<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended
September 30, 1996 Commission File No. 1-1997
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
An Ohio Corporation Employer Identification
No. 34-4307810
615 North Oak Street, Sidney, Ohio 45365
Telephone 513/492-4111
Securities registered pursuant to Section 12(b) of the act:
Name of each exchange
Title of each class on which registered
- ------------------- -------------------
Common Shares, without New York Stock Exchange Inc.
par value
------------------------
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 the past 90 days. Yes X . No .
----- ----
The number of common shares outstanding as of November 8, 1996 was 3,744,967.
There are a total of 11 pages filed in this document.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(All money amounts stated in thousands of dollars)
<TABLE>
<CAPTION>
ASSETS 9-30-96 12-31-95
- ------ Unaudited
-------- --------
<S> <C> <C>
Cash $ 5,696 $ 2,616
Accounts receivable
Customers 21,207 32,010
Earned and unbilled on partially
completed contracts 6,491 7,912
Inventories 24,650 26,149
Other current assets 2,585 2,549
-------- --------
Current assets 60,629 71,236
Property, plant & equipment - net 16,120 16,841
Prepaid pension costs 12,768 11,276
Other assets 3,554 1,995
-------- --------
93,071 101,348
======== ========
LIABILITIES
Short term borrowings 4,347 4,417
Accounts payable 7,002 12,557
Accrued liabilities 8,716 9,840
Advance payments on contracts 3,165 5,123
Accrued taxes 687 357
-------- --------
Current liabilities 23,917 32,294
Long-term borrowings 15,000 14,318
Deferred U.S. income taxes 1,134
Other accrued liabilities 2,920 952
-------- --------
41,837 48,698
-------- --------
SHAREHOLDERS' EQUITY
- --------------------
Preferred stock 15 15
Common stock 5,617 5,617
Retained earnings 45,589 46,993
Translation adjustment 13 25
-------- --------
51,234 52,650
-------- --------
$ 93,071 $101,348
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-2-
<PAGE> 3
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the nine months ended September 30, 1996 and 1995
(In thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
1996 1995
---- ----
Unaudited Unaudited
<S> <C> <C>
Net sales $ 76,897 $ 82,145
-------- --------
Operating costs and expenses:
Cost of sales 70,906 71.497
Selling and administrative 10,319 9,750
Interest expense 1,052 453
Other expense (income) (713) (70)
-------- --------
81,564 81,630
-------- --------
(4,667) 515
Gain on discontinuance of operation of
foreign subsidiary 365 230
Gain on sale of foreign property 3,528 --
-------- --------
3,893 230
-------- --------
Net income (loss) before income taxes (774) 745
Provision for income taxes 48 265
-------- --------
Net income (loss) $ (822) $ 480
======== ========
Earnings (Loss) per common share: $ (.22) $ .13
======== ========
Dividends per share:
Preferred $ 1.35 $ 1.35
Common $ .15 $ .15
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-3-
<PAGE> 4
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the three months ended September 30, 1996 and 1995
(In thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
1996 1995
--------- --------
Unaudited Unaudited
<S> <C> <C>
Net sales $ 24,419 $ 31,441
Operating costs and expenses: -------- --------
Cost of sales 21,828 27,617
Selling and administrative 3,700 3,317
Interest expense 314 192
Other expense (income) (355) (68)
-------- --------
25,487 31,058
-------- --------
(1,068) 383
Gain on discontinuance of operation of
foreign subsidiary 365 230
-------- --------
Income before income taxes (703) 613
Provision (credit) for income taxes (291) 268
-------- --------
Net income (loss) $ (412) $ 345
======== ========
Earnings (loss) per common share: $ (.11) $ .09
======== ========
Dividends per share:
Preferred $ .45 $ .45
Common $ .05 $ .05
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
-4-
<PAGE> 5
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine months ended September 30, 1996 and 1995
(All money amounts stated in thousands of dollars)
<TABLE>
<CAPTION>
1996 1995
---- ----
Unaudited Unaudited
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (822) $ 480
Adjustments to reconcile net income (loss) to net
cash provided by operations:
Depreciation 1,406 1,270
Pension Income (1,417) 32
Gain on discontinuance of operation of foreign subsidiary (365) (230)
Gain on sale of foreign property (3,528) --
Cash provided by (used for)
current assets and liabilities:
Accounts receivable 12,223 (11,029)
Inventories 1,499 (6,304)
Other assets 2,368 (1,992)
Accounts payable (5,555) 5,004
Accrued liabilities (435) 8,409
Advance payments on contracts (1,958) 3,019
Accrued income taxes 332 (276)
-------- --------
Total adjustments 4,570 (2,097)
-------- --------
Net cash provided by (used in)
operating activities 3,748 (1,617)
Cash flows from investing activities:
Capital expenditures (685) (750)
-------- --------
Cash flows from financing activities:
Dividends paid (582) (582)
Proceeds from (repayments of) short-term borrowings 611 4,661
-------- --------
29 4,079
Effect of exchange rates on cash (12) (36)
-------- --------
Net increase in cash 3,080 1,676
Cash and cash equivalents at
beginning of period 2,616 30
-------- --------
Cash and cash equivalents at
end of period $ 5,696 $ 1,706
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
-5-
<PAGE> 6
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 1996 and 1995
The foregoing consolidated results of operations are unaudited, but in the
opinion of the company all adjustments (consisting of normal recurring accruals
as well as the accounting changes) necessary to present fairly the results for
these periods have been included.
NET INCOME PER COMMON SHARE:
Net income per common share, is based upon the weighted average number of
common shares outstanding and common share equivalents, after giving effect to
the preferred share dividend requirement.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's latest annual report and any current year's previously filed Forms
10-Q.
-6-
<PAGE> 7
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the nine months ended September 30, 1996 and 1995
RESULTS OF OPERATIONS
New order bookings for the entire corporation throughout the first nine
months of 1996 were down approximately 17% relative to the level experienced
during the same period last year. During the third quarter of this year the new
order bookings increased 25% relative to the same period in 1995. The new order
rate was exceptionally strong in the second quarter last year, primarily due to
several large lines being booked at our strip processing operations. Booking
year-to-date in 1996 have been good at most of our operations, but have been
strongest at our turning operation in Sidney. The resulting level of backlogs at
the end of the first nine months of 1996 was $64.3 million as compared to $68.5
million at 6/30/96 and $59.6 million at 12/31/95.
Net sales for the first nine months of 1996 were $76.9 million as compared
to $82.1 million for the same period in 1995, and for the third quarter of 1996
were $24.4 million in contrast to the $31.4 million experienced during the same
period last year. Shipments were low in the third quarter of this year primarily
because of a temporary delay, requested by the customer, relative to the
completion of a large line of equipment being produced by our domestic strip
processing division.
Operations during the first nine months of 1996 produced a net loss of
$822,000 or $.22 per share as compared to earnings of $480,000 or $.13 per share
during the same period in 1995. The net loss of $412,000 or $.11 per share
posted in the third quarter of this year compares to the net gain of $345,000 or
$.09 per share incurred in the same period one year ago. The third quarter 1996
loss was reduced by a net gain of $237,000 or 6 cents per share from the sale of
all remaining property relating to the discontinuance of operations at our Dean
Smith & Grace subsidiary. The net loss year-to-date of $822,000 or 22 cents per
share was mitigated by the above mentioned gain as well as a net gain of $1.9
million or 51 cents per share from sale of the land & buildings owned by our
Monarch Werkzeugmaschinen GmbH subsidiary located in Hemsbach, Germany. This
subsidiary has been relocated to the Company's Stamco Depiereux facilities in
Dueren Germany. The after-tax loss in the first nine months of this year was
also negatively affected by the recording of approximately $1.1 million or 30
cents per share special charge, in the second quarter, to recognize the
consolidation of several machine tool product lines, potentially uncollectible
accounts and a state personal property tax liability. We continue to analyze our
machine tool product lines, primarily at our turning operation, with respect to
further potential product consolidations.
-7-
<PAGE> 8
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the nine months ended September 30, 1996 and 1995
RESULTS OF OPERATIONS (continued)
The year-to-date loss was also detrimentally affected in the first quarter of
this year by poor margins on several new product introductions at our domestic
strip processing division as well depressed margins at our turning division due
to the shipment of a very disadvantageous mix of products during the quarter.
Procedures have been developed to prevent a reoccurrence of the cost over-runs
experienced at the strip processing operation.
Earnings are also hampered by the generally increasing cost of purchased items
that we have only had limited success in passing along to the customer due to
severe price competition from both domestic and foreign builders of similar
products. The Company, however, continues to implement a company-wide effort to
control costs particularly with respect to the largest and fastest growing areas
of costs such as health care, travel and product liability insurance.
Selling and general and administrative expenses expressed as a percentage of
sales were 13.4% during the first nine months of this year as compared to 11.9%
during the same period last year. This ratio is highly dependent upon sales
volume because of the fixed nature of many of these costs, the Company will
continue to focus on controlling these costs where possible as we have in the
past. Cost of sales expressed as a percentage of sales went up to 92.2% during
the first nine months of 1996 as compared to 87.0% during the same period last
year. The lower margins year over year were due to the factors noted above,
particularly with respect to the machine tool operations. However the margin
erosion was primarily due to cost over-runs on several customer orders at our
domestic strip processing operation during the first quarter of 1996, and at our
foreign strip processing operations in the third quarter.
Earnings continue to be strongest at our strip processing operations due to
reasonable plant capacity utilization, and remain poorest, although improving,
at our turning operation because of considerable excess capacity.
As reported in the 1995 Annual Shareholder's Report, the investment banking firm
of Lehman Brothers Inc. has been hired to for the purpose of assisting the
Company in maximizing shareholder value. Management and Lehman Brothers have
been working together over the past months towards achieving this end.
-8-
<PAGE> 9
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the nine months ended September 30, 1996 and 1995
LIQUIDITY AND CAPITAL RESOURCES
The Company maintained a strong financial position throughout the past year and
has current assets of $2.54 for each dollar of current liabilities at 9/30/96 as
compared to $2.11 at 9/30/95.
The Company presently has long-term debt of $15 million as compared to $8
million one year ago. The Company has unsecured lines of credit aggregating $37
million, including a $20 million committed three year revolving loan with a
three year term-out option. Short-term borrowings against these facilities at
9/30/96 were $4.3 million compared to $3.7 million one year ago. Management
completed the renewal of the uncommitted credit line agreements during the
second quarter of 1996. During the second quarter of 1995 the prior unsecured
$13 million committed line was expanded to $ 20 million under essentially the
same terms as were present in the then existing facility.
-9-
<PAGE> 10
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the nine month
period ending September 30, 1996.
-10-
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report to be signed on its behalf by
the undersigned thereunto duly authorized.
THE MONARCH MACHINE TOOL COMPANY
Date 11/08/96 By /s/ Robert Riethman
---------- ------------------------------
Robert Riethman, Treasuer
Date 11/08/96 By /s/ Earl Hull,
---------- ------------------------------
Earl Hull, Treasuer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET, CONSOLIDATED INCOME STATEMENT, CONSOLIDATED
STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,696
<SECURITIES> 0
<RECEIVABLES> 21,207
<ALLOWANCES> 0
<INVENTORY> 24,650
<CURRENT-ASSETS> 60,629
<PP&E> 16,120
<DEPRECIATION> 1,406
<TOTAL-ASSETS> 93,071
<CURRENT-LIABILITIES> 23,917
<BONDS> 0
<COMMON> 5,617
0
15
<OTHER-SE> 45,602
<TOTAL-LIABILITY-AND-EQUITY> 93,071
<SALES> 76,897
<TOTAL-REVENUES> 76,897
<CGS> 70,906
<TOTAL-COSTS> 77,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 539
<INTEREST-EXPENSE> 1,052
<INCOME-PRETAX> (774)
<INCOME-TAX> 48
<INCOME-CONTINUING> (822)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (822)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
