<PAGE> 1
The following items were the subject of a Form 12b-25 and are included herein:
Items 6, 7 and 8
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended APRIL 30, 1995
OR
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from ___________ to ___________
Commission File Number: 0-16249
CIMCO, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization)
265 Briggs Avenue, Costa Mesa, California
(Address of principal executive offices)
92626 (Zip Code)
33-0251163 (I.R.S. Employer Identification No.)
Registrant's telephone number, including area code: (714) 546-4460
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety (90) days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of July 21, 1995, amounted to approximately $9,505,000.
The registrant had 2,960,481 shares of common stock, $.01 par value,
outstanding as of July 21, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Part II and Part III is incorporated by
reference to portions of the Registrant's proxy statement for the 1995 Annual
Meeting of Stockholders to be filed pursuant to Regulation 14A.
<PAGE> 2
Item 6.
FIVE - YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year ended April 30,
--------------------------------------------------------------------------
(In thousands, except per share data) 1995 1994 1993 1992 1991
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net sales $ 83,231 $ 73,880 $ 76,887 $ 70,132 $ 64,515
Operating profit (loss) (1,047) (1,162) 2,942 2,339 4,730
Other expenses, net 1,181 674 846 646 466
Earnings (loss) before provision for income taxes (2,228) (1,836) 2,096 1,693 4,264
Net earnings (loss) (1,548) (1,214) 1,476 1,100 2,559
Earnings (loss) per share
Primary $ (0.52) $ (0.41) $ 0.50 $ 0.37 $ 0.85
Weighted average shares outstanding
Primary 2,961 2,980 2,976 2,975 3,021
Capital expenditures $ 2,871 $ 8,953 $ 3,660 $ 4,652 $ 3,236
</TABLE>
<TABLE>
<CAPTION>
Year ended April 30,
--------------------------------------------------------------------------
(Dollars in thousands) 1995 1994 1993 1992 1991
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Working capital $ (1,456)* $ 12,867 $ 10,417 $ 10,276 $ 7,339
Plant, property and equipment, net 25,869 27,489 22,771 23,180 21,393
Total assets 58,583 56,648 49,348 47,001 40,993
Long-term debt (net) --* 13,536 5,719 6,178 2,017
Stockholders' equity 25,315 27,107 28,208 26,706 25,765
</TABLE>
* Working capital has been reduced by $12.1 million due to a reclassification of
long-term debt (see Note 8 to the financial statements).
<PAGE> 3
Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations - The following tables show the amounts of certain items
included in the Company's statements of operations and percentages of those
items as they relate to net sales for the three years ended April 30, 1995, as
well as the amounts and percentages of increase or decrease of those items.
AMOUNTS AND PERCENTAGES OF CERTAIN ITEMS AS THEY RELATE TO NET SALES
<TABLE>
<CAPTION>
Year ended April 30,
-------------------------------------------------------------------
1995 1994 1993
-------------------------------------------------------------------
(Dollars in thousands) Amount % Amount % Amount %
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 83,231 100.0 $ 73,880 100.0 $ 76,887 100.0
Manufacturing costs 70,815 85.1 61,212 82.9 61,471 79.9
Engineering and tooling expenses 4,638 5.6 4,527 6.1 4,447 5.8
Selling expenses 2,892 3.5 2,709 3.7 2,475 3.3
General and administrative expenses 5,933 7.1 6,594 8.9 5,777 7.5
Interest expense, net 1,181 1.4 674 0.9 621 0.8
-------------------------------------------------------------------
Earnings (loss) before provision for income taxes (2,228) (2.7) (1,836) (2.5) 2,096 2.7
Provision (benefit) for income taxes (680) (0.8) (622) 0.9 620 0.8
-------------------------------------------------------------------
Net earnings (loss) $ (1,548) (1.9) $ (1,214) (1.6) $ 1,476 1.9
===================================================================
</TABLE>
AMOUNT AND PERCENTAGE OF INCREASE (DECREASE) OF CERTAIN ITEMS
<TABLE>
<CAPTION>
Year ended April 30,
---------------------------------------------------------------
1995 vs 1994 1994 vs 1993 1993 vs 1992
---------------------------------------------------------------
(Dollars in thousands) Amount % Amount % Amount %
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 9,351 12.7 $(3,007) (3.9) $ 6,755 9.6
Manufacturing costs 9,603 15.7 (259) (0.4) 5,072 9.0
Engineering and tooling expenses 111 2.5 80 1.8 (15) (0.3)
Selling expenses 183 6.8 234 9.5 274 12.4
General and administrative expenses (661) (10.0) 817 14.1 1,046 22.1
Interest expense, net 507 75.2 53 8.5 (25) (3.9)
------- ------- -------
Earnings (loss) before provision for income taxes (392) 21.4 (3,932) (187.6) 403 23.8
Provision (benefit) for income taxes (58) 9.3 (1,242) (200.3) 27 4.6
------- ------- -------
Net earnings (loss) $ (334) 27.5 $(2,690) (182.2) $ 376 34.2
======= ======= =======
</TABLE>
The Company's consolidated net sales increased 12.7% to $83,231,000 in
fiscal 1995 from $73,880,000 in fiscal 1994 and increased 8.3% from $76,887,000
in fiscal 1993 after eliminating intersegment sales of $2,773,000, $2,993,000,
and $4,923,000, respectively, due to volume and price increases.
Consolidated manufacturing costs in fiscal 1995 increased 15.7% from
1994, and 15.2% from 1993. Manufacturing costs in fiscal 1995 as a percentage of
sales increased 2.2% and 5.2% from 1994 and 1993, respectively. The increase in
manufacturing costs in fiscal 1995 as compared to 1994 is primarily due to
increases in raw material costs, direct labor and costs associated with the use
of outside contractors, partially offset by a reduction in workers' compensation
expense. The increase in manufacturing costs in fiscal 1995 as compared to 1993
is largely due to increases in raw material costs, direct labor and costs
associated with the use of outside contractors. Selling, general and
administrative expenses increased 7.2% and 9.9% during the respective periods
for the reasons explained below.
<PAGE> 4
The Company sustained a net loss of $1,548,000 in fiscal 1995 compared
to a net loss of $1,214,000 in fiscal 1994 and net earnings of $1,476,000 in
fiscal 1993, primarily for the reasons noted above. Net earnings (loss) were
(1.9)%,(1.6)%, and 1.9% of net sales in fiscal years 1995, 1994 and 1993,
respectively. Primary earnings (loss) per share were $(.52),$(.41), and $.50 in
fiscal years 1995, 1994 and 1993, respectively, indicating a trend of decreased
earnings.
COMMERCIAL/INDUSTRIAL SEGMENT
Gross sales increased $198,000 or 0.7% to $29,920,000 in the current
fiscal year from fiscal 1994 and decreased $6,779,000 or 18.5% from 1993. The
sales decrease from fiscal year 1993 was primarily the result of lower sales to
the Segment's largest customer as its requirements trended downward, as well as
a decline in sales of certain products to its second largest customer.
The operating loss increased to $3,127,000 in fiscal 1995 from
$2,775,000 in fiscal 1994, compared to an operating profit of $766,000 in
fiscal 1993. The 1995 operating loss increased from that of 1994 primarily due
to the increase in labor and outside costs associated with certain major
contract assembly programs, some of which commenced and terminated during the
current fiscal year. In fiscal 1995, the Company was not able to overcome
certain cost increases, as described above, and improve utilization of plant
capacity. The increase in the 1995 operating loss is partially offset by the
absence of 1994 restructuring costs, as well as a reduction in workers'
compensation expenses in the current year. The operating loss in 1995 as
compared to the operating profit in fiscal 1993 is attributable to lower sales
in the current fiscal year, which resulted in an underabsorption of fixed
manufacturing costs. In addition, an adverse change in product mix negatively
impacted operating profits in 1995 compared to 1993. Engineering and tooling
operations, which are included in this segment, continue to adversely impact
operating profits.
MEDICAL SEGMENT
Gross sales increased 3.6% to $11,935,000 in the current fiscal year
from fiscal 1994 and decreased 3.3% from fiscal 1993. The increase from 1994 was
primarily the result of greater respiratory product sales, partially offset by
lower molding sales. The decrease from 1993 was primarily the result of lower
molding sales.
Operating profit decreased 61.2% to $95,000 in fiscal 1995 from a profit
of $245,000 in fiscal 1994 due to increases in direct labor and indirect
manufacturing costs and increased expenses related to the expansion in the sales
staff of the respiratory products group. After the first quarter 1995 operating
loss of $330,000, the Medical Segment posted increasing operating profits in
each of the remaining fiscal 1995 quarters as a result of work force reduction,
management changes and improved manufacturing efficiencies beginning in the
second quarter. Operating profit in fiscal 1995 increased 155.2% from fiscal
1993 primarily due to improved margins of respiratory products.
COMPOUNDING SEGMENT
Gross sales increased 23.9% to $44,149,000 in the current fiscal year
from fiscal 1994 and 34.7% from fiscal 1993. The increase in sales is
attributable to greater foreign
<PAGE> 5
and domestic sales to the Segment's largest customer and its molders and foreign
sales to new customers, which was partially offset by reduced domestic sales to
another major customer and to lower sales to the Commercial/Industrial Segment.
Operating profit increased 45.2% to $1,986,000 in the current fiscal
year from fiscal 1994 due to the increase in sales volume and greater absorption
of fixed overhead costs, partially offset by rising raw material costs. Selling,
general & administrative expenses increased slightly in support of the continued
rapid growth of the Singapore operation. Operating profit in the current fiscal
year decreased 15.4% from fiscal 1993 due primarily to price reductions,
increased selling, general and administrative expenses, and rising raw material
costs. The operations in Singapore have significantly contributed to the
performance of this Segment.
CONSOLIDATED INFORMATION
Engineering and tooling expenses in fiscal 1995 increased 2.5% from 1994
and 4.3% from 1993.
Selling expenses increased 6.8% to $2,892,000 in fiscal 1995 from
$2,709,000 in fiscal 1994, and 16.8% from $2,475,000 in fiscal 1993. These
expenses increased primarily in the Compounding Segment wherein gross sales
increased 23.9% and 34.7% in fiscal 1995 from 1994 and 1993, respectively.
Additionally, sales expenses increased in the Commercial/Industrial Segment as
part of an ongoing effort to expand and diversify that Segment's sales.
General and administrative expenses in the current fiscal year were
$5,933,000, a 10.0% decrease from the fiscal 1994 expenses of $6,594,000, which
included restructuring costs of $1,073,000, and a 2.7% increase over the fiscal
year 1993 expenses of $5,777,000. The decrease of general and administrative
expenses in fiscal 1995 compared to 1994 primarily relates to the absence of
$1,073,000 in restructuring costs which occurred in 1994, partially offset by
increases in expenses to support the growth of the Compounding Segment. The
current fiscal year increase as compared to fiscal 1993 also primarily relates
to increases in expenses to support the rapid growth of the Compounding Segment.
Interest expense, net of interest income, increased to $1,181,000 in
fiscal 1995 from $674,000 in fiscal 1994 and $621,000 in fiscal 1993. The
increase for 1995 compared to 1994 was largely the result of higher interest
rates, compounded by lower interest income resulting from the decrease in
short-term investments during the current year. The increase for 1995 as
compared to 1993 was the result of increased debt and higher interest rates,
compounded by lower interest income resulting from the decrease in short-term
investments during the current year.
The effective tax rate for fiscal 1995 was a benefit of 30.5% as
compared to a benefit of 33.9% and a provision of 29.6% in fiscal 1994 and 1993,
respectively. The fiscal 1995 and 1994 losses resulted in an income tax
receivable as compared to an income tax payable in fiscal year 1993.
INFLATION
Changes in petroleum prices will normally impact resin prices,
particularly those of a commodity nature; however, the majority of resins used
by the Company are classified as
<PAGE> 6
"engineering thermoplastics," which have been historically more stable in price.
The Company's long-term sales contracts with certain major customers provide for
price adjustments when raw material price changes exceed a predetermined amount.
These contracts are intended to protect the Company against the negative effect
of large price increases, although changes less than those provided for will
result in the Company's absorbing the difference until the changes reach levels
allowing for appropriate adjustments. Sales under these contracts were
approximately 17%, 29%, and 35% of net sales in fiscal years 1995, 1994 and
1993, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company has previously financed its capital expenditures and working
capital requirements from operating cash flow, trade credit, cash reserves, and
borrowings under its line of credit. In fiscal 1994, the Company borrowed
$5,625,000 representing an industrial development revenue bond ("IDRB") issued
by the state of Nevada. The proceeds of this bond were used to construct and
equip the new molding facility in Dayton, Nevada. Remaining proceeds of $32,000
are included in cash at April 30, 1995. Available sources of funds at April 30,
1995 consisted of approximately $803,000 in cash and cash equivalents, and
$587,000 in unused lines of credit with its bank. See note 8 to the Consolidated
Financial Statements.
Working capital was $(1,456,000) at April 30, 1995 and $12,867,000 at
April 30, 1994. Working capital as a percentage of net sales was (1.7)% and
17.4% at April 30, 1995 and 1994, respectively. The decrease in working capital
from 1994 to 1995 was largely the result of the $12,106,000 reclassification of
long-term debt to the current portion of long-term debt, and to a lesser extent,
reduced cash and short-term cash investments, and an increase in note payable to
the bank. The decrease in working capital was partially offset by a net increase
in accounts receivable over an increase in accounts payable. The increase in
accounts receivable at April 30, 1995 was primarily the result of greater sales
in the fourth quarter and extended credit terms to a new foreign customer of the
Compounding Segment. The federal income tax receivable of $761,000 was the
result of a tax benefit from the net loss in fiscal 1995. In fiscal 1996,
additional working capital will be needed to support the continued growth of the
Compounding Segment, the source of which is anticipated to be derived from the
additional borrowings described below.
Capital expenditures aggregated $2,871,000, $8,953,000, and $3,660,000
in fiscal 1995, 1994 and 1993, respectively. Expenditures for the Dayton plant
were $1,523,000, $4,114,000 and $939,000, for fiscal years 1995, 1994 and 1993,
respectively. The balance of the expenditures were used to upgrade machinery and
equipment in all segments. The Company has made a commitment to establish a
facility in Saint Etienne, France, which will require approximately $2,000,000
in capital expenditures in fiscal 1996, the source of which is anticipated to be
derived from the additional borrowings described below.
On February 1, 1995, the Company replaced its credit agreement with its
bank. The new credit agreement ("Credit Agreement") provides for a $6,000,000
revolving line of credit expiring September 15, 1995 ("Line of Credit"), a
$7,500,000 term loan ("Term Loan"), and a standby letter of credit in the amount
of $5,736,000 which secures the $5,625,000 industrial development revenue bond
discussed above. As of April 30, 1995,
<PAGE> 7
the Company had borrowed $3,816,000 under the Line of Credit, which bears
interest at the bank's prime rate plus 1/4% (9.25 % at April 30,1995). The Term
Loan is payable in forty-eight equal monthly installments commencing March 1,
1995, and bears interest at the bank's prime rate plus 1/2% (9.50% at April 30,
1995). Borrowings under the Credit Agreement are collateralized by substantially
all of the Company's assets, except for certain of the Costa Mesa land and
buildings and all of the Singapore assets.
In addition to the borrowings described above, at April 30, 1995 the
Company has a standby letter of credit in favor of the State of California for
Workers' Compensation totaling $1,433,000, and other letters of credit totaling
$164,000. After deducting the borrowing and outstanding letters of credit as of
April 30, 1995, the Company had additional borrowing capacity of $587,000 under
the Line of Credit.
The Credit Agreement contains various covenants that, among other
things, require the maintenance of certain balance sheet ratios, minimum levels
of net worth (as defined in the agreement), restrictions which limit the payment
of dividends to $100,000 annually, and limitations on the acquisition of, or
investment in, other entities.
At April 30, 1995, the Company was not in compliance with certain
financial covenants of the Credit Agreement. The bank has not waived the
Company's breaches of the covenants, but has granted the Company forbearance
from exercising its default rights until September 15, 1995, coterminous with
the expiration of its existing credit facility. The forbearance does not apply
to subsequent breaches of any covenants and management believes that the Company
is not in compliance with certain covenants as of July 31, 1995. Default under
the Credit Agreement also causes an event of default under another agreement
related to the Company's other long-term debt. Statement of Financial Accounting
Standards No. 78 (SFAS No. 78) requires that long-term obligations that are
callable by the creditor within a one year period subsequent to year end, be
classified as current liabilities. Accordingly, the Company has reclassified
$12,106,000 from long-term debt to the current portion of long-term debt.
As discussed in Note 2 to the financial statements, the Company has
sustained substantial losses from operations in fiscal 1994 and 1995, used cash
in its operations in fiscal 1995, and at April 30,1995, has a deficit in working
capital caused by a reclassification of debt as per SFAS No. 78. The Company's
continuation as a going concern is dependent upon its ability to secure
sufficient additional financing. Management has implemented measures to reduce
operating costs and is continuing discussions with the Company's primary lender
and others regarding extension and expansion of the Company's credit facilities.
Subject to the Company's ability to secure additional financing and successfully
renew or replace its existing credit facility, management believes that
financial resources will be adequate to support working capital requirements and
planned capital expenditures during the next twelve months. However, there can
be no assurance that the Company will be successful in securing additional
financing and renewing or replacing its existing credit facility.
RECENT DEVELOPMENT
On July 31, 1995 the Company filed Form 12B-25, Notification of Late
Filing, and Form 10-K, Items 1 through 5 and 9 through 14, with the Securities
and Exchange Commission. As discussed in the Form 12B-25, the Company was
assessing the extent of
<PAGE> 8
revision, if any, of certain assets related to a business alliance with one of
its customers. The result of this evaluation indicated that no adjustments to
the financial statements were required.
<PAGE> 9
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30,
---------------------------
1995 1994
========================================================================================================================
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 802,887 $ 2,284,191
Short-term cash investments 878,402
Accounts receivable, less allowance for doubtful accounts of
$204,000 and $80,000 in 1995 and 1994, respectively 16,451,712 11,345,777
Federal income tax receivable 761,000 780,000
Inventories 11,258,890 10,827,235
Prepaid expenses 408,132 420,393
---------------------------
Total current assets 29,682,621 26,535,998
Property, plant and equipment - at cost
Land 3,027,012 3,314,294
Buildings 9,959,966 9,700,754
Machinery and equipment 33,375,057 32,467,331
Leasehold improvements 2,077,330 2,012,577
---------------------------
48,439,365 47,494,956
Less accumulated depreciation and amortization 22,570,610 20,005,751
---------------------------
25,868,755 27,489,205
Other assets
Land held for sale 432,700 432,700
Other 2,598,734 2,190,578
---------------------------
3,031,434 2,623,278
---------------------------
Total assets $58,582,810 $56,648,481
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Note payable to bank $ 3,816,327 $ 2,000,000
Current portion of long-term debt 14,390,500 2,388,367
Accounts payable 10,177,863 6,701,907
Accrued expenses 2,427,811 2,378,109
Income taxes payable 325,950 200,895
---------------------------
Total current liabilities 31,138,451 13,669,278
Long-term debt, net of current portion -- 13,536,333
Deferred income taxes 2,129,000 2,336,000
Commitments -- --
---------------------------
Total liabilities 33,267,451 29,541,611
---------------------------
Stockholders' equity
Preferred stock -- $.01 par value; authorized 5,000,000 shares;
issued and outstanding, none -- --
Preferred stock-- Series A Junior Participating - $.01 par value;
authorized 100,000 shares; issued and outstanding, none -- --
Common stock -- $.01 par value; authorized 10,000,000 shares; issued and
outstanding, 2,960,481 and 2,980,481 shares in 1995 and 1994, respectively 29,605 29,805
Capital in excess of par value 7,258,757 7,371,040
Retained earnings 18,323,858 19,872,193
Foreign currency translation adjustment (24,598) 77,240
---------------------------
25,587,622 27,350,278
Less note receivable from Employee Stock Ownership Plan (272,263) (243,408)
---------------------------
Total stockholders' equity 25,315,359 27,106,870
---------------------------
Total liabilities and stockholders' equity $58,582,810 $56,648,481
===========================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 10
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended April 30,
----------------------------------------------
1995 1994 1993
==================================================================================================================================
<S> <C> <C> <C>
Net sales $ 83,231,361 $ 73,880,230 $ 76,887,148
Costs and expenses
Manufacturing costs 70,814,886 61,212,052 61,471,120
Engineering and tooling expenses 4,638,271 4,527,261 4,446,915
Selling, general and administrative expenses 8,824,921 8,230,257 8,027,068
Restructuring costs -- 1,072,873 --
----------------------------------------------
Operating profit (loss) (1,046,717) (1,162,213) 2,942,045
Other (income) expenses
Interest income (71,388) (111,063) (146,584)
Interest expense 1,253,006 784,663 767,428
Litigation settlement -- -- 225,315
----------------------------------------------
1,181,618 673,600 846,159
----------------------------------------------
Earnings (loss) before provision (benefit) for income taxes (2,228,335) (1,835,813) 2,095,886
Provision (benefit) for income taxes (680,000) (622,000) 620,000
----------------------------------------------
Net earnings (loss) $ (1,548,335) $ (1,213,813) $ 1,475,886
==============================================
Earnings (loss) per common share $ (0.52) $ (0.41) $ 0.50
==============================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 11
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Three years ended April 30, 1995
-----------------------------------------------------------------------------------------------------------------------------------
Common Stock
-------------------
Number of Capital in excess Retained Foreign currency
shares Amount of par value earnings adjustment
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Balance at April 30, 1992 2,968,081 $29,681 $7,279,464 $19,610,120 --
Exercise of employee stock options at $7.00 per share 7,500 75 52,425 -- --
Net earnings for the year -- -- -- 1,475,886 --
ESOP note receivable accrued interest/other -- -- -- -- --
-----------------------------------------------------------------------
Balance at April 30, 1993 2,975,581 29,756 7,331,889 21,086,006 --
Exercise of employee stock options at $8.00 per share 4,900 49 39,151 -- --
Net loss for the year -- -- -- (1,213,813) --
Foreign currency translation adjustment -- -- -- -- $ 77,240
ESOP note receivable accrued interest/other -- -- -- -- --
-----------------------------------------------------------------------
Balance at April 30, 1994 2,980,481 29,805 7,371,040 19,872,193 77,240
Stock repurchase (20,000) (200) (112,283) -- --
Net loss for the year -- -- -- (1,548,335) --
Foreign currency translation adjustment -- -- -- -- (101,838)
ESOP note receivable accrued interest/other -- -- -- -- --
-----------------------------------------------------------------------
Balance at April 30, 1995 2,960,481 $29,605 $7,258,757 $18,323,858 $(24,598)
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
Three years ended April 30, 1995
----------------------------------------------------------------------------------------------
Less: note receivable Total
from Employee Stockholders'
Stock Ownership Plan Equity
==============================================================================================
<S> <C> <C>
Balance at April 30, 1992 $(213,500) $26,705,765
Exercise of employee stock options at $7.00 per share 52,500
Net earnings for the year 1,475,886
ESOP note receivable accrued interest/other (25,908) (25,908)
-----------------------------------
Balance at April 30, 1993 (239,408) 28,208,243
Exercise of employee stock options at $8.00 per share 39,200
Net loss for the year (1,213,813)
Foreign currency translation adjustment 77,240
ESOP note receivable accrued interest/other (4,000) (4,000)
-----------------------------------
Balance at April 30, 1994 (243,408) 27,106,870
Stock repurchase (112,483)
Net loss for the year (1,548,335)
Foreign currency translation adjustment (101,838)
ESOP note receivable accrued interest/other (28,855) (28,855)
-----------------------------------
Balance at April 30, 1995 $(272,263) $25,315,359
===================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 12
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Year ended April 30,
-------------------------------------------
1995 1994 1993
===================================================================================================================================
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flow from operating activities:
Net earnings (loss) $(1,548,335) $(1,213,813) $ 1,475,886
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization 3,450,247 3,144,593 3,114,552
(Gain) loss on sale of property, plant and equipment (18,633) 483,172 (5,489)
Provision for bad debts 124,568 12,000 12,000
(Increase) decrease in accounts receivable (5,230,503) 193,477 (1,775,999)
(Increase) decrease in federal income tax receivable 19,000 (780,000) --
(Increase) decrease in inventories (431,655) (1,387,732) (1,276,854)
(Increase) decrease in prepaid expenses 12,261 9,593 206,305
(Increase) decrease in other assets (408,156) 497,318 (305,546)
Increase (decrease) in accounts payable 3,475,956 (267,271) 1,323,630
Increase (decrease) in accrued expenses 49,702 857,097 220,833
Increase (decrease) in income taxes payable 125,055 (138,485) 258,100
Increase (decrease) in deferred income taxes (207,000) (45,000) (65,529)
-------------------------------------------
Net cash provided by (used in) operating activities (587,493) 1,364,949 3,181,889
-------------------------------------------
Cash flow from investing activities:
Proceeds from the sale of property, plant and equipment 1,059,350 607,339 20,798
Redemption of short-term cash investments 889,460 457,716 4,105,478
Purchase of short-term cash investments (11,058) (423,498) (2,980,218)
Capital expenditures (2,870,514) (8,953,415) (3,659,976)
-------------------------------------------
Net cash used in investing activities (932,762) (8,311,858) (2,513,918)
-------------------------------------------
Cash flow from financing activities:
Net increase (decrease) in short-term borrowings 1,816,327 (150,000) 100,000
Proceeds from issuance of common stock -- 39,200 52,500
Proceeds from issuance of long-term debt 1,835,000 10,425,000 1,600,000
Principal payments on long-term debt (3,369,200) (2,279,242) (2,592,417)
Repurchase of common stock (112,483) -- --
Loan to Employee Stock Ownership Program (28,855) (4,000) (25,909)
-------------------------------------------
Net cash provided by (used in) financing activities 140,789 8,030,958 (865,826)
-------------------------------------------
Foreign currency translation gain (loss) (101,838) 77,240 --
-------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,481,304) 1,161,289 (197,855)
Cash and cash equivalents at beginning of the year 2,284,191 1,122,902 1,320,757
-------------------------------------------
Cash and cash equivalents at end of the year $ 802,887 $ 2,284,191 $ 1,122,902
===========================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 1,191,955 $ 881,410 $ 569,887
Income taxes $ 48,145 $ 19,510 $ 414,270
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 13
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
The following is a summary of the Company's significant accounting
policies consistently applied in the preparation of the consolidated financial
statements.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements
include the accounts of the Company, its wholly-owned subsidiaries (Medical
Molding Corporation of America and Compounding Technology, Inc. and its
wholly-owned subsidiary Compounding Technology Pte. Ltd.) and its 50%-owned
partnership (Mesa Leasing Company). Mesa Leasing Company is consolidated
because its other 50% partner is the Company's president and its operations
consist of leasing a facility to the Company. The results of operations of the
partnership are immaterial. All significant intercompany accounts and
transactions have been eliminated.
DEPRECIATION AND AMORTIZATION Depreciation and amortization are
provided over the estimated useful lives of the assets or over the remaining
term of the leases using straight-line and accelerated methods. Estimated
useful lives are as follows:
<TABLE>
<S> <C>
Buildings 25-30 years
Machinery and equipment 3-10 years
Leasehold improvements Remaining term of leases
</TABLE>
INCOME TAXES The Company accounts for income taxes using the asset
and liability approach under Statement of Financial Accounting Standards No.
109. The Company adopted the new standard effective May 1, 1993. The effect of
the accounting change was not material. The temporary differences giving rise
to deferred income taxes as of April 30, 1995, 1994 and 1993, consist
principally of depreciation, inventory valuation and vacation and workers'
compensation accruals.
STATEMENT OF CASH FLOWS For purposes of reporting cash flows, cash
and cash equivalents include cash and short-term cash investments that have
maturities of 90 days or less from the date of purchase.
CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of
trade receivables. Concentrations of credit risk with respect to trade
receivables are limited to the dispersion of the Company's customers over
various geographic areas, operating primarily in the manufacturing industry.
The Company performs on-going credit evaluations of its customers' financial
condition and generally requires no collateral from its customers. The Company
incurred minimal bad debt write-offs over the past three years.
The Company and its subsidiaries maintain cash balances at several
financial institutions located in the United States and Singapore. Accounts at
each institution in the United States are secured by the Federal Deposit
Insurance Corporation up to $100,000. Uninsured balances were approximately
$795,000 in the aggregate at April 30, 1995.
REVENUE RECOGNITION The company recognizes revenue on products in the
month in which shipment is made. Revenue for tooling is generally recognized
in the month in which initial samples are submitted for customer acceptance or
to a lesser extent by terms agreed upon by the Company and its customer.
FOREIGN CURRENCY TRANSLATION Assets and liabilities of the foreign
subsidiary are translated at the exchange rate in effect at each fiscal year
end. Income statement accounts are translated at the average rate of exchange
prevailing during the fiscal year.
<PAGE> 14
Translation adjustments arising from differences in exchange rates from period
to period are reflected as a separate component in stockholders' equity.
NOTE 2 - REALIZATION OF ASSETS
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate continuation
of the Company as a going concern. However, the Company has sustained
substantial losses from operations in fiscal 1994 and 1995, used cash in its
operations in fiscal 1995 and, at April 30, 1995, has a deficit in working
capital caused by a reclassification of debt as per SFAS No. 78. As discussed
in Note 8, the Company is not in compliance with certain covenants of its
credit agreement with its bank and, because of that default condition, the
Company is also in violation of another agreement with its bank. These
conditions could cause amounts borrowed under those agreements to become
immediately due and payable.
In view of the matters described in the preceding paragraph,
recoverability of a major portion of the recorded asset amounts shown in the
accompanying balance sheet is dependent upon the continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financing requirements on a continuing basis, to maintain present financing,
and to succeed in its future operations. The financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts and classification of liabilities that might be
necessary should the Company be unable to continue in existence. Management
has implemented measures to reduce operating costs and is continuing
discussions with the Company's primary lender and others regarding extension
and expansion of the Company's credit facilities. Subject to the Company's
ability to secure additional financing and successfully renew or replace its
existing credit facility, management believes that financial resources will be
adequate to support working capital requirements and planned capital
expenditures during the next twelve months. However, there can be no assurance
that the Company will be successful in securing additional financing and
renewing or replacing its existing credit facility.
NOTE 3 - CASH AND CASH EQUIVALENTS
Cash equivalents have maturities of 90 days or less from the date of
purchase. The components of cash and cash equivalents are:
<TABLE>
<CAPTION>
April 30,
------------------------------
1995 1994
------------------------------
<S> <C> <C>
Cash $389,679 $2,056,657
Certificates of deposit 206,571 201,397
Short-term commercial paper 197,267 --
Money market account 9,370 26,137
------------------------------
$802,887 $2,284,191
==============================
</TABLE>
Included in cash at April 30, 1995 are $32,445 of unused proceeds from
the issuance of an Industrial Development Revenue Bond (IDRB) discussed further
in Note 8. These proceeds are restricted to expenditures for plant and
equipment for the new facility located in Dayton, Nevada.
<PAGE> 15
NOTE 4 - SHORT-TERM CASH INVESTMENTS
Short-term cash investments at April 30, 1994 consist of commercial
paper which have maturities in excess of 90 days.
NOTE 5 - INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
Inventories consist of the following:
<TABLE>
<CAPTION>
April 30,
--------------------------------
1995 1994
--------------------------------
<S> <C> <C>
Raw materials $ 6,234,425 $ 5,575,532
Work-in-process 1,010,435 1,117,718
Finished goods 4,014,030 4,133,985
--------------------------------
$11,258,890 $10,827,235
================================
</TABLE>
NOTE 6 - INVESTMENT IN MESA LEASING COMPANY
The Company's largest Costa Mesa manufacturing facility is leased from
Mesa Leasing Company, a partnership in which the Company and the Company's
president each have a 50% interest. The president's deficit in partnership
equity of $682,870 and $664,939 at April 30, 1995 and 1994, respectively, is
included in other assets (note 7). Aggregate rental payments made by the
Company to Mesa Leasing Company were approximately $389,000, $389,000 and
$389,000 in 1995, 1994, and 1993, respectively. The lease expired in December
1994. The Company rents on a month-to-month basis at $32,376 per month.
NOTE 7 - OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
April 30,
----------------------------
1995 1994
----------------------------
<S> <C> <C>
Cash surrender value of officer's
life insurance $ 354,062 $ 330,502
Notes receivable and other assets 1,071,579 721,805
Deposits and patents 172,865 178,777
Deferred loan costs 317,358 294,555
Capital account deficit of Mesa
Leasing Company partner (note 6) 682,870 664,939
----------------------------
$2,598,734 $2,190,578
============================
</TABLE>
<PAGE> 16
NOTE 8 - CREDIT AGREEMENT AND LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
April 30,
---------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Variable rate demand Industrial
Development Revenue Bonds
collateralized by certain property
and equipment, interest determined
weekly as remarketed (4.85% at
April 30, 1995), with monthly
principal payments of $31,250 and
interest through September 15, 2008 $ 5,031,250 $ 5,406,250
Note collateralized by deed of trust pay-
able in monthly installments of
$2,850 plus interest at the bank's
prime rate, not to exceed 9 1/2%.
Balance due July 26, 1996 2,171,750 2,205,950
Term Loan, interest at the bank's prime
rate plus 1/2%, with monthly principal
payments of $156,250 plus interest
through February 1,1999 7,187,500 --
Various unsecured notes payable, interest
at the bank's prime rate, monthly
principal payments totaling $206,252,
with various maturities from
March 13, 1996 to March 25, 1999 -- 8,312,500
----------- -----------
14,390,500 15,924,700
Current portion of long-term debt 14,390,500 2,388,367
----------- -----------
$ -- $13,536,333
=========== ===========
</TABLE>
On February 1, 1995 the Company replaced its credit agreement with its
bank. The new credit agreement ("Credit Agreement") provides for a $6,000,000
revolving line of credit expiring September 15, 1995 ("Line of Credit"), a
$7,500,000 term loan ("Term Loan"), and a standby letter of credit in the
amount of $5,736,000 which secures the $5,625,000 industrial development
revenue bond described above. As of April 30, 1995, the Company had borrowed
$3,816,327 under the Line of Credit, which bears interest at the bank's prime
rate plus 1/4% (9.25% at April 30, 1995). The Term Loan is payable in
forty-eight equal monthly installments commencing March 1, 1995, and bears
interest at the bank's prime plus 1/2% (9.5% at April 30, 1995). Borrowings
under the Credit Agreement are collateralized by substantially all of the
Company's assets, except for certain of the Costa Mesa land and buildings and
all of the Singapore assets.
In addition to the borrowings described above, at April 30, 1995 the
Company has a standby letter of credit in favor of the State of California for
Workers' Compensation
<PAGE> 17
totaling $1,432,669, and other letters of credit totaling $164,168. After
deducting the borrowing and outstanding letters of credit as of April 30, 1995,
the Company had additional borrowing capacity of $586,836 under the Line of
Credit.
The Credit Agreement contains various covenants that, among other
things, require the maintenance of certain balance sheet ratios, minimum levels
of net worth (as defined in the Credit Agreement), restrictions which limit the
payment of dividends to $100,000 annually, and limitations on the acquisition
of, or investment in, other entities.
At April 30, 1995, the Company was not in compliance with certain
financial covenants of the Credit Agreement. The bank has not waived the
Company's breaches of the covenants, but has granted the Company forbearance
from exercising its default rights until September 15, 1995, coterminous with
the expiration of its existing credit facility. The forbearance does not apply
to subsequent breaches of any covenants and management believes that the Company
is not in compliance with certain covenants as of July 31, 1995. Default under
the Credit Agreement also causes an event of default under another agreement
related to the Company's other long-term debt. Statement of Financial Accounting
Standards No. 78 (SFAS No. 78) requires that long-term obligations that are
callable by the creditor within a one year period subsequent to year end, be
classified as current liabilities. Accordingly, the Company has reclassified
$12,106,300 from long-term debt to the current portion of long-term debt.
The balance sheet classification of long-term debt, at April 30, 1995 as
reported in accordance with SFAS No. 78 as compared to originally scheduled
maturities were as follows:
<TABLE>
<CAPTION>
As Originally
As Reported Scheduled
----------- -------------
<S> <C> <C>
Current $14,390,500 $ 2,284,200
Noncurrent -- 12,106,300
----------- -----------
Total $14,390,500 $14,390,500
=========== ===========
</TABLE>
As of April 30, 1995, aggregate maturities of long-term debt as reported and as
originally scheduled were as follows:
<TABLE>
<CAPTION>
As Originally
Year ending April 30, As Reported Scheduled
---------------------- ----------- -------------
<S> <C> <C>
1996 $14,390,500 $ 2,284,200
1997 -- 4,387,550
1998 -- 2,250,000
1999 -- 1,937,500
2000 -- 375,000
</TABLE>
<PAGE> 18
<TABLE>
<S> <C> <C>
Thereafter -- 3,156,250
----------- -----------
$14,390,500 $14,390,500
=========== ===========
</TABLE>
NOTE 9 - ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
April 30,
-----------------------------
1995 1994
-----------------------------
<S> <C> <C>
Accrued workers compensation $ 613,876 $ 910,401
Accrued vacation payable 555,117 488,421
Other accrued liabilities 1,258,818 979,287
---------- ----------
$2,427,811 $2,378,109
========== ==========
</TABLE>
NOTE 10 - INCOME TAXES
The components of the provision (benefit) for income taxes are as
follows:
<TABLE>
<CAPTION>
April 30,
------------------------------------------------
1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ (761,000) $ (780,000) $ 365,000
State 90,000 -- 191,000
Foreign 198,000 203,000 --
---------- ---------- ---------
(473,000) (577,000) 556,000
---------- ---------- ---------
Deferred:
Federal (413,000) (114,000) (33,000)
State -- (166,000) (2,000)
Foreign 206,000 235,000 99,000
---------- ---------- ---------
(207,000) (45,000) 64,000
---------- ---------- ---------
$ (680,000) $ (622,000) $ 620,000
========== ========== =========
</TABLE>
The following is a reconciliation of the expected statutory federal income tax
rate to the effective rate reported in the financial statements:
<TABLE>
<CAPTION>
April 30,
------------------------------------
1995 1994 1993
------------------------------------
<S> <C> <C> <C>
Federal income tax at
statutory rate (34.0%) (34.0%) 34.0%
State taxes, net of
federal tax effect (6.1) (6.1) 6.1
</TABLE>
<PAGE> 19
<TABLE>
Effect of foreign
operations including
<S> <C> <C> <C>
foreign tax credits 9.6 6.2 (10.5)
----- ----- -----
(30.5%) (33.9%) 29.6%
===== ===== =====
</TABLE>
The temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities that give rise to significant portions of
the deferred tax assets and liabilities at April 30, 1995 and 1994 relate to the
following:
<TABLE>
<CAPTION>
April 30,
----------------------------
1995 1994
----------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 82,000 $ 33,000
Inventory valuation adjustments 52,000 61,000
Workers' compensation 246,000 365,000
Vacation accrual 235,000 198,000
Net operating loss carryforward 507,000 106,000
Other 21,000 --
---------- ----------
1,143,000 763,000
---------- ----------
Deferred tax liabilities:
Accelerated depreciation 2,745,000 2,778,000
Foreign taxes 527,000 321,000
---------- ----------
3,272,000 3,099,000
---------- ----------
Net deferred taxes $2,129,000 $2,336,000
========== ==========
</TABLE>
NOTE 11 - COMMITMENTS
The Company occupies certain facilities and rents certain of its
equipment under operating leases expiring at various dates through 1999.
Facilities rent expense was approximately $1,322,000, $1,017,000 and $862,000
for the years ended April 30, 1995, 1994 and 1993, respectively. Included in the
above amounts are $389,000, $389,000 and $389,000 for the years ended April 30,
1995, 1994 and 1993, respectively, paid to related parties.
As of April 30, 1995, the remaining rental payments required under
non-cancelable operating leases are as follows:
<TABLE>
<CAPTION>
Year ending April 30, Amount
-----------------------------------------------------
<C> <C>
1996 $785,989
1997 439,412
1998 95,022
1999 33,600
2000 --
----------
$1,354,023
==========
</TABLE>
<PAGE> 20
NOTE 12 - EMPLOYEE STOCK OWNERSHIP PLAN
Effective May 1, 1982, the Company adopted an Employee Stock Ownership
Plan ("ESOP"). The ESOP was adopted as an amendment of the Company's existing
Profit Sharing Plan, and the assets under the Profit Sharing Plan were
transferred to the ESOP. The Company contributed $50,000 for the year ended
April 30, 1995. No contributions were made in 1994 or 1993.
At April 30, 1995 and 1994 the Company had a note receivable, plus
accrued interest, from the ESOP for $272,263 and $243,408, respectively. The
note bears interest at its bank's prime rate and is payable in annual principal
installments of approximately $50,000 plus accrued interest through March 2000.
NOTE 13 - STOCKHOLDERS' RIGHTS PLAN
In December, 1992, the Company declared a distribution of one Common
Stock Purchase Right ("Right") for each share of the Company's common stock
outstanding on December 17, 1992. Each Right would initially entitle the
stockholder to purchase one one-hundredth of a share of Series A Junior
Participating Preferred Stock at an exercise price to be determined.
The Rights are not currently exercisable, but would become exercisable
if certain events occurred relating to a person or group (acquiring person)
acquiring or attempting to acquire 20% or more of the outstanding shares of
common stock. In the event the Rights become exercisable, each Right would
entitle the holder to purchase, for the exercise price then in effect, shares of
the Company's Series A Junior Participating Preferred Stock.
The Rights may be redeemed by the Board of Directors in whole but not
in part, at a price of $.01 per Right. The Rights have no voting or dividend
privileges and are attached to and do not trade separately from the Common
stock. The Rights expire on December 4, 2002.
NOTE 14 - EARNINGS PER COMMON SHARE
Primary earnings per common share are based upon the weighted average
number of common and common equivalent shares (dilutive stock options)
outstanding using the average market price. Weighted average shares outstanding
for computing primary earnings per share were 2,961,016, 2,979,534 and 2,975,618
in 1995, 1994 and 1993, respectively. Certain stock options for 1995, 1994 and
1993 were anti-dilutive and were not included in determining earnings per share.
NOTE 15 - STOCK OPTION PLANS
In fiscal years 1989 and 1992, the Company adopted Incentive Stock
Option Plans. Options under these plans are exercisable at a price not less than
the fair value of the stock at date of grant and expire five years from the date
of grant. The optionees, option prices, dates of grant and number of shares
subject to each option are determined by the Stock Option Committee of the Board
of Directors. At April 30, 1995, options with respect to 116,234 shares were
available for future grant under these plans.
<PAGE> 21
In 1987, the Company granted non-qualified stock options to certain
directors. These options are exercisable at a price not less than the fair value
of the stock at date of grant and expire ten years from the date of grant.
Transactions for stock options for the years ended April 30, 1995, 1994, and
1993 are as follows:
<TABLE>
<CAPTION>
Option price
per share
------------
Number
of Shares Low High Total
-------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at:
April 30, 1992 310,625 $ 7.00 $ 14.38 $ 3,467,461
Granted 61,250 7.75 8.53 496,666
Exercised (7,500) 7.00 (52,500)
Retired (48,375) 8.25 14.58 (571,665)
-------- ------------
April 30, 1993 316,000 7.00 14.58 3,339,962
Granted 118,500 6.19 7.75 797,688
Exercised (4,900) 8.00 (39,200)
Retired (156,600) 7.75 12.60 (1,831,700)
-------- ------------
April 30, 1994 273,000 6.19 12.60 2,266,750
Granted 114,500 4.50 6.88 691,250
Exercised -- --
Retired (40,500) 6.19 14.38 (434,463)
------------
April 30, 1995 347,000 4.50 12.75 $ 2,523,537
======== ============
Exercisable at
April 30,1995 174,200
========
</TABLE>
NOTE 16 - SEGMENT INFORMATION
The Company operates three segments:
COMMERCIAL/INDUSTRIAL - Design, engineering, and production of high
precision thermoplastic components and products for commercial and industrial
markets.
MEDICAL - Design, engineering, and production of high precision
thermoplastic components and products for the medical markets including:
diagnostic, eye care, medical and surgical device, and respiratory care markets.
COMPOUNDING - Formulating and compounding of engineering thermoplastic
polymers for sale in bulk to a wide range of markets. Certain of this segment's
operations are located in Singapore.
Intersegment sales are made on the same basis as sales to unaffiliated
customers. General corporate expenses have been allocated to segments where
appropriate.
<PAGE> 22
Segments of Business by Industry
<TABLE>
<CAPTION>
April 30,
------------------------------------------------
1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
Gross sales (including
intersegment sales)
Comm/Industrial $ 29,919,987 $ 29,721,917 $36,699,488
Medical 11,934,937 11,521,049 12,339,229
Compounding 44,149,292 35,630,082 32,771,308
-----------------------------------------------
Total 86,004,216 76,873,048 81,810,025
-----------------------------------------------
Less intersegment sales
Comm/Industrial (1,511,209) (1,209,247) (2,094,204)
Medical (272,998) -- --
Compounding (988,648) (1,783,571) (2,828,673)
-----------------------------------------------
Total (2,772,855) (2,992,818) (4,922,877)
-----------------------------------------------
Net Sales $ 83,231,361 $ 73,880,230 $76,887,148
Operating profit (loss) ===============================================
Comm/Industrial $ (3,127,328) $ (2,775,046) $ 766,060
Medical 94,844 244,738 (172,512)
Compounding 1,985,767 1,368,095 2,348,497
-----------------------------------------------
Total (1,046,717) (1,162,213) 2,942,045
Interest expense, net 1,181,618 673,600 620,844
Other expense -- -- 225,315
-----------------------------------------------
Earnings (loss) before
provision for
income taxes $ (2,228,335) $ (1,835,813) $ 2,095,886
===============================================
Identifiable assets
Comm/Industrial $ 31,379,508 $ 32,120,756 $28,089,853
Medical 7,217,104 7,130,042 7,173,654
Compounding 19,986,198 17,397,683 14,084,248
-----------------------------------------------
Total $ 58,582,810 $ 56,648,481 $49,347,755
===============================================
Capital expenditures
Comm/Industrial $ 2,137,916 $ 7,125,974 $ 1,735,945
Medical 307,080 118,629 827,785
Compounding 425,518 1,708,812 1,096,246
-----------------------------------------------
Total $ 2,870,514 $ 8,953,415 $ 3,659,976
===============================================
Depreciation and
amortization
Comm/Industrial $ 2,050,661 $ 1,911,158 $ 1,892,536
Medical 483,916 493,609 485,601
Compounding 915,670 739,826 736,415
-----------------------------------------------
Total $ 3,450,247 $ 3,144,593 $ 3,114,552
===============================================
</TABLE>
<PAGE> 23
Geographic Segment Information
<TABLE>
<CAPTION>
April 30,
---------------------------------------------
1995 1994 1993
Net Sales ---------------------------------------------
<S> <C> <C> <C>
United States $62,944,430 $57,846,482 $65,863,433
Foreign 20,286,931 16,033,748 11,023,715
---------------------------------------------
Total $83,231,361 73,880,230 $76,887,148
=============================================
Operating profit
United States $(2,335,586) $(2,118,565) $ 2,080,984
Foreign 1,288,869 956,352 861,061
---------------------------------------------
Total $(1,046,717) (1,162,213) 2,942,045
=============================================
Identifiable assets
United States $47,569,759 $46,550,520 $41,872,263
Foreign 11,013,051 10,097,961 7,475,492
---------------------------------------------
Total $58,582,810 $56,648,481 $49,347,755
=============================================
Capital expenditures
United States $ 2,480,507 $ 7,715,137 $ 2,788,040
Foreign 390,007 1,238,278 871,936
---------------------------------------------
Total $ 2,870,514 $ 8,953,415 $ 3,659,976
=============================================
Depreciation and
amortization
United States $ 2,951,085 $ 2,827,405 $ 2,785,977
Foreign 499,162 317,188 328,575
---------------------------------------------
Total $ 3,450,247 $ 3,144,593 $ 3,114,552
=============================================
</TABLE>
Sales to the Company's two largest customers, including separate
divisions of one customer, represented 15.2%, and 37.3% of the Company's net
sales in fiscal 1995, 25.6% and 34.1% in fiscal 1994, and 29.6% and 31.3% in
fiscal 1993.
NOTE 17 - RESTRUCTURING COSTS
Restructuring costs of $1,072,873 in fiscal 1994 consist of costs
associated with the closing of the Corona, California molding facility and the
relocation of certain personnel and equipment to Dayton, Nevada.
<PAGE> 24
CIMCO, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance at
beginning costs and Deductions end of
Classification of period expenses (write-offs) period
-------------- --------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
April 30, 1993
Allowance for doubtful accounts................................ $75,000 $ 12,000 $16,000 $ 71,000
===================================================
April 30, 1994
Allowance for doubtful accounts................................ $71,000 $ 12,000 $ 3,000 $ 80,000
===================================================
April 30, 1995
Allowance for doubtful accounts................................ $80,000 $131,000 $ 7,000 $204,000
===================================================
</TABLE>
<PAGE> 25
Report of Independent Certified Public Accountants
To the Board of Directors and Stockholders of CIMCO, INC.
We have audited the accompanying consolidated balance sheets of CIMCO,
INC. (a Delaware corporation) and Subsidiaries as of April 30, 1995 and 1994,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended April 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
CIMCO, INC. and Subsidiaries as of April 30, 1995 and 1994, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended April 30, 1995, in conformity with
generally accepted accounting principles.
We have also audited Schedule II of CIMCO, INC. and Subsidiaries for each
of the three years in the period ended April 30, 1995. In our opinion, that
schedule presents fairly, in all material respects, the information required to
be set forth therein.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has sustained losses and used cash in its
operations, has a deficit in working capital at April 30, 1995, and is in
default of certain debt covenants which could result in demands for immediate
payment of amounts due to its lenders, raising substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
GRANT THORNTON LLP
Irvine, California
June 27, 1995 (except for note 8, as to which the date is August 11, 1995)
<PAGE> 26
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA
1995 VS. 1994 - UNAUDITED
Year ended April 30, 1995
(In thousands, except per share data)
----------------------------------------------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $18,268 $20,276 $21,089 $23,598
Operating profit (loss) (640) (572) 111 54
Interest expense, net 250 278 335 318
Earnings (loss) before provision
(benefit) for income taxes (890) (850) (224) (264)
Provision (benefit) for income taxes (320) (308) (78) 26
------------------------------------------------
Net earnings (loss) $ (570) $ (542) $ (146) $ (290)
Earnings (loss) per common share $ (0.19) $ (0.18) $ (0.05) $ (0.10)
</TABLE>
<TABLE>
<CAPTION>
Year ended April 30, 1994
(In thousands, except per share data)
----------------------------------------------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $19,256 $18,632 $16,963 $19,029
Operating profit (loss) 169 69 (533) (867)
Interest expense, net 151 164 167 192
Earnings (loss) before provision
(benefit) for income taxes 18 (95) (700) (1,059)
Provision (benefit) for income taxes (89) (122) (261) (150)
------------------------------------------------
Net earnings (loss) $ 107 $ 27 $ (439) $ (909)
Earnings (loss) per common share $ 0.04 $ 0.01 $ (0.15) $ (0.31)
</TABLE>
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Form 10-K/A Report
to be signed on its behalf by the undersigned thereunto duly authorized.
August 15, 1995 CIMCO, Inc.
By: RUSSELL T. GILBERT
-------------------------------------------
Russell T. Gilbert
President and Chief Executive Officer
<PAGE> 28
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
------ ----------- ----
<S> <C> <C>
3.1 Registrant's Articles of Incorporation Presently in Effect (Incorporated by reference
from Exhibit 3.1 to the Company's Registration Statement on Form 8-B (File No. 0-16249)
filed on September 26, 1987 (the Form 8-B))
3.2 Registrant's Bylaws Presently in Effect (Incorporated by reference from Exhibit 3.2 to
the Form 8-B)
4.1 Rights Agreement dated as of December 5, 1992, between the Registrant and First
Interstate Bank of California, as Rights Agent (Incorporated by reference from Exhibit 1
to the Company's Current Report on Form 8-K as filed with the Securities and Exchange
Commission on December 16, 1992)
</TABLE>
<PAGE> 29
<TABLE>
<S> <C> <C>
10.1 CIMCO Employee Stock Ownership Plan (Incorporated by reference from Exhibit 10.1 to the
Company's Registration Statement on Form S-1 (File No. 33-4059) filed on April 2, 1986
(the "April 2, 1986 S-1"))
10.2 CIMCO 1982 Incentive Stock Option Plan (Incorporated by reference from Exhibit 10.2 to
the April 2, 1986 S-1)
10.3 CIMCO 1986 Incentive Stock Option Plan (Incorporated by reference from Exhibit 28.1 to
the Company's Registration Statement on Form S-8 (File No. 33-8628) filed on September
10, 1986)
10.4 Lease Agreement dated August 15, 1978 between Nordic Investment Company and Registrant
(Incorporated by reference from Exhibit 10.13 to the April 2, 1986 S-1)
10.5 Lease Agreement dated December 1, 1983 between John C. Rau, Ivan M. Rau and Registrant
(Incorporated by reference from Exhibit 10.2 to the April 2, 1986 S-1)
10.6 Lease Agreement dated December 16, 1974 between Fred M. Swenson and Russell T. Gilbert,
a general partnership d.b.a. Mesa Leasing Company and Registrant (Incorporated by
reference from Exhibit 10.5 to the April 2, 1986 S-1)
10.7 Lease Agreement dated December 7, 1984 between Mesa Leasing Company and Registrant
(Incorporated by reference from Exhibit 10.16 to the April 2, 1986 S-1)
10.8 Lease Agreement dated October 1, 1961 between Frederick M. Swenson and Russell T.
Gilbert (Incorporated by reference from Exhibit 10.21 to the April 2, 1986 S-1)
10.9 Instrument of Assignment and Amendment to Agreement of Partnership of Mesa Leasing
Company dated December 3, 1984 (Incorporated by reference from Exhibit 10.23 to the
April 2, 1986 S-1)
10.10 Lease Agreement dated September 1, 1987 between Henry Lee Harkey and Registrant
(Incorporated by reference from Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year ended April 30, 1988 (the "1988 Form 10-K"))
10.11 CIMCO, INC. 1988 Incentive Stock Option Plan (Incorporated by reference from Exhibit 4.1
to the Company's Registration on Form S-8 (File No. 33-26111) filed on December 12,
1988)
10.12 Lease Agreement dated November 2, 1990 between Gordon, Colwell and Ray, a partnership,
and Registrant (Incorporated by reference from Exhibit 10.22 to the Company's Annual
Report on Form 10-K for the year ended April 30, 1991 (the "1991 Form 10-K"))
10.13 Manufacturing Agreement dated February 28, 1990 between 3M Company and Registrant
(Incorporated by reference from Exhibit 10.15 to the Company's Annual Report on
Form 10-K for the year ended April 30, 1992 (the "1992 Form 10-K"))
</TABLE>
<PAGE> 30
<TABLE>
<S> <C> <C>
10.14 Renewal of Letter of Intent to Purchase Parts dated March 14, 1991 between Coast Foundry
& Manufacturing Company and Registrant (Incorporated by reference from Exhibit 10.17 to
the Company's 1992 Form 10-K)
10.15 February 3, 1992 Amendment to Lease dated September 1, 1987 between Henry Lee Harkey and
Registrant (Incorporated by reference from Exhibit 10.28 to the Company's 1992
Form 10-K)
10.16 CIMCO, INC. 1991 Stock Incentive Program (Incorporated by reference from Exhibit 10.29
to the Company's 1992 Form 10-K)
10.17 CIMCO and Subsidiaries 401(k) Plan (Incorporated by reference from Exhibit 4.1 to the
Company's Registration Statement on Form S-8 (File No. 33-40448) filed on May 8, 1991)
10.18 Industrial Land Purchase Agreement dated August 30, 1992 and Counter Offer dated October
12, 1992, between John Lawrence (Nevada) Inc. and Registrant (Incorporated by reference
from Exhibit 10.33 to the Company's Quarterly Report on Form 10-Q for the quarter ended
January 31, 1993)
10.19 Reimbursement Agreement dated September 1, 1993, between Wells Fargo Bank, National
Association and Registrant (Incorporated by reference from Exhibit 10.41 to the
Company's Quarterly Report on Form 10-Q for the quarter ended October 31, 1993)
10.20 Loan Agreement dated September 1, 1993, between Director of the State of Nevada,
Department of Commerce and Registrant (Incorporated by reference from Exhibit 10.42 to
the Company's Quarterly Report on Form 10-Q for the quarter ended October 31, 1993)
10.21 Tenancy Agreement dated March 11, 1994, between Jurong Town Corporation and Registrant
(Incorporated by reference from Exhibit 10.37 to the Company's Annual Report on
Form 10-K for the year ended April 30, 1994)
10.22 Credit Agreement dated February 1 1995, between Wells Fargo Bank, National Association
and Registrant (Incorporated by reference from Exhibit 10.41 to the Company's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1995)
21.1 Subsidiaries of the Registrant (Incorporated by reference from Exhibit 21.1 to the Company's
Annual Report on Form 10-K for the year ended April 30, 1995)
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K.
No current report on Form 8-K was filed during the fourth quarter of
the Registrant's fiscal year.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-END> APR-30-1995
<CASH> 802,887
<SECURITIES> 0
<RECEIVABLES> 16,655,712
<ALLOWANCES> 204,000
<INVENTORY> 11,258,890
<CURRENT-ASSETS> 29,682,621
<PP&E> 48,439,365
<DEPRECIATION> 22,570,610
<TOTAL-ASSETS> 58,582,810
<CURRENT-LIABILITIES> 31,138,451
<BONDS> 0
<COMMON> 29,605
0
0
<OTHER-SE> 25,285,754
<TOTAL-LIABILITY-AND-EQUITY> 58,582,810
<SALES> 83,231,361
<TOTAL-REVENUES> 83,231,361
<CGS> 70,814,886
<TOTAL-COSTS> 70,814,886
<OTHER-EXPENSES> 13,332,192
<LOSS-PROVISION> 131,000
<INTEREST-EXPENSE> 1,181,618
<INCOME-PRETAX> (2,228,335)
<INCOME-TAX> (680,000)
<INCOME-CONTINUING> (1,548,335)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,548,335)
<EPS-PRIMARY> (0.52)
<EPS-DILUTED> (0.52)
</TABLE>
