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, 1997
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
February 2, 1998 was 434,078.
<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,
1997 1997
(Unaudited)
Current assets:
Cash and cash investments $ 17,113 $ 17,875
Accounts and notes receivable 48 191
Other current assets 30 36
--------- ---------
Total current assets 17,191 18,102
Investments in Integrated Brands, Inc. 250 250
Escrow accounts receivable 3,445 3,407
Other assets 20 16
--------- ---------
$ 20,906 $ 21,775
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 42 $ 223
Accrued expenses 3,241 3,632
--------- ---------
Total current liabilities 3,283 3,855
Deferred income 3,445 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 (20,385) (20,429)
Less 13,030 shares held in Treasury, at cost (326) 0
--------- ---------
Total shareholders' equity 14,178 14,513
--------- ---------
$ 20,906 $ 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 Ended
December 31,
1997 1996
Operating costs and expenses:
General and administrative expense $(273) $ (93)
Other income
Interest income (expense) 225 (25)
------ ------
Income (loss) from continuing operations
before income taxes (48) (118)
(Provision) benefit for income taxes 0 (9)
------ ------
Income (loss) from continuing operations (48) (127)
Income from discontinued operations 72 349
------ ------
Net income $ 24 $ 222
====== ======
Income (loss) per common share
Income (loss) from continuing operations $(0.11) $(0.28)
Income from discontinued operations 0.17 0.78
------- -------
Net income $ 0.06 $ 0.50
======= =======
Average number of common shares
outstanding (000) 435 447
=== ===
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,
1997 1996
Cash provided (used) by operations:
Income (loss) from continuing operations
before income taxes $ (48) $(118)
Adjustments to reconcile income (loss) from
continuing operations before income taxes
to net cash provided by operations
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable 143 (13)
Decrease in other current assets 6 0
(Decrease) in accounts payable and
accrued liabilities (572) (362)
Cash provided by discontinued operations 88 488
-------- ------
Net cash provided (used) by operating activities
before income taxes (383) (5)
Income taxes paid 0 (5)
-------- ------
Net cash provided (used) by operating activities (383) (10)
-------- ------
Cash flows from investing activities:
Purchase of treasury shares (379) 0
-------- ------
Net cash (used) by investing activities (379) 0
-------- ------
(Decrease) in cash (762) (10)
Cash and cash investments at beginning of period 17,875 21
-------- ------
Cash and cash investments at end of period $17,113 $ 11
======== ======
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.
Accordingly, the consolidated financial statements for fiscal 1996 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 three escrow funds which were established at the time of closing. 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) 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 carryforwards
("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 carryforward would be
reduced to approximately $4.6 million in the event of such election.
(3) 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.
(4) 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 ended December 31,
1997 was $273,000 compared with $93,000 in the comparable period 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 three months ended December 31, 1997 was $225,000 compared with interest
expense of $25,000 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 $72,000 in the current period
resulted from the settlement of liabilities relating to the sale of Multi-Arc.
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
Cash used by operating activities amounted to $383,000 compared with
$10,000 in the prior comparable period. In such prior period, Multi-Arc
advanced to the Company substantially all of the Company's operating cash
requirements.
During the current period, the Company purchased 15,330 shares of its
common stock at $25 per share. 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
The Company filed a report on form 8-K on October 15, 1997 to report the
sale of Multi-Arc Inc.
<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 13, 1998 By: /s/ Andrew J. Frankel
Andrew J. Frankel
Chairman of the Board and
Chief Executive Officer
DATE: February 13, 1998 By: /s/ Michael S. Huber
Michael S. Huber
Senior Vice President,
Chief Financial Officer,
and Treasurer
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<PERIOD-END> DEC-31-1997
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<SECURITIES> 0
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<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,191
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,906
<CURRENT-LIABILITIES> 3,283
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0
0
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<OTHER-SE> 14,178
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<INCOME-PRETAX> (48)
<INCOME-TAX> 0
<INCOME-CONTINUING> (48)
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<NET-INCOME> 24
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