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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995 Commission File Number 1-10665
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U. S. INTEC, INC
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(Exact name of registrant as specified in its charter)
Texas 74-2118350
_______________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1212 Brai Drive, Port Arthur, Texas 77643
_______________________________________________________________________________
(Address of principal executive offices) (Zip Code)
(409) 724-7024
_______________________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least 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 latest practicable date:
Number of shares outstanding
Class as of May 9, 1995
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Common Stock (par value 3,040,911
$ .02 per share)
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INDEX
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PAGE
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PART I. Financial Information
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Item 1. Financial Statements
Consolidated Statements of Earnings - Three months
ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . 1
Consolidated Balance Sheets - March 31, 1995 and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows - Three
months ended March 31, 1995 and 1994. . . . . . . . . . . . . . . 4
Notes to Condensed Consolidated Financial Statements . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . 6
PART II. Other Information. . . . . . . . . . . . . . . . . . . . . . . 6
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Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
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PART I. Financial Information
Item 1. Financial Statements
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U.S. INTEC, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended March 31
1995 1994
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Sales $ 25,262,434 $ 16,716,150
Cost of sales 20,605,976 12,731,872
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GROSS PROFIT 4,656,458 3,984,278
Selling, general and administrative expenses 5,299,730 4,049,662
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LOSS FROM OPERATIONS (643,272) (65,384)
Other income 85,410 57,546
Interest expense 612,146 279,157
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LOSS BEFORE INCOME TAXES (1,170,008) (286,995)
Benefit from income taxes (477,703) (113,939)
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NET LOSS $ (692,305) $ (173,056)
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NET LOSS PER SHARE $ (.23) $ (.06)
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Average shares outstanding during the period 3,040,467 2,993,980
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See notes to condensed consolidated financial statements.
1
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U. S. INTEC, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 1995 Dec. 31, 1994
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(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 173,531 $ 867,701
Accounts receivable - trade (net of
allowances of $554,203 in 1995 and
$515,461 in 1994) 16,825,071 13,281,014
Other receivables 975,694 954,878
Inventories - raw materials 8,934,533 8,555,546
Inventories - finished goods 7,306,008 4,232,325
Prepaid expenses 410,096 408,874
Due from affiliate 1,367,114 949,927
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TOTAL CURRENT ASSETS 35,992,047 29,250,265
PROPERTY, PLANT AND EQUIPMENT
Land 1,441,712 1,441,712
Buildings and leasehold improvements 14,542,857 9,743,369
Manufacturing equipment 51,600,494 32,557,939
Furniture and fixtures 1,903,564 1,841,032
Automotive equipment 576,987 576,987
Construction in progress 122,941 22,512,932
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70,188,555 68,673,971
Less accumulated depreciation (26,115,122) (25,470,696)
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44,073,433 43,203,275
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OTHER ASSETS
Note receivable from officer 2,803,000 2,803,000
Deferred charges and other 370,846 368,230
Goodwill and intangibles (net of
accumulated amortization of $1,710,366
in 1995 and $1,581,314 in 1994) 2,219,307 2,348,359
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TOTAL OTHER ASSETS 5,393,153 5,519,589
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$ 85,458,633 $ 77,973,129
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See notes to condensed consolidated financial statements.
2
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U. S. INTEC, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
March 31, 1995 Dec. 31, 1994
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(Unaudited) (Audited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable and bank overdrafts $ 19,052,039 $ 15,589,471
Current portion of long-term debt 1,217,989 867,299
Other accrued liabilities 4,071,134 3,131,607
Current portion of reserve for
warranty claims 1,100,000 1,100,000
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TOTAL CURRENT LIABILITIES 25,441,162 20,688,377
LONG-TERM DEBT 31,700,262 28,181,726
DEFERRED INCOME TAXES 1,273,578 1,273,578
RESERVE FOR WARRANTY CLAIMS 4,888,808 5,039,013
SHAREHOLDERS' EQUITY
Preferred stock ($1 par value, 1,000,000
shares authorized, none issued)
Common stock ($.02 par value, 10,000,000
shares authorized, 3,040,911 shares issued
in 1995 and 3,030,911 shares issued in 1994) 60,819 60,619
Additional paid-in capital 7,424,620 7,368,127
Retained earnings 14,669,384 15,361,689
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TOTAL SHAREHOLDERS' EQUITY 22,154,823 22,790,435
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$ 85,458,633 $ 77,973,129
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See notes to condensed consolidated financial statements.
3
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U.S. INTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31
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1995 1994
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OPERATING ACTIVITIES
Net loss $ (692,305) $ (173,056)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 644,426 435,240
Amortization 129,052 88,622
Provision for losses on accounts receivable 38,742 30,900
Other (14,739) 124,945
Changes in operating assets and liabilities:
Accounts receivable (3,582,799) (2,159,735)
Due from affiliate (417,187) (702,848)
Inventories (3,452,670) (907,753)
Prepaid expenses and other assets (1,222) (397,377)
Accounts payable 3,462,568 (833,674)
Accrued expenses 939,527 150,380
Reserve for warranty claims (150,205) (41,100)
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NET CASH USED IN OPERATING ACTIVITIES (3,096,812) (4,385,456)
INVESTING ACTIVITIES
Purchase of property, plant & equipment (1,514,584) (2,326,324)
Other 3,823
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NET CASH USED IN INVESTING ACTIVITIES (1,514,584) (2,322,501)
FINANCING ACTIVITIES
Proceeds from revolving line of credit
and long-term borrowings 6,392,428 7,690,059
Principal payments on revolving line
of credit and long-term borrowing (2,523,202) (1,431,989)
Proceeds from exercise of stock options 48,000 97,750
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NET CASH PROVIDED BY FINANCING ACTIVITIES 3,917,226 6,355,820
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DECREASE IN CASH AND CASH EQUIVALENTS (694,170) (352,137)
Cash and cash equivalents at beginning of
period $ 867,701 $ 666,496
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 173,531 $ 314,359
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See notes to condensed consolidated financial statements.
4
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U. S. INTEC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited interim condensed financial statements have been
prepared inaccordance with the instructions for Form 10-Q and do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal accruals) considered
necessary for the fair presentation of the financial statements have been
included. For further information, refer to the financial statements and
footnotes included in the Annual Report on Form 10-K of U. S. Intec, Inc.
(the "Company") for the fiscal year ended December 31, 1994.
NOTE B - CONTINGENCIES
There are pending against the Company lawsuits and claims arising in the
regular course of business. In the opinion of management, recoveries, if any,
by plaintiffs or claimants that may result from litigation and claims which
have been made or threatened will not be material in relation to the financial
position of the Company.
5
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PART I. Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three months ended March 31, 1994 and 1995. Sales increased $8,546,000 in
the first quarter of 1995 to $25,262,000, up from $16,716,000 in the first
quarter of 1994. The increase relates primarily to increased roll sales
associated with aggressive spring promotional programs, to increased
relabeled product sales, which are products manufactured by outside
suppliers, and to the addition of a shingle product line.
Gross profit increased $672,000 in the first quarter of 1995 to $4,656,000 from
$3,984,000 in the first quarter of 1994. Gross profit as a percentage of sales
in the first quarter of 1995 was 18.4%, as compared to 23.8% in the first
quarter of 1994. The decrease in profit margin percentage is due principally
to a shift in product sales mix and to costs associated with the new Houston
shingle manufacturing facility. During the quarter the Company experienced
sales growth in both relabeled and built-up roofing products, which have
lower margins. In February 1995, the Company began production at it's new
Houston facility, and although production levels continue to increase each
month, production levels during the quarter were low as a percentage of
capacity. As a result, fixed manufacturing costs were spread over a small
production base, which reduced gross profit associated with the Houston
operations. The Company expects this downward pressure on earnings to
continue until production volumes increase significantly or until the Company
is able to move most of the Houston production capacity over to it's new
modified laminate product, which is expected to be a gradual process that will
be completed after 1995.
Selling, general and administrative expenses increased from $4,050,000, or
24.2% of sales, in 1994, to $5,300,000, or 21.0% of sales, in 1995. The
increase in expense primarily relates to the increase in sales volume.
Interest expense increased $333,000 from $279,000 in 1994 to $612,000 in 1995.
The increase is the result of increased debt associated with the Houston
facility. With the start of production at the new Houston facility in February
1995, the Company ceased capitalizing construction period interest costs
associated with the acquisition and build out of the facility.
The net loss for the first quarter of 1995 was $692,000 or $.23 per share
compared with a net loss of $173,000 or $.06 per share in the first quarter
of 1994.
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Liquidity and Capital Resources. Working capital as of March 31, 1995 was
$10,551,000 compared with $8,562,000 at December 31, 1994, an increase of
$1,989,000. Accounts receivable increased $3,544,000 as a result of increased
first quarter sales. Inventory increased $3,453,000 in anticipation of
increased second quarter seasonal demand and as a result of the start-up of
production in Houston. Accounts payable increased $3,463,000 as a result of
the increased production volumes and inventory levels. Debt increased
$3,869,000 primarily as a result of increased accounts receivable.
The Company expects its cash requirements for the foreseeable future to be
provided from operations and available credit facilities.
PART II - OTHER INFORMATION
Items 1 through 6 not applicable
6
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. INTEC, INC.
DATE: May 12, 1995 BY: s/s J. Roane Ruddy
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J. Roane Ruddy
Chief Financial Officer
DATE: May 12, 1995 BY: s/s Danny J. Adair
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Danny J. Adair
Chief Executive Officer
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