SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6856
ANDAL CORP.
(Exact name of registrant as specified in its charter)
New York 13-2571394
(State or other jurisdiction of (I. R. S. Employer ID no.)
incorporation or organization)
200 Roundhill Drive, Rockaway, New Jersey 07866
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (201) 625-3400
Not Applicable
(Former Name, Former Address, and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check X whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes No X
The number of shares outstanding of the registrant's common stock as of
February 7, 1997 was 447,359.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANDAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands of dollars,
except share and per share amounts)
ASSETS
December 31, September 30,
1996 1996
(Unaudited)
Current assets:
Cash $ 192 $ 552
Accounts receivable 4,860 5,252
Inventories 2,043 1,553
Other current assets 1,119 857
---------- ----------
Total current assets 8,214 8,214
Investments in affiliates 2,055 1,621
Property and equipment 12,747 12,278
Loans due from Multi-Arc Inc. management 1,000 1,000
Deferred taxes 2,400 2,400
Other assets 1,539 1,683
---------- ----------
$ 27,955 $27,196
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings, including
current portion of long-term debt $ 1,447 $ 1,434
Current portion of convertible debentures 1,825 1,825
Accounts payable 2,069 1,667
Other accrued expenses 5,013 5,619
--------- --------
Total current liabilities 10,354 10,545
Long-term debt 9,547 8,671
Other deferred income 762 925
Convertible subordinated debentures 1,510 1,510
Minority interest in Multi-Arc Inc. 705 690
Shareholders' equity:
Common shares, par value $20 per share,
1,500,000 authorized and 447,359 issued 8,947 8,947
Paid-in-capital 25,995 25,995
Deficit (29,865) (30,087)
--------- ---------
Total shareholders' equity 5,077 4,855
--------- ---------
$ 27,955 $ 27,196
(See accompanying notes to consolidated financial statements)
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited and in thousands of dollars,
except per share amounts)
Three Months
Ended
December 31,
1996 1995
Operating revenues:
Trade sales $7,812 $7,461
Royalties and commissions 103 78
Equity in net income of
foreign joint ventures 35 30
------- -------
7,950 7,569
Operating costs and expenses:
Cost of revenues 4,097 3,771
Depreciation expense 589 537
Selling, general, and
administrative expenses 2,753 2,758
------- -------
7,439 7,066
Income from operations 511 503
Other income (expense):
Minority interest in net income
of Multi-Arc Inc. (15) (40)
Investment and other income, net 47 50
Interest expense (297) (465)
-------- --------
(265) (455)
Income before income taxes 246 48
Provision for income taxes (24) (6)
------- --------
Net income $ 222 $ 42
Net income per common share $.50 $.13
Average number of common
shares outstanding (000) 447 330
(See accompanying notes to consolidated financial statements)
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited and in thousands of dollars)
Three Months Ended
December 31,
1996 1995
Cash provided (used) by operating activities:
Income before income taxes $ 246 $ 48
Adjustments to reconcile income to net cash
provided by operating activities:
Depreciation 589 537
Minority interest in net income of Multi-Arc Inc. 15 40
Amortization of patents, trademarks,
and license rights 42 41
Amortization of deferred income (31) (51)
Equity in net (income) of foreign joint ventures (35) (30)
Cash (used) by discontinued operations 0 (30)
Income taxes paid (5) (6)
Other, net 20 3
Change in operating assets and liabilities:
Decrease in accounts receivable 425 224
(Increase) in inventories (483) (296)
(Increase) in other current assets (217) (98)
(Decrease) in accounts payable
and accrued liabilities (237) (578)
-------- --------
Net cash provided (used) by operating activities 329 (196)
Cash flows from financing activities:
Proceeds from long-term debt 1,150 500
Proceeds from sale of common stock in
and debentures of Multi-Arc Inc. 0 238
Reductions of long-term debt (335) (551)
-------- --------
Net cash provided by financing activities 815 187
Cash flows from investing activities:
Gross additions to property and equipment (1,058) (592)
Reductions of (investment in) joint ventures (399) 49
Other, net (47) 49
-------- --------
Net cash (used) by investing activities (1,504) (494)
-------- --------
(Decrease) in cash (360) (503)
Cash at beginning of period 552 850
-------- --------
Cash at end of period $ 192 $ 347
(See Notes to Consolidated Financial Statements)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The accompanying unaudited interim consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and include all adjustments which, in the
opinion of management, are necessary to present fairly the results for such
periods. These interim financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements and should be read in conjunction with the
consolidated financial statements and notes thereto included in Andal Corp.'s
("Andal" or the "Company") annual report on Form 10-K for the year ended
September 30, 1996.
(2) The Company is presently in discussion with a much larger company for
the sale of the Company's principal operating subsidiary, Multi-Arc Inc. No
agreement has been reached on either price or structure of any transaction.
Important factors which could interfere with the completion of this
transaction are the ability of the parties to reach an agreement as to price
and structure or other details of the transaction and satisfactory completion
of the purchaser's due diligence concerning Multi-Arc's business affairs.
There can be no assurance that these discussions will result in any
transaction.
(3) Inventories are summarized as follows:
December 31, September 30,
1996 1996
(In thousands of dollars)
Raw materials and supplies $2,019 $1,126
Work-in-process 24 427
------ ------
$2,043 $1,553
(4) Andal and its subsidiaries file a consolidated federal income tax
return, and state and local tax returns are generally filed on a combined
basis.
At September 30, 1996, the Company had net operating loss carryforwards
("NOL's") for federal income tax purposes of approximately $30.3 million which
expire in varying amounts through 2010. In addition, the Company's subsidiary
in the United Kingdom had unrelieved corporation tax losses of approximately
$1.8 million.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
The Company has provided a valuation allowance against net deferred tax assets
because it is more likely than not that a substantial portion of the net
deferred tax assets will not be realized.
(5) Income (loss) per common share for all periods was computed based on the
average number of shares outstanding during each of the respective periods.
The effects of stock options are not material and have not been included in
the computations. No fully diluted per share amounts are shown for any period
as the effects would be anti-dilutive.
(6) The Company is aware of certain lawsuits and claims which are pending
involving it and its subsidiaries. In the opinion of the Company's
management, these matters will not result in any material adverse effect on
the Company's consolidated financial position, results of operations, or
liquidity.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company, through its subsidiary, Multi-Arc Inc. ("Multi-Arc"), is
engaged in surface enhancement, the business of coating materials, primarily
metals. Multi-Arc is also engaged in the design, manufacture, assembly, and
sale of proprietary coating equipment systems.
Consolidated operating revenues of $7.9 million for the three months
ended December 31, 1996 were $380,000, or 5% higher than the revenue for the
comparable period of the prior year. Revenues from the Company's coating
services business rose $627,000, or 8% over the prior year, due to continued
penetration of the Company's served markets, with particular strength in the
industrial tool sector. Revenues in the United Kingdom were especially strong
in this area and contributed to aggregate growth of 14% there. Equipment
sales declined $277,000, as the prior year had included delivery of one small
coating system.
Income from continuing operations before income taxes was $246,000 for
the three months ended December 31, 1996, compared with $42,000 in the
comparable period of the prior year. Income from operations for the three
months ended December 31, 1996 was flat with the prior year, as increased
production costs occurred principally from Multi-Arc's having opened a coating
service center in Columbus, Ohio in July 1996. Depreciation expense increased
from the prior year which reflects the recent increased levels of capital
spending. Selling, general, and administrative expenses were flat with the
prior year, as the final effects of Multi-Arc's field sales force and sales
management augmentation were offset by savings from having ceased the
Company's New York office operations.
Interest expense for the three months ended December 31, 1996 declined
from the prior year which reflects significantly lower debt levels as a result
of the cancellation of UBC Lender debt in connection with the Company's sale
of a parcel of real estate in New York City and the retirement of Fleet
Assignee debt in exchange for common stock in August 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased $360,000 during the three months ended December 31, 1996
as cash provided by financing activities of $815,000 and cash provided by
operating activities of $329,000 were offset by cash used by investing
activities of $1.5 million.
Cash used by investing activities includes $1.1 million for capital
expenditures of the Multi-Arc business, principally for capacity expansion.
In addition, in October 1996, Multi-Arc (UK) Ltd. acquired a 33% interest in
Preci-Coat S. A., a joint venture in Switzerland, for $399,000 in cash and
bank guarantees of $1.6 million.
Cash provided by financing activities reflects additional borrowings of
$1.2 million from Multi-Arc's revolving credit facility with First Union
National Bank, principally to finance capital expenditures, offset by
scheduled repayments of $335,000 of long term debt, also to First Union.
Cash flow provided by operating activities of $329,000 compared with
cash used of $196,000 in the comparable period of the prior year. Higher
income from continuing operations and significant cash flow from accounts
receivable collections related to equipment sales are the principal reasons
for the year-over-year improvement. The Company's operating results continue
to reflect a very high level of depreciation expense.
<PAGE>
PART II. OTHER INFORMATION
ITEM 3. EXHIBITS AND REPORT ON FORM 8-K
Exhibit 27 Financial Data Schedule
No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 1996.
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANDAL CORP.
DATE: February 12, 1997 By: /s/ Peter D. Flood
Peter D. Flood
Chairman of the Board,
Chief Executive Officer,
and President
DATE: February 12, 1997 By: /s/ Walter N. Kreil, Jr.
Walter N. Kreil, Jr.
Senior Vice President, and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 192
<SECURITIES> 0
<RECEIVABLES> 4,945
<ALLOWANCES> 85
<INVENTORY> 2,043
<CURRENT-ASSETS> 8,214
<PP&E> 29,988
<DEPRECIATION> 17,241
<TOTAL-ASSETS> 27,955
<CURRENT-LIABILITIES> 10,354
<BONDS> 11,057
0
0
<COMMON> 8,947
<OTHER-SE> (3,870)
<TOTAL-LIABILITY-AND-EQUITY> 27,955
<SALES> 7,812
<TOTAL-REVENUES> 7,950
<CGS> 4,097
<TOTAL-COSTS> 7,439
<OTHER-EXPENSES> (32)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 297
<INCOME-PRETAX> 246
<INCOME-TAX> 24
<INCOME-CONTINUING> 222
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 222
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
