<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT OR SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- -------------
Commission File No. 0-7770
MCCLAIN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-1867649
State of Incorporation I.R.S. Employer I.D. No.
6200 Elmridge Road
Sterling Heights, Michigan 48310
(810) 264-3611
(Address of principal executive offices and 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 .
-- --
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of February 5, 1999.
Common Stock, No Par Value 4,668,911
- -------------------------- ----------------
Class Number of Shares
1 of 11
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MCCLAIN INDUSTRIES, INC.
------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
(unaudited)
------------ -------------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 724,482 $ 1,924,006
Accounts Receivable (Net) 18,899,386 24,235,761
Inventories 42,290,752 38,873,477
Net Investment in Sales Type
Leases - Current Portion 3,250,000 3,100,000
Prepaid Expenses 565,483 543,095
----------- -----------
Total Current Assets 65,730,103 68,676,339
----------- -----------
Property and Equipment 42,464,708 42,100,575
Accumulated Depreciation (19,559,704) (18,834,030)
Net Property and Equipment 22,905,004 23,266,545
----------- -----------
Net Investment in Sales Type
Leases - Less Current Portion 6,256,909 6,013,959
----------- -----------
Other Assets 2,239,163 2,290,124
----------- -----------
Total Assets $97,131,179 $100,246,967
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current Portion of Long-Term Debt 3,300,000 3,300,000
Accounts Payable 15,847,909 18,405,224
Accrued Liabilities 4,780,838 4,537,434
Federal and State Income Taxes 0 513,994
----------- -----------
Total Current Liabilities 23,928,747 26,756,652
----------- -----------
Deferred Income Taxes 2,215,000 2,215,000
----------- -----------
Long Term Debt - Less
Current Portion 40,959,327 42,530,105
----------- -----------
Product Liability 2,631,313 1,909,904
----------- -----------
Stockholders' Equity 27,396,792 26,835,306
----------- -----------
Total Liabilities and
Stockholders' equity $97,131,179 $100,246,967
=========== ============
</TABLE>
See notes to condensed consolidated financial statements.
2 of 11
<PAGE> 3
MCCLAIN INDUSTRIES, INC.
------------------------
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
-----------------------------------------------
UNAUDITED
---------
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1998 1997
--------------------------
<S> <C> <C>
Net Sales $27,156,906 $23,625,324
Cost of Sales 22,314,809 19,252,930
----------- -----------
Gross Profit 4,842,097 4,372,394
Selling General
and Administrative
Expenses 3,446,543 3,278,925
----------- -----------
Operating Income 1,395,554 1,093,469
----------- -----------
Other Income (Expense)
Interest Expense (863,076) (831,574)
Interest Income 363,639 308,819
Other Income (Expense) ( 45,631) ( 59,177)
----------- -----------
Net Other Expense (545,068) (581,932)
----------- -----------
Income Before Income Taxes 850,486 511,537
Income Taxes 289,000 174,000
----------- -----------
Net Income $ 561,486 $ 337,537
=========== ===========
Net income per common
share (basic and diluted) $ .12 $ .07
=========== ===========
Weighted average number of
common shares (basic and
diluted) 4,682,160 4,762,953
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
3 of 11
<PAGE> 4
MCCLAIN INDUSTRIES, INC.
------------------------
The following table presents, as a percentage of net sales, certain
selected financial data for the Company for the periods indicated:
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
December 31,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Net Sales 100.00% 100.00%
Cost of Sales 82.17 81.49
------- -------
Gross Profit 17.83 18.51
Selling, General &
Administrative Expenses 12.69 13.88
------- -------
Operating Income 5.14 4.63
Other Expenses ( 2.01) (2.46)
------- -------
Income Before Income Taxes 3.13 2.17
Provision for Income Taxes 1.06 .74
------- -------
Net Income 2.07% 1.43%
======= =======
</TABLE>
9 of 11
<PAGE> 5
MCCLAIN INDUSTRIES, INC.
------------------------
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
----------------------------------------------
Net sales increased 14.95% to $27.2 million for the quarter ended December 31,
1998 (Quarter 1998) from $23.6 million for the quarter ended December 31, 1997
(Quarter 1997). The increase in sales is attributable primarily to strong sales
in the McClain E-Z Pack product line and the company's truck program.
Cost of sales as a percentage of net sales increased to 82.17% for the Quarter
1998 from 81.49% for the Quarter 1997. Selling, General and Administrative
expenses decreased to 12.69% of net sales for the Quarter 1998 as a result of
the increased sales volume and the restructing of certain administrative
processes.
The Company had working capital of $41.8 million at December 31, 1998
compared to $41.9 million at September 30, 1998. The ratio of current assets to
current liabilities was 2.75 to 1 at December 31, 1998 compared to 2.57 to 1 at
September 30, 1998. The Company's cash and cash equivalents totaled $.72 million
at December 31, 1998. Cash flows from operations were $.7 million for the
quarter ended December 31, 1998, primarily as a result of increased receivable
collections.
The Company uses computer hardware and financial and manufacturing
software that it purchased from third party suppliers. Such suppliers have
confirmed to the Company that such products are Year 2000 compliant.
Consequently, the Company does not expect to incur any significant costs to
become Year 2000 compliant. The Company has no information concerning the Year
2000 compliance status of its suppliers or customers. If any of the Company's
significant suppliers or customers does not successfully and timely become Year
2000 compliant, the Company's business or operations could be adversely
affected. The Company has not yet generated any disaster contingency plans
related to the Year 2000 compliance issue.
<PAGE> 6
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorizd.
McCLAIN INDUSTRIES, INC.
Date: FEBRUARY 8, 1999 By: /s/ Kenneth D. McClain
----------------------- ------------------------
Kenneth D. McClain, President
Date: FEBRUARY 8, 1999 By: /s/ Mark S. Mikelait
------------------------ --------------------------
Mark S. Mikelait, Treasurer
11 of 11
<PAGE> 7
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000063686
<NAME> MCCLAIN INDUSTRIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 724,482
<SECURITIES> 0
<RECEIVABLES> 18,899,386
<ALLOWANCES> 0
<INVENTORY> 42,290,752
<CURRENT-ASSETS> 65,730,103
<PP&E> 42,464,708
<DEPRECIATION> 19,559,704
<TOTAL-ASSETS> 97,131,179
<CURRENT-LIABILITIES> 23,928,747
<BONDS> 0
0
0
<COMMON> 4,997,809
<OTHER-SE> 22,398,983
<TOTAL-LIABILITY-AND-EQUITY> 97,131,179
<SALES> 27,156,906
<TOTAL-REVENUES> 27,156,906
<CGS> 22,314,809
<TOTAL-COSTS> 22,314,809
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 863,076
<INCOME-PRETAX> 850,486
<INCOME-TAX> 289,000
<INCOME-CONTINUING> 561,486
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 561,486
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
