarks ..................... (10,549) (976)
Collection of note receivable-sale of land .............. -0- 75,000
----------- -----------
Net cash used in investing activities ................. $ (109,132) $ (5,767)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction in long-term debt ............................. $ -0- $ (3,113)
Acquisition of treasury stock ........................... -0- (35,894)
----------- -----------
Net cash used in financing activities ................. $ -0- $ (39,007)
----------- -----------
INCREASE IN CASH ......................................... $ 318,077 $ 891,679
Cash and cash equivalents, beginning of period ......... 680,570 369,276
----------- -----------
Cash and cash equivalents, end of period ............... $ 998,647 $ 1,260,955
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
General Magnaplate Corporation and its wholly-owned subsidiaries;
accordingly all intercompany transactions and balances have been
eliminated in consolidation.
NATURE OF BUSINESS
The Company is in one line of business. It provides
synergistic coatings and other related services to its customers'
products from five plants located in the United States and Canada.
MARKETABLE SECURITIES
All marketable securities are considered trading securities
and are valued at fair market value in accordance with SFAS No. 115.
Realized and unrealized gains and losses are reported in current period
income.
Market value exceeded cost by $12,022 at September 30, 1996.
INVENTORIES
Inventories consist principally of industrial supplies and
plating solutions which are valued at the lower of FIFO cost or market
and are included in Cost of Sales.
DEPRECIATION AND AMORTIZATION
Property, plant and equipment are stated at cost and
depreciation is provided principally on a straight line basis using
estimated service lives of 3-5 years for transportation equipment, 5-10
years for factory machinery and office equipment, and 10-39 years for
buildings and building improvements. Expenditures for renewals and
betterments are capitalized. Items of identifiable property which are
sold, retired, or otherwise disposed of are removed from the asset
accounts, and any gains or losses thereon are reflected in income.
Patents and trademarks are amortized on a straight line basis
over periods not exceeding 17 years.
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CORPORATE INCOME TAXES
Taxes are provided based on income reported for financial
statement purposes, including deferred taxes which are principally
provided due to temporary differences between financial and tax
reporting of certain revenue and expense items.
COMPANY EARNINGS PER SHARE
Earnings per share of common stock have been computed based on
the weighted average number of shares outstanding during the period.
STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Assets and liabilities of the subsidiary operating in Canada
are translated into U.S. dollars using the exchange rate in effect at
the balance sheet date. Results of operations are translated using the
average exchange rate prevailing throughout the period. The effects of
exchange rate fluctuations on translating foreign currency assets and
liabilities into U.S. dollars are included as part of the Foreign
Currency Translation Adjustment component of shareholders' equity,
while gains and losses resulting from foreign currency transactions are
generally included in income.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
----------- -----------
<S> <C> <C>
Land ....................................... $ 805,350 $ 805,350
Buildings .................................. 3,366,208 3,366,208
Building improvements ...................... 3,408,522 3,393,127
Factory machinery .......................... 4,546,696 4,465,319
Office equipment ........................... 867,598 865,614
Transportation equipment ................... 264,036 264,026
----------- -----------
Total ...................................... $13,258,410 $13,159,644
Less--accumulated depreciation ............. 7,868,546 7,727,314
----------- -----------
Net ........................................ $ 5,389,864 $ 5,432,330
=========== ===========
</TABLE>
NOTE 3--OTHER ASSETS
Other assets are as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
-------- --------
<S> <C> <C>
Deferred income taxes ............................ $173,834 $174,676
Note receivable-related party ................. 235,000
235,000
Deferred compensation contracts ............... 54,518 54,011
Patents and trademarks, at cost, net of
accumulated amortization ................... 46,646 37,020
-------- --------
$509,998 $500,707
======== ========
</TABLE>
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4--CORPORATE INCOME TAXES
Components of corporate income taxes are as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
--------- ---------
<S> <C> <C>
Current:
Federal ......................... $ 164,100 $ 185,700
State ........................... 25,000 25,300
Foreign ......................... -0- -0-
--------- ---------
$ 189,100 $ 211,000
--------- ---------
Deferred:
Federal .......................... $ (9,600) $ (12,900)
State ............................ (2,800) (3,700)
Foreign .......................... -0- -0-
--------- ---------
$ (12,400) $ (16,600)
--------- ---------
Total .............................. $ 176,700 $ 194,400
========= =========
</TABLE>
A reconciliation of the provision for corporate income taxes compared
with the amounts at the US statutory tax is as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
--------- ---------
<S> <C> <C>
Based on U.S. statutory federal tax rate of 34% .. $ 162,022 $ 180,181
Increase (decrease) in taxes
resulting from:
State taxes, net of federal tax benefit ......... 14,652 14,256
Non-deductible expenses ...................... 26 (37)
--------- ---------
Total .................................... $ 176,700 $ 194,400
========= =========
Effective tax rate ................................. 37.1% 36.7%
</TABLE>
The Canadian subsidiary has available unused tax benefits in the form
of operating loss carryforwards of approximately U.S. $168,000 to reduce future
Canadian taxable income. These carryforwards principally expire in 1999. A
deferred tax asset has been provided subject to a 100% valuation allowance since
it is not likely that the loss carryforwards will be utilized prior to their
expiration.
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5--ACCRUED LIABILITIES
Accrued liabilities are as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
-------- --------
<S> <C> <C>
Compensation ................................... $231,604 $309,695
Payroll, sales, and property taxes ............. 104,353 75,775
401-k plan contribution ........................ 46,241 27,176
Environmental and other costs .................. 56,411 147,257
-------- --------
$438,609 $559,903
======== ========
</TABLE>
NOTE 6--EMPLOYEE BENEFITS
The Company maintains a 401(k) savings plan which covers all full time
U.S. employees. The Company matches 50% of voluntary pre-tax employee
participant contributions up to 4% of compensation as well as providing
discretionary contributions based on compensation for all employees. Employer
discretionary contributions, which are forfeited due to employee termination
prior to the full seven year vesting period, revert back to the Company. Total
expense under the plan was $14,278 in 1996 and $14,254 in 1995.
Pursuant to employment contracts and letter agreements with officers
and key employees, the Company maintains non-qualified incentive compensation
plans which are based on the realization of pre-tax income and royalty income.
Total expense under these plans was $105,954 in 1996 and $106,775 in 1995.
The Company is obligated to provide a non-qualified retirement pension
to its chief executive officer. Such obligation provides a monthly benefit of
$7,100 and is payable for a period of fifteen years to the officer, or to his
wife in the event of his death. The Company is accruing the obligation over the
active term of employment of the officer. The Company is also accruing and
funding deferred compensation contracts with two other officers based on 10% of
annual compensation. Total expense under these three obligations was $37,671 in
1996 and $27,000 in 1995.
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7--CONTINGENCIES AND RISKS
LITIGATION
In April, 1991, a claim was served on the Canadian subsidiary,
General Magnaplate Canada, Ltd., by Dynasurf International, Inc. for
$170,000 representing the unpaid contract liability for the net assets
acquired by the Canadian subsidiary from the sellers, Carrigan
Industries, Ltd. and Dynasurf International, Inc. on January 2, 1990.
The Subsidiary has filed a counterclaim for environmental and
other costs incurred which resulted from the seller not resolving
certain environmental issues warranted in the contract of purchase.
Further, a shareholder of Dynasurf International, Inc. has also filed a
claim for breach of oral contract of employment for $119,000 which the
Company has denied in their related statement of defense.
The Company reached an out of court agreement with the
plaintiffs in September, 1996 wherein the plaintiffs were collectively
paid the sum of $65,000 in full settlement of their claim. Such
settlement did not have an adverse effect on the Company's financial
statements.
CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of its cash, marketable
securities and trade receivables.
The Company's cash and marketable securities are in
high-quality securities placed with a wide array of institutions with
high credit and investment ratings. This investment policy limits the
Company's exposure to concentrations of credit risk.
The trade receivable balances, reflecting the Company's
diversified sources of revenue, are dispersed across many different
geographic areas. As a consequence, concentrations of credit risk are
limited. The Company routinely assesses the financial strength of its
customers and generally does not require collateral to support its
credit sales.
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8--RELATED PARTY TRANSACTIONS
The Company engaged in the following related party transactions:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------
1996 1995
------ ------
<S> <C> <C>
Was charged computer consulting services
by an outside director of the Company $9,498 $8,906
Accrued interest income on an
installment note receivable of $235,000
secured by a deed of trust on the Texas
real estate. The note bears interest of
6.83% per annum collectible annually for
three years. Thereafter the note shall
be collected in (5) equal annual
principal installments of $47,000
commencing July 1, 1999 with the final
collection due July 1, 2003 plus
interest of 6.83% per annum. $4,016 $4,016
</TABLE>
NOTE 9--FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and Cash Equivalents, Accounts Receivable, Accounts Payable, and
Accrued Liabilities--The carrying amount approximates fair value
because of the short maturity of these instruments.
Marketable Securities--The carrying amount approximates fair value
because such securities are valued based on market quotes.
Note Receivable - Sale of Land--The carrying amount approximates fair
value because of similar rates on issues offered to the Corporation
under some or similar provisions.
Accrued Deferred Compensation--The carrying amount approximates fair
value because such liability is being valued based on current market
values.
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10--STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------
1996 1995
-------- --------
<S> <C> <C>
Supplementary data:
Interest expense paid ........................ $ 234 $ 4,128
Income taxes paid ............................ 39,255 146,224
Non-cash transaction:
Declaration of dividend payable
of $.07 per share ......................... 184,436 -0-
</TABLE>
<PAGE>
Item 2A - Management's Discussion and Analysis of Financial Position:
Financial Condition
Liquidity and Capital Resources
Three-Months ended September 1996
Cash and cash equivalents increased to $998,647 at September 30, 1996, with
net cash increasing $318,077 from the $680,570 at June 30, 1996. Of this,
$427,209 net cash was provided by the operating activities of the first three
months, $109,132 was used by investing activities and $0 was used by financing
activities. During the three months, the registrant's investment activities
comprised of $109,132 which was solely used for additions to property, plant and
equipment, and for additions to patents and trademarks.
In September of 1996 a $.07 per share dividend was declared and is payable
in the second quarter.
Working capital of $5,857,707 increased $188,766 during the three months
and the working capital ratio increased to 6.40 to 1 from 6.31 to 1 at June 30,
1996.
Stockholders' equity per share at September 30, 1996 increased 1.2% to
$4.33 per share compared with $4.28 per share at June 30, 1996. Although the
Board had previously authorized a stock buy back no shares of GMCC stock were
purchased during the quarter.
Management believes that internal cash flow and/or incomes from marketable
securities are expected to be sufficient to provide the capital resources
necessary to support future operating needs, and does not anticipate any
material expenditures that will have significant impact on future cash flows.
<PAGE>
Item 2B - Management's Discussion and Analysis of Results of Operations:
Quarter --- September 30, 1996 compared with September 30, 1995:
Sales rose this quarter as reflected in the current period sales of
$2,431,060, an increase of $4,729 or .2% from the same quarter last year.
Management expects this positive trend in sales increases to continue through
the remainder of the year. The construction of additional space at our Wisconsin
facility is now complete and fully operational. As expected, response to our Web
site on the World Wide Web (http://www.magnaplate.com) has steadily increased,
and has resulted in additional sales. The additional international advertising
has been met with tremendous response as justified by increased royalties.
Royalty and investment and other income for the first quarter were $65,187 and
$104,771 compared with $41,398 and $144,336 from last year's first quarter. The
$23,789 increase in royalty income is a direct result of higher sales volume
reported by all of our licensees. Negotiations are continuing to take place
regarding potential new licensees. Investment income is down slightly, this is
attributable to an adjustment of investments to market value. Though the
investment market has been unsteady lately, management believes it's investment
portfolio to be sound, diversified and less at risk to market fluctuations while
providing dividends and interest income.
Reflecting the above, gross revenue for the first quarter of this year of
$2,601,018 dropped slightly by .4% or $11,047 from the same quarter last year.
Total costs and expenses were $2,124,481 in the first quarter an increase
of $42,371 or 2% from the same period last year. Management has successfully
stabilized costs in direct proportion to revenue and continues to monitor
spending.
Income before corporate income taxes was $476,537 in this year's first
quarter, a decline of $53,418 or 10% from the $529,955 achieved in last year's
first quarter. Corporate income taxes and the effective tax rate for the period
were $176,700 and 37.1% respectively, compared with $194,400 and 36.7% in the
first quarter of last year.
Based on the above, net income in the first quarter of this year of
$299,837 decreased $35,718 or 10.6% from the $335,555 in the same period last
year.
Earnings per share were down 9% in this year's first quarter (or $.11
compared to $.12 in last year's first quarter). No shares of treasury stock were
purchased this quarter, resulting in a weighted average of shares outstanding of
2,634,797 compared with 2,742,656 for the same period last year.
Management believes the existing legal matters as detailed in note 7 to the
consolidated financial statements will have no significant impact on future
earnings.
Negotiations are in progress regarding a potential new licensee in Korea.
No other significant financial matters are expected in future months that
will have an adverse impact on earnings.
<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.
GENERAL MAGNAPLATE CORPORATION
------------------------------
(Registrant)
DATE November 14, 1996
-------------------------------------
/s/Candida C. Aversenti
- ------------------------------------------
Candida C. Aversenti
President
DATE November 14, 1996
-------------------------------------
/s/Susan E. Neri
- ------------------------------------------
Susan E. Neri
Chief Accounting Officer
<PAGE>
[GRAPHIC -- COMPANY LOGO]
MAGNAPLATE NEWS
1331 U.S. Route #1
Linden, New Jersey 07036
Telephone: 908-862-6200
Fax: 908-862-6110
FOR IMMEDIATE RELEASE
November 7, 1996
GENERAL MAGNAPLATE CORPORATION (GMCC)
Three Months Report To Shareholders -- September 30, 1996
Condensed Statement of Income for Three Months Ending September 30
------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Gross Revenue ............................ $2,601,018 $2,612,065
Income Before Taxes ...................... 476,537 529,955
Net Income ............................... 299,837 335,555
Earnings Per Share ....................... $ 0.11 $ 0.12
Avg. Shares Outstanding .................. 2,634,797 2,742,656
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 998,647
<SECURITIES> 4,158,206
<RECEIVABLES> 1,215,479
<ALLOWANCES> 145,000
<INVENTORY> 273,116
<CURRENT-ASSETS> 6,941,811
<PP&E> 13,258,410
<DEPRECIATION> 7,868,546
<TOTAL-ASSETS> 13,505,835
<CURRENT-LIABILITIES> 1,084,104
<BONDS> 0
0
0
<COMMON> 223,180
<OTHER-SE> 11,173,347
<TOTAL-LIABILITY-AND-EQUITY> 11,396,527
<SALES> 2,431,060
<TOTAL-REVENUES> 2,601,018
<CGS> 1,055,473
<TOTAL-COSTS> 2,124,481
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 476,537
<INCOME-TAX> 176,700
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 299,837
<EPS-PRIMARY> .11
<EPS-DILUTED> 0
</TABLE>
