<PAGE> 1
PAGE 1 OF 12
INDEX TO EXHIBITS - PAGE 11 OF 12
-- --
UNITED STATES
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 AUGUST 31, 1996
--------------------
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 0-14057
-------
MET-COIL SYSTEMS CORPORATION
-----------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 42-1027215
- ---------------------------------------------- ---------------------
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer No.)
5486 SIXTH STREET SW, CEDAR RAPIDS, IOWA 52404
- ------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (319) 363-6566
NOT APPLICABLE
----------------------------------------------------
(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
------- -------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
------ -------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date 3,120,361
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Page 2 of 12
MET-COIL SYSTEMS CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
PAGE
----
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Consolidated condensed balance sheets, August 31, 1996
(unaudited) and May 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Unaudited consolidated condensed statements of operations,
three months ended August 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Unaudited consolidated condensed statements of cash flows,
three months ended August 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to consolidated condensed financial statements (unaudited) . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exhibit 11 - Computation of income (loss) per common
and common equivalent shares . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MET-COIL SYSTEMS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except shares)
<TABLE>
<CAPTION>
August 31, May 31,
1996 1996
(Unaudited) (Note)
- -----------------------------------------------------------------------------
<S> <C> <C>
Current assets
Cash $ 511 $ 890
Trade receivables, net 4,836 4,585
Notes and other receivables 635 303
Inventories 8,530 8,007
Prepaid expenses 991 1,048
- -----------------------------------------------------------------------------
Total current assets 15,503 14,833
Property and equipment, net 5,340 5,507
Investments and other assets 1,588 1,574
Intangibles, net 2,650 2,749
- -----------------------------------------------------------------------------
TOTAL ASSETS $ 25,081 $ 24,663
=============================================================================
Current liabilities
Revolving lines of credit $ 2,896 $ 3,392
Notes payable to banks and current maturities
of long-term debt 4,741 2,879
Accounts payable and accrued liabilities 4,341 4,849
Customer deposits 2,465 1,959
- -----------------------------------------------------------------------------
Total current liabilities 14,443 13,079
Long-term debt 7,674 9,244
Other 528 543
Preferred stock, convertible and redeemable at $13
per share 3,771 3,709
Stockholders' Equity (deficit):
Common stock, $.01 par value, authorized 10,000,000
shares; 1997 issued 3,146,938; 1996 issued 3,146,521 31 31
Additional paid-in capital 16,236 16,205
Accumulated deficit (17,240) (17,759)
Foreign currency translation (260) (260)
Common stock in treasury, at cost, 26,557 and
28,000 shares respectively (102) (129)
- -----------------------------------------------------------------------------
Net equity (deficit) (1,335) (1,912)
- -----------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 25,081 $ 24,663
=============================================================================
</TABLE>
Note: Condensed from audited financial statements
See notes to consolidated financial statements
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Page 4 of 12
MET-COIL SYSTEMS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
August 31,
1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Net revenues $ 8,679 $ 9,654
Cost of goods sold 6,861 8,114
Operating Expenses 1,196 2,241
Interest expense, net 519 693
Other (income) expense, net (416) (47)
- --------------------------------------------------------------
Income (loss) before income taxes 519 (1,347)
Income taxes --- ---
- --------------------------------------------------------------
Net income (loss) $ 519 $ (1,347)
Preferred stock dividends --- 54
- --------------------------------------------------------------
Net income (loss) applicable to
common stock $ 519 $ (1,401)
==============================================================
Weighted average common and
common equivalent shares 3,120 2,942
==============================================================
Net income (loss) per common and
common equivalent share $ 0.17 $ (0.48)
==============================================================
</TABLE>
See notes to consolidated financial statements
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Page 5 of 12
MET-COIL SYSTEMS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
August 31,
1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 519 $ (1,347)
Adjustments to reconcile net income (loss) to net
cash flows from operating activities:
Depreciation 465 422
Amortization 99 88
Accretion of discount on debt and preferred stock 169 177
Undistributed loss of affiliate --- 42
- ------------------------------------------------------------------------------
1,252 (618)
Changes in assets and liabilities:
Trade receivables (251) 1,411
Notes and other receivables (732) 301
Inventories (523) (137)
Prepaid expenses and other 269 323
Accounts payable and accrued liabilities (349) (1,901)
Customer deposits and progress billings 506 1,061
- ------------------------------------------------------------------------------
Net cash flows from operating activities 172 440
- ------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment, net (298) (115)
Other, net --- (42)
- ------------------------------------------------------------------------------
Net Cash Flows From Investing Activities (298) (157)
- ------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments under revolving credit agreements 181 (179)
Repayments of long-term debt (492) (86)
Issuance of common stock 58 185
- ------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES (253) (80)
- ------------------------------------------------------------------------------
CASH
Increase (decrease) (379) 203
Beginning balance 890 159
- ------------------------------------------------------------------------------
Ending balance $ 511 $ 362
==============================================================================
</TABLE>
See notes to consolidated financial statements
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Page 6 of 12
MET-COIL SYSTEMS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. PRESENTATION OF FINANCIAL INFORMATION
The unaudited consolidated condensed financial statements have
been prepared by the Company in accordance with the
instructions for Securities and Exchange Commission's Form
10-Q and do not include all of the information and footnotes
required by generally accepted accounting principles for
audited financial statements. The unaudited consolidated
condensed financial statements include the accounts of the
Company and its subsidiaries. All material intercompany items
and transactions have been eliminated in the consolidation.
In the preparation of the unaudited amounts, all adjustments
(consisting solely of normal recurring adjustments) have been
made which are, in the opinion of management, necessary for a
fair statement of the results for the interim periods. The
results for the interim periods are not necessarily indicative
of the results of operations that may be expected for the
year. It is suggested that the unaudited consolidated
condensed financial statements contained herein be read in
conjunction with the consolidated statements and notes
included in the Company's Annual Report on Form 10-K for the
year ended May 31, 1996.
NOTE 2. INVENTORIES
The composition of the inventories, using the FIFO method,
which approximates replacement cost, is as follows:
<TABLE>
<CAPTION>
(in thousands)
August 31, May 31,
1996 1996
---------- --------
<S> <C> <C>
Raw materials & parts........... $ 7,884 $ 7,241
Work in process .............. 1,417 1,375
Finished goods .............. 418 580
------- -------
$ 9,719 $ 9,196
Reduction to LIFO basis ....... ( 1,189) ( 1,189)
------- -------
$ 8,530 $ 8,007
======= =======
</TABLE>
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Page 7 of 12
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 3. INVESTMENT IN AFFILIATE
The Company is accounting for its investment in Met-Coil Ltd.
(50% owned) by the equity method of accounting. Selected
financial information of the investment in affiliate is as
follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
August 31,
1996 1995
----------------------
<S> <C> <C>
Net revenues .................................... $ 2,230 $ 1,495
Gross profit .................................... 805 423
Operating income (loss)......................... 9 (195)
Net income (loss) ............................... 1 (84)
======= =======
Income (loss) from equity investments,
included in net revenues ................. $ --- $ (42)
======= =======
</TABLE>
NOTE 4. DEBT
Revolving lines of credit:
At May 31, 1996 the Company had a revolving credit
agreement with two insurance companies under which it could
borrow up to $3,500,000 in current notes payable. Borrowings
are limited pursuant to a borrowing base formula (certain
percentages of eligible trade receivables and inventories),
bear interest at 11.5% and require the payments of certain
fees. The credit agreement expires on April 30, 1999. The
Company was not in compliance with the various financial
convenants contained in its note agreements as of August 31,
1996 and at May 31, 1996. However, the Company and two
insurance companies amended the note agreement effective
September 11, 1996 and the Company currently is in compliance
with the covenants as amended.
Senior debt:
At August 31, 1996 the Company has $6,960,000 of senior
notes with two insurance companies. Interest is at 11.5%
payable monthly. The notes are due in monthly payments of
$110,000 plus interest. Additionally there is a payment of
$1,200,000 due on April 18, 1997. The Company was not in
compliance with the various financial convenants contained in
its note agreements as of August 31, 1996 and at May 31, 1996.
However, the Company and two insurance companies amended the
note agreement effective September 11, 1996 and the Company
currently is in compliance with the covenants as amended.
For additional information concerning the Company's loan
agreements and accompanying terms and restrictions see Note 5
to Financial Statements in the Company's Annual Report on Form
10-K for the year ended May 31, 1996 herein incorporated by
reference thereto.
NOTE 5. SUPPLEMENTAL CASH FLOW DATA
Cash paid for Interest ............... $ 333 $ 480
====== ======
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Page 8 of 12
MET-COIL SYSTEMS CORPORATION
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
FIRST QUARTER 1997 COMPARED TO FIRST QUARTER 1996
Revenues of $8.6 million for the first quarter decreased 11% from $9.7
million in the first quarter of fiscal year 1996 due primarily to the
sale of Rowe Machinery on February 5, 1996. The 1997 first quarter
margin of 21% increased from a 1996 first quarter margin of 16%.
Operating expenses were down significantly compared to the prior year,
primarily due to the sale of Rowe Machinery and cost cutting measures
implemented during the fiscal year ended May 31, 1996. Interest
expense also experienced a significant decrease compared to the prior
year due primarily to a lower level of borrowing during the first
quarter 1997 on the Company's revolving lines of credit and reduction
of long term debt during the prior fiscal year. Other income and
expense increased over the prior year due to the recognition of
$450,000 related to the settlement of a long standing lawsuit in the
first quarter of fiscal 1997. The first quarter 1997 net income of
$519,000 or $0.17 earnings per common share compares to a first
quarter 1996 net loss of $1.3 million or $0.48 loss per common share.
LIQUIDITY AND CAPITAL RESOURCES
Working capital of $2.5 million was $746,000 higher than the fiscal
year end level. Backlog was $12.2 million at August 31, 1996, which
is consistent with the May 31, 1996, level of $12.0 million.
On September 13, 1996, dividends of 6% were paid on the Company's
preferred stock representing one-half of the balance due from the
March 31, 1996 dividend date and the dividends due for the period
ending September 30, 1996. However, preferred shareholders Messrs.
Nonnenmann and Carver took a deferral on their dividend payments until
March 31,1997 subject to a promissory note which allows for a 9% rate
of interest.
No common stock dividends were paid during the first quarter by the
Company due to loan covenants, which prohibit payment of such
dividends. It is uncertain when, and if, the Company will pay common
stock dividends in the future.
The Company was not in compliance with the various financial
convenants contained in its note agreements as of August 31, 1996 and
at May 31, 1996. However, the Company and two insurance companies
amended the note agreement effective September 11, 1996, and the
company currently is in compliance with the covenants as amended.
Based upon amounts available under the Company's line of credit and
cash flows from operations, the Company expects to meet the cash
required for investing and financing activities for the fiscal year.
The statements under Management's Discussion and Analysis of Financial
Condition and Results of Operations and the other statements in this
Quarterly Report which are not historical facts are forward looking
statements. These forward looking statements involve risks and
uncertainties that could render them materially different, including,
but not limited to, the effect of economic conditions, the impact of
competition, availability and costs of inventory, the rate of
technology change, the availability of capital, supply constraints of
difficulties, the effect of the Company's accounting policies, the
effect of regulatory and legal developments, and other risks.
<PAGE> 9
Page 9 of 12
MET-COIL SYSTEMS CORPORATION
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - The Company was not in compliance
with the various financial convenants contained in its note agreements
as of August 31, 1996 and at May 31, 1996. However, the Company and
two insurance companies amended the note agreement effective September
11, 1996 and the Company currently is in compliance with the covenants
as amended.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders on October 8,
1996, the following actions were voted on:
1. Board of Directors
a. All nominees for election were elected as follows:
JOHN F. LOGAN
Shares in favor Shares against/withheld
--------------- -----------------------
2,043,008 33,876
MICHAEL J. NONNENMANN
Shares in favor Shares against/withheld
-------------- -----------------------
2,043,008 33,876
b. Continuing in office:
Ray Blakeman Keith Moore
Gary Neal Roy Carver
2. Ratification of appointments of Deloitte & Touche LLP as
independent auditors.
<TABLE>
Shares in favor Shares against/withheld
--------------- -----------------------
<S> <C>
2,054,805 22,709
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS -- See Index to Exhibits included elsewhere herein.
(b) FORM 8-K -- No reports on Form 8-K were filed during the
fiscal quarter.
<PAGE> 10
Page 10 of 12
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.
Date: October 16, 1996 Met-Coil Systems Corporation
Randall J. Stodola
Vice President, Controller and
Chief Accounting Officer
/s/ Randall J. Stodola
----------------------
Randall J. Stodola
<PAGE> 11
Page 11 of 12
MET-COIL SYSTEMS CORPORATION
INDEX TO EXHIBITS
Page
EXHIBIT 11 Computation of Income (Loss) Per Common and
Common Equivalent Shares . . . . . . . . . . . . . . . . . . 12
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Page 12 of 12
MET-COIL SYSTEMS CORPORATION
EXHIBIT 11 - COMPUTATION OF INCOME (LOSS) PER COMMON
AND COMMON EQUIVALENT SHARES
(In thousands, except per share amounts)
<TABLE>
<Caption Three Months Ended
August 31,
1996 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Common shares outstanding, beginning of period 3,121 2,905
Weighted average of common shares issued (2) 35
Weighted average common equivalent shares attributable to stock
options granted, computed using the treasury stock method 1 2
- --------------------------------------------------------------------------------------------
Weighted average number of shares 3,120 2,942
============================================================================================
Income (loss) applicable to common stock $ 519 $ (1,401)
============================================================================================
Net income (loss) per common share $ 0.17 $ (0.48)
============================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> AUG-31-1996
<EXCHANGE-RATE> 1
<CASH> 511
<SECURITIES> 0
<RECEIVABLES> 5,471
<ALLOWANCES> 222
<INVENTORY> 8,530
<CURRENT-ASSETS> 15,503
<PP&E> 18,958
<DEPRECIATION> 13,618
<TOTAL-ASSETS> 25,081
<CURRENT-LIABILITIES> 14,418
<BONDS> 7,674
<COMMON> 16,267
3,771
0
<OTHER-SE> (18,121)
<TOTAL-LIABILITY-AND-EQUITY> 25,081
<SALES> 8,679
<TOTAL-REVENUES> 8,679
<CGS> 6,861
<TOTAL-COSTS> 1,196
<OTHER-EXPENSES> (416)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 519
<INCOME-PRETAX> 519
<INCOME-TAX> 0
<INCOME-CONTINUING> 519
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 519
<EPS-PRIMARY> (.17)
<EPS-DILUTED> 0
</TABLE>
