<PAGE> 1
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 period ended April 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: 0-1363
-------------------------------------------------------
MRL, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Missouri 43-0614403
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
287 N. Lindbergh, Suite 206, St. Louis, Missouri 63141-7840
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(314) 432-7222
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(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
--- ---
Number of Shares
Title of class of Common Stock outstanding as of this report date
- ------------------------------ ----------------------------------
Common Stock, par value $.10 per share 2,785,694
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<PAGE> 2
PART I
FINANCIAL INFORMATION
<PAGE> 3
<TABLE>
CONDENSED BALANCE SHEETS
APRIL 30 AND JANUARY 31, 1996
<CAPTION>
APRIL 30 JANUARY 31
----------- ----------
(Unaudited)
<S> <C> <C>
Assets
- ------
Current Assets:
Cash and cash equivalents $ 5,000 $ 66,000
Accounts receivable, net 531,000 555,000
Inventories (Note B) 919,000 809,000
Prepaid expenses and
other current assets 34,000 49,000
----------- -----------
Total current assets 1,489,000 1,479,000
Property, plant and equipment, net 234,000 266,000
Other assets 27,000 28,000
Deferred income taxes (Note D) 49,000 --
----------- -----------
$ 1,799,000 $ 1,773,000
=========== ===========
Liabilities and Shareholders' Equity (Deficit)
- ----------------------------------------------
Current Liabilities:
Current maturities of long-term debt
and capital lease obligations $ 516,000 472,000
Accounts payable 640,000 581,000
Accrued expenses 295,000 225,000
Accrued payroll and payroll taxes 96,000 107,000
----------- -----------
Total current liabilities 1,547,000 1,412,000
Long-Term Obligations:
Long-term debt and capital lease obligations 1,330,000 1,307,000
Less current maturities of
long-term obligations (516,000) (472,000)
----------- -----------
814,000 835,000
Shareholders' Equity (Deficit):
Common stock 279,000 279,000
Additional paid-in capital 1,351,000 1,351,000
Deficit (1,995,000) (1,907,000)
----------- -----------
(365,000) (277,000)
Less treasury stock (197,000) (197,000)
----------- -----------
(562,000) (474,000)
----------- -----------
$ 1,799,000 $ 1,773,000
=========== ===========
</TABLE>
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<PAGE> 4
<TABLE>
UNAUDITED
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 1996 AND 1995
(Note A)
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net sales $1,064,000 $1,248,000
Cost of goods sold 791,000 984,000
----------- -----------
Gross profit 273,000 264,000
Selling and administrative expenses 364,000 455,000
----------- -----------
Operating income (loss) (91,000) (191,000)
Other income (expenses)
Interest expense (46,000) (40,000)
----------- -----------
Income (loss) from continuing operations
before income taxes (137,000) (231,000)
Income taxes (benefit) (Note D) (49,000) (85,000)
----------- -----------
Income (loss) from continuing operations (88,000) (146,000)
Discontinued operations (Note C)
Gain from operations of
discontinued segment, net of taxes -- 18,000
----------- -----------
Net income (loss) $ (88,000) $ (128,000)
=========== ===========
Earnings (loss) per common share: (Note E)
Continuing operations $ (.03) $ (.06)
Discontinued operations -- .01
----------- -----------
Net income (loss) $ (.03) $ (.05)
=========== ===========
</TABLE>
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<PAGE> 5
<TABLE>
UNAUDITED
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 30, 1996 AND 1995
<CAPTION>
1996 1995
--------- ----------
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $ (88,000) $ (128,000)
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 32,000 31,000
Provision for bad debts 3,000 1,000
(Gain) on sale of assets -- (29,000)
Common stock issuance -- 22,000
Changes in assets and liabilities:
(Increase) in inventories (110,000) (197,000)
Increase in accounts payable 59,000 307,000
(Increase) in deferred income taxes (49,000) (74,000)
Increase in accrued expenses 32,000 31,000
Decrease (increase) in accounts receivable 21,000 (167,000)
Decrease in other, net 16,000 39,000
--------- ----------
Net cash (used in) operating activities (84,000) (164,000)
Cash flows from investing activities:
Capital expenditures -- --
Proceeds from disposal of fixed assets -- 7,000
Collections on notes receivable -- 279,000
--------- ----------
Net cash provided by investing activities -- 286,000
Cash flows from financing activities:
Proceeds from line of credit 44,000 222,000
Payments on long-term obligations (21,000) (290,000)
--------- ----------
Net cash provided by (used in) financing activities 23,000 (68,000)
Net (decrease) increase in cash and cash equivalents (61,000) 54,000
Cash and cash equivalents at beginning of year 66,000 47,000
--------- ----------
Cash and cash equivalents at April 30 $ 5,000 $ 101,000
========= ==========
Supplemental cash flow information:
Interest paid $ 43,000 $ 37,000
========= ==========
Income taxes paid $ -- $ --
========= ==========
Schedule of noncash financing and investing activities:
Credit sale of property, plant and equipment $ -- $ 338,000
========= ==========
</TABLE>
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<PAGE> 6
MRL, INC.
UNAUDITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note A - In the opinion of the Company, the accompanying unaudited
condensed financial statements contain all adjustments
necessary to present fairly the Company's results of
operations and changes in financial position for the
three month period ended April 30, 1996 and 1995. All
significant intercompany accounts and transactions are
eliminated in consolidation.
The unaudited condensed statement of operations for the
three month period ended April 30, 1995 has been restated
to conform to the presentation of the statement of
operations for the three month period ended April 30,
1996.
Note B - The composition of inventory for the periods ended April
30, 1996 and January 31, 1996 is as follows:
<TABLE>
<CAPTION>
4/30/96 1/31/96
---------- ----------
<S> <C> <C>
Finished goods $ 40,000 $ 126,000
Work in process 56,000 54,000
Raw materials and supplies 823,000 629,000
---------- ----------
Total inventory $ 919,000 $ 809,000
========== ==========
</TABLE>
Note C - On March 28, 1995, the Company sold its remaining
property in Albuquerque, New Mexico for $375,000. Of the
total price, 10% was paid in cash and the balance was
paid by delivery of a New Mexico Real Estate Contract.
During the three month period ended April 30, 1995, the
Company experienced a $29,000 gain from the sale and
recorded a Note Receivable of $338,000.
Note D - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109") issued in
February 1992. The Company adopted "SFAS No. 109" as of
February 1, 1993.
Total income tax expense (benefit) for the three month
periods ended April 30, 1996 and 1995 was allocated as
follows:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
Income from
Continuing Operations $(49,000) $ (85,000)
Discontinued Operations -- 9,000
-------- ---------
$(49,000) $ (74,000)
======== =========
</TABLE>
-6-
<PAGE> 7
Income tax expense (benefit) attributed to income from
continuing operations consists of:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Three Months Ended April 30, 1996:
U.S. Federal $ -- $ (45,000) $ (45,000)
State and Local -- (4,000) (4,000)
------- --------- ---------
$ -- $ (49,000) $ (49,000)
======= ========= =========
Three Months Ended April 30, 1995:
U.S. Federal $ -- $ (68,000) $ (68,000)
State and Local -- (6,000) (6,000)
------- --------- ---------
$ -- $ (74,000) $ (74,000)
======= ========= =========
</TABLE>
The provision for income taxes differs from the amount of
income tax determined by applying the applicable U.S.
statutory federal income tax rate to income from
continuing operations before income taxes as a result of
the following differences:
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
4/30/96 4/30/95
------------ ------------
<S> <C> <C>
Computed statutory tax $(45,000) $(68,000)
Increase (reduction) in
income taxes resulting from:
State income taxes, net of
federal income tax benefit (4,000) (6,000)
Alternative minimum
tax provision -- --
--------- ----------
Income taxes (benefit) $(49,000) $ (74,000)
========= ==========
</TABLE>
-7-
<PAGE> 8
The tax effects of temporary differences that give rise
to significant portions of the deferred tax assets at
April 30, 1996 and January 31, 1996 are presented below.
<TABLE>
<CAPTION>
4/30/96 1/31/96
---------- ----------
<S> <C> <C>
Net operating loss carryforward $1,674,000 $1,629,000
Plant and equipment, principally due
to difference in depreciation 62,000 62,000
Inventories, principally due to additional
costs inventoried for tax purposes
pursuant to the Tax Reform Act of 1986 16,000 14,000
Accrued vacation pay 12,000 11,000
Provision for loss on asset sale and
lawsuit settlement 59,000 59,000
Accounts receivable, principally due to
allowance for doubtful accounts 5,000 4,000
Alternative minimum tax carryforward 5,000 5,000
---------- ----------
Total gross deferred tax assets 1,833,000 1,784,000
Less valuation allowance 1,784,000 1,784,000
---------- ----------
Net deferred tax assets $ 49,000 $ --
========== ==========
</TABLE>
At April 30, 1996, the Company had net operating loss
carryforwards for federal income tax purposes of
approximately $4,702,000 which are available to offset
future federal taxable income, if any, for periods ending
from fiscal 2004 through fiscal 2010. In addition, the
Company had alternative minimum tax credit carryforwards
of approximately $5,000 which are available to reduce
future federal regular income taxes, if any, over an
indefinite period.
Note E - Earnings (loss) per share are computed using the weighted
average number of shares of common stock outstanding of
2,685,694 and 2,639,627 for the three months ended April
30, 1996 and 1995, respectively.
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<PAGE> 9
MRL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Capital Resources and Liquidity
- -------------------------------
Accounts payable increased $59,000 from January 31, 1996 to
April 30, 1996. The increase was related to an inventory increase
of $110,000 from January 31, 1996 to April 30, 1996 in anticipation
of increased shipments in the second quarter of fiscal 1997.
On May 13, 1996, the Company entered into a $800,000 asset
based lending agreement with Concord Growth Corporation ("Concord")
to replace an existing $400,000 factoring agreement with Concord.
The new loan agreement expires on June 13, 1997 and is renewable
for successive six month periods. The loan is secured by all
accounts receivable and inventory of the Company. As of May 31,
1996, the principal amount of loans outstanding under the agreement
was $428,000, and the Company had additional borrowing availability
of $64,000 (based on eligible accounts receivable).
The Company plans to continue to closely manage inventory and
accounts receivable to maintain sufficient working capital to
operate at anticipated sales levels.
Results of Operations
- ---------------------
Sales decreased 15% for the three month period ended April 30,
1996, when compared to the first quarter of the prior fiscal year.
Changes in sales by operating group, were as follows:
<TABLE>
<CAPTION>
Three Months Ended
April 30, 1996
-----------------------
% Change
Net Over
Decrease Prior Year
-------- ----------
<S> <C> <C>
Utility Products $(178,000) (21%)
Precision Metals (6,000) (2%)
----------
Net Total $(184,000)
==========
</TABLE>
The Utility Products Group's sales decrease for the three
month period ended April 30, 1996, compared with the same period in
the prior year, was a continuation of the reduced level of demand
by this group's customers. The Company anticipates an increase in
shipping levels in the second quarter of fiscal 1997, based on the
backlog of orders that existed on April 30, 1996.
The Precision Metals Group's sales decrease for the three
month period ended April 30, 1996, compared with the same period in
the prior year, occurred due to reduced order levels from several
customers. The Company anticipates an increase in sales from the
Precision Metals Group for the balance of fiscal 1997, due to
anticipated orders from several new customers and the order backlog
on April 30, 1996 with existing customers.
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<PAGE> 10
Selling and administrative expenses for the three month period
ended April 30, 1996 decreased by $91,000 compared to the same
period in fiscal 1996. This reduction in fiscal 1997 was due to
personnel and cost reductions and the absence of costs associated
with the combination of implementation of the management agreement
with the Company's new President and CEO in March, 1995 and related
separation agreement with the former President and CEO.
Interest expense for the three month period ended April 30,
1996 increased by $6,000 compared to the same period in fiscal
1996. This increase was due to higher interest rates. Due to
current levels of borrowing, the Company expects interest expense
to increase in the second quarter of fiscal 1997.
For the three months ended April 30, 1996, the net loss from
continuing operations was $88,000 compared to a net loss from
continuing operations of $146,000 for the same period in the prior
year. The fiscal 1997 period was adversely affected by decreased
sales volume which offset improved operating margins and reduced
selling and administrative costs. The fiscal 1996 period also
contained a gain from the real estate sale recorded in discontinued
operations of $18,000 net of income taxes.
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS No. 109") issued in February 1992. For
the three month period ended April 30, 1996, the Company recorded
$49,000 of income tax benefit compared to $74,000 of income tax
benefit in the same period in the prior fiscal year.
In December 1994, a customer of the Company filed a breach of
contract lawsuit against the Company due to paint imperfections on
units supplied by the Company in fiscal 1994. The Company brought
suit in Illinois against its insurance carrier seeking to be
defended and indemnified by the carrier against this suit. In
April, 1996, the Company requested dismissal without prejudice of
the petition against the carrier with the intentions of refiling
the suit in Missouri. Negotiations to reach a settlement
acceptable to all parties are continuing.
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<PAGE> 11
PART II
OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
See the Exhibit Index on page 13 of this Report.
There were no reports on Form 8-K filed during the
quarter ended April 30, 1996.
-11-
<PAGE> 12
MRL, Inc.
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.
MRL, Inc.
Date: June 14, 1996 By: /s/Larry J. Stallings
------------------------------------
Larry J. Stallings
President,
Chief Executive Officer, and
Chief Financial Officer
-12-
<PAGE> 13
MRL, Inc.
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
Number Description
- ------- ---------------------------------------
<C> <S>
11 Computation of Weighted Average Number
of Shares
</TABLE>
-13-
<PAGE> 1
EXHIBIT 11 (a)
<TABLE>
MRL, INC.
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES
<CAPTION>
FISCAL 1997 PERIOD
DAYS
MAIN- WEIGHTED
DATE BALANCE TAINED SHARE DAYS AVERAGE
<S> <C> <C> <C> <C> <C>
Common shares
outstanding 02/01/96 2,685,694 89 239,026,766
Weighted average
number of shares,
three months ended
April 30, 1996 2,685,694
=========
<CAPTION>
FISCAL 1996 PERIOD
<S> <C> <C> <C> <C> <C>
Common shares
outstanding 02/01/95 2,585,694 41 106,013,454
03/14/95 2,685,694 48 128,913,312
-- -----------
89 234,926,766
Weighted average
number of shares,
three months ended
April 30, 1995 2,639,627
=========
</TABLE>
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed financial statements for period ended April 30, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> APR-30-1996
<CASH> 5,000
<SECURITIES> 0
<RECEIVABLES> 531,000
<ALLOWANCES> 0<F1>
<INVENTORY> 919,000
<CURRENT-ASSETS> 1,489,000
<PP&E> 234,000
<DEPRECIATION> 0<F2>
<TOTAL-ASSETS> 1,799,000
<CURRENT-LIABILITIES> 1,547,000
<BONDS> 814,000
<COMMON> 279,000
0
0
<OTHER-SE> (841,000)
<TOTAL-LIABILITY-AND-EQUITY> 1,799,000
<SALES> 1,064,000
<TOTAL-REVENUES> 1,064,000
<CGS> 791,000
<TOTAL-COSTS> 1,155,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,000
<INCOME-PRETAX> (137,000)
<INCOME-TAX> 49,000
<INCOME-CONTINUING> (88,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (88,000)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
<FN>
<F1> Allowances are not reported in interim statements.
<F2> Accumulated depreciation is not reported in interim statements.
</TABLE>
