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 March 31, 1998
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)
909 Third Avenue, New York, New York 10022
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 376-5545
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 May
1, 1998 was 286,220.
<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
March 31, September 30,
1998 1997
(Unaudited)
Current assets:
Cash and cash investments $12,728 $17,875
Accounts and notes receivable O 191
Other current assets 73 36
-------- --------
Total current assets 12,801 18,102
Investment in Yogen Fruz
World-Wide Inc. 188 250
Escrow accounts receivable 3,028 3,407
Other assets 19 16
-------- --------
$16,036 $21,775
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 45 $ 223
Accrued expenses 1,788 3,632
-------- --------
Total current liabilities 1,833 3,855
Deferred income 3,028 3,407
Shareholders' equity:
Common shares, par value $20
per share, 1,500,000 authorized
and 447,359 issued 8,947 8,947
Paid-in-capital 25,942 25,995
Deficit (19,777) (20,429)
Less 120,651 shares held in
Treasury, at cost (3,937) 0
-------- --------
Total shareholders' equity 11,175 14,513
-------- --------
$16,036 $21,775
======== ========
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited and in thousands of dollars,
except per share amounts)
Three Months Six Months
Ended Ended
March 31, March 31,
1998 1997 1998 1997
Operating costs and expenses:
General and administrative expense $(211) $(107) $(484) $(200)
Other income
Interest income (expense) 181 (58) 406 (83)
Income (loss) from continuing operations
before income taxes (30) (165) (78) (283)
(Provision) benefit for income taxes 0 (16) 0 (25)
------ ------ ------ ------
Income (loss) from continuing operations (30) (181) (78) (308)
Income from discontinued operations 658 938 730 1,287
------ ------ ------ -------
Net income $ 628 $ 757 $ 652 $ 979
====== ====== ====== =======
Income (loss) per common share
Income (loss) from continuing operations $(0.08) $(0.41) $(0.21) $(0.69)
Income from discontinued operations 1.73 2.10 1.92 2.88
------- ------- ------- -------
Net income $ 1.65 $ 1.69 $ 1.71 $ 2.19
====== ====== ====== ======
Average number of common
shares outstanding (000) 380 447 405 447
=== === === ===
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited and in thousands of dollars)
Six Months Ended
March 31,
1998 1997
Cash provided (used) by operations:
Income (loss) from continuing operations
before income taxes $ (78) $(283)
Adjustments to reconcile income (loss) from
continuing operations before income taxes
to net cash provided by operations
Change in operating assets and liabilities:
Decrease in accounts receivable 191 0
(Increase) decrease in other current assets (37) 24
(Decrease) in accounts payable and
accrued liabilities (1,328) (573)
-------- ------
Cash provided by discontinued operations 655 851
Net cash provided (used) by operating activities
before income taxes (597) 19
Income taxes paid (622) (15)
-------- ------
Net cash provided (used) by
operating activities (1,219) 4
Cash flows from investing activities:
Purchase of treasury shares (3,928) 0
-------- ------
Net cash (used) by investing
activities (3,928) 0
-------- ------
(Decrease) increase in cash (5,147) 4
Cash and cash investments at beginning
of period 17,875 21
-------- ------
Cash and cash investments at end
of period $12,728 $ 25
======= =====
<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, 1997.
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which subsidiaries are inactive and insignificant. On
September 30, 1997, the Company closed on the sale of its only operating
business, Multi-Arc Inc. ("Multi-Arc"); and, thereafter, its operations consist
of the maintenance of a corporate executive and administrative office.
Accordingly, the consolidated financial statements for fiscal 1997 have been
reclassified to show the accounts of Multi-Arc as a discontinued operation.
As a result of the sale of Multi-Arc, the Company received net proceeds of
approximately $17.8 million of cash and may be entitled to receive additional
cash from two escrow funds which were established at the time of closing. In
March 1998, the Company received $51,000 upon final settlement of the Expense
Escrow and a partial distribution of $455,000 from the Tax Escrow as a result of
the final settlement of certain tax obligations. The directors of the Company
are currently considering whether the Company should be liquidated, function as
an investment company, or seek to enter some other business activity. A
decision on the future direction of the Company is expected to be made during
fiscal 1998.
(2) During the current fiscal year, the Company purchased 15,581 shares of its
common stock at $25 per share. An additional 107,370 shares were purchased at
$33 plus .8125 shares of the Integrated Brands, Inc. ("Integrated") common stock
owned by the Company for each share of Company stock purchased. Integrated
subsequently merged into Yogen Fruz World-Wide Inc. ("Yogen Fruz"). In
addition, options for 2,300 shares exercisable at $2.25 per share of the
Company's common stock were exercised by former officers of the Company.
In April 1998, the Company purchased an additional 40,488 shares of its
common stock at $33 plus .4754 shares of the Yogen Fruz common stock owned by
the Company for each share of Company stock purchased. The Company now holds
136,078 shares, or less than 1%, of the common stock of Yogen Fruz.
(3) 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, 1997, the Company had net operating loss carry forwards
("NOL's") for federal income tax purposes of approximately $13.3 million which
expire in varying amounts through 2010. As part of the sales agreement for
stock of Multi-Arc, the Company and the acquirer may elect to treat such stock
sale as a sale of Multi-Arc assets, pursuant to Section 338(h)(10) of the
Internal Revenue Code. If such election were to be made, the acquirers have
agreed to indemnify Andal for any federal or state income taxes due in excess of
$170,000. The Company's federal net operating loss carry forward would be
reduced to approximately $4.6 million in the event of such election.
(4) Primary income (loss) per common share for all periods was computed based
on the average number of shares outstanding during each of the respective
periods. No diluted per share amounts are shown for any period as the effects
would not be material.
(5) 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
General and administrative expense for the three months and six months
ended March 31, 1998 was $211,000 and $484,000 compared with $107,000 and
$200,000 in the comparable periods of the prior year. The increase in expense
is accounted for by the increased executive, personnel, and office costs
resulting from the sale of Multi-Arc and the relocation of the Company's
executive office to New York City. Interest income for the six months ended
March 31, 1998 was $406,000 compared with interest expense of $83,000 in the
prior year. The increase in interest income is attributable to the interest
earned on the funds received from the sale of Multi-Arc.
Income from discontinued operations of $730,000 in the current six-month
period resulted principally from the settlement of liabilities and the receipt
of funds upon final settlement of the Expense Escrow account relating to the
sale of Multi-Arc. The current period also includes $185,000 from the sale of
the Company's interest in certain real estate projects which had been carried at
nil value for several years. The prior period income from discontinued
operations was attributable to the Company's equity in the earnings of Multi-Arc
for that period.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended March 31, 1998, cash decreased $5.1 million to
$12.7 million.
Cash used by operating activities amounted to $1.2 million compared with
$4,000 provided by operating activities in the prior comparable period. In the
current period, the Company reduced accounts payable and accrued liabilities by
$1.3 million, principally due to settlement of certain tax obligations for
$981,000, including accrued interest. Cash provided by discontinued operations
reflects $455,000 drawn from the Tax Escrow and $51,000 in final settlement of
the Expense Escrow related to the sale of Multi-Arc (see Note 1), and $185,000
from the sale of the Company's interest in certain real estate projects. In the
prior period, Multi-Arc advanced to the Company substantially all of the
Company's operating cash requirements.
During the current period, the Company purchased 15,581 shares of its
common stock at $25 per share. An additional 108,621 shares were purchased at
$33 per share plus .8125 shares of the Integrated Brands, Inc. ("Integrated")
common stock owned by the Company for each share of Company stock purchased.
Integrated subsequently merged into Yogen Fruz World-Wide Inc. In addition,
options for 2,300 shares exercisable at $2.25 per share of the Company's common
stock were exercised by former officers of the Company.
The Company believes that income from its cash and investments will be
sufficient to fund its operating cash needs for the foreseeable future. The
Company has no indebtedness.
<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
March 31, 1998.
<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: May 12, 1998 By: /s/ Andrew J. Frankel
Andrew J. Frankel
Chairman of the Board and
Chief Executive Officer
DATE: May 12, 1998 By: /s/ Mary Lou Holcombe
Mary Lou Holcombe
Vice President and
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 12,728
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,801
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,036
<CURRENT-LIABILITIES> 1,833
<BONDS> 0
0
0
<COMMON> 8,947
<OTHER-SE> 2,228
<TOTAL-LIABILITY-AND-EQUITY> 16,036
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 484
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (406)
<INCOME-PRETAX> (78)
<INCOME-TAX> 0
<INCOME-CONTINUING> (78)
<DISCONTINUED> 730
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 652
<EPS-PRIMARY> 1.71
<EPS-DILUTED> 1.71
</TABLE>
