<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from ----------- to -----------
Commission file number 0-1363
MRL, INC.
Missouri 43-0614403
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
287 N. Lindbergh, Suite 206, St. Louis, Missouri 63141-7840
Telephone Number: (314) 432-7222
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.10 per share
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 twelve months, and (2) has been subject to such
filing requirements for at least the past 90 days:
Yes X No
---------------- ---------------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. /X/
The aggregate market value of the shares of common stock held by
non-affiliates of the Registrant as of April 19, 1996 was $503,568 based upon
the average between the closing bid and asked prices of such stock as reported
by a market maker in the pink sheets on such date. As of April 19, 1996, the
Registrant had outstanding, 2,685,694 shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated into this Report by reference:
Part III. The definitive proxy statement of Registrant (to be filed
pursuant to regulation 14A on or about May 17, 1996) for Registrant's 1996
Annual Meeting of Stockholders, which involves the election of directors, is
incorporated by reference into Item 10, Item 11, Item 12, and Item 13.
-------- -------- -------- -------
<PAGE> 2
MRL, INC.
FORM 10-K
When used herein, the term "Company" refers to the Registrant, MRL,
Inc.
PART I
Item 1. Business.
- ------ --------
The Company was incorporated as a Missouri corporation in 1946. The
business of the Company is divided principally into two operating groups --
the Utility Products Group and the Precision Metals Group. In June 1991, the
Company amended its Articles of Incorporation to change its name to "MRL,
Inc." from "Missouri Research Laboratories, Inc." The Company's fiscal year
ends on each January 31.
The Company maintains its corporate office in leased space in St.
Louis, Missouri.
The Company currently operates in two industry segments, the Utility
Products Group and the Precision Metals Group.
Utility Products Group
The Utility Product Group's operations are conducted primarily in a
Company-owned facility in Hoffman, Illinois. The group produces and sells
mobile service and support equipment for construction and maintenance crews
of underground utility distribution systems, principally for the major
telephone companies. The group also manufactures and distributes mobile
power equipment which provides standby electrical power. This group sells
accessory equipment, and replacement and service parts for its mobile power
equipment. The group also fabricates tubular frames for mail handling
equipment. This group's products are sold under the trade name "HESCO." The
primary markets for this group are the telecommunications and utility power
industries.
Precision Metals Group
The Precision Metals Group operations are located in a leased facility
in Piggott, Arkansas. The operation consists of contract sheet metal
fabrication and assembly, machining, welding and painting. Customers are
original equipment manufacturers located primarily in the Southeast,
Southwest and Midwest regions of the United States. The group also provides
fabrication services for the Utility Products Group. The group has no
proprietary product lines.
The Company utilizes direct sales and commissioned representatives to
market its products to a variety of customers.
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<PAGE> 3
The following is a schedule of the sales, operating profit (loss) and
assets of the operations of the Company by operating group for the three
fiscal years ended January 31:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Net Sales:
Utility Products $ 2,924 $ 3,748 $ 9,087
Precision Metals 1,813 1,556 876
------- ------- -------
Total $ 4,737 $ 5,304 $ 9,963
======= ======= =======
Operating profit (loss) <F1>:
Utility Products $ (186) $ (143) $ 1,197
Precision Metals (24) (76) (7)
------- ------- -------
Total $ (210) $ (219) $ 1,190
======= ======= =======
Identifiable assets <F2>:
Utility Products $ 1,050 $ 1,174 $ 1,507
Precision Metals 656 632 642
------- ------- -------
Total $ 1,706 $ 1,806 $ 2,149
======= ======= =======
Depreciation expense:
Utility Products $ 27 $ 44 $ 62
Precision Metals 94 83 89
Corporate 3 34 62
------- ------- -------
Total $ 124 $ 161 $ 213
======= ======= =======
Capital expenditures:
Utility Products $ -- $ -- $ 65
Precision Metals 5 10 11
Corporate -- -- 23
------- ------- -------
Total $ 5 $ 10 $ 99
======= ======= =======
Sales to any single customer in excess
of 10% of total sales by group:
Utility Products (3-FY96, 2-FY95 and 2-FY94) $ 1,541 $ 1,506 $ 5,763
Precision Metals (3-FY96, 2-FY95 and 3-FY94) $ 647 $ 673 $ 457
<FN>
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<F1> Operating profit (loss) represents sales less operating costs and
expenses. In computing operating profit (loss), general corporate
expenses of $235,000, $204,000 and $440,000 in fiscal 1996, 1995,
and 1994, respectively, have been excluded from operating expenses.
<F2> Assets by operating group are those assets that are used in the Company's
operations in each group. Corporate assets (not presented) are
principally cash, notes receivable, deferred tax assets and assets
held for sale. See Notes A, D & F to the financial statements.
</TABLE>
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<PAGE> 4
During the years 1996, 1995 and 1994, HESCO equipment sales contributed
respectively 90%, 95% and 100% of the Utility Products Group sales. Sheet
meal fabrication contributed 100% of sales for the Precision Metals Group for
the years 1996, 1995 and 1994.
Deliveries of the Company's products are principally made by common
carrier or company-owned trucks.
The Company has not expended material amounts on research activities
relating to the development of new products or the improvement of existing
products during the three fiscal years ended January 31, 1996. The Company
has developed and introduced a new mobile power unit that provides modular
space for customer option modifications.
The Utility Products Group utilizes steel products and equipment
purchased from other manufacturers. In the Precision Metals Group, the
principal raw material used is sheet steel. No group of the Company is
dependent on any single supplier for a substantial amount of materials or
other parts used in production. Virtually all raw materials used in the
Company's manufacturing operations are presently obtained from domestic
sources. The Company has experienced no significant difficulty in obtaining
such raw materials and believes that alternative domestic sources are
available for such materials.
The Company has patents on certain utility maintenance support
equipment and parts produced by the Company's Utility Products Group. These
patents are not considered to be material to the future sales of this
equipment by the Company.
In fiscal 1996, sales to Bell South constituted a significant part of
the Company's revenues. In fiscal 1995, sales to Bell South and Southwestern
Bell constituted a significant part of the Company's revenues. In fiscal
1994, sales to Bell South and the U.S. Air Force constituted a significant
part of the Company's revenues.
Management believes there are no unusual practices relating to working
capital items.
The sales backlog of orders of the Company as of January 31, 1996, 1995,
and 1994 was $663,000, $640,000 and $635,000, respectively. Most orders are
shipped within approximately 120 days of the date received. It is
anticipated that virtually all of the January 31, 1996 backlog will be
included in fiscal 1997 sales. No unusually large orders were received or
are anticipated as of the end of fiscal 1996.
Mobile power equipment produced by the Utility Products Group is used
by underground utility maintenance and construction crews. These products
are distributed primarily to utility companies throughout the United States
and compete with similar power equipment units sold by several companies.
Management believes that its sales represent a significant portion of the
sale of this somewhat narrowly defined business category. Management is
unable to evaluate the competitive position of the Company's Precision Metals
Group as it operates on a specific job basis and does not produce an
established product line. Generally, the Company's sales are not
geographically restricted. Management is unable to determine the impact of
inflation on any of its segments but believes it is not a significant factor.
Present federal, state and local provisions regulating the discharge of
materials into the environment or otherwise relating to the protection of the
environment do not materially affect the capital expenditures, earnings or
competitive position of the Company.
The number of persons employed by the Company as of January 31, 1996,
was 67. The Company expects its number of employed personnel to increase to
approximately 80 employees during fiscal 1997. There are no employees
working under any collective bargaining agreement.
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<PAGE> 5
The Company has no operations outside the United States and its sales
to foreign customers are not material.
Item 2. Properties.
- ------ ----------
The Company presently conducts operations at two locations. The
operations of the Utility Products Group are conducted in a company-owned
manufacturing plant containing 36,000 square feet located in Hoffman,
Illinois. The Precision Metals Group conducts its operations in a 74,000
square foot leased manufacturing facility in Piggott, Arkansas, which the
Company has an option to purchase for $1,000,000 minus all lease payments
made. Approximately 35,000 square feet of the Piggott, Arkansas facility
were subleased to a tenant by the Company under a sublease which expired
March 31, 1996. The Company plans to use the space for its operations.
Management believes the plants at its two operating locations are adequate to
meet the Company's manufacturing needs for the foreseeable future.
In February 1995, the Company sold certain property which it owned in
Albuquerque, New Mexico, which had been leased to unrelated companies.
Item 3. Legal Proceedings.
- ------ -----------------
WESTERN DIESEL SERVICES, INC. VS MRL, INC. Circuit Court of St. Louis
------------------------------------------
County, Division 14, Cause No. 671054, filed December 27, 1994. Western
Diesel filed a suit for breach of contract in an amount to be determined but
in excess of $900,000. The claim originated from a fiscal 1994 shipment of
800 standby power units which have developed a paint imperfection. The total
value of the shipment by the Company was $2,272,000. Reliable Finishing
Company, Inc., the subcontractor that painted the units, has been named a
third party defendant in this action.
MRL, INC. VS TRAVELERS INDEMNITY COMPANY. United States District
-----------------------------------------
Court for the Southern District of Illinois, CV 95-21-WDS. This action was
filed in the Circuit Court of Madison County, No. 94-MR-524, on November 3,
1994. The suit seeks a judgment that the Travelers Indemnity Company has a duty
to investigate and defend MRL against the Western Diesel Services, Inc. claim,
and to pay, or otherwise indemnify MRL against, any sum imposed against MRL
by judgment, settlement or otherwise as a result of the alleged failure of
performance of a painting subcontractor utilized by the Company in the
manufacture of the standby power units.
See the Financial Statements, and notes thereto, for more detail
regarding the legal proceedings.
Item 4. Submission of Matters to a Vote of Security-Holders.
- ------ ---------------------------------------------------
None.
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<PAGE> 6
Item 4A. Executive Officers of the Registrant.
- ------- ------------------------------------
This information is included in Part I as a separate item in accordance
with General Instruction G to Form 10-K and Instruction 3 to paragraph (b) of
Item 401 of Regulation S-K.
The Executive Officers of the Company as of April 27, 1996 are as
follows:
<TABLE>
<CAPTION>
Name Position Age
---- -------- ---
<C> <S> <C>
Walter Funk, Jr. Chairman of the Board since October 1990; prior thereto, 79
consultant since June 1988; prior thereto Chairman of the Board
and Chief Executive Officer since 1980.
Larry J. Stallings President and Chief Executive Officer of the Company since March 54
1995; Chief Financial Officer of the Company since March 1996;
prior thereto, President of True Fitness Technology 1992 to
January 1995; prior thereto, President of General Metal Products,
Inc. from 1987 to 1991.
Alan G. Johnson Secretary of the Company since 1978; member of the law firm of 61
Gallop, Johnson & Neuman, L.C., St. Louis, Missouri, for more
than the last five years.
Lawrence C. Grazevich Vice Chairman of the Board since June 1988; prior thereto, 73
Vice Chairman and Chief Executive Officer since June 1987;
prior thereto, Vice Chairman and Chief Operating Officer
since 1980.
</TABLE>
Each of the officers of the Company is elected annually by the Board of
Directors.
On November 30, 1995, Duane E. Obert resigned as Treasurer and Chief
Financial Officer to accept employment at another company.
On March 15, 1995, William C. Cottle resigned as President and Chief
Executive Officer of the Company to pursue other interests. Larry Stallings,
a director of the Company since 1992, was elected to replace Mr. Cottle as
President and Chief Executive Officer.
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<PAGE> 7
PART II
Item 5. Market for the Company's Common Equity and related Stockholder Matters.
- ------ ----------------------------------------------------------------------
The Company's common stock is traded in the over-the-counter market.
The following table shows the high and low bid prices, obtained from Koonce
Securities, a market maker in the common stock of the Company.
<TABLE>
<CAPTION>
Year Ended January 31,
1996 1995
---- ----
Bid Price Bid Price
--------- ---------
Quarter High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1st 1/10 1/10 11/16 5/8
2nd 1/10 1/10 3/4 9/16
3rd 1/10 1/10 5/16 5/16
4th 3/32 3/32 1/8 3/32
</TABLE>
The Company had 1,989 shareholders of record at January 31, 1996.
The Company paid no dividends during fiscal 1996 or 1995.
Item 6. Selected Financial Data.
- ------ -----------------------
<TABLE>
<CAPTION>
(in thousands, except per share data)
-------------------------------------------
Year ended January 31 1996 1995 1994 1993 1992
- --------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net sales from
continuing operations $4,737 $5,304 $9,963 $7,186 $8,651
Income (loss) from
continuing operations before taxes $ (724) $ (534) $1,073 $ (62) $ (580)
Earnings (loss) per share from
continuing operations before taxes $ (.27) $ (.21) $ .42 $ (.02) $ (.23)
Average number of shares 2,674 2,586 2,573 2,526 2,538
Total assets at year-end $1,773 $2,638 $3,470 $3,069 $3,646
Long-term debt and capital lease
obligations, less current maturities $ 710 $ 736 $1,396 $1,955 $1,321
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------ -----------------------------------------------------------------------
of Operations.
-------------
Capital Resources and Liquidity
-------------------------------
Credit Facilities
For the period from February 1, 1995 through January 31, 1996, the
Company decreased its bank borrowings, capital lease debt and IRB debt by
$304,000. During the same period, net fixed assets decreased by $177,000,
which included depreciation expense for the period amounting to $124,000,
disposal of net fixed assets amounting to $58,000 and additions amounting to
$5,000. Accounts receivable and inventory decreased by $36,000.
-7-
<PAGE> 8
Effective December 1, 1994, the Company converted $188,000 of trade
accounts payable with one of its vendors to a trade note payable. The note
was to be paid in 18 equal monthly payments, beginning January 25, 1995, and
bears interest at 12% per annum on the unpaid balance. The Company failed to
make the required principal and interest payments of approximately $12,000
per payment beginning with the month of June 1995. Due to this violation,
the total principal and interest was due and payable. The Vendor has agreed
to a reduced payment schedule. Since July 14, 1995, the Company has made
payments of $1,000 per week on the note. As of January 31, 1996, the balance
due on the note was $113,000. The balance has been classified as a current
liability.
In April 1993 the Company entered into a $150,000 ten year mortgage
agreement with Farmers State Bank of Hoffman, Hoffman, Illinois. The Utility
Products Group building and fixtures in Hoffman were pledged as collateral
for the loan. The mortgage note carries an initial interest rate of 7.5% per
annum for the first three years, with interest during each three year period
thereafter at 1.5% over the base rate of The Boatmen's National Bank of St.
Louis. The proceeds from the note were utilized as additional working
capital. The Company failed to make principal and interest payments to the
Bank of Hoffman for the months of May through October, 1995. The Company
reached an agreement with the Bank of Hoffman for payment of 7 1/2% interest
only through April 1996, and then payment of the balance of the principal due
in monthly installments through April 2003, plus interest at 3% over the base
rate of The Boatmen's National Bank of St. Louis. All past due interest
payments have been made. As of January 31, 1996, the principal amount of the
loan was approximately $130,000. The principal amount has been apportioned
between current and long-term obligations in accordance with the new
amortization schedule.
In April 1993 the Company entered into a three-year line of credit
agreement with Norwest Business Credit, Inc. ("Norwest"), with $1,000,000
maximum availability based on eligible accounts receivable and inventory. As
of January 31, 1995, the Company was in violation of its financial covenants
and negotiated a standstill period expiring March 31, 1996, during which the
Company agreed to use its best efforts to obtain alternative financing. As
of July 31, 1995, the Company was in violation of the debt service coverage
ratio covenant in the Standstill Agreement. Effective August 9, 1995, the
Company and Norwest amended the Standstill Agreement to permanently reduce
the line of credit to $475,000 and provide for payment of minimum interest of
$5,500 per month. The line of credit was further reduced in August 1995 by
$128,000 from the proceeds of the sale of a note receivable held by the Company
in connection with the sale of certain property.
On November 16, 1995, the Company entered into a $400,000 line of
credit agreement with Concord Growth Corporation ("Concord") to replace the
Norwest financing. Under the terms of the agreement, the Company assigns
eligible account receivable invoices to Concord for collection. In turn,
Concord advances 85% of the invoice amount to the Company. The loan is
secured by all accounts receivable and inventory of the Company. A
semi-annual fee of 1% of the facility is due at the start of each period. Daily
interest of 0.09% of the amount outstanding is payable, with a minimum
interest charge of $4,000 per month. The term of the loan is six months and
is automatically renewable at the end of each period unless Concord or the
Company gives notice of intent not to renew. The Company can terminate the
agreement at any time after its initial term without a termination fee. The
Company considers the amounts available under the Concord Loan Agreement
adequate for current and near-future ordinary operations. At January 31,
1996, the balance outstanding under the Concord Loan Agreement was $256,000.
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<PAGE> 9
During fiscal 1996, the Company was past due up to 90 days on some
vendor payments. Repayment schedules on these amounts have been agreed to
and implemented. The Company's line of credit is expected to provide the
funds necessary to continue to maintain accounts payable in a manner
currently acceptable to its vendors.
The May 1995, Piggott, Arkansas Industrial Revenue Bond ("IRB") payment
of principal and interest of approximately $84,000 was made by the Arkansas
Industrial Development Commission ("AIDC") which had guaranteed the IRB
payment. In October 1995, the AIDC agreed to cure the default on the
existing IRB and restructure the debt. The City of Piggott issued a
Refunding IRB in the amount of $410,000 to AIDC and on November 1, 1995, AIDC
made the final payment of $285,000 on the existing IRB. The Refunding IRB
has a 9.5% interest rate with monthly principal and interest payable over 65
months, beginning in December 1995, and is secured by certain equipment used
in the operation of the Precision Metals Group.
As of January 31, 1996, the Company was delinquent on approximately
$14,000 of principal and interest payments required under certain other
long-term debt and capital lease obligations. Repayment schedules on such
obligations have been negotiated and reduced payments are being made.
Asset Sales
On February 23, 1995, the Company sold a New Mexico Real Estate
Contract (note receivable) that related to a fiscal 1994 sale of certain
property in Albuquerque, New Mexico. The Company recorded a loss of $74,000
on this sale in fiscal 1995. Substantially all the proceeds from this sale
were utilized to pay the remaining balance owing on the Albuquerque IRBs.
On February 28, 1995 the Company sold its remaining Albuquerque, New
Mexico property for $375,000, 90% of which was paid by delivery of a New
Mexico Real Estate Contract, which was sold in August 1995 for approximately
$256,000. The Company realized a gain on this sale of approximately
$287,000, approximately $29,000 of which was recognized in the first quarter
of fiscal 1996 and the balance was recognized upon the sale of the New Mexico
Real Estate Contract.
General Working Capital Matters
The Company's allowance for doubtful accounts receivable is considered
adequate to cover any future uncollectible accounts relating to sales through
January 31, 1996.
-9-
<PAGE> 10
Working capital decreased by $270,000 from $337,000 at January 31, 1995
to $67,000 at January 31, 1996, due primarily to: an increase in accounts
receivable of $8,000; a decrease in inventories of $44,000; a decrease in
deferred tax assets of $35,000; a decrease in notes receivable of $278,000;
a decrease in the current portion of long-term debt of $278,000; and an
increase in accounts payable of $193,000. The decrease in inventories in
fiscal 1996 from the previous fiscal year was due principally to decreased
sales volume experienced in the Utility Products Group during fiscal 1996.
The increase in accounts receivable as of the end of fiscal 1996 over 1995
was due principally to increased sales during the last two months of the
fiscal year. The decrease in deferred tax assets at January 31, 1996,
resulted from an increase in the deferred tax assets valuation allowance as a
result of a reduction in projected deferred income tax benefits to be earned.
The decrease in notes receivable resulted from the sale of a term note. The
decrease in the current portion of long-term debt resulted from the
retirement of an IRB. The increase in accounts payable resulted from a higher
volume of purchasing activity at the end of fiscal 1996 compared to 1995.
Results of Operations
---------------------
In fiscal 1996, total sales decreased $567,000, or 11%, when compared
to the prior year. Gross profit margin was 26% in both 1996 and 1995. The
sales decrease was due to lower sales of the Utility Products Group. In
fiscal 1995, total sales decreased $4,659,000, or 47%, when compared to the
prior year, and gross profit margin decreased from 28% in 1994 to 26% in
1995. The decrease in sales occurred in the Utility Products Group due to
the absence in fiscal 1995 of two unusually large sales orders that were
shipped in fiscal 1994.
The Company experienced a net loss of $918,000, or $.34 per share, in
fiscal 1996, compared to net loss of $144,000, or $.06 per share, in fiscal
1995, and net income of $1,046,000, or $.41 per share, in fiscal 1994. The
loss in fiscal 1996 was adversely affected by the net effect of the following,
totaling $563,000 or $.21 per share: (1) a gain on the disposal of assets of
a discontinued operation, net of income tax effects; (2) a provision for
anticipated costs associated with the paint claim law suit (described in Item
3 of this Report); and (3) an increase in the valuation allowance on deferred
tax assets. The loss in fiscal 1995 was favorably affected by the following,
totaling $179,000, or $.07 per share: (1) the net effect of gains on the
disposal of assets of a discontinued operation, net of income tax effects;
and (2) an increase in the valuation allowance on deferred tax assets.
The profit in fiscal 1994 was favorably affected by the net effect of the
following, totaling $722,000 or $.28 per share: (1) a loss on the disposal of
assets of a discontinued operation, net of income tax effects; and (2) a
decrease in the valuation allowance on deferred tax assets.
Interest expense was $166,000, $165,000 and $188,000 for the periods
ended January 31, 1996, 1995 and 1994, respectively. The increase for fiscal
1996 over 1995 was related to an increase in the rate of interest on the
Company's line of credit. The decrease in fiscal 1995 over fiscal 1994 was
related to a decrease in the amount of debt outstanding. The Company expects
an increase in interest expense during fiscal 1996 over fiscal 1995 due to an
increase in the interest rate charged on its borrowed funds.
During fiscal 1996 the Company experienced a $205,000 net gain from the
sale of assets held for sale. This gain was the result of the sale of the
Haines street property in Albuquerque in February 1995 and the sale of the
related New Mexico Real Estate Contract note receivable in August 1995. The
gain has been recorded as a discontinued operation, net of taxes, on the
Statement of Operations.
The Company increased its corporate administrative expenses by $31,000
for the period ended January 31, 1996 when compared to the same period in
1995. The increase was related primarily to one-time credits relating to
incentive compensation and land lease expenses in fiscal 1995 and severance
pay for employees terminated in fiscal 1996.
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<PAGE> 11
The Company had no net deferred tax assets at January 31, 1996. There
were no deferred tax liabilities.
The Company adopted SFAS No. 109 during fiscal 1994. During fiscal
1994 management recorded an increase in net deferred tax assets of $529,000,
based upon the belief that the St. Charles building sale would result in
future taxable income of approximately $676,000 and that sufficient pre-tax
profits would be generated in the future. During fiscal 1995 management
recorded a decrease in the net deferred tax assets of $132,000, principally
due to increasing the valuation allowance by $137,000. During fiscal 1996
management recorded a decrease in the net deferred tax assets of $397,000,
principally due to increasing the valuation allowance by $569,000. Total
gross deferred tax assets were $1,784,000 and $1,612,000 at January 31, 1996
and January 31, 1995, respectively, which amounts were reduced by valuation
allowances, respectively, of $1,784,000 and $1,215,000.
Utility Products Group:
Sales for the Utility Products Group were $2,924,000 for fiscal 1996,
$3,748,000 for fiscal 1995 and $9,087,000 in fiscal 1994.
The Utility Products Group had an operating loss of $186,000 in fiscal
1996 compared to an operating loss of $143,000 in fiscal 1995 and an
operating profit of $1,197,000 in fiscal 1994.
The sales backlog of the Utility Products Group at January 31, 1996 was
$446,000 compared to $450,000 at January 31, 1995 and $311,000 at January 31,
1994.
The Company anticipates that sales and operating profits for the group
will increase in fiscal 1997 over the levels of fiscal 1996, due to increased
capital spending plans of several of its principal customers. However, there
can be no assurance that the Company will achieve such results.
Precision Metals Group:
Sales for the Precision Metals Group for the year ended January 31,
1996 were $1,813,000, compared to $1,556,000 for fiscal 1995 and $876,000 in
fiscal 1994.
The Precision Metals Group experienced an operating loss of $24,000 for
fiscal 1996 compared to a loss of $76,000 for fiscal 1995 and a loss of
$7,000 in fiscal 1994. Fiscal 1995 would have been profitable except for the
occurrence of a significant bad debt and the scrapping of related inventory
relating to one of the groups' customers.
The sales backlog for the Precision Metals Group at January 31, 1996
was $217,000, compared to $190,000 at January 31, 1995, and $324,000 at
January 31, 1994.
The Company anticipates continued growth in sales from the Precision
Metals Group in fiscal 1997 and the years beyond as the group continues to
pursue and obtain new customers. It is anticipated that the group will
experience an operating profit in fiscal 1997. However, there can be no
assurance that the Company will achieve such results.
Item 8. Financial Statements and Supplementary Data.
- ------ -------------------------------------------
Financial statements and notes thereto are located on pages 15 through
32 hereof and are incorporated herein by this reference.
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<PAGE> 12
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------ ---------------------------------------------------------------
Financial Disclosure.
--------------------
None.
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<PAGE> 13
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
- ------- --------------------------------------------------
The information contained under the caption "INFORMATION CONCERNING
NOMINEES" in the Company's definitive proxy statement to be filed pursuant to
Regulation 14A for the Company's 1996 annual meeting of shareholders, which
involves the election of directors, is incorporated herein by this reference.
Item 11. Executive Compensation.
- ------- ----------------------
The information contained under the captions "EXECUTIVE COMPENSATION"
and "INFORMATION AS TO STOCK OPTIONS" in the Company's definitive proxy
statement to be filed pursuant to Regulation 14A for the Company's 1996
annual meeting of shareholders is incorporated herein by this reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- ------- --------------------------------------------------------------
The information contained under the caption "VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF" in the Company's definitive proxy statement to be
filed pursuant to Regulation 14A for the Company's 1996 annual meeting of
shareholders is incorporated herein by this reference.
Item 13. Certain Relationships and Related Transactions.
- ------- ----------------------------------------------
The information contained under the caption "TRANSACTIONS WITH ISSUER
AND OTHERS" in the Company's definitive proxy statement to be filed pursuant
to Regulation 14A for the Company's 1996 annual meeting of shareholders is
incorporated herein by this reference.
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<PAGE> 14
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- ------- ---------------------------------------------------------------
<TABLE>
<CAPTION>
(a) (1) Financial Statements:
Page
----
<S> <C>
The following financial statements of the Company are
included hereafter in Part IV:
Balance Sheets at January 31, 1996 and 1995 16
Statements of Operations for the Years ended January 31,
1996, 1995 and 1994 18
Statements of Changes in Stockholders' Equity (Deficit)
for the Years ended January 31, 1996, 1995 and 1994 19
Statements of Cash Flows for the Years ended January 31,
1996, 1995 and 1994 20
Notes to Financial Statements 21
Independent Auditors' Report 33
(2) Financial Statement Schedule:
Schedule IX - Valuation and Qualifying Accounts and
Reserves 34
</TABLE>
(3) Exhibits: See Exhibit Index on pages 36 through 39 of this Report.
Management contracts and compensatory plans filed as exhibits to
this Report on Form 10-K:
Employment Agreement dated July 11, 1977 and First Amendment
to Employment Agreement dated September 16, 1987, between
Walter Funk, Jr., and the Company. [See Exhibit 10(a)
listed on the Exhibit Index.]
Employment Agreement dated November 10, 1983, between
Lawrence C. Grazevich and the Company. [See Exhibit 10(c)
listed on the Exhibit Index.]
1981 Employee Incentive Stock Option Plan. [See Exhibit 10(d)
listed on the Exhibit Index.]
First Amendment to 1981 Employee Incentive Stock Option Plan,
dated December 9, 1988. [See, Exhibit 10(e) listed on the
Exhibit Index.]
Form of Stock Option Agreement (fully exercisable) for
certain options issued to Executive Officers under the 1981
Employee Incentive Stock Option Plan on December 9, 1987
(in replacement of prior options), with list of option holders.
-14-
<PAGE> 15
[See Exhibit 10(f) listed on the Exhibit Index.]
Form of Stock Option Agreement (exercisable over three years)
for certain options issued to Executive Officers under the
1981 Employee Incentive Stock Option Plan on December 9,
1987 (in replacement of prior options), with list of option
holders. [See Exhibit 10(g) listed on the Exhibit Index.]
Form of Stock Option Agreement (fully exercisable) for
option holders. [See Exhibit 10(h certain stock options
issued to Executive Officers on March 10, 1988 (in
replacement of prior options under the 1977 Stock Option
Plan), with list of ) listed on the Exhibit Index.]
Minutes of Compensation Committee dated March 12, 1993,
regarding compensation arrangement for William C. Cottle.
[See Exhibit 10(j) listed on the Exhibit Index.]
MRL, Inc., 1995 Stock Option Plan, adopted on March 14, 1995,
by the Board of Directors. [See Exhibit 10(l) listed on the
Exhibit Index.]
Stock Purchase Agreement, dated March 29, 1995, between the
Company and William C. Cottle. [See Exhibit 10(m) listed
on the Exhibit Index.]
Separation Agreement and Release, dated March 29, 1995,
between the Company and William C. Cottle. [See Exhibit
10(n) listed on the Exhibit Index.]
By resolution adopted by the Board of Directors on March 14,
1995, Larry J. Stallings was awarded 100,000 shares of MRL
Common Stock. [See Exhibit 10(p) listed on Exhibit Index.]
(b) Reports on Form 8-K: None filed for the three months ended January 31,
1996.
-15-
<PAGE> 16
<TABLE>
MRL, INC.
BALANCE SHEETS
<CAPTION>
January 31
----------------------------
Assets 1996 1995
- ------ ---------- ----------
<S> <C> <C>
Current Assets
Cash and cash equivalents (Note A) $ 66,000 $ 47,000
Accounts receivable, less allowance for
doubtful accounts of $11,000 in 1996 and
$98,000 in 1995 555,000 547,000
Note receivable (Note D) -- 278,000
Inventories (Note A)
Finished goods 126,000 41,000
Work in process 54,000 78,000
Raw materials 629,000 734,000
---------- ----------
809,000 853,000
Prepaid expenses and other
current assets (Note B) 49,000 57,000
Deferred tax assets, net -- 35,000
---------- ----------
Total current assets 1,479,000 1,817,000
Property, Plant and Equipment (Notes A, C,
E & F)
Buildings and improvements 700,000 700,000
Leased property under capital leases 1,148,000 1,148,000
Machinery and equipment 798,000 793,000
Assets held for sale -- 565,000
---------- ----------
2,646,000 3,206,000
Less accumulated depreciation and amortization (2,397,000) (2,780,000)
---------- ----------
249,000 426,000
Land 17,000 17,000
---------- ----------
266,000 443,000
Other assets 28,000 16,000
Deferred tax assets, net -- 362,000
---------- ----------
$1,773,000 $2,638,000
========== ==========
See accompanying notes to financial statements.
(Continued)
-16-
<PAGE> 17
<CAPTION>
MRL, INC.
BALANCE SHEETS
Liabilities and Stockholders' Equity (Deficit) January 31
- ---------------------------------------------- ----------------------------
1996 1995
---------- ----------
<S> <C> <C>
Current Liabilities
Current maturities of long term
debt and capital lease obligations
(Notes C & F) $ 472,000 $ 750,000
Accounts payable 581,000 388,000
Accrued expenses
Payroll and payroll taxes 107,000 97,000
Other 252,000 245,000
---------- ----------
Total current liabilities 1,412,000 1,480,000
Long-Term Obligations
Other long-term liabilities 125,000 --
Long-term debt and capital
lease obligations (Notes C & F) 1,182,000 1,486,000
Less current maturities of long-term obligations (472,000) (750,000)
---------- ----------
835,000 736,000
Commitments and Contingencies (Note I) -- --
Stockholders' Equity (Deficit) (Notes G, I & J)
Common stock-authorized 5,000,000 shares
of $.10 par value; issued 2,785,630
shares at 1996 and 2,685,630 shares at 1995 279,000 269,000
Additional paid-in capital 1,351,000 1,339,000
Deficit (1,907,000) (989,000)
---------- ----------
(277,000) 619,000
Less common stock in treasury-at cost:
99,936 shares in 1996
and 1995, respectively (197,000) (197,000)
---------- ----------
(474,000) 422,000
---------- ----------
$1,773,000 $2,638,000
========== ==========
See accompanying notes to financial statements.
</TABLE>
-17-
<PAGE> 18
<TABLE>
MRL, INC.
STATEMENTS OF OPERATIONS
<CAPTION>
Years Ended January 31
-------------------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $4,737,000 $5,304,000 $9,963,000
Cost of goods sold (3,515,000) (3,924,000) (7,190,000)
---------- ---------- ----------
Gross profit 1,222,000 1,380,000 2,773,000
Selling and administrative expenses (1,667,000) (1,803,000) (2,023,000)
---------- ---------- ----------
Operating income (loss) (445,000) (423,000) 750,000
Other income (expenses)
Interest and dividend income 12,000 32,000 18,000
Interest expense (166,000) (165,000) (188,000)
Provision for lawsuit (125,000) -- --
Provision for loss on asset held for sale (Note D) -- (74,000) --
Gain (loss) on sale of assets -- -- (16,000)
---------- ---------- ----------
Income (loss) from continuing operations
before income taxes (724,000) (630,000) 564,000
Income taxes (benefit) (Notes A & H) 325,000 (96,000) (509,000)
---------- ---------- ----------
Income (loss) from continuing
operations (1,049,000) (534,000) 1,073,000
Discontinued operations (Note E)
Gain (loss) from operations of discontinued
segment, net of income taxes 131,000 390,000 (27,000)
---------- ---------- ----------
Net income (loss) $ (918,000) $ (144,000) $1,046,000
========== ========== ==========
Per common share (Notes G & J)
- ------------------------------
Earnings (loss) per common share:
Continuing operations $ (.39) $ (.21) $ .42
Discontinued operations .05 .15 (.01)
---------- ---------- ----------
Net income (loss) $ (.34) $ (.06) $ .41
========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
-18-
<PAGE> 19
<TABLE>
MRL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Years ended Additional Guarantee of Officers'
January 31, 1996, Common Paid-in Loans for Purchase Treasury
1995 and 1994 Stock Capital Deficit of Treasury Stock Stock Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1993 $263,000 $1,338,000 $(1,891,000) $(36,000) $(197,000) $ (523,000)
Issuance of common stock 6,000 1,000 -- -- -- 7,000
Reduction in guarantees of officers' loans
for purchase of treasury stock -- -- -- 36,000 -- 36,000
Net income -- -- $1,046,000 -- -- $1,046,000
Balance at January 31, 1994 $269,000 $1,339,000 $(845,000) -- $(197,000) $ 566,000
Net loss -- -- (144,000) -- -- (144,000)
Balance at January 31, 1995 $269,000 $1,339,000 $(989,000) -- $(197,000) $422,000
Issuance of common stock 10,000 12,000 -- -- -- 22,000
Net loss -- -- (918,000) -- -- $(918,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at January 31, 1996 $279,000 $1,351,000 $(1,907,000) -- $(197,000) $(474,000)
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
-19-
<PAGE> 20
<TABLE>
MRL, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended January 31
----------------------------------------
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (918,000) $ (144,000) $ 1,046,000
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 124,000 161,000 213,000
Provision for bad debts 4,000 84,000 8,000
(Gain) loss on sale of assets (287,000) (676,000) 16,000
Loss on discounted sale of note 82,000 -- --
Provision for loss on asset held for sale -- 74,000 --
Common stock issued as additional compensation 22,000 -- 7,000
Changes in assets and liabilities:
Decrease (increase) in deferred tax assets, net 397,000 132,000 (529,000)
Increase (decrease) in accounts payable 193,000 (222,000) (270,000)
Increase in other long-term liabilities 125,000 -- --
Decrease (increase) in inventories 44,000 161,000 (279,000)
Increase (decrease) in other, net 12,000 31,000 (18,000)
Increase (decrease) in accrued expenses 17,000 (18,000) (34,000)
Decrease (increase) in accounts receivable (12,000) (13,000) 342,000
----------- ----------- ------------
Net cash provided by (used in) operating activities (197,000) (430,000) 502,000
Cash flows from investing activities:
Capital expenditures (5,000) (10,000) (99,000)
Proceeds from disposal of fixed assets 7,000 818,000 19,000
Collection on note receivable 534,000 18,000 6,000
----------- ----------- ------------
Net cash provided by (used in) investing activities 536,000 826,000 (74,000)
Cash flows from financing activities:
Payments on line of credit (4,986,000) (6,609,000) (11,188,000)
Proceeds from line of credit 4,973,000 6,471,000 10,725,000
Payments on long-term obligations (701,000) (198,000) (335,000)
Proceeds from long-term obligations 410,000 188,000 150,000
Payments on debt issuance cost (16,000) -- --
Proceeds from short-term obligations -- -- 300,000
Payments on short-term obligations -- (300,000) --
----------- ----------- ------------
Net cash used in financing activities (320,000) (448,000) (348,000)
----------- ----------- ------------
Net increase (decrease) in cash and cash equivalents 19,000 (52,000) 80,000
Cash and cash equivalents at beginning of year 47,000 99,000 19,000
----------- ----------- ------------
Cash and cash equivalents at end of year $ 66,000 $ 47,000 $ 99,000
=========== =========== ============
Supplemental cash flow information:
Interest paid $ 188,000 $ 185,000 $ 186,000
=========== =========== ============
Income taxes paid $ -- $ 5,000 $ --
=========== =========== ============
Schedule of noncash financing and investing activities:
Credit sale of property, plant & equipment $ 338,000 $ -- $ 378,000
Common stock issued as compensation $ 22,000 $ -- $ --
Reduction in guarantee of former officers' loans $ -- $ -- $ 36,000
See accompanying notes to financial statements.
</TABLE>
-20-
<PAGE> 21
MRL, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996, 1995 AND 1994
Note A -- Summary of Significant Accounting Policies
The Company follows generally accepted accounting principles to present
fairly its financial position, results of operations and cash flows. All
significant intercompany accounts and transactions are eliminated in
consolidation.
The significant accounting policies are set forth below.
Nature of Operations And Liquidity
The Company incurred a loss from operations in fiscal 1996. The Company made
a provision for costs associated with the litigation for the paint claim
discussed in Note J and elected to increase the valuation allowance for
deferred tax assets at year end. The result of these actions contributed
$694,000 to the net loss of $918,000 for the year ended January 31, 1996
which resulted in an accumulated deficit of $1,907,000.
Management of the Company believes it has taken corrective actions during the
last nine months that will generate profits beginning in fiscal 1997. These
actions include a $300,000 decrease in inventories since May, 1995,
restructuring of debt, securing an effective increase in the line of credit,
establishing payment schedules with vendors, and increasing revenues through
additional sales and marketing activities and price increases. (See Note C -
Long-Term Debt and Capital Lease Obligations.)
The Company eliminated a significant amount of overhead during fiscal 1996 by
reducing salaried and hourly headcount, closing the corporate office,
consolidating operational responsibilities and significantly reducing
corporate costs.
Subsequent to the year end, the Company has experienced an increase in orders
at its Utility Products Group which will enable the Group to operate at high
levels during the normal low volume summer months.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less
to be cash equivalents.
Inventories
Inventories other than inventoried costs relating to contracts in process are
stated at the lower of cost (determined on a first-in, first-out [FIFO]
basis) or market. Inventoried costs relating to contracts in process are
stated at actual production costs incurred to date, reduced by customer
advances and by amounts (based on the estimated average costs of all units
expected to be produced) identified with units shipped; amounts in excess of
estimated realizable value are charged to cost of sales in the year such
determination is made.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Assets under capital
leases are recorded at the net present value of future minimum lease
payments. Improvements are capitalized while normal repairs and maintenance
are expensed as incurred. When assets are retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the balance
sheet and the gains or losses on dispositions are recorded in the statement
of operations.
-21-
<PAGE> 22
MRL, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996, 1995 AND 1994
Leasehold improvements are amortized over the lesser of the period of the
lease or the estimated useful life of the asset. Assets under capital lease
arrangements are generally amortized over the primary term of the lease.
The major categories of property, plant and equipment are depreciated using
primarily declining balance and straight line methods. Their estimated
useful lives are as follows:
<TABLE>
<CAPTION>
<S> <C>
Buildings and improvements 5 to 20 years
Leased property under capital leases 5 to 30 years
Machinery and equipment 3 to 12 years
Assets held for sale 5 to 35 years
</TABLE>
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Aggregate deferred
tax assets are reduced by a valuation allowance to an amount which, in the
opinion of management of the Company, will more likely than not be realized.
Earnings (Loss) Per Common Share
Net income (loss) per share is determined by using the weighted average
number of shares of common stock and common stock equivalents outstanding
during each year plus those common shares which would have been issued under
the incentive stock option plan had the options been exercised at the
beginning of each year, to the extent such conversion would have a dilutive
effect on the per share amount.
Management's 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 the financial statements and
the reported amount of revenues and expenses during the reported period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts of the Company's cash, accounts receivable, and accounts
payable approximate fair value because of the short maturity of these
instruments. The carrying amounts of notes payable, long-term debt, and
obligations under capital leases approximate fair value because they were
entered into or renegotiated recently or because the interest rates vary with
market rates.
-22-
<PAGE> 23
MRL, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996, 1995 AND 1994
Note B -- Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consists of the following at
January 31:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Prepaid expenses $32,000 $49,000
Other current assets 17,000 8,000
------- -------
$49,000 $57,000
======= =======
</TABLE>
Prepaid expenses include various insurance premiums, maintenance contracts
and loan fees which are paid in advance and amortized over the term of the
payment.
Note C -- Long-Term Debt and Capital Lease Obligations
Long-term debt and capital lease obligations consist of the following at
January 31:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Line of credit agreement $256,000 $269,000
Trade note payable 113,000 180,000
Mortgage loan agreement 130,000 131,000
Other long-term debt 3,000 --
Capital leases 680,000 906,000
---------- ----------
$1,182,000 $1,486,000
========== ==========
</TABLE>
In April 1993 the Company entered into a three-year line of credit agreement
with Norwest Business Credit, Inc. ("Norwest"), with $1,000,000 maximum
availability based on eligible accounts receivable and inventory. As of
January 31, 1995, the Company was in violation of its financial covenants and
negotiated a standstill period expiring March 31, 1996, during which the
Company agreed to use its best efforts to obtain alternative financing. As
of July 31, 1995, the Company was in violation of the debt service coverage
ratio covenant in the Standstill Agreement. Effective August 9, 1995, the
Company and Norwest amended the Standstill Agreement to permanently reduce
the line of credit to $475,000 and provide for payment of minimum interest of
$5,500 per month. The line of credit was further reduced in August 1995 by
$128,000 from the proceeds of the sale of an obligation held by the Company
in connection with the sale of certain property.
On November 16, 1995, the Company entered into a $400,000 line of credit
agreement with Concord Growth Corporation ("Concord") to replace the Norwest
financing. Under the terms of the agreement, the Company assigns eligible
account receivable invoices to Concord for collection. In turn, Concord
advances 85% of the invoice amount to the Company. The loan is secured by
all accounts receivable and inventory of the Company. A semi-annual fee of
1% of the facility is due at the start of each period. Daily interest of
0.09% of the amount outstanding is payable, with a minimum interest charge of
$4,000 per month. The term of the loan is six months and is automatically
renewable at the end of each period unless Concord or the Company gives
notice of intent not to renew. The Company can terminate the agreement at
any time after its initial term without a termination fee. The Company
considers the amounts available under the Concord Loan Agreement adequate for
current and near-future ordinary operations. At January 31, 1996, the
balance outstanding under the Concord Loan Agreement was $256,000.
-23
<PAGE> 24
MRL, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996, 1995 AND 1994
Effective December 1, 1994, the Company converted $188,000 of trade accounts
payable with one of its vendors to a trade note payable. The note was to be
paid in 18 equal monthly payments, beginning January 25, 1995, and bears
interest at 12% per annum on the unpaid balance. The Company failed to make
the required principal and interest payments of approximately $12,000 per
payment beginning with the month of June 1995. Due to this violation, the
total principal and interest was due and payable. The Vendor has agreed to a
reduced payment schedule. Since July 14, 1995, the Company has made payments
of $1,000 per week on the note. As of January 31, 1996, the balance due on
the note was $113,000. The balance due has been classified as a current
liability.
In April 1993 the Company entered into a $150,000 ten year mortgage agreement
with Farmers State Bank of Hoffman, Hoffman, Illinois. The Utility Products
Group building and fixtures in Hoffman were pledged as collateral for the
loan. The mortgage note carries an initial interest rate of 7.5% per annum
for the first three years, with interest during each three year period
thereafter at 1.5% over the base rate of The Boatmen's National Bank of St.
Louis. The proceeds from the note were utilized as additional working
capital. The Company failed to make principal and interest payments to the
Bank of Hoffman for the months of May through October, 1995. The Company
reached an agreement with the Bank of Hoffman for payment of 10 1/2% interest
only through April 1996, and then payment of the balance of the principal due
in monthly installments through April 2003, plus interest at 3% over the base
rate of the Boatmen's National Bank of St. Louis. All past due interest
payments have been made. As of January 31, 1996, the principal amount of the
loan is approximately $130,000. The principal amount has been apportioned
between current and long-term obligations in accordance with the new
amortization schedule.
The Company leases facilities and equipment under the terms of capital leases
expiring at various dates through 2014. Several of these leases contain
provisions for interest rates to float with the prime rate. One of the lease
agreements (under an Arkansas industrial revenue bond issue ["IRB"]) required
a tangible net worth of at least $4,000,000. The Company had obtained yearly
waivers of this bond covenant, the latest of which ran through May 1, 1996.
Accordingly, this capital lease had been apportioned between current and
long-term obligations under capital leases in accordance with the original
repayment plan. On November 1, 1995, the Arkansas IRB was retired and
replaced with a Refunding IRB , with a principal amount of $410,000, with
principal and interest (at 9.5% per annum) payable so as to pay the
obligation over a 65 month term beginning on December 1, 1995. The Refunding
IRB has been apportioned between current and long-term obligations in
accordance with the new amortization schedule.
Substantially all land, buildings, equipment, inventory and accounts
receivable not otherwise serving as collateral for borrowings and a second
deed of trust on certain real estate collateralize the above obligations.
-24-
<PAGE> 25
MRL, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996, 1995 AND 1994
Aggregate maturities of long-term debt and capital lease obligations for each
of the next five years ending January 31, and thereafter are as follows:
<TABLE>
<CAPTION>
Long-Term Capital Lease
Debt Obligations
--------- -------------
<S> <C> <C>
1997 $ 381,000 $ 150,000
1998 14,000 121,000
1999 16,000 120,000
2000 18,000 120,000
2001 20,000 120,000
2002 and thereafter 53,000 606,000
--------- ----------
Total payments 502,000 1,237,000
Less amount representing interest (557,000)
----------
Present value of obligations
under capital leases 680,000
Less current maturities (381,000) (91,000)
--------- ----------
$ 121,000 $ 589,000
========= ==========
</TABLE>
The following is a summary of property held under capital leases at January 31:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Buildings & improvements $ 123,000 $ 123,000
Machinery & equipment 1,025,000 1,025,000
Assets held for sale -- 565,000
----------- -----------
1,148,000 1,713,000
Less accumulated amortization (1,013,000) (1,443,000)
----------- -----------
$ 135,000 $ 270,000
=========== ===========
</TABLE>
Aggregate payments required under operating lease obligations for each of the
years ending January 31, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $20,000
1998 8,000
1999 1,000
-------
Total operating lease obligations $29,000
=======
</TABLE>
Rent expense was $16,000, $15,000, and $11,000 in fiscal 1996, 1995, and
1994.
-25-
<PAGE> 26
MRL, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996, 1995 AND 1994
Note D -- Note Receivable
Note receivable represents a New Mexico Real Estate Contract (note)
receivable from Sawmill Investment Corp. related to the sale of the 7th
Street property in Albuquerque, New Mexico. The original principal amount of
the note was for $378,000, plus interest at 10% per annum, payable in a
monthly payment of principal and interest of $5,000 over 10 years. On
February 23, 1995 the Company sold this note receivable. At January 31, 1995
the note receivable was reflected as a current asset and at the net amount
received from the sale. The Company provided for a loss from this sale of
$74,000 at January 31, 1995.
Note E -- Discontinued Operations
Prior to fiscal 1994, the Company announced the decision to discontinue
certain lines of its business. Fiscal 1996 discontinued operations included
the gain on the sale of the Haines Street property, in Albuquerque, New
Mexico, which was included in assets held for sale on the January 31, 1995
balance sheet. Fiscal 1995 discontinued operations included the gain on the
sale of the St. Charles facility in St. Charles, Missouri. Fiscal 1994
discontinued operations included the loss on the sale of the 7th Street
property in Albuquerque, New Mexico.
Note F -- Assets Held for Sale
The Company had leased its two owned buildings in Albuquerque, New Mexico, to
various tenants since fiscal 1989. The Company sold the 7th Street property
during fiscal 1994. The remaining building, the Haines Street property, was
included in assets held for sale on the January 31, 1995 balance sheet at
cost less accumulated depreciation. The Haines Street property was sold on
February 28, 1995.
The Company placed for sale the land and building of the Metal Fabrication
Group, the St. Charles facility, in December 1991. The land and building was
sold on March 31, 1994.
The net book value of assets held for sale at January 31, 1996 and 1995 were
$0 and $58,000, respectively.
Note G -- Stock Options
The following is a summary of transactions relating to stock options:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Shares subject to options at beginning of year 210,000 210,000 35,000
Options granted 75,000 25,000 175,000
Options canceled (90,000) (25,000) --
------- ------- -------
Shares subject to options at end of year 195,000 210,000 210,000
======= ======== =======
</TABLE>
Options granted in fiscal 1996 were at an option price of $0.75 per share.
As of January 31, 1996, options for 175,000 shares were currently exercisable
at option prices of $0.22 to $1.88 per share. Another 20,000 shares were not
exercisable as of January 31, 1996. During 1996 and 1995 options were
canceled due to termination of eligible employees. Options for an additional
95,000 shares were canceled in March, 1996.
-26-
<PAGE> 27
MRL, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996, 1995 AND 1994
Note H -- Income Taxes
The Company adopted SFAS 109 as of February 1, 1993. During the first two
quarters of fiscal 1994 the Company believed the valuation allowance for the
deferred asset was equal to the deferred asset, resulting in no net deferred
asset being recorded. During October 1993 the Company concluded that the
valuation allowance should be decreased, resulting in the recording of a net
deferred asset. During January 1995 the Company concluded that the valuation
allowance should be increased, resulting in a reduction of the net deferred
asset. During January 1996, the Company concluded that the valuation
allowance should be increased, resulting in the elimination of the net
deferred asset.
The valuation allowance for deferred tax assets as of January 31, 1996 and
January 31, 1995 was $1,784,000 and $1,215,000 respectively. The net change
in the total valuation allowance for the year ended January 31, 1996 and
January 31, 1995 was an increase of $569,000 and an increase of $137,000
respectively.
Total income tax expense (benefit) for the years ended January 31 was
allocated as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Continuing Operations $ 325,000 $ (96,000) $(509,000)
Discontinued Operations 72,000 229,000 (16,000)
--------- --------- ---------
$ 397,000 $ 133,000 $(525,000)
========= ========= =========
</TABLE>
Income tax expense (benefit) attributed to income from continuing operations
consists of:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Year Ended January 31, 1996:
U.S. Federal $ -- $ 284,000 $ 284,000
State and Local 41,000 41,000
------ --------- ---------
$ -- $ 325,000 $ 325,000
====== ========= =========
Year Ended January 31, 1995:
U.S. Federal $1,000 $(85,000) $(84,000)
State and Local (12,000) (12,000)
------ -------- --------
$1,000 $(97,000) $(96,000)
====== ======== ========
Year Ended January 31, 1994:
U.S. Federal $4,000 $(422,000) $(418,000)
State and Local -- (91,000) (91,000)
------ --------- ---------
$4,000 $(513,000) $(509,000)
====== ========= =========
</TABLE>
-27-
<PAGE> 28
MRL, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996, 1995 AND 1994
The significant components of deferred income tax expense (benefit)
attributable to income from continuing operations for the years ended January
31 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Deferred tax expense (benefit) $(244,000) $(234,000) $ 209,000
Increase (decrease) in beginning of period
balance of the valuation allowance
for deferred tax assets 569,000 137,000 (722,000)
--------- --------- ---------
$ 325,000 $ (97,000) $(513,000)
========= ========= =========
</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>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Computed statutory tax $(246,000) $(214,000) $ 182,000
Increase (reduction) in income
taxes resulting from:
State income taxes, net of
federal income tax benefit 27,000 (20,000) 27,000
Alternative minimum tax provision -- 1,000 4,000
Change in the beginning of the
period balance of the valuation
allowance for deferred tax assets 569,000 137,000 (722,000)
Other (25,000) -- --
--------- --------- ---------
Income taxes (benefit) $ 325,000 $ (96,000) $(509,000)
========= ========= =========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at January 31 are presented below.
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net operating loss carryforward $1,629,000 $1,442,000
Plant and equipment, principally due
to difference in depreciation 62,000 62,000
Provision for loss on asset sale and
lawsuit settlement 59,000 40,000
Accounts receivable, principally due to
allowance for doubtful accounts 4,000 35,000
Inventories, principally due to additional
costs inventoried for tax purposes
pursuant to the Tax Reform Act of 1986 14,000 15,000
Accrued vacation pay 11,000 13,000
Alternative minimum tax carryforwards 5,000 5,000
---------- ----------
Total gross deferred tax assets 1,784,000 1,612,000
Less valuation allowance 1,784,000 1,215,000
---------- ----------
Net deferred tax assets $ -- $ 397,000
========== ==========
</TABLE>
-28-
<PAGE> 29
MRL, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996, 1995 AND 1994
At January 31, 1996, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $4,578,000 which are available
to offset future federal taxable income, if any. These net operating loss
carryforwards expire during the periods ending from fiscal 2004 through
fiscal 2010. In addition, the Company has 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 I -- Commitments and Contingencies
The Company has separate consulting agreements with two persons who are
directors and officers of the Company. One of the directors serves as
Chairman of the Board of Directors, but receives no remuneration from the
Company outside of that from the consulting agreement, which provides for
annual payments of $71,000. The other director is Vice Chairman of the
Company, whose agreement provides for annual payments of $38,000. Both
agreements expire in 2002 and are adjusted annually for changes in the cost
of living index. The agreements further provide for continuation of the
annual payments in the event of total disability and for reduced payments to
designated beneficiaries in the event of early death. Additionally, the
agreements provide for certain health care and life insurance benefits to be
provided during the terms of the consulting periods. In the event of total
disability or early death, the discounted present value of future payments
would be accrued and charged to operations at that time. Payments under both
agreements have been temporarily reduced or eliminated.
On April 4, 1988, the Company sold shares of its treasury stock to four
officers and a key employee of the Company and agreed to guarantee bank loans
obtained by each of these individuals to purchase the shares. These loans
were fully paid by January 31, 1994. The Company is a defendant in a lawsuit
filed by two of such individuals in which it is alleged that the Company
agreed to repurchase their stock. The suit asks that the Company repurchase
the common stock and reimburse the plaintiffs for interest incurred on the
loans used to finance the stock purchase. The Company is currently unaware
of any action on the part of the plaintiffs to actively pursue this suit.
The suit was dismissed, without prejudice, and the Company is unaware of any
action on the part of the plaintiffs to reinstate the suit.
In fiscal 1994 the Company was contacted by a customer regarding
imperfections in the powder coated paint on standby power units supplied by
the customer to an end user. In December 1994 the Company's customer, who
had received the standby power units and ultimately shipped them to the end
user, filed a breach of contract lawsuit against the Company in an amount to
be determined but in excess of $900,000. The Company has investigated and
verified the extent of the problem, and estimates that it is possible that
the cost to correct the paint imperfections could exceed $1,000,000. It is
the opinion of the Company that the liability for correction of this problem
is the responsibility of an independent vendor that performed the powder
coating for the Company. Should the vendor be unable to satisfy this
liability, which the Company understands is likely to be the case, it is the
opinion of management that the Company has insurance coverage that will
satisfy this liability. However, in December 1994 the Company's insurance
carrier denied coverage.The Company has brought suit against its insurance
carrier seeking to be defended and indemnified by the carrier against this
suit. The customer has begun the repair of the units. Negotiations to reach
a settlement acceptable to all parties are underway. Management has
estimated it will cost $125,000 to litigate and settle the matters related to
the paint claim. Accordingly, that amount has been accrued.
The Company has been named defendant in another lawsuit. The lawsuit
pertains to merchandise sold in a discontinued line of business to a
customer. The Company anticipates this lawsuit will be settled out of court.
The anticipated settlement is reflected in the current liabilities and
discontinued operations at January 31, 1996 and January 31, 1995.
-29-
<PAGE> 30
MRL, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996, 1995 AND 1994
Note J -- Earnings (Loss) Per Share
Earnings (loss) per share are computed using the weighted average number of
shares of common stock outstanding during the year (2,674,187 in 1996,
2,585,694 in 1995 and 2,573,036 in 1994). Stock options had no dilutive
effect on earnings (loss) per share.
Note K -- Operating Groups
SFAS 14 requires disclosure of certain industry segment (operating group)
data. The Company currently operates in two industry segments, the Utility
Products Group and the Precision Metals Group.
Utility Products Group
The Utility Product Group's operations are conducted primarily in a Company
owned facility in Hoffman, Illinois. This group produces and sells mobile
service and support equipment for construction and maintenance crews of
underground utility distribution systems, principally for the major telephone
companies. The group also manufactures and distributes mobile power
equipment which provides standby electrical power. This group sells
accessory equipment, and replacement and service parts for its mobile power
equipment. The group also fabricates tubular frames for mail handling
equipment. This group's products are sold under the trade name "HESCO." The
primary markets for this group are the telecommunications and utility power
industries.
Precision Metals Group
The Precision Metals Group operations are located in a leased facility in
Piggott, Arkansas. The operation consists of contract sheet metal
fabrication and assembly, machining, welding and painting. Customers are
original equipment manufacturers located primarily in the Southeast,
Southwest and Midwest regions of the United States. The group also provides
fabrication services for the Utility Products Group. The group has no
proprietary product lines.
The Company utilizes direct sales and commissioned representatives to market
its products to a variety of customers.
-30-
<PAGE> 31
MRL, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996, 1995 AND 1994
The following is a schedule of the sales, operating profit (loss) and assets
of the operations of the Company by operating group for the three fiscal
years ended January 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(In Thousands)
<S> <C> <C> <C>
Net Sales:
Utility Products $ 2,924 $ 3,748 $ 9,087
Precision Metals 1,813 1,556 876
------- ------- -------
Total $ 4,737 $ 5,304 $ 9,963
======= ======= =======
Operating profit (loss) <F1>:
Utility Products $ (186) $ (143) $ 1,197
Precision Metals (24) (76) (7)
------- ------- -------
Total $ (210) $ (219) $ 1,190
======= ======= =======
Identifiable assets <F2>:
Utility Products $ 1,050 $ 1,174 $ 1,507
Precision Metals 656 632 642
------- ------- -------
Total $ 1,706 $ 1,806 $ 2,149
======= ======= =======
Depreciation expense:
Utility Products $ 27 $ 44 $ 62
Precision Metals 94 83 89
Corporate 3 34 62
------- ------- -------
Total $ 124 $ 161 $ 213
======= ======= =======
Capital expenditures:
Utility Products $ -- $ -- $ 65
Precision Metals 5 10 11
Corporate -- -- 23
------- ------- -------
Total $ 5 $ 10 $ 99
======= ======= =======
<FN>
- -----------------------
<F1> Operating profit (loss) represents sales less operating costs and
expenses. In computing operating profit (loss), general corporate expenses
of $235,000, $204,000 and $440,000 in fiscal 1996, 1995, and 1994,
respectively, have been excluded from operating expenses.
<F2> Assets by operating group are those assets that are used in the Company's
operations in each group. Corporate assets (not presented) are principally
cash, notes receivable, deferred tax assets and assets held for sale.
</TABLE>
-31-
<PAGE> 32
MRL, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996, 1995 AND 1994
Note L -- Related Party Transactions
In fiscal 1994 the Company issued 60,000 shares of common stock to an officer
and director of the Company at fair market value.
On February 28, 1995, the Company sold the remaining Albuquerque, New Mexico
real estate, the Haines Street property, for $375,000. A New Mexico Limited
Liability Company, which is partially owned by the former President and CEO
of the Company purchased the property.
Note M -- Concentration of Business and Credit Risks
For the years ended January 31, 1996, 1995 and 1994, the Company had
aggregate sales to one, two and two customers, totaling $880,000,
$1,506,000 and $5,763,000, or approximately 19%, 28% and 58% of the Company's
net sales for the years then ended, respectively.
For the years ended January 31, 1996 and 1995, the Company had aggregate
trade accounts receivable balances from two customers at each year end period
totaling $121,000 and $144,000, or approximately 22% and 26% of the Company's
total trade accounts receivable balances for the years then ended,
respectively.
-32-
<PAGE> 33
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
MRL, Inc.:
We have audited the accompanying balance sheets of MRL, Inc. (the Company) as
of January 31, 1996 and 1995, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended January 31, 1996. In connection with our audits of the
financial statements, we also have audited the financial statement schedule
as listed in the accompanying index. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MRL, Inc. as of January 31,
1996 and 1995, and the results of its operations and its cash flows for each
of the years in the three-year period ended January 31, 1996, in conformity
with generally accepted accounting principles. Also in our opinion, the
related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
The accompanying financial statements and financial statement schedule have
been prepared assuming that the Company will continue as a going concern. As
discussed in Note A to the financial statements, the Company has suffered
recurring losses from operations and has a net capital deficiency that raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note A.
The financial statements and financial statement schedule do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
April 12, 1996
-33-
<PAGE> 34
<TABLE>
MRL, INC.
SCHEDULE IX - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Column A Column B Column C Column D Column E
- ------------------------------- ------------ ------------ ------------ -------------
Balance at Charged to
Beginning Costs and Deductions Balance at
Description of Period Expenses Describe End of Period
- ------------------------------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Year Ended January 31, 1996
Allowance for doubtful accounts $98,000 $ 4,000 $(91,000)<FA> $11,000
------- ------- -------- -------
Year Ended January 31, 1995
Allowance for doubtful accounts $23,000 $84,000 $(9,000)<FA> $98,000
------- ------- -------- -------
Year Ended January 31, 1994
Allowance for doubtful accounts $49,000 $ 8,000 $(34,000)<FA> $23,000
------- ------- -------- -------
<FN>
<FA> Write-offs of uncollectible accounts.
</TABLE>
-34-
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned duly authorized.
MRL, INC.
Date: April 30, 1996 By: /s/ Larry J. Stallings
---------------------------------------------
Larry J. Stallings
President and Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on the dates indicated by the following persons
on behalf of the Company and in the capacities as members of the Board of
Directors of the Company.
<TABLE>
<CAPTION>
<C> <S>
Date: April 30, 1996 /s/ Larry J. Stallings
--------------------------------------------------
Larry J. Stallings
Date: April __, 1996
--------------------------------------------------
Walter Funk, Jr.
Date: April 30, 1996 /s/ Everett Gray
--------------------------------------------------
Everett Gray
Date: April 30, 1996 /s/ Lawrence C. Grazevich
--------------------------------------------------
Lawrence C. Grazevich
Date: April 30, 1996 /s/ William W. Halliday
--------------------------------------------------
William W. Halliday
Date: April 30, 1996 /s/ Alan G. Johnson
--------------------------------------------------
Alan G. Johnson
Date: April 30, 1996 /s/ John H. Pahlmann
--------------------------------------------------
John H. Pahlmann
</TABLE>
-35-
<PAGE> 36
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit
Number Description
- ------- ---------------------------------------------------------------------
<C> <S>
3(a) Restated Articles of Incorporation, which were filed as Exhibit
3(a) to the Company's Annual Report on Form 10-K for the year ended
January 31, 1993.
3(b) Restated Bylaws and all amendments thereto, which were filed as
Exhibit 3(b) to the Company's Annual Report on Form 10-K for the
year ended January 31, 1993.
4(a) Agreement (which was filed as Exhibit 4(a) to the Company's
Annual Report on Form 10-K for the year ended January 31, 1981)
to furnish the Commission, upon its request, copies of:
(1) Indenture of Mortgage and Deed of Trust dated as of
September 1, 1980 and capitalized Lease Agreement of
even date therewith, regarding issuance by the
Industrial Development authority of St. Charles County,
Missouri of $500,000 principal amount of industrial
revenue bonds to finance such Authority acquisition of
certain real estate, improvements and equipment and
lease thereof to the Company; and
(2) Indenture of Mortgage and Deed of Trust dated as of
September 1, 1980, and capitalized Lease Agreement of
even date therewith, regarding issuance by the City of
Albuquerque, New Mexico, of $450,000 principal amount
of industrial revenue bonds to finance such City's
acquisition of certain equipment and lease thereof to
the Company.
4(b) Mortgage and Indenture of Trust, dated as of September 1, 1981,
and capitalized Lease Agreement of even date therewith, regarding
issuance by the City of Albuquerque, New Mexico of $1,400,000
principal amount of industrial revenue bonds to finance such
City's acquisition of certain real estate, improvements and
equipment and lease thereof to the Company, which was filed as
Exhibit 4(b) to the Company's Annual Report on Form 10-K for the
year ended January 31, 1982.
4(c) Trust Indenture, dated as of May 1, 1984, and Capitalized Lease
Agreement of even date therewith, regarding issuance by the City
of Piggott, Arkansas of $1,000,000 principal amount of Industrial
Revenue Bonds to finance such City's acquisition of certain equipment
and lease thereof to the Company, which was filed as Exhibit 4(c)
to the Company's Annual Report on Form 10-K for the year ended
January 31, 1985.
-36-
<PAGE> 37
<CAPTION>
Exhibit
Number Description
- ------- ---------------------------------------------------------------------
<C> <S>
4(d) Trust Indenture, dated as of May 1, 1984, and Capitalized Lease
Agreement of even date therewith, regarding issuance by the
City of Piggott, Arkansas of $500,000 principal amount of
Industrial Revenue Bonds to finance such City's acquisition of
certain equipment and lease thereof to the Company, which was
filed as Exhibit r(d) to the Company's Annual Report on Form 10-K
for the year ended January 31, 1985.
4(e) Guaranty Agreements, dated as of May 1, 1984, regarding Industrial
Revenue Bonds listed as Exhibits 4(c) and 4(d) hereof, which was
filed as Exhibit 4(e) to the Company's Annual Report on Form 10-K
for the year ended January 31, 1985.
10(a) Employment Agreement dated July 11, 1977 and First Amendment to
Employment Agreement dated September 16, 1987, between Walter
Funk, Jr. and the Company, filed as Exhibit 10(a) to the Company's
Annual Report on Form 10-K for the year ended January 31, 1994.
10(b) Lease and Loan Agreement dated as of December 1983 between the
City of Piggott, Arkansas and the Company which was filed as
Exhibit 10(a) to the Company's Annual Report on Form 10-K for the
year ended January 31, 1984.
10(c) Employment Agreement dated November 10, 1983, between Lawrence
C. Grazevich and the Company, which was filed as Exhibit 10(b)
to the Company's Annual Report on Form 10-K for the year ended
January 31, 1984.
10(d) 1981 Employee Incentive Stock Option Plan, which was filed as
Exhibit 4(e) to the Company's Registration Statement on Form S-8,
No. 2-77392, filed May 5, 1982.
10(e) First Amendment to 1981 Employee Incentive Stock Option Plan,
dated December 9, 1988, which was filed as Exhibit 10(j) to
the Company's Annual Report on Form 10-K for the year ended
January 31, 1988.
10(f) Form of Stock Option Agreement (fully exercisable) for certain
options issued to Executive Officers under 1981 Employee Incentive
Stock Option Plan on December 9, 1987 (in replacement of prior
options), with list of option holders, which was filed as
Exhibit 10(k) to the Company's Annual Report on Form 10-K for the
year ended January 31, 1988.
-37-
<PAGE> 38
<CAPTION>
Exhibit
Number Description
- ------- ---------------------------------------------------------------------
<C> <S>
10(g) Form of Stock Option Agreement (exercisable over three years)
for certain options issued to Executive Officers under 1981
Employee Incentive Stock Option Plan on December 9, 1987 (in
replacement of prior options), with list of option holders,
which was filed as Exhibit 10(l) to the Company's Annual Report
on Form 10-K for the year ended January 31, 1988.
10(h) Form of Stock Option Agreement (fully exercisable) for certain
options issued to Executive Officers on March 10, 1988 (in
replacement of prior options issued under the 1977 Stock Option
Plan), with list of option holders, which was filed as Exhibit 10(m)
to the Company's Annual Report on Form 10-K for the year ended
January 31, 1988.
10(i) Credit and Security Agreement dated April 28, 1993 with Norwest
Business Credit, Inc. (including forms of promissory notes related
thereto) (the "Credit and Security Agreement"), which was filed as
Exhibit 10(o) to the Company's Annual Report on Form 10-K for the
year ended January 31, 1993.
10(j) Minutes of Compensation Committee dated March 16, 1993
regarding compensation arrangement for William C. Cottle, which was
filed as Exhibit 10(p) to the Company's Annual Report on Form 10-K
for the year ended January 31, 1993.
10(k) First Amendment to the Credit and Security Agreement, effective
September 1, 1994, filed as Exhibit 10(k) to the Company's Annual
Report on Form 10-K for the year ended January 31, 1995.
10(l) MRL, Inc. 1995 Stock Option Plan, adopted on March 14, 1995, by the
Board of Directors, filed as Exhibit 10(l) to the Company's Annual
Report on Form 10-K for the year ended January 31, 1995.
10(m) Stock Purchase Agreement, dated March 29, 1995, between the Company
and William C. Cottle, filed as Exhibit 10(m) to the Company's Annual
Report on Form 10-K for the year ended January 31, 1995.
10(n) Separation Agreement and Release, dated March 29, 1995, between the
Company and William C. Cottle, filed as Exhibit 10(n) to the Company's Annual
Report on Form 10-K for the year ended January 31, 1995.
10(o) Standstill Agreement, dated April 27, 1995, with Norwest Business
Credit, Inc., relating to the Credit and Security Agreement, filed
as Exhibit 10(o) to the Company's Annual Report on Form 10-K for the
year ended January 31, 1995.
-38-
<PAGE> 39
<CAPTION>
Exhibit
Number Description
- ------- ---------------------------------------------------------------------
<C> <S>
10(p) Resolutions adopted by the Board of Directors on March 14, 1995, regarding
award to Larry J. Stallings of 100,000 shares of MRL common stock, filed
herewith.
23(a) Consent of KPMG Peat Marwick LLP to incorporation by reference
of its Report of Independent Certified Public Accountants into
the Company's Registration Statement No. 2-77392 on Form S-8, filed herewith.
<FN>
- ---------------
All exhibits not filed herewith are incorporated herein by reference as
exhibits to this Report.
</TABLE>
-39-
<PAGE> 1
EXHIBIT 10(p)
EXCERPT OF MINUTES OF THE MEETING OF
THE BOARD OF DIRECTORS ON MARCH 14, 1995
----------------------------------------
RESOLVED, FURTHER, that Larry Stallings be, and hereby is,
elected as President and Chief Executive Officer of the Company, to hold such
office until the next annual meeting of the directors, or until such term
expires or is otherwise terminated in accordance with the bylaws of the
Company; and
RESOLVED, FURTHER, that the Compensation Committee be, and hereby
is, authorized and directed, in its discretion, to negotiate an employment
agreement, compensation and related terms and conditions of employment with
Mr. Stallings as the President and Chief Executive Officer of the Company,
which terms shall include the issuance to Mr. Stallings of 100,000 shares of
the Company's common stock, $.10 par value, (the "Shares"); and
RESOLVED, FURTHER, that the Company be, and hereby is, authorized
and directed to issue the Shares to Mr. Stallings, in consideration of his
agreement to become President and Chief Executive Officer; and
RESOLVED, FURTHER, that the officers of the Company, on behalf of
the Company, be, and each of them jointly or severally hereby is, authorized
and directed to take such actions and to enter into, to execute and to deliver
such documents and agreements as any such officer, in such officer's sole and
absolute discretion, may deem necessary and proper to effectuate the foregoing
resolutions (the necessity or propriety of the same to be conclusively
evidenced thereby); and all of the same are hereby approved, confirmed and
ratified in all respects as if expressly set forth herein, without the
necessity of any further authorization, by resolutions or otherwise.
-40-
<PAGE> 1
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors
MRL, Inc.:
We consent to incorporation by reference in the registration statement number
2-77392 on Form S-8 of MRL, Inc., of our report dated April 12, 1996,
relating to the balance sheets of MRL, Inc. as of January 31, 1996 and 1995,
and the related statements of operations, changes in stockholders' equity
(deficit), and cash flows and related schedule for each of the years in the
three-year period ended January 31, 1996, which report appears in the January
31, 1996 Form 10-K of MRL, Inc.
Our report dated April 12, 1996, contains an explanatory paragraph that
states that the Company has suffered recurring losses from operations and has
a net capital deficiency, which raise substantial doubt about its ability to
continue as a going concern. The financial statements and financial
statement schedule do not include any adjustments that might result from the
outcome of that uncertainty.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
April 30, 1996
-41-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-K for the year ended January 31, 1996, and is qualified in its
entirety by reference to such financial statements.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 66,000
<SECURITIES> 0
<RECEIVABLES> 566,000
<ALLOWANCES> 11,000
<INVENTORY> 809,000
<CURRENT-ASSETS> 1,479,000
<PP&E> 2,646,000
<DEPRECIATION> 2,397,000
<TOTAL-ASSETS> 1,773,000
<CURRENT-LIABILITIES> 1,412,000
<BONDS> 835,000
<COMMON> 279,000
0
0
<OTHER-SE> (753,000)
<TOTAL-LIABILITY-AND-EQUITY> 1,773,000
<SALES> 4,737,000
<TOTAL-REVENUES> 4,749,000
<CGS> 3,515,000
<TOTAL-COSTS> 5,182,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166,000
<INCOME-PRETAX> (724,000)
<INCOME-TAX> 325,000
<INCOME-CONTINUING> (1,049,000)
<DISCONTINUED> 131,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (918,000)
<EPS-PRIMARY> (.34)
<EPS-DILUTED> (.34)
</TABLE>
