SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934.
Sept. 30, 1996 0-16677
(For Quarter Ended) (Commission file number)
MID-WEST SPRING MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
11-2661683
(I.R.S. Employer Identification No.)
1404 JOLIET RD. - UNIT C, ROMEOVILLE, IL 60446
(Address of principal executive offices)
630-739-3800
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
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_________
31,000,000 shares, $.0001 par value, 9,290,594
outstanding as of November 14, 1996
(Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable
date)
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
September 30, 1996 are not necessarily indicative of results that may be
expected for the year ended December 31, 1996.
Information with respect to all periods ending September 30, 1996 and 1995
is unaudited and the balance sheet data at December 31, 1995 has been derived
from audited financial statements.
MID-WEST SPRING MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
SEPT. 30, DECEMBER 31,
1996 1995
ASSETS
CURRENT ASSETS:
Cash $ 128,000 $ 564,000
Trade Accounts Receivable, net 4,364,000 4,380,000
Inventories
Finished Goods 5,154,000 4,913,000
Work-in-Process 1,557,000 1,609,000
Raw Materials and Parts 2,054,000 2,414,000
8,765,000 8,936,000
Prepaid Expenses and Other 568,000 600,000
TOTAL CURRENT ASSETS 13,825,000 14,480,000
Property, Plant & Equipment, net 18,890,000 19,934,000
Purchase Cost in Excess of Assets Acquired 8,116,000 8,328,000
Other 1,429,000 1,584,000
$42,260,000 $ 44,326,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash Overdraft -- 622,000
Notes Payable to Bank 4,588,000 4,121,000
Accounts Payable 3,162,000 2,872,000
Accrued Payroll & Other Expenses 2,139,000 1,698,000
Income Taxes Payable -- 32,000
Accrued Interest 826,000 --
TOTAL CURRENT LIABILITIES 10,715,000 9,345,000
Long-Term Debt 26,493,000 26,468,000
Deferred Income Taxes and Other 3,621,000 3,664,000
Preferred Stock of Mid-West Spring
& Stamping Corp. 2,227,000 2,227,000
COMMON STOCKHOLDERS' EQUITY:
Common Stock, par value $.0001; 31,000,000
shares authorized; 10,570,289 shares
issued, respectively -- --
Paid-in-Capital 6,559,000 6,559,000
Retained Earnings (Deficit) (6,456,000) (3,038,000)
Treasury Stock, at cost(1,279,695 shares) (899,000) (899,000)
__________ __________
TOTAL COMMON STOCKHOLDERS' EQUITY (796,000) 2,622,000
$42,260,000 $44,326,000
</TABLE>
See Notes
MID-WEST SPRING MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Nine months ended
Sept. 30, Sept. 30,
1996 1995 1996 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NET SALES $ 8,215,000 $ 9,143,000 $26,397,000 $28,898,000
Cost and expenses:
Cost of sales 6,802,000 7,305,000 21,949,000 22,556,000
Selling and administrative 1,146,000 1,412,000 3,186,000 3,943,000
Amortization of intangibles 71,000 71,000 209,000 212,000
Special charges (347,000) -- 1,653,000 --
7,672,000 8,788,000 26,997,000 26,711,000
OPERATING INCOME(LOSS) 543,000 355,000 (600,000) 2,187,000
Interest expense 951,000 894,000 2,818,000 2,557,000
_________ _________ __________ __________
Income (loss) before
Income taxes (408,000) (539,000) (3,418,000) (370,000)
Income taxes -- (180,000) -- (150,000)
_________ __________ __________ __________
NET INCOME(LOSS) $ (408,000) $(359,000) $(3,418,000) $ (220,000)
Preferred Stock of Mid-West
Spring & Stamping Corp.
Dividend Requirement 77,000 46,000 200,000 130,000
_________ _________ ___________ ___________
Income (loss) attributable
to Common Shares $ (485,000) $(405,000) $(3,618,000) $ (350,000)
INCOME PER COMMON SHARE $ (.05) $ (.04) $ (.39) $ (.04)
Weighted average number of
shares outstanding 9,290,594 10,069,877 9,290,594 10,069,877
</TABLE>
See Notes
MID-WEST SPRING MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF
COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
COMMON STOCK Additional Retained Treasury
Shares Paid-in-Capital (deficit) Stock Total
Balance, December 31, 1995 10,570,289 $ 6,559,000 ($3,038,000) ($ 899,000) $ 2,622,000
NET INCOME (392,000) ( 392,000)
__________ ___________ __________ _________ __________
Balance, March 31, 1996 10,570,289 $ 6,559,000 $(3,430,000) ($ 899,000) $ 2,230,000
NET INCOME (2,618,000) (2,618,000)
__________ ___________ __________ _________ __________
Balance, June 30, 1996 10,570,289 $ 6,559,000 ($6,048,000) ($ 899,000) $ (388,000)
NET INCOME (408,000) (408,000)
__________ ___________ __________ _________ __________
Balance, Sept.30, 1996 10,570,289 $ 6,559,000 ($6,456,000) ($ 899,000) $ (796,000)
</TABLE>
See Notes
MID-WEST SPRING MANUFACTURING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED SUMMARY OF CASH FLOWS
Nine months ended
Sept. 30
1996 1995
<TABLE>
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM (USED) IN OPERATING ACTIVITIES:
Net Income (Loss) $(3,418,000) $ (220,000)
Adjustments to reconcile net income/loss to
net cash from operating activities:
Depreciation and amortization 1,567,000 1,537,000
Deferred income taxes -- --
Changes in net operating assets and
liabilities, net of effects from
1993 acquisitions 2,093,000 (1,798,000)
242,000 (481,000)
CASH FLOWS FROM (USED) IN INVESTING ACTIVITIES:
Purchase of equipment (297,000) (2,409,000)
(297,000) (2,409,000)
CASH FLOWS FROM (USED) IN FINANCING ACTIVITIES:
Proceeds from revolving line of credit, net 467,000 3,518,000
Principal payments on long-term debt, net -- --
Cash overdraft (622,000) --
Other (226,000) (1,000,000)
(381,000) 2,518,000
NET INCREASE IN CASH ($ 436,000) ($ 372,000)
Cash, Beginning $ 564,000 $ 408,000
Cash, End $ 128,000 $ 36,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $1,859,000 $1,848,000
Income taxes 65,000 67,000
Noncash investing activities:
Reverse purchase of Pathe -- --
Noncash financing activities:
Common Stock issued -- --
Redeemable Preferred Stock of Mid-West
Spring and Stamping Corp.
dividend requirement -- --
</TABLE>
See Notes
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. PREFERRED STOCK
At September 30, 1996, there were $892,000 of accumulated and undeclared
dividends in respect to Preferred Stock of Mid-West Spring and Stamping
Corporation.
2. TAXES
A reconciliation between the Company's effective tax rate and the US
statutory rate (34%) at September 30, is as follows:
1996 1995
Statutory tax expense ($1,162,000) $(126,000)
Nondeductible amortization of cost
in excess of net assets acquired 207,000 75,000
Other, various items 955,000 ( 99,000)
$ 0 $(150,000)
At September 30, 1996, the Company has net operating loss carryforwards of
$6.4 million for income tax purposes that expire in the years 2000 through 2010.
The timing of utilization of these carryforwards may be subject to annual
limitations. $2.0 million of these carryforwards resulted from the Company's
1993 reverse purchase of Pathe. For financial reporting purposes, a valuation
allowance of $424,000 has been recognized to offset the deferred tax assets
related to those carryforwards.
Significant components of the Company's deferred tax liabilities and assets
as of January 1, 1996 are as follows:
Deferred tax liabilities:
Tax over book depreciation and bases
differences on property, plant, equip. $4,997,000
Inventories 414,000
Other 9,000
Total deferred tax liabilities 5,420,000
Deferred tax assets:
Net operating loss carryforwards 2,437,000
Provision for 1993 special charges --
Other - net 393,000
Total deferred tax assets 2,830,000
Valuation allowance for deferred
tax assets ( 424,000)
Net deferred tax asset 2,406,000
Net deferred tax liabilities $3,014,000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
OVERVIEW
The Company's net sales for the nine months and third quarter ended
September 30, 1996, decreased 8.7% and 10.1% to $26,397,0000 and $8,215,000,
respectively, attributable to lower than expected sales from Spring and
Stamping. Operating income for the same periods decreased $2,787,000 (127.4%)
and increased $188,000 (53.0%) to ($600,000) and $543,000, respectively. The
decrease in operating income for the year was attributable to operating losses
from the Advanced Pressure Casting division and to a special charge in the
second quarter relating to the closing of that division. The increase in
operating income for the third quarter was a result of closing the die cast
division as well as increased sales from Pathe Advanced Composites. The spring
plants have continued to make productivity improvements that have lowered direct
labor as a percent of sales by 2.8% for the year.
NET SALES
The Company's net sales for the three and nine months ended September 30,
1996, were $8,215,000 and $26,397,000 respectively, down 10.1% and 8.7% from the
$9,143,000 and $28,898,000 recorded in the 1995 comparable period. Spring
operations decreased $1,281,000 and $3,082,000 in net sales for the three and
nine month periods ended September 30, 1996, due to the closing of the die cast
division as well as lower sales from the spring plants over the 1995 comparable
period. The spring plants experienced lower than expected sales (down $1.6
million for the year and down $.5 million for the quarter) due to competitive
pressures and customer service problems dating back to 1995 operations.
Spring's die casting operation closed its doors as of August 31, 1996 which
contributed to the year-to-date decrease in sales. Pathe Advanced Composites
contributed a $353,000 sales increase for the 1995 comparable period. Booked
orders from Spring and Stamping (including blanket orders) at September 1996
were $6.5 million, this compares to a backlog of $9.1 million at September 1995.
OPERATING INCOME
Operating income for the three and nine months ended September 30, 1996,
increased $188,000 and decreased $2,787,000 to $543,000 and ($600,000) compared
to $355,000 and $2,187,000 for the comparable period. The decrease in operating
income was attributable to operating losses at APC ($1,425,000 loss for the
year, in addition there was a $1,653,000 special charge for the plant closing).
The spring plants showed an increase in operating income of $31,000 and $156,000
for the three and nine month periods ended September 30, 1996, over the 1995
comparable period. This was attributable to lower direct labor costs and higher
operating efficiencies through out the company, and is especially impressive
when you consider the $.5 million and $1.6 million dollar decrease in sales for
the three and nine month periods ended September 30, 1996.
Cost of Sales, as a percentage of sales, for the three and nine months
ended September 30, 1996, increased 2.9% and 5.0% to 82.8% and 83.1% due to the
operating inefficiencies at Advance Pressure Castings during the year. The
spring plants showed significant improvement in direct labor (down 2.8% from
last year) which was offset by the decreases in sales volume and related effects
on fixed costs.
Selling and Administrative expenses decreased $266,000 and $757,000 to
$1,146,000 (14.0% of sales) and $3,186,000 (19.2% of sales) for the three and
nine months ended September 30, 1996 compared to $1,412,000 and $3,943,000 for
the prior year periods. Selling expenses decreased in travel and entertainment
($30k) and commissions ($45k). These decreases are attributed to cost cutting
measures and lower sales volume during 1996. Administrative expenses decreased
across the board due to cost cutting measures. Administrative salaries
decreased as the company reassigned personnel to catalog sales in an effort to
develop that market.
Interest expense for the nine months and three months September 30, 1996
increased $261,000 to $2,818,000 and $57,000 to $951,000 for the respective
periods. The increases were due to higher debt balances and effective rate on
borrowings.
SPECIAL CHARGES
The Company had booked a $2,000,000 reserve towards the closing cost of
Advance Pressure Casting. In that amount was a write down of inventory
($347,000) which should have been charged to cost of sales. The adjustment is
reflected in the third quarter report. The special charge assumes a 50%
liquidation value on equipment. There are also lease obligations that run
through December of 1999 included in this accrual. The plant ceased all
operations on August 31, 1996.
INCOME TAX
The provision for income taxes for the periods presented was based on the
estimated effective tax rate for the year.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company's current assets ($13.8 million) exceed
current liabilities ($10.7 million) by $3.1 million which compares to the $5.2
million excess of current assets over current liabilities at December 31, 1995.
Included in current liabilities at September 30, 1996 and December 31, 1995 is
$4.6 million and $4.1 million, respectively, borrowed under its revolving credit
agreement which expires in December, 1996. The Company has successfully, in each
of the past five years, been able to "roll-over" its revolving credit agreement.
Before the changes in net operating assets and liabilities of $2.1 million
and ($1.8) million for the nine months ended September 30, 1996 and 1995, cash
flow from operating activities were ($1.9) million and $1.3 million,
respectively. Included in cash flows from operations is $2,818,000 and
$2,557,000 in interest expense for 1996 and 1995, respectively.
Short term debt at September 30, 1996 includes $4.6 million borrowed under
the Company's $5 million revolving credit line which was renewed in June 1996
and will expire in December of 1996. The Company expects, as it has
successfully done in the past, to renew or refinance its revolving credit line
prior to expiration.
The Company was in violation of certain restrictive covenants as of
September 30,1996. The Company fully expects to receive waivers for the third
quarter.
In December 1994, the Company completed an important objective toward
improving its total capitalization and long-term liquidity and reducing its
exposure to fluctuating interest rates with a $27.0 million 11.25% fixed rate,
long-term debt financing including $.5 million of detachable warrants, and $.5
million private equity offering. The net proceeds (after expenses) were used to
repay; 1) all variable interest rate short-term and medium-term borrowings; 2)
all the 14% subordinated and junior subordinated notes; 3) $4.6 million in
redeemable preferred and preferred stock of Mid-West Spring and; 4) repurchase
1,256,150 shares of the Company's Common Stock. The new long-term debt facility
permits the Company to maintain up to $5 million revolving line of credit. The
new debt facilities, as amended in December 1995, require the Company, among
other things, to maintain a current ratio of 1:1 or greater; tangible net worth,
as defined, greater than $1.5 million; fixed charges coverage ratio of 1:1 or
greater. In addition, the debt facility provides that the prepayment of
principal may, under certain circumstances, result in additional interest
charges of up to approximately 8.75%. Due to the Company breaking several
covenants, in December of 1995, under the long-term financing agreement, the
lender increased the interest rate by 1/2% to amend the covenants.
Cash flows from operations, revolving line of credit and long-term debt
refinancing at increased amounts, have been the Company's main source of capital
to fund its operating and investing activities. Increased cash flow from
operations and/or additional equity capital will most likely be required if the
Company is to increase or accelerate its capital spending or acquisition
programs.
In the fourth quarter of 1996 and for the full year of 1997, the Company
plans capital expenditures of approximately $300,000 and $1,000,000 in order to
continue to expand its existing products and markets. Future capital
expenditures are expected to be funded by cash from operations. The Company
believes it has a sufficient operating cash flow and working capital base to
meet all of its obligations for the foreseeable future.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS
(a) Exhibits:
27 - Financial Data Schedule
(b) Reports on 8-k: None
SIGNATURE
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.
MID-WEST SPRING MANUFACTURING COMPANY
By /s/ Michael B. Curran
Michael B. Curran
Chief Financial Officer
November 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 128,000
<SECURITIES> 0
<RECEIVABLES> 4,517,000
<ALLOWANCES> 153,000
<INVENTORY> 8,765,000
<CURRENT-ASSETS> 13,825,000
<PP&E> 27,841,000
<DEPRECIATION> 8,951,000
<TOTAL-ASSETS> 42,260,000
<CURRENT-LIABILITIES> 10,715,000
<BONDS> 0
0
0
<COMMON> 2,227,000
<OTHER-SE> (796,000)
<TOTAL-LIABILITY-AND-EQUITY> 42,260,000
<SALES> 26,397,000
<TOTAL-REVENUES> 26,397,000
<CGS> 21,949,000
<TOTAL-COSTS> 21,949,000
<OTHER-EXPENSES> 5,048,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,818,000
<INCOME-PRETAX> (3,418,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,418,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,418,000)
<EPS-PRIMARY> (.39)
<EPS-DILUTED> (.39)
</TABLE>
