<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
March 31, 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 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 May 10, 1996 was 3,744,967.
There are a total of 9 pages filed in this document.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996 AND DECEMBER 31, 1995
(All money amounts stated in thousands of dollars)
<TABLE>
<CAPTION>
ASSETS 3-31-96 12-31-95
- ------ ------- -------
Unaudited
<S> <C> <C>
Cash $ 7,040 $ 2,616
Accounts receivable
Customers 24,502 32,010
Earned and unbilled on partially
completed contracts 6,295 7,912
Inventories 28,417 26,149
Other current assets 3,608 2,549
------- -------
Current assets 69,862 71,236
Property, plant & equipment - net 17,271 16,841
Prepaid pension costs 11,751 11,276
Other assets 1,621 1,995
------- -------
100,505 101,348
======= =======
LIABILITIES
- -----------
Short term borrowings 6,400 4,417
Accounts payable 7,598 12,557
Accrued liabilities 8,500 9,840
Advance payments on contracts 6,470 5,123
Accrued taxes 356 357
------- -------
Current liabilities 29,324 32,294
Long-term borrowings 16,000 14,318
Deferred U.S. income taxes 812 1,134
Other accrued liabilities 2,920 952
------- -------
49,056 48,698
------- -------
SHAREHOLDERS' EQUITY
- --------------------
Preferred stock 15 15
Common stock 5,617 5,617
Retained earnings 45,828 46,993
Translation adjustment (11) 25
------- -------
51,449 52,650
------- -------
$100,505 $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 three months ended March 31, 1996 and 1995
(In thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
1996 1995
------- -------
Unaudited Unaudited
<S> <C> <C>
Net sales $24,356 $22,203
Operating costs and expenses:
Cost of sales 22,561 19,853
Selling and administrative 3,259 3,124
Interest expense 352 132
Other expense (income) (185) (37)
------- -------
25,987 23,072
Income (loss) before income taxes (1,631) (869)
Provision (credit) for income taxes (660) (364)
------- -------
Net income (loss) $ (971) $ (505)
======= =======
Earnings per common share: $ (.26) $ (.13)
======= =======
Dividends per share
Preferred $ .45 $ .45
Common $ .05 $ .05
</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 CASH FLOWS
For the three months ended March 31, 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) $ (971) $ (505)
Adjustments to reconcile net income (loss) to net
cash provided by operations:
Depreciation 465 416
Pension Income 472 32
Cash provided by (used for)
current assets and liabilities:
Accounts receivable 9,124 2,698
Inventories (2,268) (2,164)
Other assets (1,630) (1,913)
Accounts payable (4,959) 2,809
Accrued liabilities 304 1,072
Advance payments on contracts 1,347 621
Accrued income taxes
-- (274)
------- -------
Total adjustments 2,855 3,297
------- -------
Net cash provided by (used in)
operating activities 1,884 2,792
Cash flows from investing activities:
Capital expenditures (896) (77)
------- -------
Cash flows from financing activities:
Dividends paid (194) (194)
Proceeds from (repayments of) short-term borrowings 3,665 --
------- -------
3,471 (194)
Effect of exchange rates on cash (35) (1)
------- -------
Net increase in cash 4,424 2,520
Cash and cash equivalents at
beginning of period 2,616 30
------- -------
Cash and cash equivalents at
end of period $ 7,040 $ 2,550
======= =======
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
-4-
<PAGE> 5
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 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.
-5-
<PAGE> 6
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the three months ended March 31, 1996 and 1995
RESULTS OF OPERATIONS
New order bookings for the entire corporation throughout the first three
months of 1996 were up approximately 32% relative to the level experienced
during the same period last year. The strong improvement in the new order rate,
year-to-date, has been experienced at most of our operations and has not been
concentrated in any particular business segment. The accelerated order rate year
over year was also affected, in the amount of $3.0 million, by the purchase of
Monarch Busch GmbH in May of last year. The resulting level of backlogs at the
end of the first quarter of 1996 was $69.8 million as compared to $59.6 million
at 12/31/95 and $53.7 million at 3/31/95.
Net sales for the first three months of 1996 were $24.3 million as
compared to $22.2 million for the same period in 1995, but well below those of
the prior two quarters. The reduction in net sales relative to recent quarters
was due to the slow rate of new order bookings at our domestic machining center
division and low beginning backlogs at our foreign strip processing and paper
converting subsidiaries.
Operations during the first three months of 1996 produced a net loss of
$971,000 or $.26 per share as compared to a net loss of $505,000 or $.13 per
share during the same period in 1995. The increase in the net loss year over
year was due to 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 immediate future. Rising new order and backlog levels will begin
to increase net shipments, which allows the Company's operations to operate
nearer capacity, thereby covering fixed costs to a much greater degree than was
possible in the first quarter of this year.
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.
-6-
<PAGE> 7
THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the three months ended March 31, 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
13.4% during the first three months of this year as compared to 14.1% 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 92.6% during
the first of 1996 as compared to 89.4% during the same period last year. The
lower margins incurred in past quarters were due to the factors noted above
particularly the excess-capacity situation at some of our operations. Due to
the high engineering content of our products it is not practical or desirable
to radically adjust these costs to cyclical changes in the marketplace for our
equipment.
Earnings continue to be strongest at our strip processing operations due to
reasonable plant capacity utilization, and remain poorest 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 few 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 $2.38 for each dollar of current liabilities at 3/31/96
as compared to $2.12 at 3/31/95.
The Company presently has long-term debt of $16 million. 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 3/31/96 were $6.4 million
compared to $7.0 million one year ago. Management completed the renewal of
these agreements, during the second quarter of 1995, including the expansion of
the existing unsecured $13 million committed line to $ 20 million under
essentially the same terms as were present in the existing facility.
-7-
<PAGE> 8
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
a. - Exhibits
27 Financial Data Schedule
b. Reports on Form 8-K
No reports on Form 8-K were filed during the
three month period ending March 31, 1996
-8-
<PAGE> 9
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 5/13/96 By /s/ Robert Riethman
-------------------------------- ------------------------------
Robert Riethman, Treasurer
Date 5/13/96 By /s/ Earl Hull
-------------------------------- ------------------------------
Earl Hull, Corporate Secretary
-9-
<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
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,040
<SECURITIES> 0
<RECEIVABLES> 24,502
<ALLOWANCES> 0
<INVENTORY> 28,417
<CURRENT-ASSETS> 69,862
<PP&E> 17,271
<DEPRECIATION> 465
<TOTAL-ASSETS> 100,505
<CURRENT-LIABILITIES> 29,324
<BONDS> 0
<COMMON> 5,617
0
15
<OTHER-SE> 45,817
<TOTAL-LIABILITY-AND-EQUITY> 100,505
<SALES> 24,356
<TOTAL-REVENUES> 24,356
<CGS> 22,561
<TOTAL-COSTS> 25,820
<OTHER-EXPENSES> 185
<LOSS-PROVISION> 150
<INTEREST-EXPENSE> 352
<INCOME-PRETAX> (1,631)
<INCOME-TAX> (660)
<INCOME-CONTINUING> (971)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (971)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
