<PAGE>
FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 1, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 014699
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MARIETTA CORPORATION
(Exact name of registrant as specified in its charter)
New York 16-1074992
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37 Huntington Street, Cortland, New York 13045
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(Address of Principal Executive Offices) (Zip Code)
(607) 753-6746
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address, and former fiscal year
if changed since last report)
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 90 days.
YES X NO
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As of August 1, 1995 there were outstanding 3,596,049 shares of the
registrant's Common Stock, par value $.01 per share.
The purpose of this amendment is to amend Part I, Items 1 and 2
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MARIETTA CORPORATION
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FORM 10-Q
INDEX
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Statements of Operations
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MARIETTA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $18,498,429 $18,722,682 $49,181,859 $50,146,989
Cost of sales 14,841,710 13,124,352 38,029,412 36,112,435
----------- ----------- ----------- -----------
Gross profit 3,656,719 5,598,330 11,152,447 14,034,554
Selling, general, and
administrative expenses 4,511,051 3,907,151 11,814,680 11,162,691
----------- ----------- ----------- -----------
Operating income (loss) (854,332) 1,691,179 (662,233) 2,871,863
Other income (expense), net 115,554 (443,013) 258,140 (261,683)
----------- ----------- ----------- -----------
Income (loss) before income
taxes and cumulative effect
of a change in accounting
principle (738,778) 1,248,166 (404,093) 2,610,180
Income tax provision (benefit) (281,654) 462,592 (119,049) 1,021,315
----------- ----------- ----------- -----------
Income (loss) before
cumulative effect of a
change in accounting
principle (457,124) 785,574 (285,044) 1,588,865
Cumulative effect of a
change in accounting for
income taxes - - - 336,596
----------- ----------- ----------- -----------
Net income (loss) ($457,124) $785,574 ($285,044) $1,925,461
=========== =========== =========== ===========
Earnings (loss) per share:
Earnings (loss) before
cumulative effect of a
change in accounting
principle ($0.13) $0.22 ($0.08) $0.45
Cumulative effect of a
change in accounting for
income taxes - - - 0.09
----------- ----------- ----------- -----------
Earnings (loss) per share ($0.13) $0.22 ($0.08) $0.54
=========== =========== =========== ===========
Weighted average shares
and common shares
equivalents 3,613,813 3,587,859 3,607,710 3,581,815
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
MARIETTA CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS July 1, October 1,
1995 1994
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,407,978 $ 7,476,101
Accounts receivable, net 10,294,022 10,074,495
Inventories 14,828,223 11,926,566
Refundable income taxes 842,829 341,735
Other current assets 252,018 770,475
Deferred tax asset 481,805 467,083
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Total current assets 30,106,875 31,056,455
Property, plant and equipment, net 23,486,499 22,187,484
Restricted cash 2,600,000 2,300,000
Marketable securities 2,426,508 2,219,823
Excess of cost over net assets
acquired, net 3,230,131 3,327,901
Other assets 394,810 744,773
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Total assets $62,244,823 $61,836,436
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,367,843 $ 2,754,613
Accrued payroll 1,362,408 1,512,467
Accrued rebates 464,200 445,226
Accrued expenses 1,258,998 818,880
Current maturities of long-term debt 381,621 361,894
Income taxes payable 17,489 21,602
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Total current liabilities 6,852,559 5,914,682
Long-term debt, less current maturities 6,517,205 6,851,034
Convertible subordinated note 276,960 273,720
Deferred tax liability 2,538,250 2,522,406
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Total liabilities 16,184,974 15,561,842
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Shareholders' equity:
Preferred stock, $0.01 par value,
authorized 1,000,000 shares
Common stock, $0.01 par value,
authorized 10,000,000 shares,
issued 4,010,908 and 4,005,717
shares 40,109 40,057
Additional paid-in capital 36,762,049 36,768,483
Common stock notes receivable (607,500) (607,500)
Treasury stock, at cost (3,877,333) (3,923,993)
Retained earnings 14,524,448 14,750,930
Equity adjustment from foreign
currency translation (904,834) (753,383)
Marketable securities net unrealized
holding gain 122,910 -
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Total shareholders' equity 46,059,849 46,274,594
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Total liabilities and shareholder' equity $62,244,823 $61,836,436
=========== ===========
</TABLE>
See accompanying note to condensed, consolidated financial statements.
<PAGE>
MARIETTA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
July 1, July 2,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($ 285,044) $1,925,461
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Cumulative effect of a change in accounting
for income taxes 0 (336,596)
Depreciation and amortization 2,479,341 2,585,102
Provision for loss on accounts receivable 171,579 129,252
Provision for inventory obsolescence 482,579 498,503
Unrealized loss on marketable securities 0 141,175
Deferred compensation 0 97,140
Deferred income taxes (62,199) (564,091)
Loss on sale of equipment 18,783 8,120
Restricted cash (300,000) (300,000)
Other assets 186,722 (358,022)
Stock bonuses 61,040 74,610
Changes in working capital:
Accounts receivable (426,649) (1,295,596)
Inventories (3,358,441) (1,436,703)
Other current assets 516,550 585,972
Accounts payable and accrued expenses 927,080 (905,272)
Income taxes (504,714) 209,588
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Net cash provided by (used in) operating
activities (93,373) 1,058,643
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Cash flows from investing activities:
Capital expenditures (3,564,457) (2,008,948)
Sales of marketable securities 5,605 75,000
Purchases of marketable securities (26,060) 0
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Net cash used in investing activities (3,584,912) (1,933,948)
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Cash flows from financing activities:
Payments on long-term debt (314,103) (367,300)
Employee stock purchase plan 35,039 34,938
Purchase of treasury stock (55,800) 0
Payment of common stock note receivable 0 279,450
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Net cash used in financing activities (334,864) (52,912)
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Effect of foreign currency translation (54,974) 15,034
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Net decrease in cash and cash equivalents (4,068,123) (913,183)
Cash and cash equivalents, beginning of period 7,476,101 8,844,276
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Cash and cash equivalents, end of period $3,407,978 $7,931,093
========== ==========
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest $ 358,267 $ 334,442
Income taxes 466,168 1,047,107
</TABLE>
See accompanying notes to condensed, consolidated financial statements.
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MARIETTA CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The statements for the periods ended July 1, 1995 and July 2, 1994 are
unaudited. In the opinion of the Company the statements include all adjustments
necessary for a fair presentation of the results for the periods. The results
of operations for the period ended July 1, 1995 are not necessarily indicative
of the results of operations to be expected for the year ending September 30,
1995.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these financial statements be read in
conjunction with the audited financial statements and notes thereto for the year
ended October 1, 1994 included in the Company's Annual Report.
Note 2. Inventories
Inventories are stated at lower of cost or market. Cost is determined on the
first-in, first-out method. Inventories consisted of the following:
<TABLE>
<CAPTION>
July 1, October 1,
1995 1994
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<S> <C> <C>
Raw materials and $ 5,759,198 $ 4,082,839
supplies
Finished goods 9,064,025 7,843,727
----------- -----------
$14,823,223 $11,926,566
=========== ===========
</TABLE>
Note 3. Legal Proceedings
As previously reported, as a result of an embezzlement of funds by a former
financial officer and of other financial irregularities in Marietta's financial
statements discovered by the Company during 1991, the Securities and Exchange
Commission and the United States Attorney were each conducting independent
investigations. The investigation by the United States Attorney is concluded;
however, the investigation by the Securities and Exchange Commission is
continuing.
As previously reported, an action has been commenced by a former owner of
Marietta American, Inc. (formerly American Soap Company, Inc.), and by
California Soap, Inc. and two of its shareholders. This complaint alleges,
among other things, misrepresentations and omissions in connection with the
Company's acquisition of Marietta American, Inc., misrepresentations in and
omissions from various financial and other statements made by the Company,
breaches of contract and other violations of federal and state laws. This
action seeks an unspecified amount of damages. No assurance can be given as to
the outcome of this action, which could have a material adverse effect on the
Company.
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
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Quarter ended July 1, 1995 compared with the quarter ended July 2, 1994
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Net sales decreased in the quarter ended July 1, 1995 by 1.2% to $18,498,000
from $18,723,000 in the prior year's third quarter. The decrease of $225,000
consisted of a decrease of approximately $1,498,000 in custom packaging sales
partially offset by an increase of approximately $1,273,000 in guest amenity
sales. The increase in guest amenity sales was the result of increased sales
volume. Custom packaging sales continued to be affected by delays in receiving
customer-supplied materials which in turn caused delays in shipment of finished
products by Marietta.
For the third quarter of fiscal 1995 the Company's gross profit decreased to
19.8% of sales from 29.9% during the same period of fiscal 1994. Material costs
for guest amenities increased significantly in the third quarter of fiscal 1995
as compared to 1994. This increase was primarily attributable to higher than
anticipated component costs for tallow, corrugate, bottles and packaging film.
In order to offset the resulting decline in gross profit, a price increase will
become effective on August 15, 1995. The continued delays in receiving
customer-supplied materials for custom packaging caused delays in shipment of
finished products and resulted in reduced overhead absorption. In addition,
changes in the product mix negatively impacted gross profits.
Selling, general and administrative expenses, as a percentage of sales,
increased to 24.4% in the current quarter from 20.9% in the third quarter of
fiscal 1994. During the third quarter of 1995 the Company expensed $375,000 in
respect of the fee to Goldman, Sachs & Co. in connection with its retention as
the Company's financial advisor. In addition, legal charges increased $284,000
over the prior year's quarter, primarily in connection with the matters relating
to the unsolicited proposal to acquire the Company made by Dickstein Partners.
Other income (expense), net represents the netting of interest expense,
investment income and other miscellaneous income and expense. For the third
quarter of fiscal 1995 interest and other miscellaneous expense was $146,000
compared to $118,000 in the third quarter of fiscal 1994. This increase was due
to slightly higher interest rates and to an increase in miscellaneous expenses.
Investment income was $186,000 in the third quarter of fiscal 1995 as compared
to $117,000 in 1994. This increase was due to higher rates of return and to a
gain of $21,000 on the sale of marketable securities. Other miscellaneous
income, which is primarily profit on the sale of inventory components was
approximately $76,000 in 1995 compared to $30,000 in the third quarter of 1994.
The effective tax benefit for federal, state and foreign income taxes was 38.1%
in the third quarter of fiscal 1995 while the effective tax rate was 37.1% in
the third quarter of fiscal 1994.
Nine months ended July 1, 1995 compared with the nine months ended July 2, 1994
- -------------------------------------------------------------------------------
Net sales for the nine months ended July 1, 1995 decreased by 1.9% to
$49,182,000 from $50,147,000 in the prior year. The decrease of $965,000
consisted of a decrease in custom packaging sales of $3,447,000 partially offset
by an increase in guest amenity sales of $2,482,000. The increase in guest
amenity sales was the result of increased sales volume. Custom packaging sales
continue to be affected by delays in receiving customer-supplied materials which
in turn caused a delay in shipment of finished products by Marietta.
In the first nine months of fiscal 1995 the Company's gross profit decreased to
22.7% of sales from 28.0% during the same period of fiscal 1994. Higher
material costs and changes in product mix in the second and third quarters of
fiscal 1995 negatively impacted gross margins. In addition, during the second
quarter of fiscal 1995 the Company experienced a mechanical breakdown of certain
of its soap manufacturing equipment which caused an interruption in its ability
to manufacture soap. This necessitated the purchase of soap
<PAGE>
chips (the raw materials used in making soap bars) on the open market at higher
costs to the Company. During fiscal 1995, the Company made capital improvements
which it believes will improve the performance of its soap manufacturing
equipment. Also, the lower than anticipated custom packaging sales
continued to result in a reduced capability to cover fixed overhead costs.
Selling, general and administrative expense, as a percent of sales, increased to
24.0% of sales in the first nine months of 1995 from 22.3% in the same period
during 1994. During 1995 the Company expensed $625,000 in respect of the fee to
Goldman, Sachs & Co. in connection with its retention as the Company's financial
advisor. As a result of the conviction of the Company's former Chief Executive
Officer, the Company also reversed $310,000 of legal expenses which previously
had been accrued in connection with defense costs incurred by such officer. In
addition, legal charges increased $505,000 over the prior year. This increase
was attributable primarily to the matters relating to the unsolicited proposal
to acquire the Company made by Dickstein Partners.
For the first nine months of 1995 interest and other expense was $465,000
compared to $333,000 in the same period last year. This increase was due to an
increase in rates over last year. Investment income was $521,000 in the first
nine months of fiscal 1995 as compared to $378,000 in 1994. This increase was
due to higher rates of return on both restricted cash and Canadian funds
combined with larger invested balances in these areas. Other miscellaneous
income of approximately $203,000 in the first nine months of fiscal 1995 was
comparable to miscellaneous income of approximately $165,000 in the same period
during 1994.
Marietta's effective tax benefit for federal, state and foreign income taxes was
29.5% in the first nine months of 1995 compared to an effective tax rate of
39.1% for 1994. Both were impacted by state and provincial francise/equity
taxes.
Liquidity and Capital Resources
- -------------------------------
The Company's working capital decreased to $23,254,000 at July 1, 1995 from
$25,142,000 at October 1, 1994. Cash used by operating activities for the first
nine months of 1995 was $30,000 compared to $917,000 being provided by operating
activities for the first nine months of 1994. The decrease in cash provided by
operating activities was primarily the result of the net loss and a significant
increase in inventories partially offset by an increase in accounts payable and
accrued expenses. The increase in inventory during the first nine months of
fiscal 1995 was attributable principally to two factors. First, the Company's
inventory at July 1, 1995 included purchases of packaging film which in fiscal
1994 was supplied by certain major customers. In addition, the Company increased
its inventory to meet anticipated demand for the Company's guest amenity
products. The increase of cash used in investing activities in 1995 as compared
to 1994 was caused primarily by an increase in capital expenditures.
The Company has a $12,000,000 Revolving Credit Facility, all of which was
available as of July 1, 1995. The revolving credit portion of the facility
expires in October 1996, and thereafter the outstanding balance is payable in
equal quarterly installments over a four year period. Borrowings under the
facility bear interest at the prime rate or, if elected by the Company, at an
interest rate 1.1% above the LIBOR rate.
Management believes that the Company is in sound financial condition as
evidenced by its total shareholders' equity of $46,060,000 versus its long-term
debt of $7,176,000. Management believes that its current assets plus funds
provided by operations and the Company's existing line of credit and debt
capacity will be adequate to meet its anticipated capital and short-term needs.
Management also believes that inflation has not had a material effect on its
business. It is the Company's practice to review on an on-going basis the
marketability of its inventory and the Company makes provision for inventory
obsolescence as it deems appropriate.
Shareholders' equity was affected by a reduction in the Canadian exchange rate
and an increase in the fair value of certain long-term securities. The Company
experienced a decline in the equity adjustment from foreign currency translation
of $151,000 as a result of a reduction in the Canadian exchange rate from 74.49%
at October 1, 1994 to 72.87% at July 1, 1995, offset by an increase in
shareholders' equity of $123,000 due to the increase in fair value of certain
long-term marketable securities.
In fiscal 1995 the Company anticipates making expenditures for capital
improvements aggregating approximately $6,000,000. All of such expenditures
will be financed from the Company's working capital. To date, during fiscal 1995
the Company has authorized expenditures of approximately $5,790,000. The amount
expended by the Company during the first nine months of fiscal 1995 in respect
of capital expenditures was $3,560,000. Such expenditures were incurred
primarily to finance the expansion of the Company's warehouse facility in Olive
Branch, to upgrade the Company's bottling equipment and to upgrade the Company's
soap manufacturing equipment.
<PAGE>
The Company is unable to determine the impact upon the Company's financial
condition of an adverse determination, if any, in any action, proceeding or
investigation arising out of the events discussed in Note 3 of the Notes to
Financial Statements.
Seasonality
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The Company's guest amenity business is subject to some fluctuation in results
reflecting the seasonal nature of the travel and lodging industry. As a
consequence the revenues from the Company's guest amenity business in its third
and fourth fiscal quarters tend to be slightly higher than during the rest of
the year.
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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.
MARIETTA CORPORATION
Date: December 8, 1995
By: /s/ Stephen D. Tannen
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Stephen D. Tannen
President and Chief Executive Officer
By: /s/ Philip A. Shager
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Philip A. Shager
Vice President, Chief Accounting Officer
and Treasurer
