<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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
December 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 December 31, 1996, the registrant had outstanding 2,579,339 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>
December 31, September 30,
ASSETS 1996 1996
---------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $1,176 $ 508
Securities and other negotiable assets 802 1,006
Accounts receivable, less allowances for
possible losses of $128,553 and $264,000 2,227 1,872
Receivable from related parties 790 576
Notes receivable - related parties 100 100
Income tax receivable 18 18
Inventory, less reserves for
obsolescence of $301,000 and $371,000 1,634 1,057
Prepaids and other current assets 197 63
-----------------------
TOTAL CURRENT ASSETS 6,944 5,200
PROPERTY AND EQUIPMENT, Net 108 145
INVESTMENTS IN AND ADVANCES TO
JOINT VENTURES 2,997 2,995
OTHER ASSETS 11 81
----------------------
TOTAL ASSETS $10,060 $8,421
======================
</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 December 31, September 30,
SHAREHOLDERS' EQUITY 1996 1996
---------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $3,957 $2,262
Current portion of long term debt 1 1
Accrued liabilities 103 128
Income taxes payable 12
Securities margin liability 417 551
--------------------------
TOTAL CURRENT LIABILITIES 4,490 2,942
DEFERRED GAIN ON SALE OF EQUIPMENT 933 933
5,423 3,875
SHAREHOLDERS' EQUITY
Non-convertible, Cumulative, New Series A
preferred stock ($1,200,000 liquidation
preference) - $4.80 stated value,shares
authorized,issued and outstanding - 250,000 1,200 1,200
Common stock, $.01 stated value; shares authorized
10,000,000; shares issued and outstanding
2,579,339 and 2,528,117 26 25
Contributed capital in excess of stated value 1,556 1,347
Stock subscribed 231
Retained earnings 1,855 1,743
------------------------
TOTAL SHAREHOLDERS' EQUITY 4,637 4,546
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,060 $8,421
========================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 4
PCC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
In thousands, except per share data
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1996 1995
-------------------
<S> <C> <C>
Net sales $13,679 $12,572
Cost of sales 13,027 11,935
------------------
Gross profit 652 637
Selling, general and administrative
expenses 457 458
-----------------
Income from operations 195 179
Other income (expenses) -71 -12
-----------------
Net income before income taxes 124 167
Income taxes 12 17
-----------------
Net income $112 $150
=================
Income per share
Net income 0.04 0.07
Dividends applicable to preferred stock 0.02 0.02
----- ----
Net income applicable to common shares $0.02 $0.05
Average weighted number of shares 2,553,728 2,466,816
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 5
PCC GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands, (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1996 1995
------------------
<S> <C> <C>
NET CASH PROVIDED (USED) BY
Net income $112 $150
Depreciation and amortization 39 42
Provision for bad debts 30 30
Increase (decrease) from changes in:
Investments in securities 204 -171
Accounts receivable -355 -463
Receivables from related parties -214 19
Inventory -577 -567
Prepaids and other assets -98 -276
Accounts payable and accrued liabilities 1,670 1,730
Income tax payable 12 17
------------------
Net cash provided by (used in)
operating activities 823 511
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of company stock -21
Regulation S stock subscription -231
Capital contribution - joint venture -300
-----------------
Net cash provided by (used in)
investing activities) -252 -300
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance 231
Change in margin liability -134
----------------
Net cash provided by (used in)
financing activities 97
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 668 211
CASH AND CASH EQUIVALENTS,
beginning of year 508 811
-----------------
CASH AND CASH EQUIVALENTS,
end of quarter $1,176 $1,022
=================
Cash paid during the year for:
Interest 8 0
Income taxes 0 0
</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. Since 1993, PCCG begun to establish an environmental resources
division. In connection therewith, the Company is in the process of
completing its first scrap tire recycling plant located in Dalian, Peoples
Republic of China. This facility will be operated by Dalian Green Resources
Corporation ("Dalian Green"), a joint venture in which the Company holds
fifty-five perecent interest and China Dalian Materials Development
Corporation, a Chinese entity, holds a forty-five percent interest. Using
proprietary technology the plant will recycle scrap tires into industrial
products such as carbon black, fuel oil, scrap steel and synthetic gas. The
Company'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, 1996, are not necessarily
indicative of the results that may be expected for the year ending September
30, 1997. 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, 1996.
Note 2 - Income Taxes
As of September 30, 1996, for federal income tax purposes, the Company had
approximately $3 million in net operating loss carryforwards expiring through
2002. 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
Note 3 - Regulation S Offering
During the three month ended on December 31, 1996, the Company issued a
Regulation S Offering for the purpose of completing the Company's tire
recycling plant and for general corporate purposes. The Offering Circular
consisted of 51,222 common stock valued at $5.00 per share raised. This
offering raised $230,500, net of placement fees.
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Three Months Ended December 31, 1996, as Compared to the Three Months Ended
December 31, 1995
Net Sales increased 8.9% to $13.6 million in the first quarter of fiscal 1996
compared to $12.6 million in the same fiscal 1995 period. The Company
believes that this increase in net sales was due to the combined effects,
on volume, due to an increase in hard disk sales and new peripheral product
offerings (monitors and modems), and, on pricing, of continued competitive
pricing.
Gross profit increased 2.4% from $637,000 in the first quarter of 1995 to
$652,000 in the comparable fiscal 1996 quarter, reflecting both an increase
in quarterly unit sales and slightly lower profit margins. Gross profit as a
percentage of net sales decreased from 5.1% in the first quarter of 1995 to
4.8% in the first quarter of 1996, mainly due to competitive pricing within
the computer parts distribution business.
Selling, general and administrative expenses remained unchanged in dollar
terms and slightly decreased from 3.6% in the first quarter of fiscal 1995
to 3.3% in the comparable fiscal 1996 period. Strict inventory and cost
controls kept expenses in line with prior year's levels.
Income from operations increased from $179,000 in the first quarter of fiscal
1995 to $195,000 in the first quarter of 1996. As a percentage of net sales,
operating income remained unchanged at 1.4% as a result of offsetting gross
profit and selling, general and administrative variances.
Other expenses increased six fold from $12,000 in 1995 to $71,000 in 1996.
This increase was mainly attributable to securities margin interest costs.
Provision for income taxes decreased to $12,000 for the first quarter of 1996
in comparison to $17,000 for the comparable fiscal 1995 period. The income
tax provision for the quarter only reflects an accrual for state income taxes,
since the Company benefited from the application of net operating loss
carryforwards from prior years.
Net income decreased 25.3% to $112,000, or $0.04 per in the first quarter of
fiscal 1996 compared to $150,000, or $0.07 per share for the same fiscal 1995
quarter.
<PAGE> 8
Liquidity and Capital Resources
Net cash provided by operating activities during the three months ended on
December 31, 1996 was $823,000 as compared to $511,000 in the comparable
prior year quarter. Cash provided by investments in securities in the amount
of $204,00 largely substantiates the differences between quarterly periods.
Net cash provided by (used in) investing activities in 1996 was ($252,000),
as compared to ($300,000) in 1995 principally reflects the net effects of
the following activities: In 1996, the purchase of company stock along with
a Regulation S offering and; In 1995, a $300,000 equity contribution to
Dalain Green.
Net cash provided by (used in) in 1996 was $97,000 in comparison to nil
activity in 1995 mainly reflects the issuance of common shares and the use of
a securities margin facility.
Since May 1994, the Company has primarily operated with internally generated
cash flow and vendor lines of credit. The Company plans to fund the growth of
its distribution business with internally generated funds, vendor credit lines
and prospective asset-based financing. The Company intends to seek an
accounts receivables/inventory facility during the early part of 1997. The
Company has been pursuing various alternatives intended to facilitate its
entry into the environmental resources industry. To this end, it will
continue to explore the development of new recycling projects and
acquisitions along with viable funding schemes. There can be no assurances
that it will be successful in satisfying its diversification objectives. For
a description of the Company's investment in Dalian Green and its role as a
technology provider, see Note 1 to the Company's Consolidated Financial
Statements for the year ended on September 30, 1996.
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, 1997 /s/ JACK WEN
-------------------------------
Jack Wen
Chairman of the Board, President and
Chief Executive Officer
Date: February 14, 1997 /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 INCOME AND CONSOLIDATED BALANCE SHEET AND IS
QUALIFIED IN ITS ENTIRITY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1176
<SECURITIES> 802
<RECEIVABLES> 2355
<ALLOWANCES> 128
<INVENTORY> 1634
<CURRENT-ASSETS> 6944
<PP&E> 855
<DEPRECIATION> 747
<TOTAL-ASSETS> 10060
<CURRENT-LIABILITIES> 4490
<BONDS> 0
1200
0
<COMMON> 26
<OTHER-SE> 3411
<TOTAL-LIABILITY-AND-EQUITY> 10060
<SALES> 13679
<TOTAL-REVENUES> 13679
<CGS> 13027
<TOTAL-COSTS> 427
<OTHER-EXPENSES> 63
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> 124
<INCOME-TAX> 12
<INCOME-CONTINUING> 112
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112
<EPS-PRIMARY> .04
<EPS-DILUTED> .02
</TABLE>
