SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 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 incorporation (I. R. S. Employer ID no.)
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 X No
The number of shares outstanding of the registrant's common stock as of
July 31, 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
June 30, September 30,
1998 1997
(Unaudited)
Current assets:
Cash and cash investments $ 12,281 $ 17,875
Accounts and notes receivable 0 191
Other current assets 248 36
--------- ---------
Total current assets 12,529 18,102
Investment in Yogen Fruz World-Wide Inc. 0 250
Escrow accounts receivable 3,059 3,407
Other assets 18 16
--------- ---------
$ 15,606 $ 21,775
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 0 $ 223
Accrued expenses 1,759 3,632
--------- ---------
Total current liabilities 1,759 3,855
Deferred income 3,059 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 (18,652) (20,429)
Less 161,139 shares held in Treasury, at cost (5,449) 0
--------- ---------
Total shareholders' equity 10,788 14,513
--------- ---------
$ 15,606 $ 21,775
========= =========
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 Nine Months
Ended Ended
June 30, June 30,
1998 1997 1998 1997
Operating costs and expenses:
General and administrative expense $ (260) $ (89) $ (744) $ (289)
Other income
Gain on disposals of Yogen Fruz stock 1,236 0 1,236 0
Interest income (expense) 149 (41) 555 (124)
------- ------ ------- -------
Income (loss) from continuing operations
before income taxes 1,125 (130) 1,047 (413)
(Provision) benefit for income taxes 0 (24) 0 (49)
------- ------ ------- -------
Income (loss) from continuing operations 1,125 (154) 1,047 (462)
Income from discontinued operations 0 552 730 1,839
------- ------ ------- -------
Net income $1,125 $ 398 $1,777 $1,377
======= ====== ======= =======
Income (loss) per common share
Income (loss) from continuing operations $3.80 $(0.34) $2.83 $(1.03)
Income from discontinued operations 0 1.23 1.98 4.11
----- ------- ----- -------
Net income $3.80 $ 0.89 $4.81 $ 3.08
===== ======= ===== =======
Average number of common shares
outstanding (000) 296 447 370 447
=== === === ===
See accompanying notes to consolidated financial statements.
<PAGE>
ANDAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited and in thousands of dollars)
Nine Months Ended
June 30,
1998 1997
Cash provided (used) by operations:
Income (loss) from continuing operations
before income taxes $ 1,047 $(413)
Adjustments to reconcile income (loss) from
continuing operations before income taxes
to net cash provided by operations
Gain on disposals of Yogen Fruz stock (1,236) 0
Change in operating assets and liabilities:
Decrease in accounts receivable 191 0
(Increase) decrease in other current assets (212) 35
(Decrease) in accounts payable and
accrued liabilities (1,400) (459)
Cash provided by discontinued operations 655 867
-------- ------
Net cash provided (used) by operating activities
before income taxes (955) 30
Income taxes paid (622) (39)
-------- ------
Net cash(used) by operating activities (1,577) (9)
-------- ------
Cash flows from investing activities:
Proceeds from sale of Yogen Fruz stock 1,247 0
Purchase of treasury shares (5,264) 0
-------- ------
Net cash (used) by investing activities (4,017) 0
(Decrease) increase in cash (5,594) (9)
Cash and cash investments at beginning of period 17,875 21
-------- ------
Cash and cash investments at end of period $12,281 $ 12
======== ======
See accompanying 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, 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 required
to manage open issues, such as the Multi-Arc escrows, taxes, pending claims, and
lawsuits, etc. 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.
(2) On July 15, 1998, the Company entered into an agreement of merger with
Cafco Holding Corporation ("Cafco"), a company organized by Andal's principal
shareholders (who are also its executive officers) and their affiliates. Upon
completion of the merger, each Andal shareholder, other than Cafco, will receive
$37 in cash for each common share; and the Cafco shareholders will become sole
shareholders of Andal. Since Cafco, which owns 75.3% of such stock, has agreed
to vote in favor of the merger, approval by the requisite two-thirds vote of
outstanding common stock is assured.
(3) 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 recorded a
gain of $153,000 on the disposal of Yogen Fruz stock related to this
transaction. The Company then held 136,078 shares, or less than 1%, of the
common stock of Yogen Fruz.
(4) In May 1998, the Company sold its remaining 136,078 shares of Yogen Fruz
for $1,247,000 in cash and recorded a gain of $1,083,000.
(5) 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 have elected to treat such
stock sale as a sale of Multi-Arc assets, pursuant to Section 338(h)(10) of the
Internal Revenue Code. 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 will be reduced to approximately $4.6 million
as the result of such election.
(6) 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.
(7) 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 nine months
ended June 30, 1998 were $260,000 and $744,000 compared with $89,000 and
$289,000 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 nine months ended
June 30, 1998 was $555,000 compared with interest expense of $124,000 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. In April and May 1998,
the Company disposed of its remaining investment in Yogen Fruz common stock and
recorded an aggregate gain of $1,236,000 (see Notes 3 and 4).
Income from discontinued operations of $730,000 in the current nine-month
period resulted principally from the settlement of liabilities and the receipt
of $455,000 drawn from the Tax Escrow and $51,000 in final settlement of the
Expense Escrow account relating to the sale of Multi-Arc (see Note 1). 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 nine months ended June 30, 1998, cash decreased $5.6 million to
$12.3 million.
Cash used by operating activities amounted to $1.6 million compared with
$9,000 used by operating activities in the prior comparable period. In the
current period, the Company reduced accounts payable and accrued liabilities by
$1.4 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 nine months ended June 30, 1998, investing activities used $4.0
million of cash, as the Company used $5.3 million for purchases of treasury
stock. 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 Ind. ("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. In May 1998, the Company
sold its remaining investment in Yogen Fruz common stock for $1.2 million in
cash.
The Company believes that income from its cash and investments may be
sufficient to fund its operating cash needs for the foreseeable future. The
Company has no indebtedness.
<PAGE>
PART II.OTHER INFORMATION
ITEM 5.OTHER INFORMATION
On July 15, 1998, the Company entered into an agreement of merger with
Cafco Holding Corporation ("Cafco"), a company organized by Andal's principal
shareholders (who are also its executive officers) and their affiliates. Upon
completion of the merger, each Andal shareholder, other than Cafco, will receive
$37 in cash for each common share; and the Cafco shareholders will become sole
shareholders of Andal. Since Cafco, which owns 75.3% of such stock, has agreed
to vote in favor of the merger, approval by the requisite two-thirds vote of
outstanding common stock is assured.
ITEM 6.EXHIBITS AND REPORT ON FORM 8-K
Exhibit 2(a) Agreement and Plan of Merger by and between Andal Corp. and Cafco
Holding Corporation dated July 15, 1998.
Exhibit 27 Financial Data Schedule
No reports on Form 8-K were filed by the Company during the quarter ended
June 30, 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:August 14, 1998 By: /s/ Andrew J. Frankel
Andrew J. Frankel
Chairman of the Board and
Chief Executive Officer
DATE:August 14, 1998 By: /s/ Mary Lou Holcombe
Mary Lou Holcombe
Vice President and
Secretary
<PAGE>
EXHIBIT 2(a)
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (this "Plan of Merger") made as of the 15th
day of July, 1998, by and between Andal Corp., a New York corporation ("Andal"),
and Cafco Holding Corporation, a New York corporation ("Cafco"), Andal and Cafco
being sometimes collectively referred to as the "Constituent Corporations."
Andal will be the surviving corporation, sometimes hereinafter referred to as
the "Surviving Corporation."
W I T N E S S E T H:
WHEREAS, Andal has authorized capital stock consisting of (a) 1,500,000
shares of Convertible Preferred Stock, par value $1.00 per share, none of which
are issued or outstanding, (b) 5,000,000 shares of Serial Preferred Stock, par
value $1.00 per share, none of which are issued or outstanding and (c) 1,500,000
shares of common stock, par value $20.00 per share ("Andal Common Stock"), of
which 286,094 shares are issued and outstanding and none of which are held as
treasury shares; and
WHEREAS, Cafco has authorized capital stock consisting of 250,000 shares of
common stock, par value $.01 per share ("Cafco Common Stock"), of which 215,529
shares are outstanding; and
WHEREAS, 215,529 shares of Andal Common Stock are owned by Cafco; and
WHEREAS, the Board of Directors of each of the Constituent Corporations
deems it advisable and to the advantage and welfare of their respective
Constituent Corporations and their shareholders that Cafco merge with and into
Andal, with Andal to be the Surviving Corporation, pursuant to the provisions of
Section 901 of the Business Corporation Law of the State of New York (the
"NYBCL");
NOW, THEREFORE, subject to the approval of this Plan of Merger by the
shareholders of each of the Constituent Corporations, the Constituent
Corporations hereby agree as follows:
1. The names of the Constituent Corporations are Andal Corporation, which was
formed under the name National Cleaning Contractors, Inc., and Cafco
Holding Corporation.
2. (a) Andal has authorized capital stock consisting of (i) 1,500,000 shares
of Convertible Preferred Stock, par value $1.00 per share, none of which are
issued or outstanding, ii) 5,000,000 shares of Serial Preferred Stock, par value
$1.00 per share, none of which are issued or outstanding and (iii) 1,500,000
shares of Andal Common Stock, of which 286,094 shares are issued and outstanding
and none of which are held as treasury shares.
(b) Cafco has authorized capital stock consisting of 250,000 shares of
Cafco Common Stock, of which 215,529 shares are outstanding; and
3. At the Effective Time, as hereinafter defined, Cafco will be merged with
and into Andal (the "Merger").
4. This Plan of Merger constitutes a plan of merger pursuant to Section 902 of
the NYBCL, to be carried out in the manner, on the terms and subject to the
conditions herein set forth.
5. The Merger will become effective immediately upon filing with the Secretary
of State of the State of New York following approval by the shareholders of each
of the Constituent Corporations of this Plan of Merger or a plan of merger which
sets forth the terms of the Merger as set forth in this Plan of Merger and such
other matters as may be provided by Section 902 of the NYBCL. Such date and
time is herein referred to as the "Effective Time."
6. Cafco agrees to vote its shares of Andal Common Stock in favor of the Plan
of Merger.
7. At the Effective Time, the separate existence of Cafco will cease, and
Andal, as the Surviving Corporation, will continue to exist under and be
governed by the laws of the State of New York. The name of the Surviving
Corporation will remain Andal Corp.
8. At and after the Effective Time, the Surviving Corporation will succeed to
and possess, without further act or deed, all of the estate, rights, privileges,
powers, and franchises, both public and private, and all of the property, real,
personal and mixed, of the Constituent Corporations; all debts due either of the
Constituent Corporations will be vested in the Surviving Corporation; all
claims, demands, property, rights, privileges, powers and franchises and every
other interest of either of the Constituent Corporations will be the property of
the Surviving Corporation; the title to any real property of either of the
Constituent Corporations will not revert or be in any way impaired by reason of
the Merger, but will be vested in the Surviving Corporation; all rights of
creditors and all liens upon any property of either of the Constituent
Corporations will be preserved unimpaired, limited in lien to the property
affected by such lien at the Effective Time; and all debts, liabilities and
duties of the Constituent Corporations will thenceforth attach to the Surviving
Corporation and may be enforced against it to the same extent as if such debts,
liabilities and duties had been incurred or contracted by the Surviving
Corporation.
9. At the Effective Time:
(a) Each outstanding share of Andal Common Stock, other than shares owned
by Cafco and any shares owned by shareholders exercising their appraisal rights,
shall, by operation of law and without further action on the part of the former
holders, automatically be converted into and become the right to receive thirty
seven dollars ($37.00). Holders of shares exercising their dissenters' rights
shall have the rights provided for in Sections 910 and 623 of the NYBCL.
(b) Each outstanding share of Cafco Common Stock shall, by operation of
law and without further action on the part of the former holders, automatically
be converted into and become the right to receive one fully paid and
non-assessable share of Andal Common Stock.
10. Each option to purchase one share of Andal Common Stock shall, with the
consent of the holder thereof, become the right to receive per share the amount
by which thirty seven dollars ($37.00) exceeds the exercise price thereof.
11. The certificate of incorporation of Andal as existing at the Effective Time
shall not be modified or amended by the Merger.
12. The By-laws of Andal, as existing at the Effective Time, will continue in
force as the By-laws of the Surviving Corporation until altered, amended or
repealed as provided therein or as provided by law.
13. The directors and officers of Andal immediately prior to the Merger, will
be the directors and officers of the Surviving Corporation, to hold office until
their respective successors have been elected and shall qualify, or as otherwise
provided in the By-Laws of the Surviving Corporation.
14. This Plan of Merger may be terminated and the Merger abandoned for any
reason whatsoever, by mutual consent of the Boards of Directors of the
Constituent Corporations, at any time prior to the Effective Time,
notwithstanding adoption and approval of this Plan of Merger by the shareholders
of the Constituent Corporations.
15. This Plan of Merger may be amended at any time prior to the Effective Time
by mutual consent of the Boards of Directors of the Constituent Corporations;
provided, however, that no such amendment shall adversely affect the rights of
the shareholders of Andal or Cafco subsequent to the adoption and approval of
this Plan of Merger by the shareholders of Andal or Cafco, as the case may be.
IN WITNESS WHEREOF, the foregoing Plan of Merger, which was duly adopted by
the Board of Directors of each of the Constituent Corporations, has been
executed by the chairman of the board and secretary or assistant secretary of
each of the Constituent Corporations on and as of the date first set forth
above.
ANDAL CORP.
By: /s/ Andrew J. Frankel
Andrew J. Frankel
Chairman of the Board and CEO
Attest: /s/ Alan N. Cohen
Alan N. Cohen, Assistant Secretary
CAFCO HOLDING CORPORATION
By: /s/ Andrew J. Frankel
Andrew J. Frankel
Chairman of the Board and CEO
Attest: /s/ Mary Lou Holcombe
Mary Lou Holcombe, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 12,281
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,529
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,606
<CURRENT-LIABILITIES> 1,759
<BONDS> 0
0
0
<COMMON> 8,947
<OTHER-SE> 1,841
<TOTAL-LIABILITY-AND-EQUITY> 15,606
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 744
<OTHER-EXPENSES> (1,236)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (555)
<INCOME-PRETAX> 1,047
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,047
<DISCONTINUED> 730
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,777
<EPS-PRIMARY> 4.81
<EPS-DILUTED> 4.81
</TABLE>
