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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File
December 31, 1995 Number: 0-13280
PCC GROUP, INC.
(Exact name of registrant as specified in its charter)
California 95-3815164
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
163 University Parkway 91768
Pomona, California (Zip Code)
(Address of principal executive office)
Registrant's telephone number, including area code: (909) 869-6133
Indicate by check mark, whether the registrant 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 report), and has been subject to such filing
requirements for the past 90 days.
Yes x No.___
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 x No.___
As of December 31, 1995, the registrant had outstanding 2,285,375 shares of
its Common Stock, $.01 par value per share.
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ITEM 1. FINANCIAL STATEMENTS
PCC GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
IN THOUSANDS
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, September 30,
ASSETS 1995 1995
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $1,022 $ 811
Investments in securities 171
Accounts receivable, less allowances for
possible losses of $294,000 and $264,000 2,121 1,658
Receivables from related parties 873 892
Notes receivable related parties 100 100
Inventory, less reserves for obsolescence
of $371,000 and $341,000 766 199
Other current assets 303 27
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TOTAL CURRENT ASSETS 5,356 3,687
PROPERTY AND EQUIPMENT 230 270
INVESTMENT IN AND ADVANCES TO
JOINT VENTURE 2,221 1,921
OTHER ASSETS 88 139
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TOTAL ASSETS $7,895 $6,017
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</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
2
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PCC GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
IN THOUSANDS
(UNAUDITED) (CONCLUDED)
<TABLE>
<CAPTION>
LIABILITIES AND December 31, September 30,
SHAREHOLDERS' EQUITY 1995 1995
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<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $2,537 $1,696
Current portion of long-term debt 6 8
Accrued liabilities 1,296 424
Income taxes payable 36 19
------ ------
TOTAL CURRENT LIABILITIES 3,875 2,147
DEFERRED GAIN ON SALE OF EQUIPMENT 959 959
LONG-TERM DEBT, less current portion 2 2
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4,836 3,108
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SHAREHOLDERS' EQUITY
Non-convertible, New Series A preferred
stock ($1,200,000 liquidation preference)
$4.80 stated value, shares authorized,
issued and outstanding - 200,000 1,200 1,200
Common stock, $.01 stated value; shares
authorized - 10,000,000; shares issued and
outstanding - 2,285,373 23 23
Contributed capital in excess of stated
value 587 587
Retained earnings 1,249 1,099
------ ------
TOTAL SHAREHOLDERS' EQUITY 3,059 2,909
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $7,895 $6,017
====== ======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
3
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PCC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
IN THOUSANDS, EXCEPT PER SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------------
1995 1994
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<S> <C> <C>
Net sales $12,572 $10,619
Cost of sales 11,935 10,134
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Gross profit 637 485
Selling, general and administrative expenses 458 471
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Income from operations 179 14
Other income (expense) (12) 5
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Net income before income taxes 167 19
Income taxes (17) (2)
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Net income $150 $17
Dividend on preferred stock (40) (40)
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Net income applicable to common shares 110 (23)
======= =======
Income per share
Net income 0.07 $0.01
Dividend on preferred stock 0.02 (0.02)
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Net income applicable to common shares 0.05 ($0.01)
======= =======
Average weighted number of common shares 2,285,375 2,285,375
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
4
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PCC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
IN THOUSANDS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-----------------------------
1995 1994
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<S> <C> <C>
NET CASH PROVIDED (USED) BY
Net income $ 150 $ 17
Depreciation and amortization 42 40
Provision for bad debts 30
Increase (decrease) from changes in:
Accounts receivable (463) (323)
Inventories (567) 695
Receivables from related parties 19 243
Other assets (276) 208
Accounts payable and accrued liabilities 1,730 203
Income taxes payable 17 11
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Net cash provided by (used in) operating
activities 682 1,094
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in securities (171) (396)
Purchase of property and equipment (7)
Related party note receivable (4)
Capital contributions to joint venture (300)
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Net cash provided by (used in) investing
activities (471) (407)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 211 687
CASH AND CASH EQUIVALENTS
beginning of year 811 705
------ ------
CASH AND CASH EQUIVALENTS
end of quarter $1,022 $1,392
====== ======
Supplemental disclosure of cash flow information:
Cash paid during the quarter for:
Interest 5
Income taxes 18
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
5
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PCC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
PCC Group, Inc. ("PCCG" or the "Company") is principally a wholesale
distributor of microcomputer products. The Company serves a select client base
which includes Value Added Resellers ("VAR's"), system integrators and dealers.
Beginning in August 1993, PCCG started to reposition itself as a business in
the environmental resources industry. In connection therewith, the Company
obtained an exclusive license to uses proprietary pyrolysis technology in seven
Pacific Rim countries, including Peoples Republic of China. Pyrolysis is a
process of thermal decompositon of tires in an oxygen deprived environment.
The Company's first recycling plant being built in Dalian, China, is expected
to commence operations in early 1996. The plant will process scrap tires into
recycled by products such as carbon black, fuel oil, scrap steel and gas. This
facility will be operated by Dalian Green Resources Corporation ("Dalian
Green"), a joint venture in which the Company holds a fifty-five percent
interest and China Dalian Materials Development Corporation, a Chinese entity,
holds a forty-five percent interest. PCCG's corporate office and warehouse is
located in Pomona, California.
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited 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 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 adjustments) considered necessary for fair
presentation have been included. Operating results for the three month period
ended December 31, 1995, are not necessarily indicative of the results that may
be expected for the year ending September 30, 1996. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended September 30,
1995.
NOTE 2 - INCOME TAXES
As of September 30, 1995, for federal income tax purposes, the Company had
approximately $3.3 million in net operating loss carryforwards expiring through
2001. The annual utilization of the operating loss carryforward may be
significantly limited due to the adverse resolution, if any, with respect to
the loss carryover provisions of Internal Revenue Code section 382 in
connection with certain stock issuances by the Company.
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ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Three Months Ended December 31, 1995 as Compared to the Three Months Ended
December 31, 1994
Net sales of $12.6 million for the three months ended December 31, 1995
increased by $2 million (18%) over net sales of $10.6 million for the three
months ended December 31, 1994. This increase was principally attributable to a
higher volume of hard disk drive sales.
Gross profit for the first quarter of 1995 was $637,000, an 31% increase, when
compared to $485,000 during the prior year's comparable period reflecting both
an increase in unit sales along with lower product costs. Gross profit as a
percentage of net sales increased from 4.6% in the first quarter of 1994 to
5.1% in the first quarter of 1995 due to a higher margin product mix.
Selling, general and administrative expenses decreased in absolute dollars to
$458,000 in the first quarter of fiscal 1996 compared to $471 million for the
comparable fiscal 1995 period. The absolute dollar decrease in SG&A expenses
was primarily attributable to cost cutting measures. As a percentage of
revenue, SG&A expenses decreased from 4.4% in 1995 to 3.6% in 1996 principally
due to higher sales.
Income from operations increased from $14,000 in the first quarter of fiscal
1995 to $179,000 in the comparable fiscal 1996 period, reflecting both sales
volume and gross profit growth. The 1.3% increase in operating income as a
percentage of net sales primarily reflects a higher gross margin rate.
Net income increased to $110,000, or $0.05 per share (after preferred stock
dividend deduction), in the first quarter of fiscal 1996 compared to ($23,000),
or $(0.01) per share (after preferred stock dividend deduction) for the same
fiscal 1995 quarter.
Liquidity and Capital Resources
Net cash provided by operating activities during the three months ended on
December 31, 1995 was $150,000, as compared to $17,000 in the comparable
prior year period. The primary use of cash during the period resulted from a
substantial decrease in accounts receivable and inventory. This decrease was
mainly attributable to the effects of downsizing.
Net cash used for investing activities in the amount of $471,000 reflects the
purchase of corporate securities and a capital contribution of $300,000 to
Dalian Green.
Since May 1994, the Company has operated with internally generated cash flow
and vendor lines of credit. The Company expects to have sufficient liquidity
to sustain its core business with internally generated cash flow and vendor
lines of credit. The Company's plan to obtain a $2.5 million credit line in
January 1996, to re-energize its core business did not materialize. As of
December 31, 1995 the Company had made cash contributions to Dalian Green of
$1,550,000, and was committed to making an additional cash contributions of
$410,000 during fiscal 1996. The Company is exploring, with the assistance of
7
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an investment banker, both financing and other alternatives, including
disposition of its microcomputer product distribution business, to raise funds
for development and expansion of the tire recycling venture. There can be no
assurances that the Company will be successful in satisfying its joint venture
equity contribution commitment and/or in securing additional financing needed
to complete the Dalian Green plant and, thus able to realize its
diversification objectives. For a description of the Company's investment in
and advance to Dalian Green see Note 1 of the Company's fiscal 1995
Consolidated Financial Statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has dully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PCC GROUP, INC.
(Registrant)
Date: February 14, 1996 /s/ JACK WEN
--------------------------------------
Jack Wen
Chairman of the Board, President and
Chief Executive Officer
/s/ J. LAURO VALDOVINOS
--------------------------------------
Date: February 14, 1996 J. Lauro Valdovinos
Vice President - Finance and Chief
Financial Officer (Principal
Financial and Accounting Officer)
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENT OF EARNINGS AND CONSOLIDATED BALANCE SHEET AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<RESTATED>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,022
<SECURITIES> 171
<RECEIVABLES> 3,388
<ALLOWANCES> 294
<INVENTORY> 766
<CURRENT-ASSETS> 5,356
<PP&E> 866
<DEPRECIATION> 636
<TOTAL-ASSETS> 7,895
<CURRENT-LIABILITIES> 3,875
<BONDS> 0
1,200
0
<COMMON> 23
<OTHER-SE> 1,836
<TOTAL-LIABILITY-AND-EQUITY> 7,895
<SALES> 12,572
<TOTAL-REVENUES> 12,572
<CGS> 11,935
<TOTAL-COSTS> 428
<OTHER-EXPENSES> 12
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 167
<INCOME-TAX> 17
<INCOME-CONTINUING> 150
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 150
<EPS-PRIMARY> .07
<EPS-DILUTED> .05
</TABLE>
