<PAGE> 1
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
March 31, 1996 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.___
As of March 31, 1996, the registrant had outstanding 2,285,375 shares of its
Common Stock, $.01 par value per share.
<PAGE> 2
ITEM 1. FINANCIAL STATEMENTS
PCC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
In Thousands
(Unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
ASSETS 1996 1995
--------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $673 $811
Investments in securities 143
Accounts receivable, less allowances
for possible losses of $294,000 and
$264,000 1,632 1,658
Receivables from related parties 560 892
Notes receivable related parties 100 100
Inventory, less reserves for
obsolescence of $371,000 and
$341,000 378 199
Other current assets 816 27
______ ______
TOTAL CURRENT ASSETS 4,302 3,687
PROPERTY AND EQUIPMENT 188 270
INVESTMENT IN AND ADVANCES TO
JOINT VENTURE 1,920 1,921
OTHER ASSETS 56 139
_______ ______
TOTAL ASSETS $6,466 $6,017
======= ======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 3
PCC GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
In thousands
(Unaudited) (Concluded)
<TABLE>
<CAPTION>
LIABILITIES AND March 31, September 30,
SHAREHOLDERS' EQUITY 1996 1995
--------- --------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $2,066 $1,696
Current portion of long-term debt 8
Accrued liabilities 340 424
Income taxes payable 14 19
______ ______
TOTAL CURRENT LIABILITIES 2,420 2,147
DEFERRED GAIN ON SALE OF EQUIPMENT 794 959
LONG-TERM DEBT, less current portion 2 2
______ ______
3,216 3,108
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 1,440 1,099
______ ______
TOTAL SHAREHOLDERS' EQUITY 3,250 2,909
______ ______
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $6,466 $6,017
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 4
PCC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OFINCOME
In Thousands, except per share data
(Unaudited)
<TABLE>
<CAPTION>
Three Monts Six Months
Ended Ended
March 31, March 31,
1996 1995 1996 1995
-------------- -------------
<S> <C> <C> <C> <C>
Net sales $9,773 $13,728 $22,345 $24,347
Cost of sales 9,240 13,173 21,175 23,307
______________ _______________
Gross profit 533 555 1,170 1,040
Selling, general
and administrative expenses 472 634 930 1,105
Income from operations 61 (79) 240 (65)
Other income (expense)
Gain (loss) on sale of
investments (18) 107 (30) 112
Gain on sale of equipment to
related party 165 165
147 107 135 112
_____________ _____________
Net income before income taxes 208 28 375 47
Income taxes 19 (6) 34 (8)
_____________ ____________
Net income $189 $22 $341 $39
Dividend on preferred stock (40) (40) (80) (80)
_____________ _____________
Net income applicable to common
shares $149 $18 $261 ($41)
=============================
Income per share
Net income $0.08 $0.01 $0.15 $0.02
Dividend on preferred stock 0.02 (0.02) 0.04 (0.04)
______________ ______________
Net income applicable to
common shares $0.06 ($0.01) $0.11 ($0.02)
Average weighted number of
common shares 2,285,375/2,235,375/2,285,375/
2,285,375
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 5
PCC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
In thousands (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1996 1995
-----------------
<S> <C> <C>
NET CASH PROVIDED (USED) BY
Net income $341 $39
Depreciation and amortization 84 83
Provision for bad debts 30
Increase (decrease) from changes in:
Accounts receivable 26 (424)
Receivables from related parties 332 509
Inventories (179) 1,305
Other assets (789) (2,003)
Accounts payable and accrued 286 940
liabilities
Income taxes payable 10 26
______ ______
Net cash provided by (used in)
operating activities 141 141
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in securities (143) (488)
Purchase of property and equipment (1) (7)
Related party note receivable (7)
Net advances from joint venture 165
Capital contributions to joint venture (300)
______ ______
Net cash provided by (used in)
investing activities (279) (502)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (138) (27)
CASH AND CASH EQUIVALENTS
beginning of year 811 705
------ -------
CASH AND CASH EQUIVALENTS
end of quarter $673 $678
===================
Supplemental disclosure of cash flow information:
Cash paid during the quarter for:
Interest $3 $5
Income taxes $3 $18
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 6
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 begun to reposition itself as a
business in the environmental resources industry. In connection therewith,
the Company obtained an exclusive license to use proprietary pyrolysis
technology in seven Pacific Rim countries, including the 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, PRC, previously scheduled to commence operations in early 1996, will
come on stream this summer due to unforeseen plant equipment installation
delays and funding limitations. The facility 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 six month period ended March 31, 1996,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.
<PAGE> 7
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Three Months Ended March 31, 1996 as Compared to the Three Months Ended
March 31, 1995
Net sales of $9.8 million for the six months ended March 31, 1996 decreased
by $3.9 million (28.9%) over net sales of $13.7 million for the similar 1995
period. This decrease was principally attributable to industry wide sales
contraction impacting both unit prices and volume. The Company mainly offers
hard disk drive products.
Gross profit for the second quarter of 1996 was $533,000, a 5.4% decrease,
when compared to $555,000 during the prior year's comparable period
reflecting a decrease in unit sales along with lower product costs. Gross
profit as a percentage of net sales increased from 4% in the second quarter
of 1995 to 5.4% in the second quarter of 1996 due to a higher margin product
mix.
Selling, general and administrative expenses decreased in absolute dollars to
$472,000 in the second quarter of fiscal 1996 compared to $634,000 for the
comparable fiscal 1995 period. The absolute dollar decrease in SG&A expenses
was primarily attributable to cost containment measures. As a percentage of
revenue, SG&A expenses slightly increased from 4.6% in 1995 to 4.8% in 1996.
Loss from operations decreased from ($79,000) in the second quarter of fiscal
1996 to $61,000 in the comparable fiscal 1996 period, principally reflecting
better gross margins. Operating income as a percentage of net sales remained
unchanged in comparable 1995 and 1996 fiscal periods.
Other income of $147,000 increased by $40,000 when compared to $107,000 for
the comparable fiscal 1995 period. A $165,000 gain on sale of equipment to
Dalian Green is included in the 1996 second quarter figure.
Net income increased to $149,000, or $0.06 per share (after preferred stock
dividend deduction), in the second quarter of fiscal 1996 compared to
$18,000, or $(0.01) per share (after preferred stock dividend deduction)
for the same fiscal 1995 quarter.
Six Months Ended March 31, 1996 as Compared to the Six Months Ended March 31,
1995
Net sales decreased 8.2% from $24.3 million in 1995 to $22.3 million in 1996.
Revenue shortfall was largely due to a declining sales trend affecting the
computer industry during the first quarter of 1996. This downward trend
impacted the Company's product unit prices and volume.
Gross profits increased 12.5% from $1,040,000 in the six month period ended
on March 31, 1996 to $1,170,000 in the comparable fiscal 1996 period, due to
a decrease in unit sales along with better gross margins. Gross profit as a
percentage of net sales increased form 4.2% in 1995 to 5.2% in the similar
1996 six month period mainly reflects an augmentation of profit margins as a
result of product line selection.
<PAGE> 8
Selling, general and administrative expenses decreased by $175,000 (15.8%)
during the 1996 first six month period compared to $1,105,000 for the
comparable fiscal 1995 period. This decrease was due to strict cost
controls. As a percentage of revenue, SG&A slightly decreased from 4.5% in
1995 to 4.2% in 1996.
Other income of $135,000 increased by $23,000 when compared to $112,000 for
the comparable fiscal 1995 period. Other income for the 1996 period mainly
reflects a gain on sale of equipment to Dalian Green.
Net income increased to $261,000, or $0.11 per share (after preferred stock
dividend deduction), in the six months ended March 31, 1996 compared to
($41,000), or ($0.02) per share (after preferred stock dividend deduction)
for the same fiscal 1995 period.
Liquidity and Capital Resources
Net cash provided by operating activities during the six months ended on
March 31, 1996 was $141,000, as compared to $475,000 in the comparable prior
year period. The primary use of cash during the period resulted from the
following transactions recorded under Other Assets: a) A $455,000 cash
advance to Laser Micro Systems, a Taiwanese company owned by a related party
for professional services and the purchase of inventory products; b)
Advances and/or purchases in the aggregate of $252,354 for equipment that
will be subsequently billed to Dalian Green and; c) $77,214 for materials
purchases made on behalf of Green Earth Chemical Inc., a company owned by a
related party and shareholder of the Company.
Net cash used for investing activities in the amount of $279,000 reflects the
net effect of the following transactions: a $300,000 capital contribution to
Dalian Green, a $165,000 net payment from the previously cited joint venture
and the purchase of corporate securities.
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, early in fiscal 1996, a $2.5
million credit line to re-energize its core business did not materialize.
As of March 31, 1965 the Company had made cash contributions to Dalian Green
of $1,850,000, and was committed to making additional cash contributions of
$110,000 during fiscal 1996. The Company is exploring, with the assistance of
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.
<PAGE> 9
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: May 14, 1996 /s/ JACK WEN
-----------------------------------
Jack Wen
Chairman of the Board,
President and Chief Executive Officer
Date: May 14, 1996 /S/ J. LAURO VALDOVINOS
----------------------------
J. Lauro Valdovinos
Vice President - Finance and Chief
Financial Officer (Principal
Financial and Accounting Officer)
<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>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 673
<SECURITIES> 143
<RECEIVABLES> 2,586
<ALLOWANCES> 294
<INVENTORY> 378
<CURRENT-ASSETS> 4,302
<PP&E> 866
<DEPRECIATION> 678
<TOTAL-ASSETS> 6,466
<CURRENT-LIABILITIES> 2,420
<BONDS> 0
<COMMON> 23
1,200
0
<OTHER-SE> 2,027
<TOTAL-LIABILITY-AND-EQUITY> 6,466
<SALES> 22,345
<TOTAL-REVENUES> 22,345
<CGS> 21,175
<TOTAL-COSTS> 900
<OTHER-EXPENSES> 135
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 375
<INCOME-TAX> 34
<INCOME-CONTINUING> 341
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 341
<EPS-PRIMARY> .15
<EPS-DILUTED> .11
</TABLE>
