<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended NOVEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-14203
MERIDIAN NATIONAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 34-1470518
(State of Incorporation) (I.R.S. Employer
Identification Number)
805 CHICAGO STREET, TOLEDO, OH 43611
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number: (419) 729-3918
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 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
--- ---
As of December 31, 1996, 3,409,878 shares of Meridian National Corporation
common stock were outstanding.
<PAGE> 2
MERIDIAN NATIONAL CORPORATION
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements of Meridian
National Corporation are unaudited but, in the opinion of management, reflect
all adjustments (including only normal recurring accruals) necessary to present
fairly such information for the periods and at the dates indicated. The results
of operations for the three months and nine months ended November 30, 1996 may
not be indicative of the results of operations for the year ending February 28,
1997. Since the accompanying condensed consolidated financial statements have
been prepared in accordance with Article 10 of Regulation S-X, they do not
contain all information and footnotes normally contained in annual consolidated
financial statements; accordingly, they should be read in conjunction with the
consolidated financial statements and notes thereto appearing in the Company's
Annual Report on Form 10-K for fiscal year ended February 29, 1996.
2
<PAGE> 3
MERIDIAN NATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 29,
1996 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 16,820 $ 176,667
Accounts receivable - net 10,800,687 8,221,356
Inventories 10,148,374 8,860,574
Other current assets 221,031 157,840
----------- ------------
Total current assets 21,186,912 17,416,437
Property and equipment, at cost 12,530,621 12,295,459
Less accumulated depreciation and amortization 4,863,917 5,403,083
----------- ------------
7,666,704 6,892,376
Other assets 1,549,536 944,453
----------- ------------
$30,403,152 $ 25,253,266
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $11,630,100 $ 9,006,182
Accounts payable and accrued liabilities 11,885,084 8,904,892
Long-term debt due within one year:
Related parties -- 149,206
Other 831,061 799,270
----------- ------------
Total current liabilities 24,346,245 18,859,550
Long-term debt due after one year:
Related parties 275,232 596,822
Other 3,592,272 4,891,969
Minority interest 178,693 --
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized:
$100 Series A, 5,000 shares authorized,
4,000 shares issued and outstanding 400,000 400,000
$3.75 Series B, 1,375,000 shares authorized,
206,752 shares issued and outstanding 775,320 775,320
Common stock, $.01 par value, 20,000,000 shares authorized,
3,409,878 shares outstanding (2,755,145 at February 29, 1996) 34,099 27,551
Capital in excess of stated value 10,779,203 10,042,327
Deficit (9,977,912) (10,340,273)
----------- ------------
Total stockholders' equity 2,010,710 904,925
----------- ------------
$30,403,152 $ 25,253,266
=========== ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
MERIDIAN NATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
------------------------------ ------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $18,124,374 $13,763,637 $49,593,396 $41,108,688
Costs of sales 15,893,599 12,311,682 43,307,617 36,535,540
----------- ----------- ----------- -----------
Gross margin 2,230,775 1,451,955 6,285,779 4,573,148
Other costs and expenses:
Selling, general and administrative 1,826,173 1,429,214 5,405,740 4,341,652
Interest expense 411,812 344,390 1,195,549 1,078,014
0 0
Miscellaneous - net (86,463) (66,755) (239,194) (99,637)
----------- ----------- ----------- -----------
2,151,522 1,706,849 6,362,095 5,320,029
----------- ----------- ----------- -----------
Income (loss) from continuing operations
before extraordinary gain 79,253 (254,894) (76,316) (746,881)
Discontinued operations:
Gain (loss) from operations 891 69,505 (12,728) 126,246
Gain from disposal 5,000 -- 200,498 --
----------- ----------- ----------- -----------
Income (loss) before extraordinary gain 85,144 (185,389) 111,454 (620,635)
Extraordinary gain - extinguishment of debt -- -- 329,279 149,206
----------- ----------- ----------- -----------
Net income (loss) $ 85,144 $ (185,389) $ 440,733 $ (471,429)
=========== =========== =========== ===========
Earnings (loss) applicable to common stock $ 50,946 $ (219,587) $ 337,163 $ (569,130)
=========== =========== =========== ===========
Earnings (loss) per common share -
primary and fully diluted:
Income (loss) before extraordinary gain:
Continuing operations $ 0.01 $ (0.11) $ (0.05) $ (0.33)
Discontinued operations -- 0.03 0.05 0.05
Extraordinary gain -- -- 0.10 0.06
----------- ----------- ----------- -----------
Net income (loss) $ 0.01 $ (0.08) $ 0.10 $ (0.22)
=========== =========== =========== ===========
Weighted average common
shares outstanding 3,409,878 2,714,506 3,178,500 2,608,447
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes
4
<PAGE> 5
MERIDIAN NATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
NOVEMBER 30,
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Loss from continuing operations before extraordinary gain $ (76,316) $ (746,881)
Adjustments to reconcile loss to net cash
provided by operating activities:
Depreciation and amortization 634,637 360,996
Gain on disposal of assets (19,741) --
Minority interest (19,096) --
Changes in operating assets and liabilities:
Accounts receivable (2,405,921) 757,486
Inventories (1,287,800) 1,382,469
Other current assets (63,191) (51,109)
Accounts payable and accrued liabilities 2,560,472 (1,240,711)
----------- -----------
Net cash used in continuing operating activities (676,956) 462,250
Net cash provided by discontinued operating activities 13,397 184,746
----------- -----------
Net cash provided by (used in) operating activities (663,559) 646,996
INVESTING ACTIVITIES
Additions to property and equipment (1,516,730) (826,146)
Proceeds from disposal of assets 530,759 --
Changes in other assets (599,536) (31,434)
----------- -----------
Net cash used in investing activities (1,585,507) (857,580)
FINANCING ACTIVITIES
Changes in notes payable 2,623,918 186,303
Payments on long-term debt (1,107,540) (685,286)
Issuance of common stock of subsidiary 600,000 --
Cash dividends paid (27,159) (27,065)
Net proceeds from exchange of warrants -- 304,134
----------- -----------
Net cash provided by financing activities 2,089,219 (221,914)
----------- -----------
Decrease in cash and cash equivalents (159,847) (432,498)
Cash at beginning of period 176,667 655,373
----------- -----------
Cash at end of period $ 16,820 $ 222,875
=========== ===========
</TABLE>
Significant noncash investing and financing activities:
In the nine months ended November 30, 1996, the Company has incurred
obligations of $135,000, related to an expansion project of its paint waste
recycling operation, which are included in accounts payable at November 30,
1996.
See Notes 3 and 5 for additional noncash transactions.
See accompanying notes.
5
<PAGE> 6
MERIDIAN NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
1. FINANCING OF EXPANSION OF PAINT WASTE RECYCLING FACILITIES
In November 1996 the Company completed arrangements for short-term financing for
an expansion project scheduled for completion in March 1997 at its paint waste
recycling facility. The cost of the expansion is estimated at $2,300,000.
Financing arrangements include the extension of the maturity of two notes with
its prime lender bank to September 30, 1997. These two notes total $650,000. The
bank also loaned an additional $1,700,000 under a note which is secured by the
expansion project. This note requires monthly payments of $21,000 plus interest
at prime plus 1.5% and a final payment of the outstanding balance at October 31,
1997. The note is guaranteed up to $750,000 by MNP Corporation ("MNP"), a
company in which one of the Company's directors has a majority ownership.
Presently MNP leases certain properties from the Company. The Company has agreed
to reimburse MNP to the extent MNP is called upon to honor such guarantee and,
as security for this reimbursement obligation, the Company has granted certain
security in the leased properties. Additionally, an officer and stockholder has
given his personal guarantee on the Company's entire borrowings from the bank,
including its revolving credit line of $12,000,000. $25,000 of a closing fee of
$200,000 in conjunction with the financing was paid at closing, with the balance
of $175,000 due at October 31, 1997. The Company is expensing the closing fee
ratably over the twelve months until maturity of the borrowings. The Company is
investigating various sources for long-term financing for the project.
2. MINORITY INVESTMENT IN PAINT WASTE RECYCLING BUSINESS
In November 1996, a recently formed, and previously wholly-owned subsidiary, EPI
Technologies, Inc., issued shares of its common stock representing a 20%
interest for $600,000. The issued shares are held equally by three investors,
one of which is MNP Corporation. Concurrent with the sale of the common stock of
EPI Technologies, the Company transferred to EPI Technologies two wholly-owned
subsidiaries which between them own a 100% interest in a partnership,
Environmental Purification Industries Company, which operates the Company's
paint waste recycling facility.
6
<PAGE> 7
3. DISCONTINUED OPERATIONS
On July 5, 1996, the Company sold all of the property and equipment of Meridian
Environmental Services, Inc. ("MES"), a wholly-owned subsidiary which operated
the Company's waste acid recycling and disposal business. The assets were sold
for $700,000 to a new company formed by MES management. Of the $700,000 purchase
price, $200,000 is represented by notes due from the purchaser, payable in
varying installments over a period of five years. Of the $395,000 gain on the
sale of the assets, $195,000 was recognized in July 1996, and the remainder will
be recognized as the notes are collected.
The accompanying condensed consolidated financial statements have been restated
to separately report the operating results of this discontinued operation. Net
sales of the discontinued operation were $507,000 in the quarter ended November
30, 1995 and $458,000 and $1,378,000 for the nine-month periods ended November
30, 1996 and 1995, respectively.
4. EXTINGUISHMENT OF DEBT
The Company executed an agreement, effective June 28, 1996, to repay a note
payable to Haden Purification, Inc. ("HPI"). The terms of the agreement
included, among other things, settlement of the note payable, which had a
balance due of $674,000 on June 28, 1996, for a payment of $350,000 made in July
1996 in full satisfaction of all principal and interest due under the note. The
resultant $329,000 gain on extinguishment of debt is classified as an
extraordinary gain in the accompanying statements of operations for the nine
months ended November 30, 1996.
In March 1995, the Company negotiated an agreement with a stockholder who held
less than 5% of the outstanding voting stock, whereby a convertible note payable
in an amount of $596,822 was settled for $447,600 payable in 18 monthly payments
commencing in March 1995, without interest. The early retirement of this
obligation resulted in the recording of an extraordinary gain of $149,000 in the
nine months ended November 30, 1995.
5. CAPITAL STOCK
In May 1996 the Board of Directors of the Company authorized the issuance of
600,000 shares of common stock in exchange for a reduction of $300,000 to a
convertible note payable to an officer and stockholder. Accordingly, long-term
debt due after one year has been reduced and stockholders' equity has been
increased by $300,000 in the accompanying November 30, 1996 condensed
consolidated balance sheet.
7
<PAGE> 8
6. DIVIDENDS
The Company's Series B preferred stock has a mandatory dividend payable
semi-annually. On August 1, 1996 the Company paid a dividend to holders of the
Series B preferred stock by issuing 54,733 shares of common stock. The dividend
was recorded at the fair market value of the common shares issued.
7. RELATED PARTY TRANSACTIONS
The Company leases property and equipment from affiliates of certain officers
and directors of the Company. Lease payments to these affiliates during the
three months and nine months ended November 30, 1996 amounted to $75,000 and
$226,000, respectively. During the three months and nine months ended November
30, 1995, the lease payments amounted to $63,000 and $188,000, respectively.
Company management believes the terms of the leases are at least as favorable as
those that could have been obtained from unrelated parties.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THIRD QUARTER ENDED NOVEMBER 30, 1996
COMPARED TO
THIRD QUARTER ENDED NOVEMBER 30, 1995
Third quarter sales of $18.1 million represented a 32% increase over sales
reported in the same quarter in the prior year. This second consecutive
quarterly sales record for the Company was a result of the strong demand for
steel products in the U.S. economy and the growth of the Company's steel
processing operations.
As discussed further in Note 3 to the condensed consolidated financial
statements, in the third quarter of fiscal 1997 the Company sold all of the
property and equipment of its waste acid recycling and disposal business.
Accordingly, operating results for the Company have been restated for all
periods presented to separately report the operating results and gain on sale of
assets of this discontinued operation. Discussions of results of operations
which follow pertain only to continuing operations.
For the third quarter of fiscal 1997, the Company reported income from
continuing operations before extraordinary gain of $79,000 compared to a loss of
$255,000 in the same quarter last year.
STEEL DISTRIBUTION AND PROCESSING SEGMENT The Company's steel distribution and
processing operations reported net sales of $17.3 million for the third quarter
of fiscal 1997, an increase of $4.5 million or 35% over the third quarter of the
prior year. The sales increase was caused primarily by the growth of the
Company's steel service centers in the Detroit and Chicago markets. Net sales
for the steel service center in Gary, Indiana, which was acquired in November
1995, amounted to $3.8 million in the third quarter of fiscal 1997. Operating
profits for this segment amounted to $820,000, an increase of $598,000 from the
third quarter of the prior year.
Gross margin (net sales less cost of sales) as a percentage of net sales was
11.4% in the third quarter of fiscal 1997 compared to 8.3% in the comparable
quarter of the prior year. This gross margin increase is attributable to the
increased emphasis on providing value-added processing of steel products sold to
end-user customers, which generally generates higher gross margins than the
steel distribution business. Additionally, the market for steel products
continues to be strong as demand continues at high levels.
9
<PAGE> 10
In March 1995 the Company shut down its bumper stock pickling business. At that
time, certain changes were made to the pickling facility in order to handle bar
coil product. The Company was unable to secure sufficient bar coil pickling
business to operate profitably during fiscal 1996 and this operation was closed
in March 1996. The Company has leased the facility and an adjacent warehouse to
another party. Operating profit for this facility amounted to $5,000 for the
third quarter of fiscal 1997, whereas the operating loss for the third quarter
of the prior year amounted to $97,000.
WASTE MANAGEMENT SEGMENT This segment reflects the results of the operations of
the Company's paint waste recycling operation and excludes the discontinued
operations of the waste acid recycling and disposal operation. Net sales for
paint waste recycling decreased to $804,000 in the third quarter of fiscal 1997
from $927,000 in the third quarter of the prior year. The sales decline resulted
mainly from a 10 day loss of production from one of its two processing systems
due to damage from debris which entered the system with paint wastes it was
processing.
This segment reported a $144,000 operating loss in the third quarter of fiscal
1997, compared to operating profits of $98,000 for the same quarter last year.
The loss principally resulted from lower sales volume and higher administrative
costs as the paint waste recycling operation prepares for the implementation of
additional process capacity through expansion of its facilities in Toledo, Ohio.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES The $397,000 increase in selling,
general and administrative expenses is primarily attributable to the development
of the Company's steel service center business and increased administrative
expenses associated with the paint waste recycling operations.
INTEREST EXPENSE Interest expense increased $67,000 (or 20%) in the third
quarter of fiscal 1997. The Company's average outstanding borrowings rose as a
result of the increase in working capital requirements associated with the
expansion of the steel processing business.
NINE MONTHS ENDED NOVEMBER 30, 1996
COMPARED TO
NINE MONTHS ENDED NOVEMBER 30, 1995
Net sales for the nine months ended November 30, 1996 of $49.6 million
represented record sales for the Company for any nine month period and was a 21%
increase over the same period for the prior year. For the nine month period
ended November 30, 1996, the Company reported an operating loss from
10
<PAGE> 11
continuing operations before extraordinary gain of $76,000 compared to $747,000
for the same period in the prior fiscal year. Results for fiscal 1997 and 1996
include the recognition of extraordinary gains from the extinguishment of debt
at less than face value of $329,000 and $149,000, respectively.
STEEL DISTRIBUTION AND PROCESSING SEGMENT Sales for the segment amounted to
$47.0 million for the nine months ended November 30, 1996, a $8.5 million or 22%
increase over sales reported in the same period in the prior fiscal year. The
development of the Company's steel service center business previously described
largely contributed to this sales increase. Operating profits for this segment
amounted to $2,069,000, an increase of $1,077,000 from the first nine months of
the prior fiscal year. Steel segment gross margin as a percentage of net sales
was 11.4% for the first nine months of fiscal 1997 compared to 9.0% in the
comparable period of the prior year. The increase in gross margin percentage and
operating profits is due to the effect of the strong demand for steel products
and the Company's emphasis on providing value-added processing of steel products
for its end-user customers.
WASTE MANAGEMENT SEGMENT This segment reflects the results of the operations of
the Company's paint waste recycling operation and excludes the discontinued
operations of the waste acid recycling and disposal operation. Net sales for
paint waste recycling decreased slightly to $2,582,000 in the first nine months
of fiscal 1997 from $2,618,000 in the comparable period of the prior year.
The paint waste recycling operation reported a $304,000 operating loss in the
first nine months of fiscal 1997, compared to operating profits of $143,000 for
the same period last year. The loss principally resulted from lost production
time in the third quarter as previously discussed and higher administrative
costs as the paint waste recycling operation prepares for its expanded
operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES The $1,064,000 increase in selling,
general and administrative expenses is primarily attributable to the development
of the Company's steel service center business and increased administrative
expenses associated with the paint waste recycling operations.
INTEREST EXPENSE Interest expense increased $117,000 (or 11%) as the average
outstanding borrowings rose as a result of the increase in working capital
requirements associated with the expansion of the Company's steel processing
business.
LIQUIDITY AND CAPITAL RESOURCES
Environmental Purification Industries Company ("EPIC") has commenced an
expansion project at its paint waste recycling facility in Toledo, Ohio. EPIC is
a
11
<PAGE> 12
partnership which is indirectly 100% owned by EPI Technologies, Inc., a company
which is 80% owned by the Company (see Note 2 to the Condensed Consolidated
Financial Statements). The project, scheduled for completion and start-up in
March 1997, has been undertaken to expand the capabilities and capacity of
EPIC's paint waste recycling services. The expansion will supplement EPIC's
existing recycling methods and will utilize a new technology for recycling paint
wastes, the Polymeric Recovery System ("PRS"), which produces a recycled product
used in the making of compounded polymer products such as sealants and
adhesives.
The cost of the expansion, estimated to be $2,300,000, was to have been paid for
by a combination of (i) anticipated proceeds from a planned initial public
offering of an approximate 50% interest in EPI Technologies and (ii) debt
financing. Due to weakness in the investment market for the public offering, the
planned offering has been indefinitely delayed. The Company has arranged interim
short-term financing to allow completion of the expansion project. Refer to Note
1 to Condensed Consolidated Financial Statements for terms and additional
information regarding the short-term bank financing. The Company is
investigating various alternatives to provide long term funding for the project,
including debt financing, completion of the proposed initial public offering and
other sources of equity capital.
The Company has incurred in excess of $400,000 for legal, accounting and
printing fees in conjunction with the proposed initial public offering. These
fees were to be paid from the offering proceeds. The Company is seeking to
reduce the amount of these fees and establish payment schedules through
negotiations with the service providers in the event the Company is unable to
complete an offering. These costs have been deferred as other assets in the
accompanying balance sheet as of November 30, 1996.
The Company had a $3,159,000 working capital deficit at November 30, 1996,
reflecting an increase in the deficiency since February 29, 1996 of $1,716,000.
This increase is a result of financing EPIC's expansion project with short-term
interim financing and the extinguishment of certain long-term debt at a discount
from proceeds of short-term borrowings. Certain components of working capital,
including accounts receivable, inventories, notes payable and accounts payable,
historically fluctuate significantly based upon market conditions, sales volume
and steel purchasing strategies of the Company's steel operations.
The Company's primary sources of liquidity are its cash balances and a $12
million revolving demand credit line with a bank. Borrowing availability under
the revolving credit line is determined using a formula based upon eligible
accounts receivable and inventories. As of November 30, 1996, the outstanding
balance of the revolving credit line amounted to $9,280,000 and unused
availability amounted to $2,720,000.
12
<PAGE> 13
The revolving credit line agreement prohibits the payment of cash dividends on
the Company's common stock and allows the payment of cash dividends on the
Company's preferred stock issues only if the Company is not in default of any
provisions in the loan agreement and payment of such dividend would not result
in any defaults.
In the first quarter of fiscal 1997, William D. Feniger, an officer, director
and stockholder received 600,000 newly issued shares of common stock in exchange
for a $300,000 reduction of a convertible note payable to him.
As a result of federal environmental regulations issued in 1991, EPIC, the
Company's paint waste recycling operation, is required to and has submitted to
the U.S. EPA an operating permit application under the Resources Conservation
Recovery Act of 1980. The final approval for such a permit may take several
years and require additional outlays of funds. During the application and review
process, EPIC's operations continue on interim status and are unaffected. EPIC
may be required to make modifications to its operating procedures or equipment
in the future, although EPIC's management believes its operations meet the
requirements without modification.
EPIC has entered into a license agreement with Aster, Inc. whereby Aster has
granted the Company the exclusive right, except in Mexico, to use certain
patented processes and technology in its PRS paint recycling process. EPIC has
agreed to pay Aster royalties and other fees for ongoing work performed by Aster
to commercialize and to continue to refine the process, formulae and technology.
Minimum monthly payments required under the agreement are $20,000. As previously
discussed, EPIC has begun construction of a facility which will utilize the
Aster technology.
Additional expenditures to complete EPIC's expansion project are estimated to
approximate $850,000 at November 30, 1996. Other than EPIC's expansion project,
the Company does not have any material capital expenditure commitments at this
time. Capital expenditures are otherwise limited to $500,000 under its loan
agreement with the bank.
The Company has incurred losses in the two prior fiscal years, has a working
capital deficiency, and has in the past been unable to meet certain covenants of
its bank loans. Management has taken certain actions to improve the Company's
operating performance and financial position. The following transactions, which
are more fully described above or in the notes to the condensed consolidated
financial statements, have been completed to improve the financial condition of
the Company and provide additional working capital:
13
<PAGE> 14
- Exchange of 600,000 shares of Common Stock of the Company for
a $300,000 reduction of a note payable to an officer and
stockholder.
- The sale of its spent acid recycling operations in July 1996.
- The extinguishment of certain debt at a discount in July 1996.
- The shutdown of a bar coil pickling operation and the leasing
of the facility and adjacent warehouse to another party.
- Sale of a 20% interest in EPI Technologies for $600,000.
- Implementation of a cost reduction program in December 1996.
Historically, the Company's operations have been funded with cash generated from
operations and bank financing. The Company has also raised funds through sale of
equity securities and has used the proceeds to fund its investments in EPIC,
among other items. As previously discussed, management is taking measures to
improve operating results and the Company's financial position and accordingly,
except as noted below, management believes its existing resources, including
available cash, cash provided by operating activities and the Company's credit
facilities will be sufficient to satisfy its working capital and other capital
requirements for the next year. In the event the Company is unable to secure
adequate long-term funding for EPIC's expansion project prior to the maturity of
the current short-term financing in September and October 1997, the Company
would be unable to repay the obligations without significant adverse effects on
its ability to continue its overall operations at current levels.
14
<PAGE> 15
MERIDIAN NATIONAL CORPORATION
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
One report on Form 8-K was filed during the quarter ended November 30,
1996. A report was filed on November 27, 1996 to disclose under Item 5
Other Events, the completion of short-term financing arrangements for
EPIC's expansion project and the completion of a private placement of a
20% equity interest in EPI Technologies.
15
<PAGE> 16
SIGNATURES
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.
MERIDIAN NATIONAL CORPORATION
(Registrant)
Date: January 17, 1997 By /s/ William D. Feniger
-------------------------------------
William D. Feniger
Chairman of the Board of Directors,
President and Chief Executive Officer
Date: January 17, 1997 By /s/ James L. Rosino
-------------------------------------
James L. Rosino
Vice President - Finance and
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET OF MERIDIAN NATIONAL CORPORATION
AS OF NOVEMBER 30, 1996 AND THE RELATED UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED NOVEMBER 30, 1996. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 16,820
<SECURITIES> 0
<RECEIVABLES> 10,800,687
<ALLOWANCES> 0
<INVENTORY> 10,148,374
<CURRENT-ASSETS> 21,186,912
<PP&E> 12,530,621
<DEPRECIATION> 4,863,917
<TOTAL-ASSETS> 30,403,152
<CURRENT-LIABILITIES> 23,346,245
<BONDS> 3,867,504
0
1,175,320
<COMMON> 34,099
<OTHER-SE> 835,390
<TOTAL-LIABILITY-AND-EQUITY> 30,403,152
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<TOTAL-REVENUES> 49,593,396
<CGS> 43,307,617
<TOTAL-COSTS> 43,307,617
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 1,195,549
<INCOME-PRETAX> (76,316)
<INCOME-TAX> 0
<INCOME-CONTINUING> (76,316)
<DISCONTINUED> 187,770
<EXTRAORDINARY> 329,279
<CHANGES> 0
<NET-INCOME> 440,733
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
