SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission File No. 0-27958
FLANDERS CORPORATION
(Exact name of registrant as specified in its charter)
North Carolina 13-3368271
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization.)
531 Flanders Filters Road, Washington, North Carolina 27889
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (919) 946-8081
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
18,016,103 shares common stock, par value $.001, as of August 13, 1997
(Title of Class)
<PAGE>
FLANDERS CORPORATION
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1997
PART I - FINANCIAL INFORMATION Page
Item 1 -
Financial Statements
Consolidated Condensed Balance Sheet for June 30, 1997
and December 31, 1996 2
Consolidated Condensed Statements of Operations for
the three months and six months ended
June 30, 1997 and 1996 4
Consolidated Condensed Statements of Shareholders'
Equity for the six months ended June 30, 1997 and
the year ended December 31, 1996 5
Consolidated Condensed Statements of Cash Flows for
the three months and six months ended
June 30, 1997 and 1996 6
Notes to Consolidated Condensed Financial Statements 8
Item 2 -
Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 18
Item 2 - Changes in Securities 18
Item 3 - Defaults Upon Senior Securities 18
Item 4 - Submission of Matters to a Vote of Security Holders 18
Item 5 - Other Information 18
Item 6 - Exhibits and Reports on Form 8-K 18
SIGNATURES 19
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FLANDERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
- ------------------------------------------------- ------------- -------------
(unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 2,340,535 $ 2,390,411
Restricted cash (See Note 3) - 8,000,005
Short-term investments 294,409 -
Receivables:
Trade, less allowance for doubtful accounts
of $346,480 at June 30, 1997 and December
31, 1996 20,843,497 17,906,879
Related party 1,812,039 905,930
Other 405,729 786,811
Inventories (See Note 2) 13,541,869 9,894,707
Deferred taxes 962,000 920,520
Other current assets 1,090,305 687,524
------------- -------------
Total current assets 41,290,383 41,492,787
------------- -------------
Other assets 443,373 909,307
Intangible assets, net 13,721,111 14,016,691
Property and equipment, net of accumulated
depreciation and amortization of $8,296,519
at June 30, 1997; $6,866,817 at
December 31, 1996 35,349,324 30,099,626
------------- -------------
$ 90,804,191 $ 86,518,411
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------- ------------- -------------
Current liabilities
Current maturities of long-term debt $ 593,724 $ 4,379,973
Accounts payable 13,916,799 11,002,587
Accrued expenses and other current liabilities 6,802,947 3,540,110
------------- -------------
Total current liabilities 21,313,470 18,922,670
------------- -------------
Long-term debt, less current maturities 9,255,864 25,776,295
Convertible debt 3,200,000 4,000,000
Deferred income taxes 4,370,000 4,466,676
Committed capital (See Note 3) - 8,000,005
Commitments and contingencies
Stockholders' equity
Preferred stock, no par value, 10,000,000
shares authorized; none issued - -
Common stock, $.001 par value; 50,000,000
shares authorized; issued and outstanding:
18,016,103 at June 30, 1997; 15,951,548
at December 31, 1996 18,016 15,952
Additional paid-in capital 41,609,338 16,964,713
Retained earnings 11,037,503 8,372,100
------------- -------------
Total stockholders' equity 52,664,857 25,352,765
------------- -------------
$ 90,804,191 $ 86,518,411
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
Page 3
<PAGE>
FLANDERS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months ended Six Months ended
June 30, June 30,
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $33,383,196 $14,402,607 $61,250,037 $26,241,260
Cost of goods sold 24,443,135 10,814,485 45,306,412 19,773,754
------------ ------------ ------------ ------------
Gross Profit 8,940,061 3,588,122 15,943,625 6,467,506
------------ ------------ ------------ ------------
Operating expenses 6,110,787 2,576,142 11,853,390 4,548,468
------------ ------------ ------------ ------------
Operating income 2,829,274 1,011,980 4,090,235 1,919,038
------------ ------------ ------------ ------------
Nonoperating income (expense):
Other income (expense) 200,494 310,160 535,862 392,375
Interest expense (104,628) (83,035) (450,693) (145,568)
------------ ------------ ------------ ------------
95,866 227,125 85,169 246,807
------------ ------------ ------------ ------------
Income before income taxes 2,925,140 1,239,105 4,175,404 2,165,845
Income taxes 1,055,000 435,000 1,510,000 817,876
------------ ------------ ------------ ------------
Net income $ 1,870,140 $ 804,105 $ 2,665,404 $ 1,347,969
============ ============ ============ ============
Earnings per weighted average common
and common equivalent share
outstanding:
Primary $ 0.09 $ 0.05 $ 0.12 $ 0.09
============ ============ ============ ============
Fully diluted $ 0.08 $ 0.05 $ 0.12 $ 0.08
============ ============ ============ ============
Weighted average common and common
equivalent shares outstanding:
Primary 21,488,804 16,553,915 21,680,950 15,252,025
============ ============ ============ ============
Fully diluted 22,243,394 17,157,171 22,435,540 15,860,484
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
Page 4
<PAGE>
FLANDERS CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock Capital Earnings
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1996 $ 11,434 $ 3,418,671 $ 4,778,312
Issuance of 3,371,204 shares of common stock
related to the Private Offerings 3,372 18,760,986 -
Less committed capital (Note 3) - (8,000,005) -
Issuance of 1,036,885 shares of common stock
related to the Acquisitions 1,037 (1,037) -
Valuation and release from escrow of 282,295
shares of common stock related to the
Acquisitions - 2,681,803 -
Issuance of 96,280 shares of common stock
upon exercise of warrants 96 240,604 -
Issuance of 13,200 shares of common stock
upon exercise of options 13 32,987 -
Income tax benefit from stock options
exercised - 37,433 -
Fair value of warrants issued with
convertible debt - 33,971 -
Receivables secured by stock related to
exercise of warrants - (240,700) -
Net income - - 3,593,788
------------ ------------ ------------
Balance, December 31, 1996 15,952 16,964,713 8,372,100
Issuance of 102,555 shares of common stock
upon conversion of convertible debt 102 817,174 -
Release of committed capital (Note 3) - 8,000,005 -
Issuance of 1,897,000 shares of common stock 1,897 15,857,511 -
Issuance of 65,000 shares of common stock
upon exercise of options 65 162,435 -
Receivables secured by stock related to
exercise of warrants - (192,500) -
Net income (unaudited) - - 2,665,404
------------ ------------ ------------
Balance, June 30, 1997 (unaudited) $ 18,016 $41,609,338 $11,037,504
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
Page 5
<PAGE>
FLANDERS CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES $ 1,339,638 $(1,184,116) $ 3,207,937 $(2,148,729)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of assets from BB&D & IP (403,000) - (403,000) -
Acquisitions, net of cash received - (6,707,955) - (6,707,955)
Purchase of equipment (4,938,763) (287,247) (6,679,400) (719,279)
------------ ------------ ------------ ------------
NET CASH (USED) BY
INVESTING ACTIVITIES (5,341,763) (6,995,202) (7,082,400) (7,427,234)
CASH FLOWS FROM FINANCING ACTIVITIES
Release of restricted cash from escrow - - 8,000,005 -
Short-term investments (181) - 294,409 -
Net change in long-term borrowings 3,478,937 1,054,554 (20,351,282) (1,413,708)
Proceeds from issuance of common stock 236,205 7,339,573 15,881,455 8,421,892
------------ ------------ ------------ ------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 3,714,961 8,394,127 3,824,587 7,008,184
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (287,164) 214,809 (49,876) (2,567,779)
------------ ------------ ------------ ------------
CASH AT BEGINNING OF PERIOD 2,627,699 191,209 2,390,411 2,973,797
CASH AT END OF PERIOD $ 2,340,535 $ 406,018 $ 2,340,535 $ 406,018
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid for income taxes $ 1,605,354 $ 270,000 $ 2,055,000 $ 754,033
============ ============ ============ ============
Cash payments for interest $ 754,681 $ 83,035 $ 952,827 $ 145,568
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURES OF NONCASH
FINANCING ACTIVITIES
Conversion of debentures plus accumulated
interest into common stock $ - $ - $ 834,798 $ -
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
Page 6
<PAGE>
FLANDERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Interim Financial Statements
Nature of business: Flanders Corporation (the "Company") is a leading
supplier of a broad range of air filtration products, including (i) High
Efficiency Particulate Air ("HEPA") filters, typically with at least 99.97%
efficiency and absolute isolation barriers ("Absolute Isolation Barriers") for
the absolute control and containment of contaminants and toxic gases in
certain manufacturing processes, (ii) filters for individual and commercial
use, which fall under specifications which are categorized by efficiency
ratings established by the American Society of Heating, Refrigeration and Air
Conditioning Engineers ("ASHRAE"), and (iii) low cost filters with efficiency
ratings below 30% sold typically off-the-shelf for standard residential and
commercial furnace and air conditioning applications. The Company's air
filtration products are utilized by many industries, including those
associated with commercial and residential heating, ventilation and air
conditioning systems (commonly known as "HVAC" systems), semiconductor
manufacturing, ultra-pure materials, biotechnology, pharmaceuticals,
synthetics, nuclear power and nuclear materials processing. The Company also
designs and manufactures its own production equipment to allow for highly
automated manufacturing of these products. Furthermore, the Company produces
glass-based fiber media for many of its products to maintain control over the
quality and composition of such media.
The Company is positioning itself to offer to its customers a full range of
air filtration products. Although the Company historically has specialized in
HEPA and medium efficiency filters and equipment, the Company implemented a
strategy of growth by acquisition in December 1995. As a result, in 1996, the
Company expanded its product line through the purchase of three other
companies: Charcoal Service Corporation ("CSC"), which specializes in
charcoal filtration systems for the removal of gaseous contaminants, Air Seal
Filter Housings, Inc. ("Air Seal"), which specializes in filter housings and
customized industrial HVAC equipment, and Precisionaire, Inc.
("Precisionaire"), which specializes in the manufacture and sale of filter
products ranging from mid-range ASHRAE grade filters through low cost
residential furnace filters. Additionally, during the first six months of
1997, the Company acquired the majority of the assets of Intermountain Paint
and Sub-Assembly, Inc., and B B & D Manufacturing, Inc. (collectively "BB&D")
and placed them in a newly formed, majority owned subsidiary, Airseal West,
Inc. ("Airseal West").
Interim financial statements: The interim financial statements presented
herein are unaudited and have been prepared in accordance with the
instructions to Form 10-Q. These statements should be read in conjunction
with financial statements and notes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1996. The accompanying
financial statements have not been examined by independent accountants in
accordance with generally accepted auditing standards, but in the opinion of
management such financial statements include all adjustments (consisting only
of normal recurring adjustments) necessary to summarize fairly the Company's
financial position, results of operations, and cash flows. The results of
operations and cash flows for the three month and six month periods ended June
30, 1997 may not be indicative of the results that may be expected for the
year ending December 31, 1997.
Earnings per Common Share: The computation of earnings per common share and
common share equivalent is done according to the treasury method, which is
based upon the weighted average number of common shares outstanding during the
period. Earnings per common and common equivalent share include the effect of
the stock options and warrants mentioned in Note 5 as if the options and
warrants had been exercised at the date the options and warrants were granted.
The number of common shares outstanding was increased by the number of shares
issuable under the stock options and warrants and this theoretical increase in
the number of common shares was reduced by the number of common shares which
are assumed to have been repurchased with the applicable portion of the
proceeds from the exercise of the options and warrants.
Page 7
<PAGE>
FLANDERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Interim Financial Statements - Continued
Primary earnings per common and common equivalent share for the three month
and six month periods ended June 30, 1997 and 1996 were calculated as follows:
<TABLE>
<CAPTION>
Three Months ended Six Months ended
June 30, June 30,
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income $ 1,870,140 $ 804,105 $ 2,665,404 $ 1,347,969
Weighted average shares outstanding 17,189,106 13,149,924 16,958,023 12,517,226
Add: exercise of weighted average
warrants and options reduced by the
number of shares purchased with
proceeds 4,299,698 3,403,991 4,722,927 2,734,799
------------ ------------ ------------ ------------
Adjusted weighted average shares
outstanding 21,488,804 16,553,915 21,680,950 15,252,025
============ ============ ============ ============
Net income per common share $ 0.09 $ 0.05 $ 0.12 $ 0.09
============ ============ ============ ============
</TABLE>
Fully diluted earnings per common and common equivalent share for the three
month and six month periods ended June 30, 1997 and 1996 were calculated as
follows:
<TABLE>
<CAPTION>
Three Months ended Six Months ended
June 30, June 30,
-------------------------- --------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income $ 1,870,140 $ 804,105 $ 2,665,404 $ 1,347,969
Weighted average shares outstanding 17,943,696 13,210,364 17,712,613 12,547,446
Add: exercise of weighted average
warrants and options reduced by the
number of shares purchased with
proceeds 4,299,698 3,946,807 4,722,927 3,313,038
------------ ------------ ------------ ------------
Adjusted weighted average shares
outstanding 22,243,394 17,157,171 22,435,540 15,860,484
============ ============ ============ ============
Net income per common share $ 0.08 $ 0.05 $ 0.12 $ 0.08
============ ============ ============ ============
</TABLE>
Note 2. Inventories
Inventories consist of the following at June 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
6/30/97 12/31/96
------------- --------------
<S> <C> <C>
Finished goods $ 4,070,188 $ 3,321,713
Work in progress 952,313 1,490,438
Raw materials 8,564,368 5,127,556
------------- --------------
13,586,869 9,939,707
Less allowance for obsolete raw materials 45,000 45,000
------------- --------------
$ 13,541,869 $ 9,894,707
============= ==============
</TABLE>
Page 8
<PAGE>
FLANDERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Capital Transactions
Secondary offering. On January 22, 1997, the Company completed an underwritten
public secondary offering dated January 16, 1997, of 1,600,000 shares of the
Company's common stock at $9.50 per share (the "Offering"). Net proceeds to the
Company after deducting commissions and expenses from the Offering totaling
approximately $1,720,000 amounted to $13,480,000. The Company utilized the
entire amount of the proceeds from the Offering to pay down long-term and
convertible debt. On January 31, 1997, the Underwriters of the Offering
exercised their over-allotment option to purchase 240,000 shares of the
Company's common stock at $9.50 per share. Net proceeds to the Company after
deducting commissions and expenses from the over-allotment totaling
approximately $164,000 amounted to $2,116,000, which were also used to pay down
long-term debt. Net proceeds from the Offering, including the over-allotment,
were $15,596,000.
Restricted cash. On January 6, 1997, a Registration Statement under the
Securities Act of 1933 was declared effective registering certain shares,
including those shares purchased by two investors through a private placement
in September and October 1996. Due to the effectiveness of the Registration
Statement, the potential right of rescission held by those two investors
expired, and $8,000,005 of cash which had been held in escrow was released to
the Company and used to pay down long-term debt.
Note 4. Stock Options and Warrants
The following table summarizes the activity related to the Company's stock
options and warrants for the six months ended June 30, 1997 and the year ended
December 31, 1996:
<TABLE>
<CAPTION>
Weighted Average
Exercise Price Exercise Price
Stock per Share per Share
Warrants Options Warrants Options Warrants Options
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1, 1996 61,280 2,500,000 $ 2.50 $ 1.00 $ 2.50 $ 1.00
Granted 97,712 5,136,520 2.50 - 9.63 2.50 - 9.50 5.29 4.61
Exercised 96,280 13,200 2.50 2.50 2.50 2.50
Canceled or expired 37,712 -
---------------------
Outstanding at December 31, 1996 25,000 7,623,320 9.63 1.00 - 9.50 9.63 3.43
Granted 150,256 95,100 8.11 -14.73 7.13 14.28 7.13
Exercised - 65,000 2.50 2.50
Canceled or expired - -
---------------------
Outstanding at June 30, 1997 175,256 7,653,420 $ 8.11 -14.73 $ 1.00 - 9.50 $ 13.61 $ 3.48
=====================
Exercisable at June 30, 1997 35,256 7,558,320 $ 8.11 - 9.63 $ 1.00 - 9.50 $ 9.19 $ 3.43
=====================
</TABLE>
The warrants expire at various periods through January 2002. The options
expire at various times through February 2006.
Page 9
<PAGE>
FLANDERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Litigation
The Company recently purchased property in Momence, County of Kankakee,
Illinois ("Illinois Property") for a new Precisionaire facility. In
connection with such purchase, the Company agreed to assume all risk of
environmental liability for past, present or future conditions on the Illinois
Property except for any liability related to ground water environmental
problems. The Illinois Property had certain environmental problems which
required remediation under federal and Illinois law. The seller of the
Illinois Property has worked extensively with the Illinois Environmental
Protection Agency ("IEPA") with regard to the environmental matters, and the
Company has completed Phase I and Phase II environmental surveys with respect
to the property and it appears that the environmental matters have been
resolved, except for certain monitoring procedures required by the IEPA.
However, resolution of state issues has no effect on any potential federal or
common law claims, and there can be no assurance that such claims will not be
made. There were no material additions to, or changes in status of, any
ongoing, threatened or pending legal proceedings during the three months ended
June 30, 1997, other than the liabilities assumed in connection with the
purchase of the Illinois Property.
From time to time, the Company is a party to various legal proceedings
incidental to its business. None of these proceedings are material to the
conduct of the Company's business, operations or financial condition.
Page 10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussions should be read in conjunction with the Company's
Consolidated Financial Statements and the notes thereto presented in Item 1.
The information set forth in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" includes forward-looking
statements that involve risks and uncertainties. Many factors could cause
actual results to differ materially from those contained in the forward-
looking statements below. See "Outlook".
Overview
The Company is a full-range air filtration product company engaged in
designing, manufacturing and marketing high performance air filtration
products and certain related products and services. The Company focuses on
those products with high replacement potential. The Company designs and
manufactures its own production equipment and also produces glass-based media
for many of its products. During 1996 and the first quarter of 1997, the
Company experienced significant growth from the acquisition of other air
filtration related companies. The Company acquired CSC as of May 31, 1996,
Air Seal on June 15, 1996, and Precisionaire as of September 23, 1996. The
acquisitions of CSC, Air Seal and Precisionaire are sometimes referred to
herein as the "Acquisitions." CSC specializes in the manufacture of high-end
charcoal filters and containment environments, and has a service arm. Air Seal
produces customized mid-range housings and HVAC equipment. Precisionaire
manufactures air filters and related products for commercial and residential
air conditioning and heating systems. The Company also established two new
subsidiaries in 1996: Flanders International, Ltd. ("FIL") and Airpure
Products West, Inc. ("Airpure West"). FIL is a Singapore-based sales and
marketing subsidiary marketing the Company's products to customers in the
Pacific Rim. In 1997, Airpure West's operations were consolidated with
Precisionaire at Precisionaire's newly-opened Henderson, Nevada manufacturing
and distribution facility. As of March 1997, the Company acquired the
majority of the assets of BB&D and placed them in a newly formed, majority
owned subsidiary, Airseal West. Airseal West sells, manufactures and
distributes specialty and standard housings for air filtration and HVAC
systems in the western United States. The results of operations for the
acquired businesses are included in the Company's financial statements only
from the applicable date of acquisition. As a result, the Company's
historical results of operations for the periods presented should be evaluated
specifically in the context of the Acquisitions. Additionally, the historical
results of operations do not fully reflect the operating efficiencies and
improvements that are expected to be achieved by integrating and upgrading the
acquired businesses into the Company's operations. There can be no guarantee
that the Company will be able to achieve these objectives and gains in
efficiency. The Company believes the Acquisitions will have a positive impact
on its future results of operations.
Results of Operations for Three Months Ended June 30, 1997 Compared to June
30, 1996
The following table summarizes the Company's results of operations as a
percentage of net sales for the three months ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1997 1996
---------------- ----------------
(000's omitted)
<S> <C> <C> <C> <C>
Net sales 33,383 100.0% 14,403 100.0%
Gross profit 8,940 26.8 3,588 24.9
Operating expenses 6,111 18.3 2,576 17.9
Operating income 2,829 8.5 1,012 7.0
Income before income taxes 2,925 8.8 1,239 8.6
Income taxes 1,055 3.2 435 3.0
Net income 1,870 5.6 804 5.6
</TABLE>
Page 11
<PAGE>
Net sales: Net sales for the three months ended June 30, 1997 increased by
$18,980,000, or 132%, to $33,383,000 from $14,403,000 for the three months
ended June 30, 1996. The increase was primarily due to the Acquisitions,
which contributed approximately $21,098,000 of net sales. Comparable sales
from the Company's business at June 30, 1996, which included the operations of
Flanders Filters, Inc. ("FFI"), CSC and Flanders Airpure Products, Inc.
("Airpure") were still down approximately $2,118,000, or 14.7%, compared to
the prior year quarter. The Company attributes this decrease to a cyclical
slowdown in capital spending for new semiconductor facilities. To take
advantage of this excess capacity, the Company has established two separate
divisions: (i) the Absolute Isolation Division to concentrate on Absolute
Isolation Barriers for the absolute control and containment of contaminants
and toxic gases in certain manufacturing processes, including pharmaceutical
production; and (ii) the Integrated Environmental Control Division to focus on
indoor air quality ("IAQ") diagnosis and solutions for commercial and public
buildings. See "Outlook".
Gross Profit: Gross profit for the three months ended June 30, 1997 increased
by $5,352,000, or 149%, to $8,940,000, which represented 26.8% of net sales,
from $3,588,000, which represented 24.9% of net sales, for the three months
ended June 30, 1996. The primary reasons for the increase in gross profit
margin were improvements in operating efficiency associated with focusing each
manufacturing facility on a particular type of product, which reduced direct
costs in the following areas: (i) reduced down time due to switching lines
between products; (ii) eliminated individual lot inventory tracking at the
Company's Washington, NC facility required by regulations governing the
manufacture of nuclear and biological containment environments by moving all
containment environment manufacturing operations to CSC's plant in Bath, NC;
(iii) the automation of additional production lines at several Precisionaire
facilities; and (iv) reduced training and coordination time at each location
by reducing the number of certification and training hours required of
employees by producing fewer types of products at each facility. Other
factors affecting gross profit margins included lower profit margins from
newly started subsidiaries and differences in timing of orders and product mix
during the respective periods.
Operating expenses: Operating expenses for the three months ended June 30, 1997
increased by $3,535,000, or 137%, to $6,111,000, representing 18.3% of net
sales, from $2,576,000, representing 17.9% of net sales, for the three months
ended June 30, 1996. The primary reason for the overall increase in operating
expenses was the Acquisitions, which accounted for an increase of $3,736,000
compared to the prior year quarter. Excluding the Acquisitions, operating
expenses for the three months ended June 30, 1997 decreased by $201,000, or
7.8%, primarily due to operating efficiencies gained as a result of
consolidating certain overhead functions between the original businesses and the
Acquisitions. See "Outlook." Operating expenses increased as a percentage of net
sales compared to the prior year quarter, primarily because FFI's sales volume
was down compared to the prior year quarter while its operating expenses
remained relatively flat.
Net income: Net income for the three months ended June 30, 1997 increased by
$1,066,000, or 133%, to $1,870,000, or $0.09 per share ($0.08 fully diluted),
from $804,000, or $0.05 per share for the three months ended June 30, 1996.
As a result of capital raising activities, including the sale of approximately
3,176,000 shares of common stock during the twelve months ended June 30, 1997,
the Company's average primary and fully diluted shares outstanding increased
to 21,488,804 and 22,243,394 shares outstanding, respectively, for the three
months ended June 30, 1997, up from 16,553,915 and 17,157,171 shares,
respectively, for the three months ended June 30, 1996.
Page 12
<PAGE>
Results of Operations for Six Months Ended June 30, 1997 Compared to June 30,
1996
The following table summarizes the Company's results of operations as a
percentage of net sales for the six months ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
---------------- ----------------
(000's omitted)
<S> <C> <C> <C> <C>
Net sales 61,250 100.0% 26,241 100.0%
Gross profit 15,944 26.0 6,468 24.6
Operating expenses 11,853 19.4 4,548 17.3
Operating income 4,090 6.7 1,919 7.3
Income before income taxes 4,175 6.8 2,166 8.3
Income taxes 1,510 2.5 818 3.1
Net income 2,665 4.4 1,348 5.1
</TABLE>
Net sales: Net sales for the six months ended June 30, 1997 increased by
$35,009,000, or 133%, to $61,250,000 from $26,241,000 for the six months ended
June 30, 1996. The increase was primarily due to the Acquisitions and
establishment of new subsidiaries, which contributed approximately $40,681,000
of net sales. Comparable sales from the Company's business at June 30, 1996,
which included the operations of Flanders Filters, Inc. ("FFI"), CSC and
Flanders Airpure Products, Inc. ("Airpure") were still down approximately
$5,695,000, or 21.9%, compared to the prior year quarter. The Company
attributes this decrease to a cyclical slowdown in capital spending for new
semiconductor facilities. To take advantage of this excess capacity, the
Company has established two separate divisions: : (i) the Absolute Isolation
Division to concentrate on Absolute Isolation Barriers for the absolute
control and containment of contaminants and toxic gases in certain
manufacturing processes, including pharmaceutical production; and (ii) the
Integrated Environmental Control Division to focus on IAQ diagnosis and
solutions for commercial and public buildings.. See "Outlook".
Gross Profit: Gross profit for the six months ended June 30, 1997 increased by
$9,476,000, or 147%, to $15,944,000, which represented 26.0% of net sales,
from $6,468,000, which represented 24.6% of net sales, for the six months
ended June 30, 1996. The primary reasons for the increase in gross profit
margin were improvements in operating efficiency associated with focusing each
manufacturing facility on a particular type of product, which reduced direct
costs in the following areas: (i) reduced down time due to the switching
lines between products; (ii) eliminated individual lot inventory tracking at
the Company's Washington, NC facility required by regulations governing the
manufacture of nuclear and biological containment environments by moving all
containment environment manufacturing operations to CSC's plant in Bath, NC;
(iii) the automation of additional production lines at several Precisionaire
facilities; and (iv) reduced training and coordination time at each location
by reducing the number of certification and training hours required of
employees by producing fewer types of products at each facility. Other
factors affecting gross profit margins included lower profit margins from
newly started subsidiaries and differences in timing of orders and product mix
during the respective periods.
Operating expenses: Operating expenses for the six months ended June 30, 1997
increased by $7,305,000, or 161%, to $11,853,000, representing 19.4% of net
sales, from $4,548,000, representing 17.3% of net sales, for the six months
ended June 30, 1996. The primary reasons for the overall increase in operating
expenses were the Acquisitions and the establishment of new subsidiaries, which
accounted for an increase of $7,192,000 compared to the prior year period.
Operating expenses increased as a percentage of net sales compared to the prior
year period, primarily because FFI's sales volume was down compared to the prior
year period while its operating expenses remained relatively flat.
Net income: Net income for the six months ended June 30, 1997 increased by
$1,317,000, or 98%, to $2,665,000, or $0.12 per share, from $1,348,000, or
$0.09 per share ($0.08 fully diluted) for the six months ended June 30, 1996.
Page 13
<PAGE>
Liquidity and Capital Resources
Working capital was $19,977,000 at June 30, 1997, compared to $22,570,000 at
December 31, 1996. This includes cash, cash equivalents and other short-term
investments of $2,635,000 and $2,390,000 at June 30, 1997 and December 31, 1996,
respectively, and restricted cash of $0 and $8,000,000 at June 30, 1997 and
December 31, 1996, respectively. The $8,000,000 in restricted cash and committed
capital which was outstanding at December 31, 1996 was released in January 1997,
and used to pay down long-term and convertible debt (see Note 3 to "Notes to
Unaudited Consolidated Financial Statements").
Trade receivables increased $2,936,000, or 16.4%, to $20,843,000 at June 30,
1997 from $17,907,000 at December 31, 1996. The increase was due to the greater
volume of sales during the period ended June 30, 1997, compared to the period
ended December 31, 1996. The majority of the Company's sales are on terms
ranging from 30 to 90 days, and the typical days outstanding for payment of the
Company's invoices ranges from 65 to 90 days.
Operations generated $1,340,000 of cash during the three months ended June 30,
1997, compared to using $1,184,000 for the three months ended June 30, 1996.
Operations generated $3,208,000 of cash during the six months ended June 30,
1997, compared to using $2,149,000 during the six months ended June 30, 1996.
Investing activities consumed $5,342,000 and $6,995,000 of cash during the three
months ended June 30, 1997 and 1996, respectively, consisting primarily of the
purchase of equipment and the acquisitions of CSC and Airseal, respectively.
Investing activities consumed $7,082,000 and $7,427,000 of cash during the six
months ended June 30, 1997 and 1996, respectively, consisting primarily, in both
periods, of the acquisition of new companies and the purchase of equipment.
Financing activities generated $3,715,000 and $8,394,000 of cash during the
three months ended June 30, 1997 and 1996, respectively, with activities
consisting primarily of payments and borrowings on long-term debt and the sale
of stock. Financing activities generated $3,825,000 and $7,008,000 of cash
during the six months ended June 30, 1997 and 1996, respectively, with
activities consisting primarily of payments on long-term debt and the sale of
stock in various offerings (see Note 3 to "Notes to Unaudited Consolidated
Financial Statements").
The Company has arranged a long-term credit facility with NationsBank, N.A.
consisting of a working capital revolving credit facility in the maximum
principal amount of $25,000,000 which bears interest at the prime rate as
established by NationsBank, N.A., plus one percent (1%) per annum and any
outstanding balance is due and payable in full on September 30, 1998. The
revolving credit facility is secured by substantially all of the Company's
assets. As of June 30, 1997, the Company had used approximately $1,659,000 of
the revolving credit facility.
On March 7, 1997, the Company acquired, through its majority owned subsidiary,
Airseal West, the majority of the assets of BB&D. Assets acquired included
fixed assets, inventory and the unbilled and uncompleted portion of ongoing
orders. As consideration for such assets, the Company paid $403,000 and BB&D
received forty percent of the outstanding stock of Airseal West. Airseal West
is located in Salt Lake City, Utah, and manufactures specialty and standard
housings for air filtration and HVAC systems, as well as integrated custom
industrial-grade HVAC systems. It also continues other job-shop related
activities begun by BB&D.
On January 22, 1997, the Company completed an underwritten public secondary
offering dated January 16, 1997, of 1,600,000 shares of the Company's common
stock at $9.50 per share (the "Offering"). Net proceeds to the Company after
deducting commissions and expenses from the Offering totaling approximately
$1,720,000 amounted to $13,480,000. The Company utilized the entire amount of
the proceeds from the Offering to pay down long-term and convertible debt. On
January 31, 1997, the Underwriters of the Offering exercised their over-
allotment option to purchase 240,000 shares of the Company's common stock at
$9.50 per share. Net proceeds to the Company after deducting commissions and
expenses from the over-allotment totaling approximately $164,000 amounted to
$2,116,000, which were also used to pay down long-term debt. Net proceeds from
the Offering, including the over-allotment, were $15,596,000.
Page 14
<PAGE>
Expansion of the Company will require substantial continuing capital
investment for the manufacture of filtration products. Although the Company
has been able to arrange debt facilities or equity financing to date, there
can be no assurance that sufficient debt financing or equity will continue to
be available in the future, or that it will be available on terms acceptable
to the Company. Substantial additional debt or equity financing may be needed
for the Company to achieve its short-term and long-term business objectives.
Failure to obtain sufficient capital could result in materially adverse
conditions for the Company's business. The Company expects that future
financing will include equity placements, however, no assurance can be given
that the Company will be able to obtain additional financing on reasonable
terms, if at all.
The Company is currently being monitored by the EPA for possible environmental
contamination at one of its main facilities. The Company has entered into an
agreement with the EPA to conduct monthly monitoring of groundwater. The
Company estimates the monitoring will last from 3-5 years, and believes the
total cost will not exceed $45,000. The Company has received a limited
indemnification from Thomas Allan, Robert Amerson and Steven Clark (directors,
officers and shareholders of the Company) of approximately $975,000 with
respect to the claims by the EPA; however, there can be no assurance that the
amount of this indemnification will be sufficient to cover the aggregate of
liabilities asserted by the EPA.
Furthermore, the Company recently purchased the Illinois Property for a new
Precisionaire facility. The Company agreed to assume all risk of
environmental liability for past, present or future conditions on the Illinois
Property except liability related to ground water environmental problems. The
Illinois Property had certain environmental problems which required
remediation under federal and Illinois law. The seller of the Illinois
Property has worked extensively with the IEPA with regard to the environmental
matters, and the Company has completed Phase I and Phase II environmental
surveys with respect to the property, and it appears that the environmental
matters have been resolved, except for certain monitoring procedures required
by the IEPA. However, resolution of state issues has no effect on any
potential federal or common law claims, and there can be no assurance that
such claims will not be made.
The Company's business and operations have not been materially affected by
inflation during the periods for which financial information is presented.
Outlook
This Outlook section, and other sections of the document, contains many
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, including, among others (i) results of
operations (including expected changes in the Company's gross margin and
general, administrative and selling expenses); (ii) the Company's business
strategy for expanding its market share of the air filtration industry (iii)
the Company's strategy to increase the size and customer base of the air
filtration market; and (iv) the Company's ability to distinguish itself from
its current and future competitors.
These forward looking statements are based largely on the Company's current
expectations and are subject to a number of risks and uncertainties. Actual
results could differ materially from these forward-looking statements.
Important factors to consider in evaluating such forward-looking statements
include (i) the shortage of reliable market data regarding the air filtration
market; (ii) changes in external competitive market factors or in the
Company's internal budgeting process which might impact trends in the
Company's results of operations; (iii) anticipated working capital or other
cash requirements; (iv) changes in the Company's business strategy or an
inability to execute its strategy due to unanticipated changes in the market;
(v) product obsolescence due to the development of new technologies, and (vi)
various competitive factors that may prevent the Company from competing
successfully in the marketplace. In light of these risks and uncertainties,
there can be no assurance that the events contemplated by the forward-looking
statements contained in this Form 10-Q will in fact occur.
The Company believes the semiconductor manufacturing industry, which accounted
for approximately 20% of its business in 1996, is in a cyclical downturn, and
that the demand for new semiconductor facilities and the related demand for
the Company's laminar flow HEPA products will be less than previous quarters
through at least the third and fourth quarters of 1997.
Page 15
<PAGE>
The Company believes its future results of operations could be affected by a
variety of factors, including the successful integration of CSC, AirSeal and
Precisionaire into the Company, management's ability to successfully manage
the Company's growth, the Company's ability to keep up with technological
changes, the success of the Company's efforts to automate its stock product
lines, the Company's ability to withstand increased pricing pressure from the
Company's competition, the effects of changing government regulations
governing indoor air quality, the amount of capital expenditures by
semiconductor manufacturers, and any adverse changes in general economic
conditions in locations where the Company does business.
The Acquisitions give the Company a broader product line of air filtration
products. As part of the integration of the Acquisitions, the Company has
adopted a strategy of increasing its market share by providing its
manufacturers' representatives with the ability to offer a full product line
of the Company's products and "one stop" purchasing of air filtration products
to existing and new customers. Many of the Company's representatives have
indicated a willingness to offer the Company's products exclusively now that
the Company offers a broader range of products; however, the Company does not
have any written agreements with such representatives that require exclusivity
for the Company's entire product line. These representatives may decide to
work exclusively with some other company for various reasons; thus, the
current distribution channels would be unavailable. Additionally, integration
of the Acquisitions may significantly strain the Company's management,
financial and other resources. There can be no assurance that the Company's
systems, procedures and controls will be adequate to accommodate integration
of these companies. Failure to successfully integrate these companies could
materially adversely affect the Company's business and results of operation.
The Company intends to continue to seek increased market share through
strategic acquisitions of synergistic businesses. The Company seeks to
identify potential acquisition targets with (i) dominant positions in local or
regional markets, (ii) excess or under-utilized capacity, (iii) an ability to
add new product lines to the Company's business and (iv) significant asset
value to enable the Company to obtain debt financing or non-diluted equity
financing for such acquisition. The Company is continuously evaluating
acquisition opportunities in light of the above criteria. Once a potential
target is identified, the Company commences an in-depth due diligence
evaluation of the target's operations, markets, profitability and examines all
potential liabilities including environmental liabilities and any contingent
liabilities. The Company's strategy of growth through acquisition exposes the
Company to the potential risks inherent in assessing the value, strengths,
weaknesses, contingent or other liabilities and potential profitability of
acquisition candidates and in integrating the operations of acquired
companies. The Company has no specific agreements with respect to future
acquisitions, but is continuing to investigate potential acquisition
opportunities. Substantial equity or debt financing may be needed for the
Company to continue to grow through the acquisition of other businesses.
Failure to obtain sufficient equity or debt financing could adversely affect
the Company's growth strategies. In addition, there can be no assurance that
any future acquisitions will be able to be integrated successfully into the
Company, given that any future acquisitions will have been operated under
different management philosophies, management teams and marketing strategies.
There can be no assurance that the Company's systems, procedures and controls
will be adequate to accommodate integration of any future acquisitions.
The Company has begun a program to increase its gross margins by automating
portions of its production lines at FFI, Precisionaire and Airpure using
technology developed at Precisionaire and FFI. Currently, approximately twenty
percent of the Company's product lines incorporate the new automated equipment
designs. The Company will continue to implement the additional automation for
these production lines one at a time, to minimize down time. The Company
estimates the total cost for automation will be approximately $10,000,000.
The Company intends to continue building capacity for production of air
filtration products, and has announced plans to expand upon or build
facilities in the Asia/Pacific Basin. The Company has recently relocated its
Airpure West operations to a facility in Henderson, Nevada, and consolidated
such operations with Precisionaire's manufacturing and distributing
operations. Additionally, the Company has recently opened a Precisionaire
manufacturing facility at the Illinois Property. These new or expanded
facilities, as well as the automation of existing production lines, are part
of the Company's growth strategies and will require substantial continuing
investment in capital equipment during 1997. Although the Company has been
able to arrange equity financing or debt facilities to date, there can be no
assurance that additional equity or debt financing will continue to be
available in the future, or that it will be available on terms acceptable to
the Company.
Page 16
<PAGE>
The Company intends to develop new markets and products for those markets by
applying existing technology developed for high-technology niche markets to
new applications. For each new applications, the Company will first develop a
line of products to meet the needs of the specific application, and through
trade shows, technical publications, mass marketing, distributor education and
other appropriate methods, will create demand for the application in the new
target market. The Company has established the Absolute Isolation Division
and the Integrated Environmental Control Division to focus on (i) methods to
manufacture pharmaceutical and other products in an isolated and secure arena
using Absolute Isolation Barriers and (ii) IAQ diagnosis and solutions for
commercial and public buildings and for residential application. The Company
believes there will be an increase in interest in Absolute Isolation Barriers
in the future because these products completely prevent cross-contamination
between different products and different lots of the same product being
manufactured at the same facility, as well as increase production yields.
Additionally, the Company believes there is an increase in public concern
regarding the effects of IAQ on employee productivity, as well as an increase
in interest in standards for detecting and solving IAQ problems. The Company
will continue to concentrate its efforts on products with high replacement
potential.
Subsequent Events
As of July 25, 1997, the Company purchased the Illinois Property for a new
Precisionaire facility. See "Part II - Item 1. - Legal Proceedings."
Page 17
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There were no material additions to, or changes in status of, any
ongoing, threatened or pending legal proceedings during the three months
ended June 30, 1997, except that the Company recently purchased the
Illinois Property for a new Precisionaire facility. The Company agreed
to assume all risk of environmental liability for past, present or future
conditions on the Illinois Property except for any liability related to
ground water environmental problems. The Illinois Property had certain
environmental problems which required remediation under federal and
Illinois law. The seller of the Illinois Property has worked extensively
with the Illinois Environmental Protection Agency ("IEPA") with regard to
the environmental matters, and the Company has completed Phase I and
Phase II environmental surveys with respect to the property and it
appears that the environmental matters have been resolved, except for
certain monitoring procedures required by the IEPA. However, resolution
of state issues has no effect on any potential federal or common law
claims, and there can be no assurance that such claims will not be made.
From time to time, the Company is a party to various legal proceedings
incidental to its business. None of these proceedings are material to the
conduct of the Company's business, operations or financial condition.
Item 2. Changes in Securities.
On May 15, 1997, the Company completed a private offering under
Regulation D of 45,000 shares of common stock at $5.75 per share to
accredited investors. Net proceeds to the Company from the offering,
after deducting placement fees totaling $25,390, were $233,360. In June
1997, certain option holders exercised 65,000 options to purchase common
stock at $2.50 per share. Net proceeds to the Company from the exercise
were $162,500.
Item 3. Defaults Upon Senior Securities - None.
Item 4. Submission of Matters to a Vote of Security Holders - None.
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
3.1 Articles of Incorporation for Flanders Corporation, filed with the
Form 8-A dated March 8, 1996, incorporated herein by reference.
3.2 Bylaws of Flanders Corporation, filed with the Form 8-A dated March
8, 1996, incorporated herein by reference.
4.1 Form of Series A Convertible Subordinated Debentures, filed with the
September 30, 1996 Form 10-Q, incorporated herein by reference.
4.2 Form of 10% Convertible Notes, filed with the September 30, 1996 Form
10-Q, incorporated herein by reference.
4.3 Form of Warrants, filed with the September 30, 1996 Form 10-Q,
incorporated herein by reference.
Page 18
<PAGE>
10.1 Stock Purchase Agreement between Flanders Corporation and the
Shareholders of Precisionaire, Inc., filed with the Form 8-K dated
December 31, 1995, incorporated herein by reference.
10.2 Indemnification Agreement between Flanders Corporation, Steven K.
Clark, Robert Amerson and Thomas Allan, filed with the December 31,
1995 Form 10-K, incorporated herein by reference.
10.3 Purchase and Sale Agreement between POT Realty and Precisionaire,
Inc., filed with the September 30, 1996 Form 10-Q, incorporated
herein by reference.
10.4 Assumption Agreement with Release of Liability between POT Realty
and Precisionaire, Inc., for original principal amount of $2,069,653,
filed with the September 30, 1996 Form 10-Q, incorporated herein by
reference.
10.5 Assumption Agreement with Release of Liability between POT Realty
and Precisionaire, Inc., for original principal amount of $133,025,
filed with the September 30, 1996 Form 10-Q, incorporated herein by
reference.
10.6 Guaranty Agreement between Flanders Corporation and American
National Bank of Texas, filed with the September 30, 1996 Form 10-Q,
incorporated herein by reference.
10.7 Agreement and Plan of Merger between Elite Acquisitions and Flanders
Filters, Inc., filed with the December 31, 1995 Form 10-K,
incorporated herein by referrence.
10.8 Stock Purchase Agreement between Flanders Corporation and the
Shareholders of Charcoal Service Corporation, filed with the May 31,
1996 Form 8-K, incorporated herein by reference.
10.9 Stock Purchase Agreement between Flanders Corporation and the
Shareholders of Air Seal Filter Housings, Inc. (previously filed with
Form S-1, filed October 21, 1996 (Reg. No. 333-14655) and
incorporated herein by reference).
27 Financial Data Schedule.
99.1 Employment Agreement between Elite Acquisitions, Inc., Flanders
Filters, Inc., and Steven K. Clark, filed with the December 31, 1995
Form 10-K, incorporated herein by reference.
99.2 Stock Option Agreement between Elite Acquisitions, Inc., and Steven
K. Clark, filed with the December 31, 1995 Form 10-K, incorporated
herein by reference.
99.3 Employment Agreement between Elite Acquisitions, Inc., Flanders
Filters, Inc. and Robert R. Amerson, filed with the December 31, 1995
Form 10-K, incorporated herein by reference.
99.4 Stock Option Agreement between Elite Acquisitions, Inc. and Robert
R. Amerson, filed with the December 31, 1995 Form 10-K, incorporated
herein by reference.
99.5 Stock Option Agreement between Elite Acquisitions, Inc., and Thomas
T. Allan, filed with the December 31, 1995 Form 10-K, incorporated
herein by reference.
99.6 Stock Option Agreement between Elite Acquisitions, Inc., and William
M. Claytor, filed with the December 31, 1995 Form 10-K, incorporated
herein by reference.
99.7 Employment Agreement between Flanders Corporation, Precisionaire,
Inc., and Gustavo Hernandez, filed with Form S-1 dated October 21,
1996 (Reg. No. 333-14655) and incorporated herein by reference.
99.8 Amendment to Employment Agreement between Elite Acquisitions, Inc.,
Flanders Filters, Inc., and Steven K. Clark, filed with Form S-1
dated October 21, 1996 (Reg. No. 333-14655) and incorporated herein
by reference.
99.9 Amendment to Employment Agreement between Elite Acquisitions, Inc.,
Flanders Filters, Inc., and Robert R. Amerson, filed with Form S-1
dated October 21, 1996 (Reg. No. 333-14655) and incorporated herein
by reference.
99.10 Flanders Corporation Long-Term Incentive Plan, filed with the
December 31, 1995 Form 10-K, incorporated herein by reference.
Page 19
<PAGE>
99.11 Flanders Corporation 1996 Director Option Plan, filed with the
December 31, 1995 Form 10-K, incorporated herein by reference.
99.12 Stock Option Agreement between Flanders Corporation and Steven K.
Clark dated February 22, 1996, filed with Form S-8 on July 21, 1997,
incorporated herein by reference.
99.13 Stock Option Agreement between Flanders Corporation and Robert R.
Amerson dated February 22, 1996, filed with Form S-8 on July 21,
1997, incorporated herein by reference.
99.14 Stock Option Agreement between Flanders Corporation and Steven K.
Clark dated June 3, 1996, filed with From S-8 on July 21, 1997,
incorporated herein by reference.
99.15 Stock Option Agreement between Flanders Corporation and Robert R.
Amerson dated June 3, 1996, filed with Form S-8 on July 21, 1997,
incorporated herein by reference.
(b) Reports on Form 8-K - None
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.
Dated this 13th day of August, 1997.
FLANDERS CORPORATION
By: /s/ Steven K. Clark
-------------------------
Steven K. Clark
Vice President Finance/Chief Financial Officer
and Director
Page 20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 2,340,535 2,340,535
<SECURITIES> 294,409 294,409
<RECEIVABLES> 23,407,745 23,407,745
<ALLOWANCES> 346,480 346,480
<INVENTORY> 13,541,869 13,541,869
<CURRENT-ASSETS> 41,290,383 41,290,383
<PP&E> 43,645,843 43,645,843
<DEPRECIATION> 8,296,519 8,296,519
<TOTAL-ASSETS> 90,804,191 90,804,191
<CURRENT-LIABILITIES> 21,313,470 21,313,470
<BONDS> 0 0
0 0
0 0
<COMMON> 18,016 18,016
<OTHER-SE> 52,646,841 52,646,841
<TOTAL-LIABILITY-AND-EQUITY> 90,804,191 90,804,191
<SALES> 33,383,196 61,250,037
<TOTAL-REVENUES> 33,383,196 61,250,037
<CGS> 24,443,135 45,306,412
<TOTAL-COSTS> 6,110,787 6,110,787
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 104,628 450,693
<INCOME-PRETAX> 2,925,140 4,175,404
<INCOME-TAX> 1,055,000 1,510,000
<INCOME-CONTINUING> 1,870,140 2,665,404
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
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