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, 1997
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, 1997 :
Common Stock, No Par Value 2,454,397
(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 - None
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>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Accountants' Review Report
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statement of Stockholders' Equity
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Supplementary Information
<PAGE>
MAURIELLO, FRANKLIN & LoBRACE
A PROFESSIONAL CORPORATION
CERTIFIED PUBLIC ACCOUNTANTS
45 SPRINGFIELD AVENUE, SPRINGFIELD, NEW JERSEY 07081
TELEPHONE (201) 379-5400 FAX (201) 379-3696
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, 1997 and the
related consolidated statement of stockholders' equity for the three months
ended September 30, 1997 and the related consolidated statements of income and
cash flows for the three months ended September 30, 1997 and 1996, 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, 1997 and 1996 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, 1997 and 1996 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, 1997 was audited by us,
and we expressed an unqualified opinion on it in our report dated August 8,
1997. We have not performed any auditing procedures on the balance sheet since
August 8, 1997.
October 24, 1997
<PAGE>
<TABLE>
<CAPTION>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
ASSETS 1997 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents .............................. $ 1,376,528 $ 1,216,824
Marketable securities (Note 1) ......................... 3,120,128 2,875,776
Accounts receivable--trade, net of
allowance for doubtful accounts of
$116,000 (June 30, 1997-$116,000) .................... 1,401,558 1,426,471
Inventories (Note 1) ................................... 303,088 303,088
Prepaid expenses ....................................... 143,716 170,806
Other current assets ................................... 135,365 215,298
----------- -----------
Total current assets ............................... $ 6,480,383 $ 6,208,263
Property, plant, and equipment, at
cost, net of accumulated
depreciation (Notes 1 and 2) ........................... 5,431,572 5,355,600
Cash surrender value of officers' life insurance.......... 775,464 752,148
Note receivable-officer (Note 7) ......................... 529,191 532,449
Note receivable-related party partnership (Note 7)........ 235,000 235,000
Other assets (Note 3) .................................... 465,528 429,816
----------- -----------
Total assets ......................................... $13,917,138 $13,513,276
=========== ===========
</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 1997 1997
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable ........................................ $ 233,643 $ 196,179
Accrued liabilities (Note 5) ............................ 424,780 548,333
Dividends payable ....................................... 245,730 -0-
Corporate income taxes payable .......................... 270,940 168,389
------------ ------------
Total current liabilities ............................. $ 1,175,093 $ 912,901
------------ ------------
Long-term liabilities:
Rent security deposit ................................... $ 9,194 $ 9,193
Accrued deferred compensation (Note 6) .................. 1,183,985 1,139,698
------------ ------------
Total long-term liabilities ........................... $ 1,193,179 $ 1,148,891
------------ ------------
Total liabilities ..................................... $ 2,368,272 $ 2,061,792
------------ ------------
Commitments and contingencies (Note 9)
Stockholders' equity:
Common stock--no par value
Authorized--5,000,000 shares
Issued and outstanding--2,459,397shares ............... $ 223,180 $ 223,180
Retained earnings ....................................... 11,464,336 11,365,263
Foreign currency translation adjustment ................. (138,650) (136,959)
------------ ------------
(Note 1)
Total stockholders' equity ............................ $ 11,548,866 $ 11,451,484
------------ ------------
Total liabilities and stockholders' equity............. $ 13,917,138 $ 13,513,276
============ ============
</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, 1997
Foreign
Currency
Common Retained Translation
Stock Earnings Adjustment
-------- ----------- ---------
<S> <C> <C> <C>
Balance,
July 1, 1997 $223,180 $11,365,263 $(136,959)
Add--net income -0- 345,013 -0-
Less--foreign currency
translation adjustment -0- -0- (1,691)
Less--dividends declared
of $.10 per share -0- (245,940) -0-
-------- ----------- ---------
Balance,
September 30, 1997 $223,180 $11,464,336 $(138,650)
======== =========== =========
</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, 1997 AND 1996
1997 1996
---------- ----------
<S> <C> <C>
Gross revenue:
Sales ............................................. $2,680,860 $2,431,060
Royalty income .................................... 56,172 65,187
Investment and other income ....................... 158,469 104,771
---------- ----------
$2,895,501 $2,601,018
---------- ----------
Costs and expenses:
Cost of sales ..................................... $1,176,214 $1,055,473
Selling and administration ........................ 1,021,208 926,802
Depreciation and amortization ..................... 153,466 141,972
Interest .......................................... -0- 234
---------- ----------
$2,350,888 $2,124,481
---------- ----------
Income before corporate income taxes ................ $ 544,613 $ 476,537
Corporate income taxes (Notes 1 and 4) .............. 199,600 176,700
---------- ----------
Net income .......................................... $ 345,013 $ 299,837
========== ==========
Earnings per share (Note 1) ......................... $ .14 $ .11
========== ==========
Weighted average shares outstanding ................. 2,459,397 2,634,797
========== ==========
</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, 1997 AND 1996
1997 1996
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 345,013 $ 299,837
----------- -----------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ...................... $ 153,466 $ 141,972
Reserve for unrealized gain ........................ (57,891) (14,064)
Deferred tax credits ............................... (16,000) (12,400)
Allowance for doubtful accounts .................... 13,800 8,000
Accrued deferred compensation ...................... 44,287 37,672
Foreign exchange translation adjustment ............ (1,691) 694
Increase (decrease) in cash resulting from
changes in current assets and liabilities:
Marketable securities ........................... (186,461) 48,279
Accounts receivable ............................. 11,113 31,366
Inventories ..................................... -0- (43)
Prepaid and other current assets ................ 72,788 52,487
Accounts payable and accrued liabilities ....... (86,088) (317,753)
Corporate income taxes payable .................. 136,770 149,845
Rent security deposit ........................... -0- 1,317
----------- -----------
Total adjustments .......................... $ 84,093 $ 127,372
----------- -----------
Net cash provided by operating activities ........... $ 429,106 $ 427,209
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment, net ....... $ (226,519) $ (98,583)
Additions to patents and trademarks .................... (5,343) (10,549)
Additions to deferred compensation contracts ........... (17,288) -0-
Collection of note receivable-officer .................. 3,064 -0-
Increase in cash surrender value-officers'
life insurance ...................................... (23,316) -0-
----------- -----------
Net cash used in investing activities ................ $ (269,402) $ (109,132)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES ..................... $ -0- $ -0-
----------- -----------
INCREASE IN CASH (Note 10) .............................. $ 159,704 $ 318,077
Cash and cash equivalents, beginning of period ........ 1,216,824 680,570
----------- -----------
Cash and cash equivalents, end of period .............. $ 1,376,528 $ 998,647
=========== ===========
</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 $85,461 and $12,022 as of
September 30, 1997 and 1996 respectively.
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 10 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,
1997 1997
----------- -----------
<S> <C> <C>
Land ................................... $ 805,350 $ 805,350
Buildings .............................. 3,409,075 3,366,208
Building improvements .................. 3,450,824 3,450,824
Factory machinery ...................... 4,947,256 4,828,457
Office equipment ....................... 933,292 911,058
Transportation equipment ............... 313,649 271,018
----------- -----------
Total .................................. $13,859,446 $13,632,915
Less--accumulated depreciation ......... 8,427,874 8,277,315
----------- -----------
Net .................................... $ 5,431,572 $ 5,355,600
=========== ===========
</TABLE>
Note 3--Other Assets
Other assets are as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
-------- --------
<S> <C> <C>
Patents and trademarks, at cost, net of
accumulated amortization of $103,400
and $100,481 ............................... $ 85,442 $ 83,018
Deferred income taxes .......................... 249,100 233,100
Deferred compensation contracts ................ 130,986 113,698
-------- --------
$465,528 $429,816
======== ========
</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,
1997 1996
--------- ---------
<S> <C> <C>
Current:
Federal $ 190,200 $ 164,100
State 25,400 25,000
Foreign -0- -0-
--------- ---------
$ 215,600 $ 189,100
--------- ---------
Deferred:
Federal $ (12,400) $ ( 9,600)
State (3,600) (2,800)
Foreign -0- -0-
--------- ----------
$ (16,000) $ (12,400)
--------- ---------
Total $ 199,600 $ 176,700
========= =========
</TABLE>
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4--Corporate Income Taxes (Continued)
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,
-----------------------
1997 1996
-------- --------
<S> <C> <C>
Based on U.S.statutory federal tax rate of 34% $185,168 $162,022
Increase (decrease) in taxes
resulting from:
State taxes, net of federal tax benefit ...... 14,388 14,652
Non-deductible expenses ...................... 44 26
-------- --------
Total ..................................... $199,600 $176,700
======== ========
Effective tax rate ............................ 36.7% 37.1%
</TABLE>
The Canadian subsidiary has available unused tax benefits in the form
of operating loss carryforwards of approximately U.S. $64,000 to reduce future
Canadian taxable income. These carryforwards principally expire in 2002. 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.
Note 5--Accrued Liabilities
Accrued liabilities are as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
-------- --------
<S> <C> <C>
Compensation ................................. $268,946 $435,256
Payroll, sales, and property taxes ........... 105,297 61,718
401-k plan contribution ...................... 23,038 19,954
Environmental and other costs ................ 27,499 31,405
-------- --------
$424,780 $548,333
======== ========
</TABLE>
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 $12,487 in 1997 and $14,278 in 1996.
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 $115,071 in 1997 and $105,954 in 1996.
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 $39,567 in
1997 and $37,671 in 1996.
<PAGE>
GENERAL MAGNAPLATE CORPORATION
AND
WHOLLY-OWNED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7--Related Party Transactions
The Company engaged in the following related party transactions:
<TABLE>
<CAPTION>
Three Months Ended
September 30
--------------------
1997 1996
<S> <C> <C>
Was charged computer consulting services by an
outside director of the Company; $12,175 $ 9,498
Accrued interest income on an installment note
receivable of $235,000 due from a limited
partnership controlled by a stockholder of the
Company 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 plus
interest of 6.83% per annum commencing July 1, 1999
with the final collection due July 1, 2003; $ 4,013 $ 4,013
Charged interest income on a mortgage note
receivable of $550,000 from its chief executive
officer on December 16, 1996. The note is to be
repaid in (34) equal monthly installments of $3,814
which includes interest of 6.16% per annum
commencing February 1, 1997 with the final balloon
payment of $512,124 due December 16. 1999. The
receivable balance at June 30, 1997 was $544,996
and is secured by a real estate first mortgage. $ 8,377 $ -0-
</TABLE>
Note 8--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.
Notes Receivable - Related Parties--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 9--Commitments and Contingencies
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 on September 9, 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.
Lease Commitment
The Company leases warehouse space in its New Jersey facility
to a tenant under an operating lease expiring December 31, 1999.
Minimum future rentals to be received on the lease as of June 30, 1997
are as follows: 1997-98 - $115,198; 1998-99 - $118,443; and 1999-00 -
$60,844.
<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,
----------------------
1997 1996
-------- ---------
<S> <C> <C>
Supplementary data:
Interest expense paid ....................... $ -0- $ 234
Income taxes paid ........................... 78,830 39,255
Non-cash transaction:
Declaration of dividend payable
of $.10 and $.07 per share respectively .. 245,940 184,436
</TABLE>
<PAGE>
Item 2A - Management's Discussion and Analysis of Financial Position:
Financial Condition
Liquidity and Capital Resources
Three-Months ended September 1997
Cash and cash equivalents increased to $1,376,528 at September 30, 1997,
with net cash increasing $159,704 from the $1,216,824 at June 30, 1997. Of this,
$429,106 net cash was provided by the operating activities of the first three
months, $269,402 was used by investing activities and $0 was used by financing
activities. During the three months, the registrant's investment activities were
primarily comprised of $231,862 used for additions to property, plant and
equipment, and for additions to patents and trademarks, $17,288 for additions to
deferred compensation contracts and $23,316 for additions to cash surrender
value-life insurance.
In September of 1997 a $.10 per share dividend was declared and was payable
in October.
Working capital of $5,305,290 increased $9,928 during the three months and
the working capital ratio decreased to 5.51 to 1 from 6.80 to 1 at June 30,
1997.
Stockholders' equity per share at September 30, 1997 increased .9% to $4.70
per share compared with $4.66 per share at June 30, 1997. 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.
Item 2B - Management's Discussion and Analysis of Results of Operations:
Quarter --- September 30, 1997 compared with September 30, 1996:
Sales rose this quarter as reflected in the current period sales of
$2,680,860 an increase of $249,800 or 10.3% from the same quarter last year.
Sales for the first quarter are the highest reported in the past five years.
Management feels that sales will continue to increase thru the rest of the year,
this is based on increases in customer contracts, and volume and a larger sales
force. We are in full production with the Black & Decker OSD steam iron
production and have an exclusive trademark agreement allowing them to use our
MAGNAGLIDE mark. In late September a press release was issued announcing a
million dollar purchase order with Black & Decker for such irons.
Royalty and investment and other income for the first quarter were $56,172
and $158,469 compared with $65,187 and $104,771 from last year's first quarter.
Although royalty income is down slightly this is primarily due to a timing
difference, not all royalty reports were received from our licensee at the time
the financial statements were prepared. Additional royalties due will be
reported in the second quarter. The international advertising continues to be
very successful. Management is continuing to investigate potential licensee
candidates in Italy, Mexico and Korea. Investment income increased 51.2% or
$53,698. Although 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.
<PAGE>
Reflecting the above, gross revenue for the first quarter of this year of
$2,895,501 increased 11.3% or $294,483 from the same quarter last year.
Total costs and expenses were $2,350,888 in the first quarter an increase
of $226,407 or 10.7% from the same period last year. The primary increase is due
to additional employees and advance raw material purchases to accommodate
increased production.
Income before corporate income taxes was $544,613 in this year's first
quarter, an increase of $68,076 or 14.3% from the $476,537 achieved in last
year's first quarter. Corporate income taxes and the effective tax rate for the
period were $199,600 and 36.7% respectively, compared with $176,700 and 37.1% in
the first quarter of last year.
Based on the above, net income in the first quarter of this year of
$345,013 increased $45,176 or 15.1% from the $299,837 in the same period last
year.
Earnings per share were up 27.2% in this year's first quarter (or $.14
compared to $.11 in last year's first quarter). No shares of treasury stock were
purchased this quarter, resulting in a weighted average of shares outstanding of
2,459,397 compared with 2,634,797 for the same period last year.
General Magnaplate Canada, Ltd. will be relocating to a newer, more modern
facility which will allow for further expansion of the Canadian market. The
building which will be purchased is located in Ajax, Ont. The closing is
expected to take place in early November.
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 13, 1997
/s/ Candida C. Aversenti
------------------------
Candida C. Aversenti
President
DATE: November 13, 1997
/s/ Susan E. Neri
-----------------
Susan E. Neri
Chief Accounting Officer
<PAGE>
[GRAPHIC -- COMPANY LOGO]
MAGNAPLATE NEWS
Dedicated to the Future Needs of Mankind
Through Surface Enhancement
1331 U.S. Route #1
Linden, New Jersey 07036
Telephone: 908-862-6200
Fax: 908-862-6110
http://www.magnaplate.com
e-mail:[email protected]
FOR IMMEDIATE RELEASE
Linden, New Jersey November 5, 1997
GENERAL MAGNAPLATE CORPORATION (GMCC)
First Quarter Report to Shareholders - September 30, 1997
Total sales increased 10.3% and gross revenue increased 11.3% over last
year's first quarter. Net income increased 15.1% over last year. Earnings per
share showed a 27.2% increase. General Magnaplate has expanded its Plasmadize(R)
line of surface enhancements as well as adding several other new processes and
enlarged its capacity at all five facilities. This quarter our stock price has
doubled and shown a significant increase in trading activity.
Condensed Comparative Statement of Income -
Three Months Ended September 30
1997 1996
---- ----
Gross Revenue $2,895,501 $2,601,018
Income Before Taxes 544,613 476,537
Net Income 345,013 299,837
Net Income Per Share $0.14 $0.11
Average Shares Outstanding 2,459,397 2,634,797
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 1,376,528
<SECURITIES> 3,120,128
<RECEIVABLES> 1,401,558
<ALLOWANCES> 116,000
<INVENTORY> 303,088
<CURRENT-ASSETS> 6,480,383
<PP&E> 13,859,446
<DEPRECIATION> 8,427,874
<TOTAL-ASSETS> 13,917,138
<CURRENT-LIABILITIES> 1,175,093
<BONDS> 0
0
0
<COMMON> 223,180
<OTHER-SE> 11,325,686
<TOTAL-LIABILITY-AND-EQUITY> 11,548,866
<SALES> 2,680,860
<TOTAL-REVENUES> 2,895,501
<CGS> 1,176,214
<TOTAL-COSTS> 2,350,888
<OTHER-EXPENSES> 1,174,674
<LOSS-PROVISION> 13,800
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 544,613
<INCOME-TAX> 199,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 345,013
<EPS-PRIMARY> .14
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