UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended 3/31/96
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 0-4538
LUMEX, INC.
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(Exact name of registrant as specified in its charter)
New York 11-1731581
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2100 Smithtown Avenue, Ronkonkoma, New York 11779
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (516) 585-9000
------------------------------
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
--- ---
On March 31, 1996, the registrant had outstanding 4,354,938 shares of Common
Stock, par value $.10 per share, which is the registrant's only class of common
stock.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
---------------------
LUMEX, INC.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(unaudited)
THREE MONTHS ENDED
MARCH 31,
---------
1996 1995
---- ----
<S> <C> <C>
Net sales $20,076 $18,243
Cost and expenses:
Cost of sales 12,076 10,661
Selling and administrative 6,914 6,803
Product development 981 1,180
Other (income) (6) (99)
------- -------
19,965 18,545
------- -------
Operating profit (loss) 111 (302)
Interest expense 585 251
Interest income 65 350
------- -------
Loss from continuing operations before
income tax benefit (409) (203)
Income tax benefit - 72
------- -------
LOSS FROM CONTINUING OPERATIONS (409) (131)
(Loss) income from discontinued operations, net (414) 247
------- -------
NET (LOSS) INCOME $ (823) $ 116
======= =======
(LOSS) INCOME PER SHARE OF COMMON STOCK:
Continuing operations $ (.09) $ (.03)
Discontinued operations (.10) .06
------- -------
NET (LOSS) INCOME $ (.19) $ .03
======= =======
</TABLE>
See notes to consolidated condensed financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
LUMEX, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
MARCH 31, DECEMBER 31,
1996 1995
---- ----
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 274 $ 1,798
Investments - 2,476
Accounts receivable 17,891 22,482
Inventories 13,163 12,024
Lease receivables 1,115 574
Net assets of discontinued operations 38,533 37,214
Other current assets 3,060 5,466
------- -------
Total Current Assets 74,036 82,034
Property, plant and equipment, net 12,957 13,291
Lease receivables 1,630 1,402
Intangible assets 1,583 1,687
Other assets 906 504
------- -------
$91,112 $98,918
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $15,250 $15,250
Accounts payable 9,011 10,874
Other current liabilities 22,949 28,218
------- -------
Total Current Liabilities 47,210 54,342
Deferred income taxes 1,227 1,227
Long-term debt 2,540 2,715
Stockholders' Equity
Common stock, par value $.10 per share,
authorized 15,000,000 shares, issued
4,420,986 in 1996 and 4,364,403 in 1995 449 446
Capital surplus 17,358 17,128
Retained earnings 23,278 24,101
Treasury stock at cost (66,048 shares
in 1996 and 1995) (629) (629)
Other (321) (412)
------- -------
Total Stockholder's Equity 40,135 40,634
------- -------
$91,112 $98,918
======= =======
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
LUMEX, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
THREE MONTHS ENDED
MARCH 31,
1996 1995
---- ----
(Dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (823) $ 116
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 734 1,262
Net changes in operating assets
and liabilities (3,862) (6,808)
Change in net assets of discontinued
operations (1,319) -0-
------ ------
NET CASH USED IN OPERATING ACTIVITIES (5,270) (5,430)
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (176) (1,939)
Proceeds from sales and maturities
of investments 2,476 -0-
Purchases of intangible assets (30) (3,517)
Other -0- (17)
------ -------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 2,270 (5,473)
FINANCING ACTIVITIES:
Proceeds from short-term borrowings -0- 3,000
Proceeds from sales of leases 2,473 -0-
Principal payments of long-term debt (1,150) (925)
Exercise of stock options 153 18
Common shares reacquired -0- (2)
------ -------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,476 2,091
------ -------
(DECREASE) IN CASH (1,524) (8,812)
CASH AND CASH EQUIVALENTS -- January 1 1,798 9,746
------ -------
CASH AND CASH EQUIVALENTS -- March 31 $ 274 $ 934
====== =======
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
LUMEX, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands)
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and changes in cash flows in
conformity with generally accepted accounting principles. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The Company has
reclassified the presentation of certain prior year information to conform to
the current year presentation format.
It is suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the Company's
latest Annual Report on Form 10-K for the year ended December 31, 1995.
NOTE 2--DISCONTINUED OPERATIONS
On April 3, 1996, the Company completed the sale of its Lumex Division (the
"Division") to Fuqua Enterprises, Inc. ("Fuqua") for $40,750,000 in cash and,
accordingly the net assets and operating results of the Division are reflected
as discontinued operations. The sale agreement provides for a post closing
adjustment to the sales price based on changes in the net assets of the Division
from December 31, 1995 through the closing date. The Company has received
preliminary indications from Fuqua that it is not in agreement with the recorded
amount of certain of the net assets of the Division as of the closing date.
Under the terms of the sale agreement, if the Company and Fuqua are unable to
agree on the recorded amount of net assets, the disputed items will be
submitted to arbitration by an independent accounting firm.
NOTE 3--INVENTORIES
Inventories are valued at the lower of cost or market. Certain inventories are
valued under the last-in first-out (LIFO) method. The estimated replacement cost
of LIFO inventories exceeds stated LIFO cost by $1,525,972 and $1,500,972 at
March 31, 1996 and December 31, 1995 respectively.
Inventories were as follows:
March 31, December 31,
1996 1995
---- ----
Finished goods $ 3,957 $ 4,160
Work in process 3,749 3,828
Raw materials 5,457 4,036
------- -------
$13,163 $12,024
======= =======
5
<PAGE>
Because the inventory determination under the LIFO method can only be made at
the end of each fiscal year based on the inventory levels and costs at that
point, interim LIFO determinations are based on management's estimates of
expected year-end inventory levels and costs.
Since future estimates of inventory levels and prices are subject to many forces
beyond the control of management, interim financial results are subject to final
year-end LIFO inventory amounts.
NOTE 4--NET (LOSS) INCOME PER COMMON SHARE
Net (loss) income per common share is computed by dividing net (loss) income by
the weighted average number of common shares and, if applicable, common share
equivalents (dilutive stock options) outstanding during each year (4,420,986 in
1996 and 4,357,981 in 1995).
6
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
On April 3, 1996, the Company completed the sale of substantially all the assets
of its Lumex Division for $40,750,000 in cash. Accordingly, the results of
operations of the Lumex Division have been reclassified as discontinued
operations.
The following discussion, including statistics presented, refers solely to
continuing operations unless otherwise stated.
RESULTS OF OPERATIONS
The following table sets forth selected items from the consolidated statements
of operations as a percentage of sales:
Quarter Ended %
March 31, Inc.(Dec)
--------- ---------
1996 1995
---- ----
Net sales 100.0% 100.0% 10.0%
Cost and expenses:
Cost of sales 60.2 58.4 13.3
Selling and administrative 34.4 37.3 1.6
Product development 4.9 6.5 (16.9)
Loss from continuing operations
before income tax benefit (2.0) (1.1)
1996 vs. 1995:
--------------
Net sales increased 10.0%, to $20,076,000 in the first quarter 1996 as compared
to net sales of $18,243,000 in the first quarter 1995. The quarterly sales
growth came from increased shipments of fitness products into each of the
Rehabilitation, Fitness and International markets. Shipments of variable
resistance training equipment, including the second generation VR2 products,
rose $2.4 million, or 43%, in the first quarter 1996 as compared to the same
period a year earlier. Sales of the Company's lines of free weight, plate loaded
and modular systems were also higher while shipments of the BIKE and SEMI were
lower due to competitive pricing pressures.
Gross margins declined in the first quarter 1996 as compared to the first
quarter of 1995 principally the result of product mix, higher material costs and
increased international shipments.
Selling and administrative expenses rose 1.6% in the first quarter 1996,
however, as a percentage of sales declined to 34.4% as compared to 37.3% in the
1995 quarter, as the benefits from restructuring operations exceeded volume
based costs.
7
<PAGE>
Product development expenses decreased 16.9% in the first quarter 1996 as
expenses in 1995 were higher due to accelerated efforts to complete the Cybex
NORM and VR2 product lines, which were successfully introduced in mid 1995.
Interest expense rose to $585,000, due principally to increased borrowings.
Interest income declined due to lower average balances held in the Company's
lease portfolio and reduced average balances in short term investments.
The Company has significant carryforward tax losses and has not taken any
additional tax benefit for financial statement purposes.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company's working capital was approximately $26.8
million, its current ratio was 1.57 to 1 and total short-term and long-term
borrowings were $31.1 million. As a result of the sale of the Lumex Division,
completed on April 3, 1996, for $40.75 million in cash, the Company's financial
condition was considerably improved as the Company repaid all its borrowings
other than $3.3 million of industrial bond financings.
Net cash used in operating activities was $5.3 million during the first quarter
1996 including $1.7 million from discontinued operations. Cash used from
continuing operations of approximately $3.6 million results largely from a $1.1
million increase in inventories, a $1.3 million increase in lease receivables
and a $6.2 million reduction in payables and accrued liabilities offset by a
decrease of $4.9 million in trade receivables due to the lower sales volume in
the first quarter 1996 compared to fourth quarter 1995.
Cash provided by investing activities of $2.2 million was primarily sales and
maturities of investments used to fund operating activities during the quarter.
Cash provided by financing activities of approximately $1.5 million principally
resulted from the sale of more than $2.4 million in lease receivables offset by
principal payments of long term debt of $1.1 million.
With the close of the sale of its Lumex Division and the concurrent paydown of
short and long-term borrowings the Company's capital structure is conservative
with total bank debt representing 8.2% of total stockholders' equity. The
Company has a $10 million bank line of credit under which, subsequent to the
sale of the Lumex Division, there were no outstanding borrowings. Management
expects the cash flow generated from its manufacturing operations plus the net
proceeds from the sale of the Lumex Division will be sufficient to meet its
general working capital and capital expenditure requirements, including those
related to the restructuring of its continuing operations. The Company's finance
subsidiary is expected to support its continued growth through periodic sales of
its lease portfolios to third party financial institutions.
8
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
2(a) - Asset Sale Agreement, dated as of March 13, 1996, by
and between the Company, MUL Acquisition Corp. I, MUL
Acquisition Corp. II and Fuqua Enterprises, Inc.,
incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K, dated April 3, 1996.
27 - Financial Data Schedules (filed herewith)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended March 31, 1996.
9
<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.
LUMEX, INC.
Date: May 20, 1996 By /s/ J. Raymond Elliott
--------------------------- ----------------------------
J. Raymond Elliott
President and
Chief Executive Officer
Date: May 20, 1996 By /s/ Robert McNally
--------------------------- -----------------------
Robert McNally
Sr. Vice President and
Chief Financial Officer
10
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
2(a) Asset Sale Agreement, dated as of March 13, 1996, by and between the
Company, MUL Acquisition Corp. I, MUL Acquisition Corp. II and Fuqua
Enterprises, Inc., incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K, dated April 3, 1996.
27 Financial Data Schedule (filed herewith)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the financial
statements contained in the body of the
accompanying Form 10-Q and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 274
<SECURITIES> 0
<RECEIVABLES> 19,006
<ALLOWANCES> 0
<INVENTORY> 13,163
<CURRENT-ASSETS> 74,036
<PP&E> 12,957
<DEPRECIATION> 0
<TOTAL-ASSETS> 91,112
<CURRENT-LIABILITIES> 47,210
<BONDS> 2,540
0
0
<COMMON> 449
<OTHER-SE> 39,686
<TOTAL-LIABILITY-AND-EQUITY> 40,135
<SALES> 20,076
<TOTAL-REVENUES> 20,076
<CGS> 12,076
<TOTAL-COSTS> 12,076
<OTHER-EXPENSES> 981
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 585
<INCOME-PRETAX> (409)
<INCOME-TAX> 0
<INCOME-CONTINUING> (409)
<DISCONTINUED> (414)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (823)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
