<PAGE> 1
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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 THE QUARTER ENDED DECEMBER 31, 1998
Commission File Number 0-2762
MAXCO, INC.
(Exact Name of Registrant as Specified in its Charter)
Michigan 38-1792842
-------- ----------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1118 Centennial Way
Lansing, Michigan 48917
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (517) 321-3130
-------------
Indicate by check mark whether the registrant (1) has filed all annual,
quarterly and other reports required to be filed by Section 12 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding twelve months 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 for each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 31, 1998
----- --------------------------------
Common Stock 3,208,395 shares
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1
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PART I
FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
MAXCO, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
(Unaudited)
-----------------------------------
(in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,196 $ 1,040
Marketable securities--Note 3 255 400
Accounts and notes receivable, less allowance of
$602,000 ($565,000 at March 31, 1998) 21,024 16,280
Inventories--Note 2 5,034 3,579
Prepaid expenses and other 743 303
-------- --------
TOTAL CURRENT ASSETS 28,252 21,602
MARKETABLE SECURITIES - LONG TERM--Note 3 2,133 7,657
PROPERTY AND EQUIPMENT
Land 732 732
Buildings 11,723 10,553
Machinery, equipment, and fixtures 28,145 20,854
-------- --------
40,600 32,139
Allowances for depreciation (9,965) (8,321)
-------- --------
30,635 23,818
OTHER ASSETS
Investments 13,492 15,842
Restricted securities--Note 4 3,240
Notes and contracts receivable and other 4,024 3,056
Intangibles 4,430 2,992
Restricted cash for acquisition of equipment--Note 5 1,088
-------- --------
25,186 22,978
-------- --------
$ 86,206 $ 76,055
======== ========
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
(Unaudited)
-------------------------------------
(in thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 226 $ 226
Accounts payable 10,312 6,568
Employee compensation 1,866 2,058
Taxes, interest, and other liabilities 2,121 2,028
Current maturities of long-term obligations 2,375 1,490
------- -------
TOTAL CURRENT LIABILITIES 16,900 12,370
LONG-TERM OBLIGATIONS, less current maturities 32,469 27,698
DEFERRED INCOME TAXES 1,322 1,180
STOCKHOLDERS' EQUITY
Preferred stock:
Series Three: 10% cumulative redeemable, $60 face
value; 14,943 shares issued and outstanding
(14,988 at March 31, 1998) 687 690
Series Four: 10% cumulative redeemable, $51.50 face
value; 46,414 shares issued and outstanding 2,390 2,390
Series Five: 10% cumulative redeemable, $120 face
value; 6,648 shares issued and outstanding
(6,680 at March 31, 1998) 798 802
Common stock, $1 par value; 10,000,000 shares
authorized, 3,208,395 issued shares (3,307,910 at
March 31, 1998) 3,208 3,308
Net unrealized gain on marketable securities 34 47
Retained earnings 28,398 27,570
------- -------
35,515 34,807
------- -------
$86,206 $76,055
======= =======
</TABLE>
See notes to consolidated financial statements
3
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CONSOLIDATED STATEMENTS OF OPERATIONS (CONDENSED)
MAXCO, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended December 31,
1998 1997
(Unaudited) (Unaudited)
------------------ ------------------
(in thousands, except per share data)
<S> <C> <C>
Net sales $ 29,697 $ 24,091
Costs and expenses:
Cost of sales and operating expenses 22,763 18,405
Selling, general and administrative 5,234 4,254
Depreciation and amortization 860 615
-------- --------
28,857 23,274
-------- --------
OPERATING EARNINGS 840 817
Other income (expense)
Investment and other income 196 267
Interest expense (698) (548)
-------- --------
INCOME BEFORE FEDERAL
INCOME TAXES AND EQUITY IN EARNINGS OF AFFILIATES 338 536
Federal income tax expense 129 179
-------- --------
INCOME BEFORE EQUITY IN EARNINGS OF AFFILIATES 209 357
Equity in earnings (loss) of affiliates, net of deferred tax (80) (10)
-------- --------
NET INCOME 129 347
Less preferred stock dividends (102) (102)
-------- --------
NET INCOME APPLICABLE TO COMMON STOCK 27 245
======== ========
NET INCOME PER COMMON SHARE - BASIC $ .01 $ .07
======== ========
NET INCOME PER COMMON SHARE - ASSUMING DILUTION $ .01 $ .07
======== ========
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF OPERATIONS (CONDENSED)
MAXCO, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Nine Months Ended December 31,
1998 1997
(Unaudited) (Unaudited)
------------------ ------------------
(in thousands, except per share data)
<S> <C> <C>
Net sales $ 100,946 $ 81,272
Costs and expenses:
Cost of sales and operating expenses 79,117 61,675
Selling, general and administrative 15,337 12,519
Depreciation and amortization 2,285 1,807
--------- ---------
96,739 76,001
--------- ---------
OPERATING EARNINGS 4,207 5,271
Other income (expense)
Investment and other income 668 727
Interest expense (1,929) (1,529)
--------- ---------
INCOME BEFORE FEDERAL
INCOME TAXES AND EQUITY IN EARNINGS OF AFFILIATES 2,946 4,469
Federal income tax expense 1,042 1,558
--------- ---------
INCOME BEFORE EQUITY IN EARNINGS OF AFFILIATES 1,904 2,911
Equity in earnings (loss) of affiliates, net of tax (38) 193
--------- ---------
NET INCOME 1,866 3,104
Less preferred stock dividends (306) (288)
--------- ---------
NET INCOME APPLICABLE TO COMMON STOCK 1,560 2,816
========= =========
NET INCOME PER COMMON SHARE - BASIC $ .48 $ .83
========= =========
NET INCOME PER COMMON SHARE - ASSUMING DILUTION $ .47 $ .81
========= =========
</TABLE>
See notes to consolidated financial statements
5
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONDENSED)
MAXCO, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Nine Months Ended December 31,
1998 1997
(Unaudited) (Unaudited)
---------------------------------------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 1,866 $ 3,104
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and other non-cash items 2,303 1,615
Changes in operating assets and liabilities (2,713) (1,612)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,456 3,107
INVESTING ACTIVITIES
Payments received on notes receivable 45 3,443
Redemption of marketable securities 5,650 2,874
Investment in affiliates (3,881) (6,293)
Purchases of property and equipment (6,971) (4,508)
Sale of investment 2,160
Purchase of business (2,700)
Other 107 (217)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (5,590) (4,701)
FINANCING ACTIVITIES
Restricted cash for acquisition of equipment 1,088 (2,460)
Proceeds from long-term obligations 5,645 10,095
Repayments on long-term obligations and notes payable (1,298) (5,294)
Changes in capital stock (839) (1,185)
Dividends paid on preferred stock (306) (288)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,290 868
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 156 (726)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,040 1,609
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 1,196 $ 883
======== ========
</TABLE>
See notes to consolidated financial statements
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAXCO, INC. AND SUBSIDIARIES
DECEMBER 31, 1998
NOTE 1 - Basis of Presentation and Significant Accounting Policies
The accompanying unaudited, condensed, 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 of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the results of the interim
periods covered have been included. For further information, refer to the
consolidated financial statements and notes thereto included in Maxco's
annual report on Form 10-K for the year ended March 31, 1998.
The results of operations for the interim periods presented are not
necessarily indicative of the results for the full year. Certain other
amounts in the consolidated financial statements have been reclassified to
conform with the current presentation.
NOTE 2 - Inventories
The major classes of inventories, at the dates indicated were as follows:
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
---- ----
(Unaudited)
(in thousands)
<S> <C> <C>
Raw materials $ 820 $ 723
Finished goods and
work in progress 1,245 1,077
Purchased products
for resale 2,969 1,779
------ ------
$5,034 $3,579
====== ======
</TABLE>
NOTE 3 - Marketable Securities
The Company classifies its marketable securities as securities available
for sale under FASB 115, Accounting for Certain Investments in Debt and
Equity Securities. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses, net of tax, reported as a separate
component of stockholders' equity. Application of this method resulted in
an unrealized gain, net of deferred tax, of approximately $34,000
being reported as part of stockholders' equity at December 31, 1998.
NOTE 4 - Restricted Securities
In October, 1998, Maxco sold its 45% equity interest in Strategic
Interactive, Inc. to Provant, Inc. for cash and stock. The stock is
subject to certain restrictions. As such, the stock is carried at
historical cost under restricted securities.
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<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAXCO, INC. AND SUBSIDIARIES
NOTE 5 - Restricted Cash
At March 31, 1998, the Company had borrowings under its variable rate tax
exempt revenue bond. The use of the proceeds from these borrowings was
restricted for the acquisition of certain equipment. At December 31, 1998,
all of the proceeds had been expended.
NOTE 6 - Long-Term Debt
In the first quarter of 1998, the Company's Ersco unit secured a commitment
for a $10.0 million credit facility, available under certain circumstances,
to fund acquisitions.
NOTE 7 - Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1998 1997 1998 1997
---------------------------- -------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
NUMERATOR:
Net income $ 129 $ 347 $ 1,866 $ 3,104
Preferred stock dividends (102) (102) (306) (288)
------- ------- ------- -------
NUMERATOR FOR BASIC EARNING PER SHARE--INCOME
AVAILABLE TO COMMON STOCKHOLDERS 27 245 1,560 2,816
Effect of dilutive securities:
------- ------- ------- -------
NUMERATOR FOR DILUTED EARNINGS PER SHARE--INCOME
TO COMMON STOCKHOLDERS AFTER ASSUMED CONVERSIONS 27 245 1,560 2,816
DENOMINATOR:
DENOMINATOR FOR BASIC EARNINGS PER SHARE--
WEIGHTED-AVERAGE SHARES 3,226 3,310 3,265 3,401
Effect of dilutive securities:
Employee stock options 36 108 45 85
------- ------- ------- -------
Dilutive potential common shares 36 108 45 85
------- ------- ------- -------
DENOMINATOR FOR DILUTED EARNINGS PER SHARE--ADJUSTED
WEIGHTED-AVERAGE SHARES AND ASSUMED CONVERSIONS 3,262 3,418 3,310 3,486
======= ======= ======= =======
BASIC EARNINGS PER SHARE $ .01 $ .07 $ .48 $ .83
======= ======= ======= =======
DILUTED EARNINGS PER SHARE $ .01 $ .07 $ .47 $ .81
======= ======= ======= =======
</TABLE>
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAXCO, INC. AND SUBSIDIARIES
NOTE 8 - Comprehensive Income
Effective April 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." Statement
130 established new rules for the reporting and display of comprehensive
income and its components. The adoption of this Statement requires
unrealized gains or losses on marketable securities be included in
comprehensive income, which prior to adoption were only reported separately
in shareholders' equity.
The components of comprehensive income for the first quarter and nine
months of fiscal years 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
----------------------- ---------------------
1998 1997 1998 1997
-------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C>
Net earnings $ 129 $ 347 $ 1,866 $ 3,104
Unrealized gains (losses) on marketable securities (21) (5) (13) 153
======= ======= ======= =======
$ 108 $ 342 $ 1,853 $ 3,257
======= ======= ======= =======
</TABLE>
The components of accumulated comprehensive income, net of related tax at
December 31, 1998 and March 31, 1998 are as follows:
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
----------------------------------------
(in thousands)
<S> <C> <C>
Unrealized gains (losses) on marketable securities $ 34 $ 47
</TABLE>
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MAXCO, INC. AND SUBSIDIARIES
DECEMBER 31, 1998
MATERIAL CHANGES IN FINANCIAL CONDITION
Cash generated from net income, sale of marketable securities, and proceeds from
long-term borrowings in the first nine months of the year were used by Maxco in
its operating activities to fund higher levels of working capital items, in
investing activities to purchase property and equipment, and to invest in
additional affiliates.
At December 31, 1998, a higher level of working capital items, primarily
accounts receivable and inventory, resulted in the use of cash and other liquid
resources. The higher sales activity in the current quarter by the Company's
construction supplies segment (Ersco) over the traditionally slower fourth
quarter of the prior year was the principal cause of this increased investment
since March 31, 1998.
In addition to the higher working capital requirements during the peak
construction period by the construction supplies segment, Maxco is investing in
the growth of the concrete construction supplies industry by seeking
acquisitions and other opportunities in key market areas. During the second
quarter, Ersco established a new sales and distribution facility in Louisville,
Kentucky to serve the construction market in Northern Kentucky and Southern
Ohio. In October 1998, Ersco purchased a company in Columbus, Ohio which
provides concrete forming and shoring equipment to concrete construction
contractors. In the first quarter of 1998, Ersco secured a commitment for a
$10.0 million credit facility, available under certain circumstances, to fund
acquisitions.
The Company has also invested in property and equipment for its heat treating
segment (Atmosphere Annealing). This investment was made to improve the
processes and capacity of this metal heat treating unit in anticipation of
higher sales.
In addition to investing in its wholly owned subsidiaries, Maxco has invested in
additional affiliates since March 31, 1998. In the first quarter, Maxco acquired
a one-third interest in Blasen Brogan Asset Management Company, a Lansing,
Michigan based registered investor advisory firm.
Effective August 1, 1998, the Company acquired a 50% equity interest in and
agreed to finance certain debt of Mid-State Industrial Services, Inc., which is
in the business of selling, leasing, and servicing lift trucks. In addition, the
Company acquired in the same quarter a 40% equity interest in a software
developer, whose customers primarily are in the light manufacturing and
distribution industries.
In the current quarter, the Company made additional investments in its real
estate activity as it acquired a 50% investment in LandEquities and Nilson
Builders. These companies manage, develop, and build commercial and residential
property.
The Company's cash investment in these affiliates totaled approximately $3.5
million.
In October 1998, Maxco sold its 45% equity interest in Strategic Interactive,
Inc. to Provant, Inc. for cash and stock. The transaction contains an earn out
provision based on the future performance of Strategic Interactive over the next
three years that could result in additional compensation to Maxco. The current
market price of the Provant stock received in the transaction indicates an
unrealized gain of approximately $1.4 million, net of deferred tax at December
31, 1998. This unrealized gain is not included in the accompanying financial
statements.
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<PAGE> 11
The Company believes that its current financial resources, together with cash
generated from operations, and its available resources under its lines of credit
will be adequate to meet its cash requirements for the next year.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO 1997
Net sales increased to $29.7 million compared to $24.1 million in last year's
third quarter. Third quarter results reflect operating earnings of $840,000
compared to $817,000 for the comparable period in 1997. Net income was $129,000
or $.01 per share assuming dilution compared to last year's $347,000 or $.07 per
share assuming dilution.
Sales and operating earnings for the three months ending December 31, 1998 and
1997 by each of the Company's segments were as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
December 31, 1998 December 31, 1997
------------------------------ -------------------------
Operating Operating
Earnings Earnings
Sales (loss) Sales (loss)
----------- ----------- --------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Construction supplies $16,744 $ 467 $11,730 $ 626
Heat treating 9,087 1,035 8,199 651
Packaging products 3,782 (302) 4,074 (177)
</TABLE>
The growth in sales for the three months was primarily a result of the $5.0
million increase for the construction supplies segment, as the increase in sales
for the heat treating segment was offset by a decline in sales for the packaging
products segment.
The growth in net sales at the construction supplies segment for the three
months ended was the result of an increase in same branch sales of approximately
18%. In addition, sales for the current period from acquisitions made by Ersco
since January 1, 1998, totaled approximately $3.5 million. The same branch sales
increase was primarily attributable to additional activity due to an overall
strong general construction market fueled in part by increased availability of
federal highway repair dollars.
Consolidated gross margin (net sales less cost of sales and operating expenses)
for the three months ended December 31, 1998, increased primarily as a result of
the overall sales increase, to $6.9 million or 23.3% of sales from $5.7 million
or 23.6% of sales.
Selling, general, and administrative expenses increased $980,000 or 23% to $5.2
million from $4.3 million primarily due to additional expenses incurred to
support the growth of the Company's construction supplies segment. Selling
expenses increased as a result of the increased sales for this segment.
Operating costs at a branch opened in the current quarter, as well as those
costs at branches acquired since January 1, 1998, also contributed to the
increase.
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<PAGE> 12
Depreciation and amortization expense for the three months ended December 31,
1998 increased primarily due to the amortization of intangibles and additional
depreciation related to the acquisitions at the Company's construction supplies
segment.
Operating earnings for the three months were comparable, despite the additional
margin from the increased sales level, because of the increase in selling,
general, and administrative expenses as well as additional depreciation and
amortization expenses for the current year. Operating earnings were also
affected by an increase in employee benefit costs at the Company's heat treating
segment.
Net interest expense increased in 1998 from the prior year's comparable period
due to additional long-term borrowings and reduction in marketable securities,
the proceeds of which were used for investments in new affiliates, repurchase of
the Company's stock, and additional purchases of property and equipment.
Equity in earnings of affiliates consists of Maxco's share of earnings in less
than 50% owned entities. On a consolidated basis, equity in net losses of
affiliates, net of tax, was $80,000 for the three months ended December 31,
1998, compared to net losses of $10,000 for the prior year comparable period.
NINE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO 1997
Net sales increased to $100.9 million compared to $81.3 million in last year's
nine month period. The nine month results reflect operating earnings of $4.2
million compared to $5.3 million for the comparable period in 1997. Net income
was $1.9 million or $.47 per share assuming dilution compared to last year's
$3.1 million or $.81 per share assuming dilution.
Sales and operating earnings for the nine months ending December 31, 1998 and
1997 by each of the Company's segments were as follows:
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
December 31, 1998 December 31, 1997
------------------------------- -------------------------------
Operating Operating
Earnings Earnings
Sales (loss) Sales (loss)
------------- -------------- -------------- -------------
(in thousands)
<S> <C> <C> <C> <C>
Construction supplies $ 62,508 $3,939 $42,364 $ 3,356
Heat treating 25,746 2,334 24,676 3,106
Packaging products 12,443 (560) 13,971 (19)
</TABLE>
The growth in sales for the fiscal year was primarily a result of the $20.1
million increase for the construction supplies segment. A modest increase in
sales for the heat treating segment was offset by a decline in sales for the
packaging products segment.
The growth in net sales at the construction supplies segment for the nine months
ended was the result of an increase in same branch sales of approximately 15%,
and sales of approximately $14.1 million generated by new Ersco branches in
Illinois, Ohio, and Kentucky. The same branch sales increase was primarily
attributable to additional activity due to an overall strong general
construction market fueled in part by increased availability of federal highway
repair dollars.
Consolidated gross margin (net sales less cost of sales and operating expenses)
for the nine months ended December 31, 1998, increased, as a result of the
overall sales increase, to $21.8 million or 21.6% of sales from $19.6 million or
24.1% of sales. The decline in gross margin
12
<PAGE> 13
percentage was primarily attributable to the construction supplies segment.
Gross margin percentage for this segment was lower as a higher portion of their
increased sales level was product sales on a direct shipment basis, which
generally have a lower margin.
Selling, general, and administrative expenses increased $2.8 million or 22.5% to
$15.3 million from $12.5 million. Selling, general, and administrative expenses
increased at both the construction supplies and heat treating segments. The
increase in selling, general, and administrative expenses for the construction
supplies segment was primarily the result of the increase in sales, additional
operating costs associated with the newly acquired locations, and wage and other
expenses incurred to support the planned growth of this unit.
The increase in selling, general, and administrative expenses by the heat
treating segment was caused primarily by increased employee benefit expenses
plus higher costs occurred in anticipation of increased sales. The planned sales
increase did not occur in part due to a labor strike at one of its major
customers as well as delays which occurred in making a new process line
operationally efficient.
Depreciation and amortization expense for the nine months ended December 31,
1998 increased primarily due to the amortization of intangibles and additional
depreciation related to the acquisitions at the Company's construction supplies
segment. Additions of property and equipment by the Company's heat treating and
packaging products segments also contributed to the increase in depreciation
expense for the nine months.
Operating profit decreased from $5.3 million to $4.2 million primarily as a
result of the reduced operating profit for the heat treating segment resulting
from the additional selling, general, and administrative costs, and an operating
loss of approximately $560,000 which occurred at Maxco's packaging products
segment, due to this segment's lower sales and gross margin percentage.
Net interest expense for the nine months increased in 1998 from the prior year
quarter due to additional long-term borrowings and reduction in marketable
securities, the proceeds of which were used for investments in new affiliates,
repurchase of the Company's stock, and additional purchases of property and
equipment.
Equity in earnings of affiliates consists of Maxco's share of earnings in less
than 50% owned entities. On a consolidated basis, equity in net losses of
affiliates, net of tax, was $38,000 for the nine months ended December 31, 1998,
compared to net earnings of $193,000 for the prior year comparable period.
IMPACT OF THE YEAR 2000 ISSUE
The Company recognizes the need to ensure its operations will not be adversely
impacted by year 2000 software issues and continues to evaluate and manage the
risks associated with this problem. The Company believes that based on initial
assessments, the cost of achieving year 2000 compliance is not estimated to be
materially over the cost of normal software upgrades and replacements which are
expected to be incurred through September 30, 1999.
In addition to reviewing its internal year 2000 issues, Maxco has begun to
analyze any third party readiness to insure that there could not be a material
impact on the Company. Due to the diverse nature of Maxco's operations and its
many suppliers and vendors, the Company believes that no significant loss of
business is anticipated as a result of any of its customers or vendors not being
year 2000 ready.
13
<PAGE> 14
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
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(a) Exhibits
3 Restated Articles of Incorporation are hereby incorporated
from Form 10-Q dated February 13, 1998.
3.1 By-laws are hereby incorporated by reference from Form
S-4 dated November 4, 1991 (File No. 33-43855).
4.2 Resolution establishing Series Three Preferred Shares is
hereby incorporated by reference from Form S-4 dated
November 4, 1991 (File No. 33-43855).
4.3 Resolution authorizing the redemption of Series Two Preferred
Stock and establishing Series Four Preferred Stock and the
terms of the subordinated notes is hereby incorporated by
reference from Form 10-Q dated February 14, 1997.
4.4 Resolution establishing Series Five Preferred Shares is hereby
incorporated by reference from Form 10-K dated June 5, 1997.
10.1 Incentive stock option plan adopted August 15, 1983, including
the amendment (approved by shareholders August 25, 1987) to
increase the authorized shares on which options may be granted
by two hundred fifty thousand (250,000), up to five hundred
thousand (500,000) shares of the common stock of the company
is hereby incorporated by reference from the registrant's
annual report on Form 10-K for the fiscal year ended March 31,
1988.
14
<PAGE> 15
PART II
OTHER INFORMATION (CONTINUED)
10.8 Stock Purchase Agreement (sale of FinishMaster, Inc.)
effective July 9, 1996, is hereby incorporated by reference
from registrants Form 10-K dated June 18, 1996.
10.9 Asset purchase agreement - Wright Plastic Products, Inc. is
hereby incorporated by reference from registrants Form 10-Q
dated November 14, 1996.
10.10 Amended and restated loan agreement between Comerica Bank and
Maxco, Inc. dated September 30, 1996 is hereby incorporated by
reference from Form 10-Q dated November 14, 1996.
10.11 Asset purchase agreement for the purchase of Atmosphere
Annealing, Inc. is hereby incorporated by reference from Form
8-K dated January 17, 1997.
10.12 Asset purchase agreement - Axson North America, Inc. is hereby
incorporated by reference from Form 10-Q dated February 14,
1997.
10.13 Loan agreement between Michigan Strategic Fund and Atmosphere
Annealing, Inc. is hereby incorporated by reference from Form
10-Q dated February 13, 1998.
10.14 Loan agreement between LAM Funding, L.L.C. and borrower
including Guaranty-Maxco, Inc. is hereby incorporated by
reference from Form 10-Q dated February 13, 1998.
10.15 First Amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated August 1, 1997, is hereby
incorporated by reference from Form 10-K dated June 24, 1998.
10.16 Second amendment to amended and restated loan agreement
between Comerica Bank and Maxco, Inc. dated June 24, 1998 is
hereby incorporated by reference from Form 10-K dated June 24,
1998.
10.17 Third amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated September 24, 1998 is
hereby incorporated by reference from Form 10-Q dated November
12, 1998.
10.18 Maxco, Inc. 1998 Employee Stock Option Plan is hereby
incorporated by reference from Form 10-Q dated November 12,
1998.
27* Financial Data Schedule
Item 6(b) Reports on Form 8-K
None
*Filed herewith
15
<PAGE> 16
SIGNATURES
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.
MAXCO, INC.
Date February 12, 1999 \S\ VINCENT SHUNSKY
------------------- ---------------------------------------
Vincent Shunsky, Vice President-Finance
and Treasurer (Principal Financial and
Accounting Officer)
16
<PAGE> 17
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
Item 1. Legal Proceedings
None
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(a) Exhibits
3 Restated Articles of Incorporation are hereby incorporated
from Form 10-Q dated February 13, 1998.
3.1 By-laws are hereby incorporated by reference from Form
S-4 dated November 4, 1991 (File No. 33-43855).
4.2 Resolution establishing Series Three Preferred Shares is
hereby incorporated by reference from Form S-4 dated
November 4, 1991 (File No. 33-43855).
4.3 Resolution authorizing the redemption of Series Two Preferred
Stock and establishing Series Four Preferred Stock and the
terms of the subordinated notes is hereby incorporated by
reference from Form 10-Q dated February 14, 1997.
4.4 Resolution establishing Series Five Preferred Shares is hereby
incorporated by reference from Form 10-K dated June 5, 1997.
10.1 Incentive stock option plan adopted August 15, 1983, including
the amendment (approved by shareholders August 25, 1987) to
increase the authorized shares on which options may be granted
by two hundred fifty thousand (250,000), up to five hundred
thousand (500,000) shares of the common stock of the company
is hereby incorporated by reference from the registrant's
annual report on Form 10-K for the fiscal year ended March 31,
1988.
10.8 Stock Purchase Agreement (sale of FinishMaster, Inc.)
effective July 9, 1996, is hereby incorporated by reference
from registrants Form 10-K dated June 18, 1996.
10.9 Asset purchase agreement - Wright Plastic Products, Inc. is
hereby incorporated by reference from registrants Form 10-Q
dated November 14, 1996.
10.10 Amended and restated loan agreement between Comerica Bank and
Maxco, Inc. dated September 30, 1996 is hereby incorporated by
reference from Form 10-Q dated November 14, 1996.
10.11 Asset purchase agreement for the purchase of Atmosphere
Annealing, Inc. is hereby incorporated by reference from Form
8-K dated January 17, 1997.
10.12 Asset purchase agreement - Axson North America, Inc. is hereby
incorporated by reference from Form 10-Q dated February 14,
1997.
10.13 Loan agreement between Michigan Strategic Fund and Atmosphere
Annealing, Inc. is hereby incorporated by reference from Form
10-Q dated February 13, 1998.
10.14 Loan agreement between LAM Funding, L.L.C. and borrower
including Guaranty-Maxco, Inc. is hereby incorporated by
reference from Form 10-Q dated February 13, 1998.
10.15 First Amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated August 1, 1997, is hereby
incorporated by reference from Form 10-K dated June 24, 1998.
10.16 Second amendment to amended and restated loan agreement
between Comerica Bank and Maxco, Inc. dated June 24, 1998 is
hereby incorporated by reference from Form 10-K dated June 24,
1998.
10.17 Third amendment to amended and restated loan agreement between
Comerica Bank and Maxco, Inc. dated September 24, 1998 is
hereby incorporated by reference from Form 10-Q dated November
12, 1998.
10.18 Maxco, Inc. 1998 Employee Stock Option Plan is hereby
incorporated by reference from Form 10-Q dated November 12,
1998.
27* Financial Data Schedule
Item 6(b) Reports on Form 8-K
None
*Filed herewith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) FORM
10-Q FOR THE QUARTER ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH (B) FINANCIAL STATEMENTS AND NOTES THERETO.
</LEGEND>
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0
3,875
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