<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
June 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 August 9, 1996 was 3,744,967.
There are a total of 10 pages filed in this document.
<PAGE> 2
<TABLE>
PART 1 - FINANCIAL INFORMATION
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996 AND DECEMBER 31, 1995
(All money amounts stated in thousands of dollars)
<CAPTION>
ASSETS 6-30-96 12-31-95
- ------ ------- --------
Unaudited
<S> <C> <C>
Cash $ 5,969 $ 2,616
Accounts receivable
Customers 22,811 32,010
Earned and unbilled on partially
completed contracts 5,368 7,912
Inventories 25,830 26,149
Other current assets 3,078 2,549
------- --------
Current assets 63,056 71,236
Property, plant & equipment - net 17,036 16,841
Prepaid pension costs 12,260 11,276
Other assets 1,530 1,995
------- --------
93,882 101,348
======= ========
LIABILITIES
- -----------
Short term borrowings 3,350 4,417
Accounts payable 5,868 12,557
Accrued liabilities 8,212 9,840
Advance payments on contracts 2,754 5,123
Accrued taxes 356 357
------- --------
Current liabilities 20,540 32,294
Long-term borrowings 17,000 14,318
Deferred U.S. income taxes 1,553 1,134
Other accrued liabilities 2,920 952
------- --------
42,013 48,698
------- --------
SHAREHOLDERS' EQUITY
- --------------------
Preferred stock 15 15
Common stock 5,617 5,617
Retained earnings 46,195 46,993
Translation adjustment 42 25
------- --------
51,869 52,650
------- --------
$93,882 $101,348
======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE> 3
<TABLE>
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the six months ended June 30, 1996 and 1995
(In thousands of dollars, except per share amounts)
<CAPTION>
1996 1995
Unaudited Unaudited
--------- ---------
<S> <C> <C>
Net sales $ 52,478 $ 50,704
Operating costs and expenses:
Cost of sales 49,078 43,880
Selling and administrative 6,619 6,432
Interest expense 738 261
Other expense (income) (358) (1)
-------- --------
56,077 50,572
(3,599) 132
Gain on sale of foreign property 3,528
Net income (loss) before income taxes (71) 132
Provision (credit) for income taxes 339 (3)
-------- --------
Net income (loss) $ (410) $ 135
======== ========
Earnings (Loss) per common share: $ (.11) $ .04
======== ========
Dividends per share:
Preferred $ .90 $ .90
Common $ .10 $ .10
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE> 4
<TABLE>
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
For the three months ended June 30, 1996 and 1995
(In thousands of dollars, except per share amounts)
<CAPTION>
1996 1995
--------- ---------
Unaudited Unaudited
<S> <C> <C>
Net sales $28,123 $28,501
Operating costs and expenses:
Cost of sales 26,517 24,028
Selling and administrative 3,360 3,308
Interest expense 386 130
Other expense (income) (172) 34
------- -------
30,091 27,500
(1,968) 1,001
Gain on sale of foreign property 3,528
Income before income taxes 1,560 1,001
Provision for income taxes 999 361
------- -------
Net income $ 561 $ 640
======= =======
Earnings per common share: $ .15 $ .17
======= =======
Dividends per share:
Preferred $ .45 $ .45
Common $ .05 $ .05
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE> 5
<TABLE>
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended June 30, 1996 and 1995
(All money amounts stated in thousands of dollars)
<CAPTION>
1996 1995
--------- ---------
Unaudited Unaudited
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (410) $ 135
Adjustments to reconcile net income (loss) to net
cash provided by operations:
Depreciation 939 846
Pension Income 945 32
Cash provided by (used for)
current assets and liabilities:
Accounts receivable 11,743 (4,627)
Inventories 319 (2,803)
Other assets (1,992) (1,964)
Accounts payable (6,689) 3,160
Accrued liabilities 758 3,190
Advance payments on contracts (2,370) 5,328
Accrued income taxes -- (274)
------- -------
Total adjustments 3,653 2,888
------- -------
Net cash provided by (used in)
operating activities 3,243 3,023
Cash flows from investing activities:
Capital expenditures (1,135) (619)
------- -------
Cash flows from financing activities:
Dividends paid (388) (388)
Proceeds from (repayments of) short-term borrowings 1,615 231
------- -------
3,471 (157)
Effect of exchange rates on cash 18 (39)
------- -------
Net increase in cash 3,353 2,208
Cash and cash equivalents at
beginning of period 2,616 30
------- -------
Cash and cash equivalents at
end of period $ 5,969 $ 2,238
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
-5-
<PAGE> 6
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 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 financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's latest annual report and
any current year's previously filed Forms 10-Q.
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<PAGE> 7
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the six months ended June 30, 1996 and 1995
RESULTS OF OPERATIONS
New order bookings for the entire corporation throughout the first six months of
1996 were down approximately 28% relative to the level experienced during the
same period last year. During the second quarter of this year the new order
bookings decreased 55% 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 half of 1996 was $68.5 million as compared to $59.6 million
at 12/31/95 and $85.2 million at 6/30/95.
Net sales for the first six months of 1996 were $52.5 million as compared to
$50.7 million for the same period in 1995, and for the second quarter of 1996
were $28.1 million in contrast to the $28.5 million experienced during the same
period last year.
Operations during the first half of 1996 produced a net loss of $410,000 or $.11
per share as compared to earnings of $135,000 or $.04 per share during the same
period in 1995. The net profit of $561,000 or $.15 per share posted in the
second quarter of this year compares to the net gain of $640,000 or $.17 per
share incurred in the same period one year ago. Second quarter 1996 earnings
were enhanced by a net gain of $ 1.9 million or 51 cents per share from the sale
of the land & buildings owned by our Monarch Werkzeugmachinen GmbH subsidiary
located in Hemsbach, Germany. This subsidiary has been relocated to the
Company's Stamco Depiereux facilities in Dueren Germany. The operating loss of
$1.3 million or 36 cents per share was affected by the recording of
approximately $1.1 million or 30 cents per share special charge to recognize the
consolidation of several machine tool product lines, potentially uncollectible
accounts and a state personal property tax liability. Earnings, year-to-date
were 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. An increase in orders for non-commodity type
machines at our turning division will help lift margins in the future.
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.
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<PAGE> 8
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the six months ended June 30, 1996 and 1995
RESULTS OF OPERATIONS (continued)
Our efforts at cost containment are evidenced by the fact that selling and
general and administrative expenses expressed as a percentage of sales were
12.6% during the first six months of this year as compared to 12.7% during the
same period last year. Although 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 93.2% during the first half
of 1996 as compared to 86.5% during the same period last year. The lower margins
year over year were due to the factors noted above particularly the cost
over-runs on several customer orders at our domestic strip processing operation.
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintained a strong financial position throughout the past year and
has current assets of $3.07 for each dollar of current liabilities at 6/30/96 as
compared to $2.26 at 6/30/95.
The Company presently has long-term debt of $17 million as compared to $5
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
6/30/96 were $3.4 million compared to $7.3 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.
-8-
<PAGE> 9
PART II - OTHER INFORMATION
Item 4 - Submission of matters to a vote of security holders.
During the annual meeting of shareholders held on May 7, 1996 the
following matters were voted upon by the Company's security holders.
The following is a tabulation of the voting results:
1) Election of directors to the class whose term expires in 1998.
Votes Votes
"For" "Withheld"
----- ----------
John A. Bertrand 3,053,364 32,267
Waldemar M. Goulet 3,051,710 33,921
Kenneth H. Hopkins 3,053,173 32,458
John F. Torley 3,050,559 35,072
Directors not voted upon whose term of office continued after the
meeting:
David E. Lundeen
Robert B. Meeker
John M. Richardson
William A. Enouen
Joseph M. Rigot
Robert J. Siewert
Item 6 - Exhibits and Reports on Form 8-K
27 Financial Data Schedule
No reports on Form 8-K were filed during the six month period
ending June 30, 1996.
-9-
<PAGE> 10
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 8/09/96 By /s/ Robert Reithman
------------------------ ------------------------------------
Robert Riethman, Treasurer
Date 8/09/96 By /s/ Earl Hull
------------------------ ------------------------------------
Earl Hull, Corporate Secretary
-10-
<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>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,969
<SECURITIES> 0
<RECEIVABLES> 22,811
<ALLOWANCES> 0
<INVENTORY> 25,830
<CURRENT-ASSETS> 63,056
<PP&E> 17,036
<DEPRECIATION> 940
<TOTAL-ASSETS> 93,882
<CURRENT-LIABILITIES> 20,540
<BONDS> 0
<COMMON> 5,617
0
15
<OTHER-SE> 46,237
<TOTAL-LIABILITY-AND-EQUITY> 93,882
<SALES> 52,478
<TOTAL-REVENUES> 52,478
<CGS> 49,078
<TOTAL-COSTS> 52,549
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 539
<INTEREST-EXPENSE> 738
<INCOME-PRETAX> (71)
<INCOME-TAX> 339
<INCOME-CONTINUING> (410)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (410)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
