<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 1996
--- TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-20179
RECYCLING INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
COLORADO 84-1103445
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
384 INVERNESS DRIVE SOUTH, SUITE 211
ENGLEWOOD, COLORADO 80112
(Mailing Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (303) 790-7372
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: COMMON STOCK, $.001
PAR VALUE
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock as of the close of the period covered by this Report.
Number of Shares Outstanding As Of
Class September 30, 1996
----- -----------------------------------
Common Stock, $.001 Par Value 13,911,974
<PAGE>
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION PAGE
----
ITEM 1. FINANCIAL STATEMENTS*
Consolidated Balance Sheets - June 30, 1996 (Unaudited)
and September 30, 1995 1-2
Consolidated Statements of Operations (Unaudited) for the three
months and nine months ended June 30, 1996 and 1995 3
Consolidated Statement of Stockholders' Equity through
June 30, 1996 (Unaudited) 4
Consolidated Statements of Cash Flows (Unaudited) for the nine
months ended June 30, 1996 and 1995 5
Notes to the Consolidated Financial Statements 6-11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 12-16
PART II -- OTHER INFORMATION
Item 1-6 17-18
Signatures 19
Statement Regarding Computation of Per Share Earnings 20
Financial Data Schedule 21
- ----------------
*The accompanying interim financial statements have not been
audited by an independent certified public accountant, and are so noted as
"Unaudited" where applicable. Only those statements corresponding to a fiscal
year-end (September 30) are audited.
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND SEPTEMBER 30, 1995
ASSETS
(Substantially Pledged)
<TABLE>
JUNE 30, 1996 SEPTEMBER 30, 1995
------------- ------------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 396,000 $ 184,000
Trade accounts receivable, less allowance for
doubtful accounts of $10,000 and $15,000 respectively 1,879,000 1,026,000
Accounts receivable, related party 195,000 223,000
Inventories 2,082,000 497,000
Prepaid expenses 301,000 137,000
Other 60,000 -
Deferred Income Taxes 1,000,000 -
----------- -----------
Total Current Assets 5,913,000 2,067,000
PROPERTY, PLANT AND EQUIPMENT, net 10,797,000 6,686,000
DEFERRED INCOME TAXES 241,000 800,000
OTHER ASSETS 5,186,000 744,000
----------- -----------
TOTAL ASSETS $22,137,000 $10,297,000
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND SEPTEMBER 30, 1995
LIABILITIES AND STOCKHOLDERS EQUITY
<TABLE>
June 30, 1996 September 30, 1995
------------- ------------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $ - $ 61,000
Notes payable - related parties 1,380,000 -
Trade accounts payable 2,050,000 655,000
Trade accounts payable - related parties 63,000 73,000
Accrued liabilities:
Interest 28,000 22,000
Interest - related party 35,000 8,000
Payroll and other 182,000 107,000
Income taxes payable 86,000 86,000
Due to factor, related party 512,000 197,000
Current portion of long-term debt 331,000 227,000
Current portion of long-term debt,
related parties 2,257,000 218,000
Current portion of obligation
under capital lease 1,662,000 37,000
----------- -----------
Total Current Liabilities 8,586,000 1,691,000
----------- -----------
LONG-TERM DEBT:
Long-term debt, net of current portion 2,847,000 132,000
Long-term debt - related parties, net
of current portion 893,000 1,979,000
Obligation under capital lease, net
of current portion 30,000 41,000
----------- -----------
Total Long-term Debt 3,770,000 2,152,000
----------- -----------
Total Liabilities 12,356,000 3,843,000
----------- -----------
COMMITMENTS & CONTINGENCIES:
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 10,000,000
shares authorized
Series A 13,000 (unaudited) shares
issued and outstanding 1,312,000 1,312,000
Series B -0- and 300,000
shares issued and outstanding - 450,000
Common Stock ($.001 par value),
50,000,000 shares authorized,
10,175,193 (unaudited) and 8,395,785
shares issued and outstanding respectively 10,000 8,000
Additional paid-in-capital 17,923,000 13,120,000
Accumulated deficit (9,464,000) (8,436,000)
----------- -----------
Total Stockholders' Equity 9,781,000 6,454,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $22,137,000 $10,297,000
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE FOR THE NINE
MONTHS ENDED JUNE 30, MONTHS ENDED JUNE 30,
----------------------- -----------------------
1996 1995 1996 1995
----------- ---------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues:
Sales $ 6,287,000 $3,641,000 $17,022,000 $10,731,000
Brokerage 462,000 -- 462,000 --
Other Income (28,000) 9,000 -- 36,000
----------- ---------- ----------- -----------
Total revenues 6,721,000 3,650,000 17,484,000 10,767,000
----------- ---------- ----------- -----------
Cost and Expenses:
Cost of Sales 6,331,000 2,419,000 15,043,000 6,982,000
Cost of brokerage 462,000 -- 462,000 --
Cost of Sales--related party 200,000 431,000 840,000 1,191,000
Personnel 251,000 178,000 1,113,000 441,000
Professional services 59,000 71,000 323,000 361,000
Travel 4,000 23,000 64,000 42,000
Occupancy 87,000 16,000 115,000 41,000
Depreciation and amortization 100,000 62,000 201,000 186,000
Interest 190,000 91,000 435,000 289,000
Other general and administrative 185,000 106,000 423,000 296,000
----------- ---------- ----------- -----------
Total Costs and Expenses 7,869,000 3,397,000 19,019,000 9,829,000
----------- ---------- ----------- -----------
Income (loss) before
extraordinary gain and
Income Taxes (1,148,000) 253,000 (1,535,000) 938,000
Extraordinary gain from
settlement of debts 22,000 240,000 70,000 462,000
Income (loss) before income
taxes (benefit) (1,126,000) 493,000 (1,465,000) 1,400,000
Income taxes (benefit) -- -- (437,000) --
----------- ---------- ----------- -----------
Net Income (loss) $(1,126,000) $ 493,000 $(1,028,000) $ 1,400,000
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
NET INCOME (LOSS) PER SHARE:
Before extraordinary gain $ (0.11) $ 0.05 $ (0.12) $ 0.19
Extraordinary gain -- 0.04 0.01 0.10
----------- ---------- ----------- -----------
Net Income (loss) per share $ (0.11) $ 0.09 $ (0.11) $ 0.29
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Weighted average shares
outstanding 10,104,974 5,697,527 9,309,447 4,890,494
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
Additional
Preferred Stock Common Stock Paid-in Accumulted
Shares Amount Shares Amount Capital (Deficit) Total
-------- ---------- ---------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, September 30, 1995 313,000 $1,762,000 8,395,785 $ 8,000 $13,120,000 $(8,436,000) $ 6,454,000
Common stock issued for
acquisition of Anglo
(Unaudited) -- -- 227,693 -- 925,000 -- 925,000
Conversion of preferred stock
Series B (Unaudited) (300,000) (450,000) 12,000 -- 450,000 -- --
Common stock issued in private
offering, net of offering costs
of $880,000 (Unaudited) -- -- 1,040,636 1,000 1,980,000 -- 1,981,000
Conversion of bridge loans
(Unaudited) -- -- 323,523 1,000 1,137,000 -- 1,138,000
Common stock issued for cash
(Unaudited) -- -- 55,556 -- 50,000 -- 50,000
Common stock issued for cash
(Unaudited) -- -- 30,000 -- 36,000 -- 36,000
Common stock issued in private
offering, net of offering costs
of $22,000 (Unaudited) -- -- 90,000 -- 225,000 -- 225,000
Net loss (Unaudited) -- -- -- -- -- (1,028,000) (1,028,000)
-------- ---------- ---------- ------- ----------- ----------- -----------
Balances, June 30, 1996 13,000 $1,312,000 10,175,193 $10,000 $17,923,000 $(9,464,000) $ 9,781,000
(Unaudited)
-------- ---------- ---------- ------- ----------- ----------- -----------
-------- ---------- ---------- ------- ----------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
For the Three Months Ended: For the Nine Months Ended:
------------------------------ -----------------------------
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM (TO) OPERATING
ACTIVITIES:
Net Income (Loss) $(1,126,000) $ 493,000 $(1,028,000) $ 1,400,000
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Depreciation and amortization 263,000 234,000 742,000 688,000
Extraordinary gain from settlement of
debts (22,000) (240,000) (70,000) (462,000)
Deferred income taxes - - (441,000) -
Changes in Assets and Liabilities
Trade accounts receivable 270,000 (81,000) (853,000) (333,000)
Inventories 49,000 (14,000) (164,000) 38,000
Prepaid expenses (73,000) (97,000) (164,000) (92,000)
Other current assets 156,000 (6,000) (60,000) 26,000
Accounts payable 745,000 (439,000) 1,392,000 (445,000)
Accrued liabilities 11,000 (190,000) 171,000 (252,000)
----------- ----------- ----------- -----------
Net Cash Provided (Used) by
Operating Activities 273,000 (340,000) (475,000) 568,000
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Additions to equipment (1,060,000) (31,000) (1,362,000) (437,000)
Receivable - related party (128,000) (42,000) - (123,000)
Additions to acquisition costs and
goodwill (292,000) (135,000) (896,000) (191,000)
Non competition agreement (50,000) - (250,000) -
Loan Fees (181,000) - (181,000) -
Advances to related parties 28,000 - 28,000 -
----------- ----------- ----------- -----------
Net Cash Provided (Used) in
Investing Activities (1,683,000) (208,000) (2,661,000) (751,000)
----------- ----------- ----------- -----------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from borrowings - related
parties (5,000) 38,000 1,588,000 38,000
Proceeds from other borrowings 136,000 - 156,000 -
Principal payments on borrowings (26,000) 206,000 (427,000) (2,092,000)
Principal payments on borrowings -
related parties (735,000) (43,000) (1,146,000) (324,000)
Principal payments on capital lease (74,000) (28,000) (186,000) (28,000)
Proceeds from line of credit 1,638,000 - 1,638,000 -
Payment on line of credit (204,000) - (204,000) -
Proceeds from factor - related party 2,190,000 2,174,000 6,124,000 5,538,000
Payments to factor - related party (1,815,000) (2,048,000) (5,809,000) (5,542,000)
Proceeds from issuance of common
stock 14,000 1,200,000 2,292,000 3,982,000
Deferred offering costs (553,000) 314,000 (678,000) -
----------- ----------- ----------- -----------
Net Cash Provided (Used) in
Financing Activities 566,000 1,813,000 3,348,000 1,572,000
Increase (decrease) in Cash (844,000) 1,265,000 212,000 1,389,000
CASH, Beginning 1,240,000 239,000 184,000 115,000
----------- ----------- ----------- -----------
CASH, Ending $ 396,000 $ 1,504,000 $ 396,000 $ 1,504,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
RECYCLING INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
GENERAL INFORMATION:
I. The Financial Statements included herein have been prepared by the Company
without audit except the September 30, 1995, balance sheet which was
audited. The Statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect all
adjustments, consisting of only normal recurring accruals which are, in
the opinion of management, necessary for a fair statement of the results
of operations for the periods shown. These statements do not include all
information required by Generally Accepted Accounting Principles to be
included in a full set of Financial Statements. These Financial
Statements should be read in conjunction with the Financial Statements
and notes thereto included in the Company's latest report on Form 10-K,
dated September 30, 1995.
II. On December 11, 1995, the Company acquired substantially all of the assets
and the business of Anglo Metal, Inc., d/b/a Anglo Iron & Metal (Anglo).
The assets acquired from Anglo consisted of a heavy duty automotive
shredder, inventories, metal shearing equipment and baler related to
recycling ferrous and non-ferrous metals. The Company also purchased
from Anglo certain real property, buildings and leasehold improvements
used in the metal recycling business.
The purchase price for Anglo was $6,065,000 comprised of: $2,079,000 in
cash; $1,865,000 note which is to be paid in ten monthly installments of
$186,500 beginning in February 1996; a $446,000 secured promissory note
payable in 60 consecutive monthly installments of $9,000, including
interest; a $750,000 unsecured note payable in 72 equal consecutive
monthly installments of $10,400; and 227,693 shares of Common Stock
valued at $925,000.
Of the cash paid at the closing of the acquisition, $1,800,000 was
obtained through a sale-leaseback transaction with Ally Capital
Corporation, collateralized by all of Anglo's machinery and equipment,
accounts receivable and inventories, which has been recorded as a capital
lease.
The terms of the sale-leaseback provide for 60 consecutive monthly lease
payments of $41,000 with a bargain purchase option at the end of the
lease term. The lease contained numerous covenants for maintaining
certain financial ratios and earnings levels. The remaining $279,000
paid at closing was obtained from the operating cash reserves and working
capital of the Company.
The Company signed a consulting and non-competition agreement with the
president of Anglo. The term of the non-compete portion is for six
years and is valued at $1,000,000 which will be amortized over the
term of the agreement using the straight line method. The consulting
portion is for a term of six months and is payable $5,000 per month.
The Company also entered into a sublease agreement with Anglo for three
yard facilities for $2,500 a month through December 10, 2005.
The real property acquired from Anglo and the common stock issued by the
Company have been placed in escrow to provide for the remediation of
environmental contamination related to the operations of Anglo prior to
the acquisition.
6
<PAGE>
The purchase price has been allocated as follows:
Equipment under capital lease $ 1,800,000
Contract to purchase land and buildings 70,000
Covenant not to compete 1,000,000
Inventories 1,365,000
Purchase price in excess of net assets acquired 1,830,000
-----------
Total purchase price $ 6,065,000
Notes payable (3,061,000)
Common stock (925,000)
-----------
Cash paid at closing 2,079,000
Capital lease obligation (1,800,000)
-----------
Cash paid from operating capital $ 279,000
-----------
-----------
Prior to acquiring Anglo, the Company commissioned extensive
environmental studies on the Anglo sites. These environmental
investigations resulted in a determination that certain isolated areas of
the facilities may contain environmental contaminates. As a result, the
Company established an Environmental Escrow to cover the cost of
potential clean up of these areas. Additionally, during the Escrow
Period, the Company shall engage an environmental engineer to determine
the level of contamination on the real property. The location of any
contamination will be identified by a survey and the legal description of
the real property shall be revised to provide that the Company will not
purchase any contaminated portion of the real property.
If prior to the termination of the Escrow Period, the location of the
contamination cannot be determined or if the Company determines that
there is extensive contamination of the real property, all documents held
in escrow shall be destroyed and the Company shall enter into a lease
agreement for the real property, which lease shall be retroactive to the
Closing Date. The lease payments under such lease agreement shall be
equal to those that would otherwise have been due under the Secured
Promissory Note. Due to the Escrow Agreement, the real property has been
recorded as an intangible asset, Contract to Acquire Land.
III. On April 15, 1996, the Company acquired substantially all of the
assets (excluding cash and accounts receivable) of Mid-America
Shredding, Inc. The assets acquired consist of real property,
buildings, a heavy duty automotive shredder mill, a wire chopping
plant and heavy equipment and tools used in the business of recycling
ferrous and non-ferrous metals. The purchase price totaled
$1,925,000, settled through the assumption of outstanding bank debt of
$1,210,000, $660,000 cash paid at closing and $55,000 note, payable
over eight months.
The purchase price is allocated as follows:
Inventories $ 55,000
Land 310,000
Building and improvements 560,000
Machinery and equipment 1,000,000
----------
$1,925,000
----------
----------
7
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1996
<TABLE>
RECYCLING ANGLO PRO FORMA
INDUSTRIES IRON & PRO FORMA JUNE 30,
INC. METAL MID-AMERICA ADJUSTMENTS 1996
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues $17,484,000 $10,957,000 $ 1,779,000 $(8,759,000) $21,461,000
Costs and
expenses 19,019,000 10,751,000 1,929,000 (8,945,000) 22,754,000
----------- ----------- ----------- ----------- -----------
Income (loss)
before extraordinary
gain & income taxes (1,535,000) 206,000 (150,000) 186,000 (1,293,000)
Extraordinary gain
from settlement
of debts (70,000) - - - (70,000)
----------- ----------- ----------- ----------- -----------
Income (loss)
before income taxes $(1,465,000) $ 206,000 $ (150,000) $ 186,000 $(1,223,000)
Provision (benefit)
from income taxes (437,000) - - 94,000 (343,000)
----------- ----------- ----------- ----------- -----------
Net income (loss)
after extraordinary
gain and income
taxes $(1,028,000) $ 206,000 $ (150,000) $ 92,000 $ (880,000)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Income (loss) per
common share:
Before
extraordinary
gain $ (.10)
Extraordinary gain .01
-----------
Net (loss) per
common share $ (.09)
-----------
-----------
Weighted average
number of common
shares outstanding 9,309,447
</TABLE>
IV. In December 1995, and January 1996, the Company borrowed $1,575,000 of
bridge financing represented by the notes payable - related parties with
interest at 10% per annum. Proceeds from the loans were used to finance
the Anglo acquisition and general corporate expenses. In January 1996,
principal of $1,125,000 and accrued interest of $13,000 were converted
into 323,523 shares of Common Stock. In connection with the bridge
financing, the lenders were issued warrants to purchase a total of 359,250
shares of Common Stock at $1.50 per share, exercisable through the end of
a three-year period commencing on the effective date of a registration
statement covering the underlying Common Stock. The Company paid the
balance of principal and accrued interest on these loans of $485,000 on
September 30, 1996.
V. On January 31, 1996, and April 8, 1996, the Company completed a Private
Placement of an aggregate of 1,454,156 shares of Common Stock at $2.75 per
share and issued warrants to purchase up to 727,078 shares of Common Stock
at $7.50 per share. Of the $3,998,934 raised, $1,137,000 was raised
through the conversion of the bridge financing indebtedness discussed
above. The proceeds from these private placements were used to complete
the acquisition of Mid-America Shredding, Inc., discussed in Note VI below
for general working capital purposes.
8
<PAGE>
VI. On July 17, 1996, the Company completed the Public Offering of 4.4 million
shares of Common Stock at an offering price of $4.125 per share. Net
proceeds raised by the Company from the Public Offering were $15,323,485.
In connection with the Public Offering, the Company repurchased 1,380,585
shares of Common Stock for $4.00 per share. In connection with this
repurchase, the holders of the Company's Series G Warrants agreed to
certain contractual "lock-up" restrictions. In addition, upon consummation
of the Public Offering, the Company exchanged 213,388 Placement Agent's
Warrants for 376,512 shares of Common Stock and 213,388 Series H Warrants,
representing an effective exercise price of $.60 per share of Common
Stock.
VII. On August 5, 1996, Recycling Industries of Iowa, Inc., a wholly-owned
subsidiary of the Registrant, acquired from Wesley J. Weissman all of the
issued and outstanding capital stock of Weissman Industries, Inc.,
("Weissman"), a privately held metals recycler with operations in
Waterloo, Iowa. Weissman's primary markets are midwestern steel mills.
The assets owned by Weissman consist of heavy equipment, tools and rolling
stock used in the business of recycling ferrous and non-ferrous metal.
The total purchase price for Weissman was $12.1 million including $1.5
million paid in the form of 363,637 shares of the Registrant's common
stock. The $10.6 million cash portion of the purchase price was funded as
follows: approximately $5.3 million from the proceeds of the Registrant's
public offering which closed on July 23, 1996 and the Company's operating
cash; $3.5 million from long term debt obtained from Coast Business
Credit, a division of Southern Pacific Thrift and Loan ("Coast") secured
by the equipment of Weissman; and approximately $1.7 million of revolving
credit borrowings obtained from Coast.
Assuming the Company's acquisitions of Anglo, Mid-America and Weissman had
been completed on October 1, 1995, pro forma results of operations for the
nine months ended June 30, 1996, would have been:
Revenues $35,987,000
Income from continuing operations,
net of Income taxes 284,000
Net income after extraordinary gain and income 354,000
Net income per common share $ .03
Weighted average number of common share outstanding 10,662,195
The pro forma information is not necessarily indicative of the combined
results of operations that would have occurred had the acquisitions been
completed as of October 1, 1995.
VIII. Concurrently with the Commencement of the public offering discussed in
Item VI, the Company's Common Stock was approved for listing on the
NASDAQ National Market.
IX. In June, 1996, the Company entered into an inventory and receivables
financing agreement with Coast Business Credit in Los Angeles, California.
Advances are at the Bank of America Reference Rate plus 2% except for the
over advance facility which is plus 3%. The agreement has been
collateralized by a first security interest on all of the Company's
assets.
X. For presentation purposes, the Statement of Operations for the nine months
ended June 30, 1995, has been revised to reflect line item consistency
with the Statement of Operations provided in the September 30, 1995, 10-K.
XI. On August 15, 1996, the Company redeemed all of its outstanding Series A
Convertible Preferred Stock and repurchased 120,000 shares of Common Stock
for $2.4 million. This transaction was funded through the proceeds of the
Public Offering.
9
<PAGE>
XII. On September 25, 1996, the Company executed a non-binding letter of intent
for the acquisition of Sunshine Metal Processing, Inc. ("Sunshine").
Under the terms of the letter of intent, the purchase price for the
Sunshine assets is $2,500,000, payable as follows: $750,000 in cash;
the assumption of $1,250,000 of debt; and the issuance of the
Company's convertible preferred stock having a value of $500,000. The
acquisition is subject to a number of material contingencies,
including negotiation of definitive acquisition terms, obtaining
sufficient financing to complete the acquisition and completion of the
Company's due diligence related to the acquisition. In addition, the
Company's acquisition of Sunshine is subject to satisfactory
resolution of a lawsuit against Sunshine in which a third party claims
to have a contract to acquire Sunshine's assets.
XIII. Inventories as of June 30, 1996 and September 30, 1995, consist of the
following:
June 30, 1996 September 30, 1995
------------- ------------------
(Unaudited)
Raw materials $ 795,000 $350,000
Finished goods 1,287,000 147,000
---------- --------
Total $2,082,000 $497,000
---------- --------
---------- --------
XIV. Property, plant and equipment as of June 30, 1996, and September 30,
1995, consist of the following:
June 30, 1996 September 30, 1995
------------- ------------------
(Unaudited)
Land $ 1,950,000 $1,640,000
Building and improvements 938,000 365,000
Heavy machinery and equipment 1,866,000 1,472,000
Auto shredder mill 4,491,000 3,161,000
Transportation equipment 821,000 679,000
Office equipment 156,000 121,000
Assets under capital lease 1,918,000 --
----------- ----------
Total 12,140,000 7,438,000
Less accumulated depreciation
and amortization 1,343,000 752,000
----------- ----------
Total $10,797,000 $6,686,000
----------- ----------
----------- ----------
10
<PAGE>
XV. Other assets consist of the following at:
June 30, 1996 September 30, 1995
------------- ------------------
(Unaudited)
Acquisition costs $ 166,000 $ 61,000
Goodwill, net of accumulated
amortization of $82,000 and
$29,000 2,740,000 188,000
Non compete agreement, net of
accumulated amortization of
$97,000 903,000 --
Investment in affiliate, at cost 277,000 277,000
Engineering plans, net of
accumulated amortization of
$946,000 and $899,000 141,000 188,000
Patent rights 25,000 25,000
Land contract 70,000 --
Loan fees 181,000 --
Deferred offering costs 678,000 --
Other assets 5,000 5,000
---------- --------
$5,186,000 $744,000
---------- --------
---------- --------
XVI. Net operating loss carry overs available for the future through the year
2009 are approximately $8.1 million.
XVII. Supplemental information to the statement of cash flow for non-cash
investing and financing activities:
Nine Months Ended:
June 30,
-----------------------------
1996 1995
---------- ----------
(Unaudited) (Unaudited)
Cash paid for interest $ 402,000 $ 294,000
---------- ----------
---------- ----------
Stock issued for conversion of
bridge financing $1,138,000 $ 150,000
---------- ----------
---------- ----------
Acquisition of subsidiaries for
stock $ 925,000 $ --
---------- ----------
---------- ----------
Purchase of equipment for notes
payable $1,540,000 $ 35,000
---------- ----------
---------- ----------
Restructure of preferred stock to
debt $ -- $2,300,000
---------- ----------
---------- ----------
Acquisition of equipment under
capital lease $ -- $ 113,000
---------- ----------
---------- ----------
Contract to acquire land and
building acquired for note payable $ 446,000 $ --
---------- ----------
---------- ----------
Acquisition of Anglo inventory for
note payable $1,421,000 $ --
---------- ----------
---------- ----------
Capital lease obligation incurred
to finance Anglo acquisition $1,800,000 $ --
---------- ----------
---------- ----------
Note payable issued for non-compete
agreement $ 750,000 $ --
---------- ----------
---------- ----------
Reversal of deferred gain on sale
of subsidiary $ -- $ --
---------- ----------
---------- ----------
Issuance of common stock to Chief
Executive Officer $ -- $ --
---------- ----------
---------- ----------
Acquisition of goodwill for note
payable $ 843,000 $ --
---------- ----------
---------- ----------
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and the notes thereto included elsewhere
herein.
OVERVIEW
The Company is a full-service metals recycler engaged in the collection
and processing of various ferrous and non-ferrous metals for resale to
domestic and foreign steel producers and other metal producers and
processors. Prior to May 1994, the Company was a development stage
enterprise engaged in the development of the technology related to the
recycling of municipal solid waste (the "MSW Technology").
The Company's current operations commenced in May 1994, with the
acquisition of its Nevada metals recycling facility. Since that time, the
Company has experienced significant growth from the acquisition of other
metals recycling facilities. On June 30, 1995, the Company acquired a 20%
interest in a metals recycling facility located in Georgia. The Company's
ownership interest in Loef was to have been reduced to 15% if the Company did
not invest an additional $200,000 in Loef by June 30, 1996. The Company did
not make this payment and, pending the receipt of information regarding the
current operations and financial performance of Loef, the Company has taken
the position that its interest was not reduced to 15% on June 30, 1996. On
December 11, 1995, the Company acquired its four southern Texas facilities.
On April 15, 1996, the Company acquired its Missouri facility and, on August
5, 1996, the Company acquired Weissman Iron & Metal. These acquisitions,
except for the 20% ownership interest in the Georgia facility, are accounted
for under the purchase method for business combinations and, accordingly, the
results of operations for such acquired businesses are included in the
Company's financial statements only from the applicable date of acquisition.
As a result, the Company's historical results of operations for the period
presented are not directly comparable.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
The results of operations for the three months ended June 30, 1996,
include the effects of the acquisitions of the Company's southern Texas
facilities for the entire period and the Missouri facility since April 15,
1996 whereas the June 30, 1995, results reflect only the operations of the
Nevada facility. The key operating results for each of the three month
periods are summarized as follows:
REVENUES. For the three months ended June 30, 1996, total revenues
increased by $3,071,000, or 84%, to $6,721,000 from $3,650,000 for the three
months ended June 30, 1995. The increase in revenues is primarily the result
of the acquisitions of the Company's southern Texas facilities on December
11, 1995, and the Company's Missouri facility on April 15, 1996. The
operations of the southern Texas facilities generated $3,718,000 in revenues
during the three months ended June 30, 1996. The operations of the Missouri
facility generated $554,000 in revenues during the three months ended June
30, 1996. Revenues for the Nevada facility declined 32% to $2,477,000 for
the three months ended June 30, 1996, from $3,641,000 for the three months
ended June 30, 1995. The major factors contributing to this reduction were a
3-1/2 week shutdown of the automobile shredder for a major rebuild and
significantly lower recycled paper selling prices in 1996.
In general, sales values for ferrous, non-ferrous and paper have declined
for the quarter ended June 30, 1996, as compared to the quarter ended June
30, 1995.
COST OF SALES. For the three month period ended June 30, 1996, cost of
sales increased $3,681,000 to $6,531,000 from $2,850,000 for the three months
ended June 30, 1995, and increased as a percentage of total revenues to 97%
from 78%. For the three month period ended June 30, 1996 cost of brokerage
was $462,000 and was 7% of total revenues. The increased cost of sales for
the period was primarily due to the increased volume generated by the
acquired facilities. The increase in cost of sales as a percentage of
revenues is primarily the result of reduced sales values at NRI without
corresponding
12
<PAGE>
decreases in purchase costs and remaining high inventory costs at the
Company's southern Texas facilities, including a $383,000 inventory valuation
adjustment. The Company has adjusted purchase prices for raw material over
the course of the quarter ended June 30, 1996, and believes that future
margins will reflect such changes. Overall gross margin decreased by
$1,035,000 to $(244,000) for the three months ended June 30, 1996, compared
to $791,000 for the three months ended June 30, 1995.
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expenses
increased to $586,000, or 9% of revenues for the three months ended June 30,
1996, from $394,000, or 11% of revenues, for the three months ended June 30,
1995. Of this increase, $73,000 was the result of increased personnel,
selling and overhead costs related to acquired operations and to overhead
added in anticipation of additional growth.
BENEFIT FROM INCOME TAXES. At June 30, 1996, the Company has recognized
a net deferred tax asset of $1.2 million, as management has determined that
the net operating loss carry forward was more likely than not to be used in
the near future due to the future taxable income to be generated by the
Company's acquired facilities. The recorded net loss through June 30, 1996
provided approximately $8.1 million of net operating loss carry forward
available through 2009. No benefit from deferred income taxes was recognized
for the three months ended June 30, 1995.
INCOME FROM CONTINUING OPERATIONS, NET OF INCOME TAXES. Income from
continuing operations, net of income taxes decreased to $(1,148,000), or
$(.10) per share, for the three months ended June 30, 1996, from $253,000, or
$.05 per share, for the three months ended June 30, 1995.
NET INCOME. For the three months ended June 30, 1996, the Company had
net loss of $(1,126,000), or $(.11) per share, compared to net income of
$493,000, or $.09 per share, for the three months ended June 30, 1995.
NINE MONTHS ENDED JUNE 30, 1996 AND 1995
The results of operations for the nine months ended June 30, 1996, were
impacted by a number of factors, including delays in processed scrap
shipments and lower gross margins at the Company's Nevada facility. In
addition, profitability was negatively affected by transition expenses
incurred in conjunction with the acquisitions of the southern Texas
facilities on December 11, 1995, and the Missouri facility on April 15, 1996.
REVENUES. Revenues increased $6,717,000, or 62%, to $17,484,000 for the
nine months ended June 30, 1996, from $10,767,000 for the nine months ended
June 30, 1995. The increase in revenues is primarily due to the
acquisitions of the Company's southern Texas facilities on December 11, 1995,
and its Missouri facility on April 15, 1996. The operations of the southern
Texas facilities generated $8,151,000 of revenues, the Missouri facility
provided $554,000 in revenues and the Nevada facilities provided $8,779,000
of revenues during the nine months ended June 30, 1996.
In general, sales values for ferrous, non-ferrous and paper have declined
for the nine months ended June 30, 1996, as compared to the nine months ended
June 30, 1995. The Ford Ferrous Bundles Index has fallen from 160 in October
1995 to 133 in November 1996, a decline of 17%. The Ford Ferrous Bundles
Index is a measurement of industrial steel scrap prices.
COST OF SALES. For the nine months ended June 30, 1996, cost of sales
increased $7,710,000 to $15,883,000 from $8,173,000 for the nine months ended
June 30, 1995, and increased as a percentage of total revenues to 91% from
76%. This increase in cost of sales was primarily due to increased volume
from acquisitions. For the nine months ended June 30, 1996 cost of
brokerage was $462,000 and was 3% of total revenues. Gross profit decreased
to $1,139,000 for the nine months ended June 30, 1996, from $2,558,000 for
the nine months ended June 30, 1995. This decrease in gross profit was
primarily due to increased prices in the market for materials and lower
achieved selling prices for processed materials.
13
<PAGE>
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
increased to $2,038,000 or 12% of revenues, for the nine months ended June
30, 1996, from $1,181,000, or 11% of revenues, for the nine months ended June
30, 1995. Of this increase, $672,000 resulted from additional personnel
costs associated with acquired operations and expenses incurred in connection
with the Company's increase in personnel in anticipation of additional
acquisitions. Included in this amount was $205,000 of incentive compensation
paid to the Company's Chief Executive Officer upon the consummation of the
acquisition of the Company's southern Texas facilities.
INTEREST EXPENSE. Interest expense was $435,000 for the nine months
ended June 30, 1996, compared to $289,000 for the nine months ended June 30,
1995. Interest expense increased primarily due to higher average interest
rates on the Company's debt as well as additional debt incurred to finance
the purchase of the southern Texas facilities in December 1995, and the
Missouri facility in April 1996.
BENEFIT FROM INCOME TAXES. For nine months ended June 30, 1996, the
Company recorded an increase to its net deferred tax asset of $441,000. As
a result, at June 30, 1996, the Company has recognized a net deferred tax
asset of $1.2 million, as management has determined that the net operating
loss carry forward was more likely than not to be used in the near future due
to the future taxable income to be generated by the Company's acquired
facilities. The net loss before income taxes for the nine months ended June
30, 1996, increased the net operating loss carry forward by $441,000
providing approximately $8.1 million of net operating loss carry forward
available through 2009. No benefit from deferred income taxes was recognized
for the nine months ended June 30, 1995.
INCOME FROM CONTINUING OPERATIONS, NET OF INCOME TAXES. For the nine
months ended June 30, 1996, the Company's loss from continuing operations,
net of income taxes was $(1,098,000), or $(.12) per share, compared to
$938,000, or $.19 per share of income, for the nine months ended June 30,
1995. The principal reasons for this decrease were the shutdown of the NRI
shredder for a major rebuild, a relatively lower sales value for ferrous
scrap in the western area of the country, high inventory values at the
southern Texas facilities and significant finished inventory on hand at the
end of the quarter.
NET INCOME. For the nine months ended June 30, 1996, the Company had a
net loss of $(1,028,000), or $(.11) per share, compared to net income of
$1,400,000, or $.29 per share, for the nine months ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
As the Company's business has grown, overall cash requirements for
internal growth and acquisitions have been met through a combination of
private placements of debt and equity securities, equipment and receivables
financing and cash flow from operations. Since commencement of its metals
recycling operations in May 1994 through June 1996, the Company has raised
net cash proceeds of $ 6.3 million through the sale of its equity securities.
Through June 1995, the Company was also funded in part by $887,000 of
borrowings from First Dominion Holdings, Inc., a company controlled by the
Company's Chairman and Chief Executive Officer ("First Dominion"), all of
which has been repaid. At June 30, 1996, the Company had $12,356,000 of
liabilities and $8,020,000 debt outstanding, of which $4,250,000 is due in
the next 12 months.
On May 11, 1994, the Company acquired its Nevada facility by purchasing
all of the outstanding common stock of Nevada Recycling, Inc. As
restructured, the purchase price for the Nevada facility consisted of debt of
$5.0 million and the issuance of 13,000 shares of the Company's Series A
Convertible Preferred Stock valued at $1.3 million. In addition, the Company
issued to the sellers a warrant to acquire up to 20,000 shares of Common
Stock at an exercise price of $1.25 per share.
On June 30, 1995, the Company acquired a 20% interest in a Georgia metals
recycling facility through its investment in The Loef Company ("Loef"). This
investment has been valued at $277,000, the amount of costs incurred by the
Company in pursuing its acquisition of Loef. The Company's ownership
interest in Loef was to have been reduced to 15% if the Company did not
invest an additional $200,000 in Loef by June 30, 1996. The Company did not
make this payment and, pending the receipt of information regarding the
current operations and financial performance of Loef, the Company has taken
the position that its interest was not reduced to 15% on June 30, 1996.
14
<PAGE>
On December 11, 1995, the Company acquired its southern Texas facilities
by acquiring substantially all of the assets of Anglo Metals, Inc., d/b/a
Anglo Iron & Metal, for $6.1 million. The purchase price was paid as
follows: (i) $2.1 million in cash; (ii) $1.9 million note which is to be paid
in ten monthly installments of $186,500 beginning in February 1996; (iii) a
$446,000 secured promissory note bearing interest at 8% and payable in 60
monthly installments of $9,000; (iv) a $750,000 unsecured promissory note and
non-compete agreement payable in 72 consecutive installments of $10,400; and
(v) 227,693 shares of Common Stock, valued at $925,000.
On April 15, 1996, the Company acquired its Missouri facility by
acquiring substantially all of the assets of Mid-America Shredding, Inc.,
d/b/a Mid-America Shredding, for $1.9 million. The purchase consideration
consisted of cash of $660,000, assumed outstanding bank debt of $1.2 million
and a $55,000 note payable over eight months.
On June 20, 1996, the Company secured $4.0 million in inventory and
receivables financing from Coast Business Credit, an asset-based lender
specializing in inventory and receivables financing. In connection with the
Weissman acquisition, the credit facility was increased to $10.0 million on
August 15, 1996.
On July 17, 1996, the Company completed the Public Offering of its Common
Stock, receiving net proceeds, after deducting underwriting discounts and
offering expenses of $14.4 million. These proceeds were used as follows:
$5.2 million to pay a portion of the cash purchase price for Weissman on
August 5, 1996; $5.7 million to repurchase 1,380,585 shares of Common Stock;
$2.4 million to redeem all of the Company's outstanding Series A Convertible
Preferred Stock and repurchase 120,000 shares of Common Stock on August 15,
1996. The remaining proceeds of approximately $1.1 million are being used
for general corporate purposes.
On August 5, 1996, the Company acquired Weissman for a total purchase
price of $12.1 million. The purchase price was paid as follows: (i) 363,637
shares of Common Stock valued at $1.5 million; (ii) $5.3 million from the
proceeds of the Public Offering and the Company's operating cash; (iii) a
$3.5 million term loan bearing interest at prime plus 2.25%, payable in 60
monthly installments of $58,333; and (iv) approximately $1.7 million of
revolving credit borrowings.
On August 15, 1996, the Company redeemed all of its outstanding Series A
Convertible Preferred Stock and repurchased 120,000 shares of Common Stock
for $2.4 million. This transaction was funded through the process of the
Public Offering.
On September 30, 1996, the Company paid the balance of the principal plus
accrued interest on its bridge indebtedness of $485,000.
For the nine months ended June 30, 1996, net cash used by operations was
$475,000. During this period, the Company generated a net loss of
$(1,028,000) and depreciation and amortization of $742,000, which were
partially offset by deferred income tax of $441,000 and an extraordinary gain
of $70,000. Increases in accounts receivable, inventory, prepaid expenses,
and current assets amounted to $1,241,000, offset by an increase in accounts
payable and accrued liabilities of $1,563,000. Inventories and accounts
receivable increases were primarily related to the acquisitions of the
Company's southern Texas facilities on December 11, 1995, and the Missouri
facility on April 15, 1996.
For the nine months ended June 30, 1996, the Company used net cash in
investing activities of $2,661,000 compared to $751,000 for the nine months
ended June 30, 1995. Such amounts primarily related to acquisition costs and
goodwill as well as additions of capital equipment.
The Company had a positive net worth of approximately $9,781,000 at June
30, 1996, compared to $6.5 million at September 30, 1995, and $2.8 million at
September 30, 1994. This improvement in net worth is due to issuance of $2.3
million (net) of Common Stock during the nine months ended June 30, 1996, the
conversion of $1.1 million of bridge loan debt to equity, and the issuance of
$925,000 of Common Stock in connection with the acquisition of the southern
Texas facilities.
15
<PAGE>
Working capital deficit at June 30, 1996, was $2,673,000 as compared to
$376,000 of working capital at September 30, 1995. As of September 30, 1994,
the Company has a working capital deficit of $4.2 million. The decrease in
working capital at June 30, 1996, is due primarily to the increased use of
short-term financing related to continuing operations and acquisitions. The
improvement in working capital from fiscal 1994 to fiscal 1995 reflects the
increase in cash provided by a full year of operations at the Nevada
facility, the restructuring of long-term debt and the additional equity
raised from the issuance of Common Stock during fiscal 1995.
The planned capital expenditures over the next 12 to 24 months for the
Company's existing facilities are estimated to be $2.0 million. Included in
this amount are capital improvements for the Company's shredders and
materials handling equipment designed to increase capacity and improve
operating efficiencies.
INFLATION AND PREVAILING ECONOMIC CONDITIONS.
To date, inflation has not had a significant impact on the Company's
operations. The Company believes it should be able to implement price
increases sufficient to offset most raw material cost increases resulting
from inflation, although there may be some delay between raw material cost
increases and sales price increases and competitive factors may require the
Company to absorb at least a portion of these cost increases. Management
believes that a sustained economic slowdown would negatively impact the
operations and financial performance of the Company.
SEASONALITY
The Company believes that its operations can be adversely affected by
protracted periods of inclement weather which could reduce the volume of
material processed at its facilities. In addition, periodic maintenance
shutdowns by the Company's larger customers may have a temporary adverse
impact on the Company's operations.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently a party to any material litigation and is
not aware of any threatened litigation that could have a material adverse
effect on the Company's business, operating results or financial condition.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Amended and Restated Articles of Incorporation,
incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement of Form S-1, filed May 3, 1996,
as amended, Commission File No. 333-4574.
3.2 Amended and Restated Bylaws, incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on
Form S-1, filed May 3, 1996, as amended, Commission File
No. 333-4574.
10.1 Asset Purchase Agreement dated February 16, 1996 by and
among Recycling Industries of Missouri, Inc., Recycling
Industries, Inc., Mid-America Shredding, Inc. and Linda
Lawton.*
10.2 Assumption Without Release and Modification Agreement, dated
April 15, 1996, by and among Mid-America Shredding, Inc.,
Recycling Industries of Missouri, Inc., Recycling
Industries, Inc., Linda F. Lawton, Personal Representative
of the Estate of Robert L. Lawton, Deceased and Linda
Lawton.*
10.3 Security Agreement, dated April 15, 1996, between Recycling
Industries of Missouri, Inc. and Southwest Bank of St.
Louis.*
10.4 Continuing Unlimited Guaranty Agreement dated April 15,
1996, between Recycling Industries, Inc. and Southwest Bank
of St. Louis.*
10.5 Loan Agreement dated April 8, 1992, between Mid-America
Shredding, Inc. and Southwest Bank of St. Louis.*
10.6 Promissory Note dated February 8, 1996, between Mid-America
Shredding, Inc. and Southwest Bank, Inc.*
11. Statement Regarding Computation of Per Share Earnings.**
27. Financial Data Schedule.**
17
<PAGE>
* Incorporated by reference to the Company's current report on Form 8-K
reporting an event of April 15, 1996, as amended July 12, 1996, on Form
8-K/A, Commission file No. 0-20179.
** Filed Herewith.
Reports of Form 8-K
Report on Form 8-K dated April 29, 1996, reporting the acquisition
of Mid-America Shredding on April 15, 1996, as amended on Form 8-K/A
filed July 12, 1996, Commission File No. 0-20179, including the
following financial statements:
1. Audited financial statements of Mid-America Shredding, Inc.
2. Pro-forma consolidated financial statements for Recycling Industries,
Inc. and subsidiaries.
3. Audited consolidated financial statements for Recycling Industries,
Inc.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: November 12, 1996 By: /s/ THOMAS J. WIENS
----------------- ------------------------------------------------
Thomas J. Wiens,
Chairman & Chief Executive Officer
Date: November 12, 1996 By: /s/ BRIAN L. KLEMSZ
----------------- ------------------------------------------------
Brian L. Klemsz, Principal Financial Officer
19
<PAGE>
EXHIBIT 11
Computation of Earnings per Common Share
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------ -----------------------
1996 1995 1996 1995
----------- ---------- ----------- ----------
Primary Earnings
Net income (loss) $(1,126,000) $ 493,000 $(1,028,000) $1,400,000
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Shares
Weighted average number of
common shares outstanding 10,104,974 5,697,527 9,309,447 4,234,980
Assumed exercise of options
and warrants (as determined
by the application of the
treasury stock method) -- -- -- 655,514
----------- ---------- ----------- ----------
Weighted average number
of shares outstanding
as adjusted 10,104,974 5,697,527 9,309,447 4,890,494
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Primary earnings per common
share:
Net income (loss) $ (0.11) $ 0.09 $ (0.11) $ 0.29
----------- ---------- ----------- ----------
Fully Diluted Earnings
Net income (loss) $(1,126,000) $ 493,000 $(1,028,000) $1,400,000
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Shares
Weighted average number of
common shares outstanding 10,104,974 5,697,527 9,309,447 4,890,494
Assuming conversion of
convertible preferred stock -- -- 252,121 252,121
----------- ---------- ----------- ----------
Weighted average number of
common shares outstanding
as adjusted 10,104,974 5,697,527 9,561,568 5,142,615
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Fully diluted earnings per
common share:
Net income (loss) $ (0.11) $ 0.09 $ (0.11) $ 0.27
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 396,000
<SECURITIES> 0
<RECEIVABLES> 2,084,000
<ALLOWANCES> 10,000
<INVENTORY> 2,082,000
<CURRENT-ASSETS> 5,913,000
<PP&E> 12,140,000
<DEPRECIATION> 1,343,000
<TOTAL-ASSETS> 22,137,000
<CURRENT-LIABILITIES> 8,586,000
<BONDS> 0
0
1,312,000
<COMMON> 10,000
<OTHER-SE> 8,459,000
<TOTAL-LIABILITY-AND-EQUITY> 22,137,000
<SALES> 17,484,000
<TOTAL-REVENUES> 17,484,000
<CGS> 16,345,000
<TOTAL-COSTS> 19,019,000
<OTHER-EXPENSES> 2,239,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 435,000
<INCOME-PRETAX> (1,535,000)
<INCOME-TAX> (437,000)
<INCOME-CONTINUING> (1,098,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 70,000
<CHANGES> 0
<NET-INCOME> (1,028,000)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
