SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File No.
March 31, 1997 33-19107
LBO Capital Corp.
(Exact name of Registrant as Specified in its Charter)
Colorado 38-2780733
- ---------------------------------- --------------------
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
7001 Orchard Lake Road, Suite 424
West Bloomfield MI 48322-3608
- --------------------------------------- -------------------
(Address of Principal Executive Offices) (Zip Code)
(248) 851-5651
(Registrant's Telephone Number Including Area Code)
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 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 May 1, 1997 a total of 12,100,000 shares, $.0001 par value common
stock, were issued and outstanding.
<PAGE>
LBO CAPITAL CORP.
Form 10-Q Filing of Quarter Ended March 31, 1997
INDEX
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets
March 31, 1997 (Unaudited) and December 31, 1996 3
Statements of Operations (Unaudited)
Three months ended March 31, 1997 and 1996 4
Statements of Cash Flows (Unaudited)
Three months ended March 31, 1997 and 1996 5
Notes to Financial Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial
Statements (Unaudited) 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
Financial Statements of Ajay Sports, Inc.
as of March 31, 1997 9-x
Signature Page x
Note: No other information is included in answer to any item under Part 11
as those other Items are either not applicable, or if applicable, the answer
is negative.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
LBO CAPITAL CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1997 1996
-------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Equivalents $ 81 $ 78
Marketable Securities - Available for Sale 23,012 28,765
------------ ------------
Total Current Assets 23,093 28,843
TOTAL ASSETS $ 23,093 $ 28,843
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable 731 3,703
Accounts Payable - Related Entities 820 960
Notes Payable - Other 504,441 501,791
Accrued Expenses and Taxes 33,477 20,741
------------ ------------
Total Current Liabilities 539,469 527,195
Stockholders' Equity
Common Stock, $.0001 par value;
Authorized 100,000,000 Shares;
Issued and Outstanding 12,100,000 shares 1,210 1,210
Additional Paid-In Capital 623,094 623,094
Unrealized Gain(Loss) on Available for Sale Securities(25,384) (19,632)
Accumulated Deficit (1,115,296) (1,103,024)
------------ ------------
Total Stockholders' Deficit (516,377) (498,352)
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 23,093 $ 28,843
============ ============
</TABLE>
See notes to financial statements.
3
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
LBO CAPITAL CORP.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
1997 1996
-------------- -----------------------
<S> <C> <C>
REVENUES: $ -0- $ -0-
EXPENSES:
Professional Services (1,368) 146
Management Fees 820 1,230
Interest Expense 12,736 10,059
Other Expenses 83 214
----------- -------------
Total Expenses 12,271 11,649
----------- -------------
Income (Loss) Before Income Taxes (12,271) (11,649)
Income Tax Expense (Benefit):
Currently Payable -0- -0-
----------- -------------
Net Income (Loss) $ (12,271) $ (11,649)
=========== =============
Net Income (Loss) per Share $ (.00) $ (.00)
=========== =============
Weighted Average Number of Common Shares
Outstanding 12,100,000 12,100,000
=========== =============
</TABLE>
See notes to financial statements.
4
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
LBO CAPITAL CORP.
CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
March 31, March 31,
1997 1996
----------------------------------------
<S> <C> <C>
Cash Flows for Operating Activities:
Net Loss $ (12,271) $ (11,649)
----------- -----------
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Changes in Assets and Liabilities:
(Increase) Decrease in:
Prepaid Expenses and Deposits -0- 102
(Decrease) Increase in:
Accounts Payable (2,972) (1,636)
Accounts Payable - Related Entities (140) 1,230
Accrued Expenses and Taxes 12,736 2,783
----------- -----------
Total Adjustments 9,624 2,479
----------- -----------
Net Cash (Used for) Operations (2,647) (9,170)
Cash (Used for) Investing Activities
Marketable Securities Available for Sale -0- (22,065)
----------- -----------
-0- (22,065)
Cash Flows from Financing Activities:
Payments on Notes Payable - Related Entity -0- -0-
Proceeds on Notes Payable 2,650 31,250
----------- -----------
Net Cash Provided by Financing Activities 2,650 31,250
----------- -----------
Net Increase (Decrease) in Cash 3 15
Cash and Cash Equivalents:
At Beginning of Period 78 78
----------- -----------
At End of Period $ 81 $ 93
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ -0- $ 7,276
=========== ===========
</TABLE>
See notes to financial statements
5
<PAGE>
LBO CAPITAL CORP
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying financial statements of LBO Capital Corp. ("the
Company") have been prepared by the Company without audit by independent
accountants, except for the balance sheet at December 31, 1996. In the
opinion of the Company's management, the financial statements reflect all
adjustments necessary to present fairly the Company's financial position at
March 31, 1997 and December 31, 1996, and the results of operations and cash
flows for the three month periods ended March 31, 1997 and 1996.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These unaudited
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report 10-K.
The results for the three-month periods ended March 31, 1996 are not
necessarily indicative of future financial results.
NOTE 2. INVESTMENTS.
As previously reported, the Company had acquired 1,880,000 shares of
the restricted common stock of Ajay Sports, Inc. ("Ajay") in April 1989, for
$182,000. Subsequently, this was reduced to 1,480,000 shares. As a result
of recording the Company's equity in net losses of Ajay, the carrying value
of this investment is zero. The Company also obtained 200,000 warrants of
Ajay at that time. Each warrant entitles the Company to purchase one share
of Ajay common stock at $.34. These warrants expire June 13, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
(a) Material Changes in Financial Condition
Working capital decreased by $18,024 in the three-month period ended
March 31, 1997 due to the net loss of $12,271 and a decrease in unrealized
gain on investments of $5,753 for the three months ended March 31, 1997.
6
<PAGE>
(b) Results of Operations
Registrant's operations for the three months ended March 31, 1997
resulted in a loss of $12,271. This was due mainly to interest expense of
$12,736, management fees of $820 and professional fees of $(1,368) due to
overestimation of audit fees.
Liquidity and Capital Resources
The Registrant is currently meeting its cash needs from borrowing from
a company. There is no assurance that this will continue in future years.
The Registrant's principal asset is its investment in marketable securities
of Ajay, which it has held for over four years. These shares are carried at
a zero value on the Registrant's Balance Sheet as a result of recording the
Registrant's equity in net losses of Ajay. The market value of Ajay stock on
March 31, 1996 as listed in the NASDAQ Small-Cap Issues was $0.1880 per
share. The approximate market value of the Registrant's 1,480,000 shares was
$277,500 on that date. The Registrant also owns 15,341 shares of Enercorp,
Inc. common stock. These shares are carried at their fair market value of
$1.50 per share at March 31, 1997, which is $25,384 below cost. These shares
could be liquidated to meet cash flow needs if necessary.
Part II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Pursuant to the provisions of Reg. & 210.3-09 of Regulation S-X, the
Registrant is required to file separate financial statements of its equity
basis investee Ajay, which financial statements for March 31, 1997 are filed
herewith.
(b) Reports on Form 8-K.
None
7
<PAGE>
LBO CAPITAL CORP.
FORM 10-Q
For the Quarter Ended March 31, 1997
Signature Page
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.
LBO CAPITAL CORP.
(Registrant)
By s\Thomas W. Itin
----------------------------
Thomas W. Itin, President,
Chairman of Board of Directors
By s\Frances B. Bucholz
----------------------------
Frances Bucholz, Controller
Date signed: May 14, 1997
8
<PAGE>
Item 1. FINANCIAL STATEMENTS
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
March 31, 1997 December 31,
(Unaudited) 1996
--------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 190 $ 64
Trade accounts receivable, net 7,236 5,274
Inventories 7,489 7,957
Prepaid expenses and other current assets 598 362
Deferred tax benefit 363 363
-------- --------
Total current assets 15,876 14,020
Fixed assets, net 1,785 1,822
Other assets 316 320
Deferred tax benefit 754 756
Goodwill 1,699 1,709
------- ------
Total assets $20,430 $18,627
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to affiliates $ 885 $ 885
Notes payable to banks 6,934 6,104
Current portion of capital lease 8 9
Accounts payable 3,801 3,107
Accrued expenses 705 567
------- -------
Total current liabilities 12,333 10,672
Notes payable - long term 5,432 5,213
Stockholders' equity:
Preferred stock, 10,000,000 shares
authorized,
Series B, $0.01 par value, 12,500 shares
outstanding at liquidation value 1,250 1,250
Series C, $10.00 par value, 296,170 and
296,170 shares outstanding at stated value,
respectively 2,962 2,962
Common stock, $.01 par value 100,000,000
shares authorized, 23,274,039 and
23,274,039 shares outstanding, respectively 233 233
Additional paid-in capital 9,313 9,313
Accumulated deficit (11,093) (11,016)
-------- --------
Total stockholders' equity 2,665 2,742
Total liabilities and stockholders'equity $20,430 $ 18,627
======== ======
2
<PAGE>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months
Ended March 31,
1997 1996
------- -------
Net sales $ 7,601 $ 6,262
Cost of sales 6,143 5,133
------- -------
Gross profit 1,458 1,129
Selling, general and
administrative expenses 1,168 1,192
------- -------
Operating income (loss) 290 (63)
Non-operating (income) expense:
Interest expense, net 278 279
Other, net 5 2
------- -------
Total non-operating expense 283 281
Income (loss) before income taxes 7 (344)
Income tax expense (benefit) 2 (117)
------- -------
Net income (loss) $ 5 $ (227)
======= =======
Income (loss) per common share outstanding* $ .00 $ (.01)
======= =======
Income (loss) per common share & equivalents $ .00 $ (.01)
outstanding** ======= =======
Weighted average common shares outstanding 23,274 23,345
======= ======
* Computed by dividing net income or loss, after reduction for preferred stock
dividends, by the weighted average number of common shares outstanding.
** Computed by dividing net income or loss, after reduction for preferred stock
dividends, by the weighted average number of common share and common
share equivalents outstanding.
3
<PAGE>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS), (UNAUDITED)
Three Months
Ended March 31,
1997 1996
-------- --------
Cash flows from operating activities:
Net income (loss) $ 5 $ (227)
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 81 119
Change in assets [(increase)/decrease] and
liabilities [increase/(decrease)]:
Trade accounts receivable, net (1,962) (1,069)
Inventories 468 (181)
Prepaid expenses and other current assets (236) (261)
Other assets 4 (128)
Deferred tax benefits 2 (117)
Accounts payable 694 38
Accrued expenses 137 (126)
Goodwill 10 --
-------- -------
Net cash used in operating activities (797) (1,952)
-------- -------
Cash flows from investing activities:
Purchase of property, plant, equipment (44) (155)
-------- -------
Net cash used in investing activities (44) (155)
-------- -------
Cash flows from financing activities:
Net change in bank loan 1,049 2,012
Preferred stock conversion -- 1
Dividends (82) (79)
-------- -------
Net cash provided by financing activities 967 1,934
-------- -------
Net increase (decrease) in cash and cash equivalents 126 (173)
Cash and cash equivalents at beginning of period 64 362
-------- -------
Cash and cash equivalents at end of period $ 190 $ 189
======== =======
Supplemental disclosures of cash flow information:
Cash paid for interest $ 277 $ 263
======== =======
Cash paid for income tax -- --
======== =======
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by Ajay Sports, Inc. (the "Company") without audit and pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of the Company, the financial statements reflect all adjustments, which consist
only of normal recurring adjustments, necessary to present fairly the financial
position of the Company at March 31, 1997 and the results of operations for the
three-month periods ended March 31, 1997 and 1996 and the cash flows for the
same three-month periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the SEC rules and regulations dealing
with interim financial statements. However, the Company believes that the
disclosures made in the condensed financial statements included herein are
adequate to make the information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.
The year-end condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles.
Note 2. INVENTORIES
The major classes of inventories (rounded to thousands) are as follows:
March 31, December 31,
1997 1996
--------- ------------
Raw Materials $ 3,601 $ 4,153
Work in Process 1,144 995
Finished Goods 2,744 2,809
--------- --------
$ 7,489 $ 7,957
========= ========
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
Note 3. DEBT
The Company's current bank lender advised the Company that the bank
contends that the Company is in technical default under its loan agreement due
to the default of the guarantor, Williams Controls, Inc. (Williams).
Accordingly, the loan must be paid by June 30, 1997. Ajay had been operating up
until February 12, 1997 on a revolver limit of $8.5 million. On February 12 the
line was reduced to $7 million and the bank restricted further advances from
Williams to the Company advising the Company that the Company was in technical
default under its loan agreement as a result of the default of the guarantor,
Williams Controls, Inc. The Company did and has continued to make all interest
payments on time and has operated within the limit amounts contained in the loan
facility. Restrictions during February and March curtailed operating capability
and reduced sales and profitability opportunities otherwise available. On April
14 the bank agreed to waive the existing default and restructured the loan on
less favorable formula advance rates and at an increased interest rate. In
addition, the bank is requiring that the Company make a $500,000 term loan
payment in June, 1997.
Ajay has signed loan proposal agreements with two different asset based
lenders who have begun their respective due diligence investigations. The loans
under each of the proposed agreements would supply funds sufficient to repay the
current lender. As the new loan proposals are presently structured, Williams
Controls, Inc. the guarantor of the Company's loan, would be required to invest
approximately $5 million into the Company. The terms and conditions of such
investment have not yet been negotiated or determined. The Company believes that
the new financing, including the Williams investment, would be sufficient to
provide for its needs through 1998 and can be put in place by June 30, 1997. If
the Company does not close the new loan and repay the current lender by June 30,
1997, the current lender could demand payment of the loan.
Note 4. BUSINESS SEGMENT REPORTING
The relative contributions to net sales, operating profit and identifiable
assets of the Company's two industry segments for the quarter ended March 31,
1997 (unaudited) are as follows (in thousands):
Quarter Ended
March 31, 1997
-------------------------------------------------
Furniture Golf Corporate Consolidated
--------- ------ --------- ------------
Net Sales $ 1,890 $ 5,711 $ - $ 7,601
Operating Profit/(Loss) 394 (41) (63) 290
Total Assets 3,475 16,955 - 20,430
Depreciation/Amortization 16 65 - 81
Capital Expenditures 10 34 - 44
6
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<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000753557
<NAME> LBO Capital Corp.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Mar-31-1997
<EXCHANGE-RATE> 1
<CASH> 81
<SECURITIES> 23,012
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,012
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,093
<CURRENT-LIABILITIES> 539,469
<BONDS> 0
0
0
<COMMON> 1,210
<OTHER-SE> (515,167)
<TOTAL-LIABILITY-AND-EQUITY> 23,093
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (465)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,736
<INCOME-PRETAX> (12,271)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,271)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,271)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
