<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended: December 31, 1996
Commission File number: 1-9429
ROTONICS MANUFACTURING INC.
---------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-2467474
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
17022 SOUTH FIGUEROA STREET, GARDENA, CALIFORNIA 90248
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(310) 538-4932
--------------
(Registrant's telephone number, including area code)
N/A
--------------
(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
--- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 31, 1996
----- --------------------------------
Common Shares 14,167,808 Shares
($.01 stated value)
Total Pages 15
Exhibit Index at Page 14
<PAGE> 2
ROTONICS MANUFACTURING INC.
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance Sheets -
December 31, 1996 (Unaudited)
and June 30, 1996 (Audited) 3
Statements of Income and
Accumulated Deficit -
Three Months and Six Months Ended December 31, 1996
and 1995 (Unaudited) 4
Statements of Cash Flows -
Six Months Ended December 31, 1996
and 1995 (Unaudited) 5
Notes to Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROTONICS MANUFACTURING INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
------------ ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 13,800 $ 11,600
Accounts receivable, net of allowance for doubtful accounts
of $57,200 and $90,000, respectively (Notes 5 and 6) 4,923,600 5,790,700
Notes receivable 46,100 46,900
Inventories (Notes 2, 5 and 6) 5,282,000 4,939,400
Deferred income taxes, net (Note 9) 1,989,100 2,015,900
Prepaid expenses and other current assets 342,500 218,500
------------ ------------
Total current assets 12,597,100 13,023,000
Notes receivable, less current portion 455,000 455,000
Deferred income taxes, net (Note 9) 1,149,700 1,786,300
Property, plant and equipment, net (Notes 3, 5 and 6) 8,622,200 8,316,900
Intangible assets, net (Note 4) 5,228,600 5,382,100
Other assets 66,700 92,400
------------ ------------
$ 28,119,300 $ 29,055,700
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 6) $ 982,800 $ 1,176,700
Accounts payable 2,488,300 2,686,100
Accrued liabilities (Note 7) 991,200 1,001,700
Dividends payable (Note 8) 577,500 -
------------ ------------
Total current liabilities 5,039,800 4,864,500
Bank Line of credit (Note 5) 1,000,000 1,983,500
Long-term debt, less current portion (Note 6) 3,411,700 3,880,600
Deferred pension liabilities 4,000 4,000
------------ ------------
Total liabilities 9,455,500 10,732,600
------------ ------------
Stockholders' equity:
Common stock, stated value $.01: authorized 20,000,000 shares;
issued and outstanding 14,134,000 and 14,158,517 shares, respectively,
net of treasury shares (Note 8) 24,531,900 24,577,400
Accumulated deficit (5,868,100) (6,254,300)
------------ ------------
Total stockholders' equity 18,663,800 18,323,100
------------ ------------
$ 28,119,300 $ 29,055,700
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
ROTONICS MANUFACTURING INC.
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December December
---------------------------- -------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 9,478,200 $ 8,904,100 $ 19,708,100 $ 17,886,000
------------ ------------ ------------ ------------
Costs and expenses:
Cost of goods sold 7,001,800 6,719,400 14,625,400 13,517,400
Selling, general and
and administrative expenses 1,483,500 1,634,700 2,964,400 3,177,600
------------ ------------ ------------ ------------
Total costs and expenses 8,485,300 8,354,100 17,589,800 16,695,000
------------ ------------ ------------ ------------
Income from operations 992,900 550,000 2,118,300 1,191,000
------------ ------------ ------------ ------------
Other (expense)/income:
Interest expense (122,100) (179,000) (260,200) (370,000)
Other (expense)/income (50,100) 46,100 (76,600) 95,000
------------ ------------ ------------ ------------
Total other expenses (172,200) (132,900) (336,800) (275,000)
------------ ------------ ------------ ------------
Income before income taxes 820,700 417,100 1,781,500 916,000
Income tax provision (Note 9) (386,300) (227,200) (829,900) (358,700)
------------ ------------ ------------ ------------
Net income 434,400 189,900 951,600 557,300
Accumulated deficit, beginning of period (5,737,100) (6,793,400) (6,254,300) (7,098,800)
Preferred stock dividends - - - (62,000)
Common stock dividends (565,400) (566,200) (565,400) (566,200)
------------ ------------ ------------ ------------
Accumulated deficit, end of period $ (5,868,100) $ (7,169,700) $ (5,868,100) $ (7,169,700)
============ ============ ============ ============
Income per common share (Note 10):
Net income:
Primary $ .03 $ .01 $ .07 $ .04
============ ============ ============ ============
Fully diluted $ .03 $ .01 $ .07 $ .04
============ ============ ============ ============
Weighted average number of common and
common equivalent shares outstanding:
Primary 14,167,808 14,165,197 14,167,360 13,533,954
============ ============ ============ ============
Fully diluted 14,167,808 14,165,577 14,167,360(1) 13,534,736
============ ============ ============ ============
</TABLE>
(1) The result of the fully diluted earnings per share computation is
anti-dilutive.
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
ROTONICS MANUFACTURING INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 951,600 $ 557,300
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 776,300 791,700
Gain on sale of equipment - (1,200)
Deferred income tax provision/(benefit) 663,400 284,500
Provision for doubtful accounts 21,000 52,800
Changes in assets and liabilities:
Decrease in accounts receivable 846,100 563,100
(Increase)/decrease in inventories (342,600) 521,000
Increase in prepaid expenses and other current assets (124,000) (123,500)
Decrease in other assets 20,600 11,300
Decrease in accounts payable (197,800) (539,900)
Increase/(decrease) in accrued liabilities 1,700 (292,600)
Decrease in income taxes payable - (23,400)
----------- -----------
Net cash provided by operating activities 2,616,300 1,801,100
----------- -----------
Cash flows from investing activities:
Repayments on notes receivable, net 800 4,600
Capital expenditures (923,000) (511,300)
Proceeds from sale of equipment - 1,200
----------- -----------
Net cash used in investing activities (922,200) (505,500)
----------- -----------
Cash flows from financing activities:
Net repayments under line of credit (983,500) (175,900)
Proceeds from issuance of long-term debt 26,400 -
Repayment of long-term debt (689,200) (717,500)
Redemption of preferred stock - (250,200)
Payment of preferred stock dividends - (85,400)
Payment of common stock dividends (100) -
Proceeds from exercise of stock options 6,100 -
Purchase of treasury stock (51,600) (156,400)
----------- -----------
Net cash used in financing activities (1,691,900) (1,385,400)
----------- -----------
Net increase/(decrease) in cash 2,200 (89,800)
Cash at beginning of period 11,600 96,700
----------- -----------
Cash at end of period $ 13,800 $ 6,900
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 266,500 $ 377,400
=========== ===========
Income taxes $ 164,000 $ 157,500
=========== ===========
Supplemental schedule of noncash financing activities:
Conversion of preferred stock to common stock $ - $ 2,749,800
=========== ===========
Common dividends declared but not paid $ 565,400 $ 566,200
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
ROTONICS MANUFACTURING INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1-INTERIM REPORTING:
The interim financial information included herein is unaudited. This information
reflects all adjustments (consisting solely of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair statement of
operating results for the interim periods. This interim financial information
should be read in conjunction with the Rotonics Manufacturing Inc. ("the
Company") Annual Report as filed on Form 10-K for the fiscal year ended June 30,
1996.
NOTE 2 - INVENTORIES:
Inventories consist of:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
---------- ----------
<S> <C> <C>
Raw materials $2,630,100 $2,691,300
Finished goods 2,651,900 2,248,100
---------- ----------
$5,282,000 $4,939,400
========== ==========
</TABLE>
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of:
<TABLE>
<CAPTION>
December, 31, June 30,
1996 1996
------------ ------------
<S> <C> <C>
Land $ 574,200 $ 574,200
Buildings and building improvements 2,724,000 2,701,500
Machinery, equipment, furniture and fixtures 11,838,600 11,376,200
Construction in progress 505,900 93,800
------------ ------------
15,642,700 14,745,700
Less - accumulated depreciation (7,020,500) (6,428,800)
------------ ------------
$ 8,622,200 $ 8,316,900
============ ============
</TABLE>
NOTE 4 - INTANGIBLE ASSETS:
Intangible assets consist of:
<TABLE>
<CAPTION>
December, 31, June 30,
1996 1996
------------ ----------
<S> <C> <C>
Patents, net of accumulated amortization of $82,600 and $79,600 $ 47,800 $ 50,800
Goodwill, net of accumulated amortization
of $1,919,400 and $1,768,900 5,180,800 5,331,300
---------- ----------
$5,228,600 $5,382,100
========== ==========
</TABLE>
6
<PAGE> 7
NOTE 5 - BANK LINE OF CREDIT:
The Company has a $5,000,000 revolving line of credit with Wells Fargo Bank. The
line matures May 16, 1998 and is secured by the Company's machinery and
equipment, accounts receivable and inventories. Interest is payable monthly at
the bank's prime rate. The bank's prime rate at December 31, 1996 was 8.25% per
annum. The loan agreement allows the Company to convert the outstanding
principal balance in increments of $250,000 to a LIBOR-based loan for periods up
to 90 days. At December 31, 1996 the Company had $1,000,000 borrowed under the
LIBOR option bearing interest at 8.10547% per annum and maturing on January 5,
1997. Proceeds from the loan were used for working capital purposes. At December
31, 1996 the Company had approximately $4,000,000 available for future
borrowings under the revolving line of credit.
NOTE 6 - LONG-TERM DEBT:
Long-term debt consists of:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
----------- -----------
<S> <C> <C>
Note payable - Bank (A) $ 2,733,300 $ 3,133,300
Note payable - Bank (B) - 197,500
Note payable - Bank (C) 1,180,400 1,213,600
Note payable - Bank (D) 441,700 491,700
Other 39,100 21,200
----------- -----------
4,394,500 5,057,300
Less current portion (982,800) (1,176,700)
----------- -----------
$ 3,411,700 $ 3,880,600
=========== ===========
</TABLE>
A) In May 1995 the Company restructured its credit agreement with Wells Fargo
Bank. The loan consists of a $4,000,000 sixty-month term loan. The note is
due in monthly principal installments of $66,700 plus interest at the
bank's prime rate (8.25% at December 31, 1996). In addition, the loan
agreement allows the Company to convert all or a portion of the outstanding
principal in increments of $250,000 to a LIBOR-based loan for periods up to
180 days. At December 31, 1996 the Company had $2,500,000 of the
outstanding principal balance under the LIBOR option at 7.875% per annum
maturing on January 5, 1997. The note is secured by the Company's machinery
and equipment, accounts receivable and inventories and matures on May 16,
2000.
B) This note was issued to the First State Bank of Gainesville in the original
amount of $250,000. The loan was due in monthly installments of
approximately $3,000 including interest at 8% per annum beginning September
1993 and continuing for 36 months, at which time the entire balance of
unpaid principal plus accrued interest were due and payable. The note was
secured by a deed of trust on the Company's real property in Gainesville,
Texas. Proceeds from the loan were used for working capital purposes and to
finance the majority of a fixed asset expansion project at the Company's
Idaho facility. In August 1996 the note was paid in full pursuant to its
terms and the lien on the Texas real property was removed
C) This note was issued to Wells Fargo Bank on September 15, 1994 in
connection with the purchase of real property in Bensenville, Illinois. The
note is due in monthly principal installments of approximately $5,500 plus
interest at the bank's prime rate (8.25% per annum at December 31, 1996) on
a twenty-year amortization with the outstanding principal due in five
years. The note is secured by a first trust deed on the real property and
matures September 15, 1999.
D) In fiscal 1996 the Company was advanced $500,000 on its machinery and
equipment term-loan commitment with Wells Fargo Bank. The proceeds were
used to repay amounts originally borrowed under the Company's revolving
line of credit to finance approximately $700,000 in machinery and equipment
purchases. The note is due in monthly principal installments of
approximately $8,300 plus interest at the bank's prime rate (8.25% at
December 31, 1996) or LIBOR interest rate option for periods up to six
months. At December 31, 1996 the total outstanding principal was under the
LIBOR option at 8.10547% per annum maturing January 10, 1997. The note is
secured by the Company's machinery and equipment and matures on May 15,
2001. At December 31, 1996 the Company had available a term-loan commitment
in the amount of $500,000 for future machinery and equipment purchases.
Advances under the line will be subject to monthly interest only payments
at the bank's prime or LIBOR interest rate options until May 15, 1997, at
which time amounts borrowed will convert to a 60-month fully amortizable
loan.
7
<PAGE> 8
NOTE 7 - ACCRUED LIABILITIES:
Accrued liabilities consist of:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
----------- ----------
<S> <C> <C>
Salaries, wages, commissions and related payables $ 849,900 $ 806,200
Other 141,300 195,500
---------- ----------
$ 991,200 $1,001,700
========== ==========
</TABLE>
NOTE 8 - COMMON STOCK:
Treasury stock is recorded at cost. At December 31, 1996, treasury stock
consisted of 33,808 shares of common stock at a cost of $53,200 and at June 30,
1996, treasury stock consisted of 1,801 shares of common stock at a cost of
$1,500.
On December 10, 1996, the Board of Directors declared at its Annual Meeting of
Stockholders a common stock dividend of $.04 per common share payable on January
24, 1997 to stockholders of record on January 6, 1997.
NOTE 9 - INCOME TAXES:
The components of the income tax provision/(benefit) were:
<TABLE>
<CAPTION>
For the three months ended For the six months ended
December 31, December 31
-------------------------- ------------------------
1996 1995 1996 1995
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Current:
Federal $ 19,500 $ 13,400 $ 42,500 $ 18,700
State 59,800 26,100 124,000 55,500
-------- -------- -------- --------
79,300 39,500 166,500 74,200
-------- -------- -------- --------
Deferred:
Federal 295,900 171,100 641,200 264,100
State 11,100 16,600 22,200 20,400
-------- -------- -------- --------
307,000 187,700 663,400 284,500
-------- -------- -------- --------
$386,300 $227,200 $829,900 $358,700
======== ======== ======== ========
</TABLE>
At December 31, 1996, the Company had net operating loss (NOL) carryforwards of
approximately $12,500,000 and $1,200,000, respectively, for federal and state
income tax purposes expiring in varying amounts through 2009. The NOL
carryforwards, which are available to offset future profits of the Company and
are subject to limitations should a "change in ownership" as defined in the
Internal Revenue Code occur, will begin to expire in 1998 and 1996 for federal
and state tax purposes, respectively, if not utilized.
In conjunction with the adoption of Statement of Financial Accounting Standards
No. 109 (FAS 109) "Accounting for Income Taxes", management determined the
future taxable income of the Company will more likely than not be sufficient to
realize the tax benefits of its NOL's. As such, an initial deferred tax asset of
$4,013,000, net of a valuation allowance of $2,662,000 was recorded.
Based on the operating results since the adoption of FAS 109 and management's
continuing assessment, management believes that the Company will continue to
utilize its NOL's in the normal course of business. As such, through fiscal 1996
management has substantially reduced the $2,662,000 initial valuation allowance.
At December 31, 1996, a state valuation allowance of $54,500 existed for the
potential amount of the Company's state NOL which may not be utilized prior to
its expiration. As depicted above, since the federal valuation allowance was
reduced to zero in fiscal 1996, the Company will report a greater deferred tax
provision until such time that the Company's NOL's and corresponding deferred
tax assets are fully utilized.
NOTE 10 - COMPUTATION OF EARNINGS PER SHARE:
Primary and fully diluted earnings per share have been computed in accordance
with APB No. 15 "Earnings per Share", using the treasury stock method for
applicable common stock warrants and options. Net income was reduced by the
appropriate amount of preferred stock dividends in fiscal year 1996 to determine
earnings applicable to common stock.
8
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations - Three Months Ended December 30, 1996 and 1995
Net sales for the three months ended December 31, 1996, increased 6.4% to
$9,478,100 compared to $8,904,100 for the same period last year. The Company
continues to report substantial increases in its custom molded products during
this current period. Management attributes the increase to the continued
expansion of rotationally molded products in the marketplace as well as
relatively stable market conditions which have strengthened consumer confidence.
The Company also continues to build and refine its sales, marketing and
engineering staff, and feels these efforts have contributed to the Company's
continued growth.
Cost of goods sold decreased 1.6% to 73.9% of net sales for the three months
ended December 31, 1996, compared to 75.5% for the same period last year. The
Company attributes the decrease to increased sales volumes in the current period
coupled with the raw material purchasing strategies and sales price increases
instituted to lessen the impact of plastic resin cost increases. Plastic resin
costs represent a significant component of the Company's manufacturing costs and
continue to show signs of future volatility. As such, management, as it has done
during the last two years, continues to focus its attention on mitigating
current and future increases in resin costs. In efforts to reduce cost of goods
sold, management also contributes significant time and resources to reduce
overall production costs. Management is currently focusing its attention on
automating the finishing process at several of its facilities. The Company is
proud to be among the first to utilize automated routing machines and believes
that these machines will provide significant efficiencies in turn around times
and cost benefits to the Company and its customers.
Selling, general, and administrative expenses were $1,483,500, or 15.7% of net
sales for three months ended December 31, 1996, compared with $1,634,700, or
18.4% for the same period last year. The reduction is attributed to increased
sales volumes and the absence of temporary costs incurred which were associated
with the closure of the Wisconsin plant facility in the prior period.
Total interest expense decreased $56,900 to $122,100 for the three months ended
December 31, 1996, compared to $179,000 for the same period last year. The
Company attributes this reduction to continued improvement in profitability
combined with the utilization of its net operating loss carryforwards which has
enabled the Company to generate significant cash flows. These cashflows in turn
have allowed the Company to reduce its debt structure by $995,000 during the
three month period ended December 31, 1996, without compromising sufficient
working capital for the future growth of the Company.
Income taxes increased $159,100, to $386,300 for the three months ended December
31, 1996, compared to $227,200 for the same period last year. The increase of
$119,300 is primarily related to an increase in the Company's deferred tax
provision. Since the Company has depleted the balance of its valuation allowance
which was originally recorded when it adopted FAS 109 in fiscal 1994, it no
longer has an allowance to off set the deferred tax portion of its provision as
it did in prior periods. The deferred tax component of the Company's tax
provision is primarily associated with the on going utilization of the Company's
net operating loss carryforwards (NOL's). As such, the Company's future
operating results will include a comparable deferred tax provision. Deferred
taxes associated with the utilization of the company's NOL's will not require
any current or future cash outlay.
Net income was $434,400, or $.03 per common share, for the three months ended
December 31, 1996, compared to $189,900, or $.01 per common share for the same
period last year. These results reflect a tremendous improvement over last years
results. Income from operations has increased 80% when compared to results for
the same period last year. The increase in sales volumes, improved gross margins
and reductions in selling, general, administrative and interest expenses are
attributed to the factors described above. Management plans to continue to
strive for improved growth and profitability during fiscal 1997.
9
<PAGE> 10
Results of Operations - Six Months ended December 31, 1996 & 1995
Net sales for the six months ended December 31, 1996, increased $1,822,100 or
10.2% to $19,708,100 compared to $17,886,000 for the same period last year. The
increase is attributed to growth in sales volumes in the majority of the
Company's product lines as well as general price increases instituted to
minimize escalating plastic resin costs. In particular, the Company has reported
significant growth in its custom molded products. This product group embodies a
wide spectrum of industries which signifies continued growth potential for
rotationally molded products in the marketplace. With eight manufacturing
locations and the Company's commitment to constantly improve and expand its
facilities, we believe we will continue to build marketshare and remain a leader
in our industry.
Cost of goods sold decreased 1.4% to 74.2% of net sales for the three months
ended December 31, 1996, compared to 75.6% for the same period last year. The
Company's gross margin continues to reflect improvements over prior year
results. The Company attributes these improvements to increased sales volumes,
raw material purchasing strategies and sales price increases. Although plastic
resin prices remain volatile, management will continue to focus its efforts on
improving gross margins and its overall profitability. In addition to minimizing
the effects from raw material cost increases, management also contributes
significant time and resources to reduce overall production costs. Management is
currently focusing its attention on automating the finishing process at several
of its facilities. Management believes these improvements will provide
significant efficiencies in product turn around times and cost benefits to the
Company and its customers.
Selling, general and administrative expenses were $2,964,400 or 15.0% of net
sales for the six months ended December 31, 1996, compared with $3,177,600 or
17.8% for the same period last year. The reduction is due to increased sales
volumes and the absence of temporary costs associated with the closure of the
Wisconsin facility, the expansion of the Illinois facility and the early post
acquisition operations of the Arleta facility. Management continues to
effectively control excess costs and will capitalize on tactics to better
utilize its work force and resources, such as, the benefits obtained from
combining the Wisconsin and Illinois facilities.
Total interest expenses decreased $109,800 to $260,200 compared to $370,000 for
the same period last year. The Company attributes this significant reduction to
increased cashflows which have allowed the Company to reduce its debt structure
by $2.6 million since December 31, 1995.
Income taxes increased $471,200, which represents a $.03 reduction in earnings
per common share, to $829,900 for the six months ended December 31, 1996,
compared to $358,700 for the same period last year. The increase is related to
an increase in the Company's deferred tax provision of $378,900 due to the
depletion of the Company's deferred tax asset valuation allowance in the prior
period.
Net income was $951,600 or $.07 per common share for the six months ended
December 31, 1996, compared to $557,300 or $.04 per common share for the same
period last year. Management is pleased with the Company's improved performance
as it builds sales volumes and regains profit margins lost in prior periods due
to increases in resin costs. Income from operations increased 78% when compared
to prior year results. The increase in profits is also attributable to
reductions in selling, general, administrative and interest expenses described
above. These improvements reflect management's commitment to perform at its
highest possible level while it strives to operate in today's challenging
business climate.
Financial Condition
Working capital decreased $601,200 to $7,557,300 at December 31, 1996, compared
to $8,158,500 at June 30, 1996. The decrease is attributed to an increase in
dividends payable of $565,400 associated with the common stock dividend declared
in December 1996 in addition to normal fluctuations in accounts receivable,
accounts payable, inventories and prepaid expenses consistent with current
operations. Cashflows from operations reflected a notable increase of $815,200
when compared to the results of the same period last year. The change is
primarily associated with an increase in net income of $394,300 between the
reported periods net of normal fluctuations in non-cash items, accounts
receivable, accounts payable, inventories and accrued liabilities consistent
with current operations.
10
<PAGE> 11
The Company expended a total of $923,000 for property, plant and equipment
during the six month period ended December 31, 1996, compared to $511,300 for
the same period last year. The increase is related to the building and equipment
expansion projects at the Texas facility amounting to approximately $245,000 in
the current period and the purchase of automated routing machines for several
locations. Management continues to allocate substantial cashflows for the
expansion and improvement of its facilities. The Company anticipates spending an
additional $500,000 - $750,000 during the remaining portion of fiscal 1997 on
various machinery and equipment, plant expansion and acquisition projects. In
addition, the Company is currently scouting a site for a possible relocation of
its Denver facility.
Borrowings under the line of credit decreased by $983,500 to $1,000,000 between
June 30, 1996 and December 31, 1996. This reduction supports the Company's
ability to generate sufficient cashflows to effectively reduce its overall debt
structure without compromising the necessary cashflows required for future
growth. At December 31, 1996, the Company had approximately $4,000,000 available
for future borrowings under its revolving line of credit.
On December 10, 1996, the Board of Directors declared at its Annual Meeting of
Stockholders its second annual cash dividend on the Company's common stock. A
regular dividend of $.04 per common share will be paid on January 24, 1997 to
stockholders of record on January 6, 1997. The Board of Directors felt it was
appropriate to continue to recognize and reward its loyal stockholders with the
declaration and payment of this dividend. The Board of Directors is pleased with
the Company's continued success and believes our loyal shareholders should also
receive a return on their investments for their continued support.
The Company's cash flows from operations continue to increase along with the
Company's continued growth and profitability. The Company also continues to
benefit from the additional cashflows generated as it utilizes its net operating
loss carryforwards. The Company will continue to maximize the use of these
additional cashflows until such time that it exhausts its remaining NOL
carryforwards. As such, cash flows from operations in conjunction with the
Company's revolving line of credit and machinery and equipment loan commitment
are expected to meet the Company's needs for working capital, capital
expenditures, repayment of long-term debt and payment of its common stock
dividend for the foreseeable future.
11
<PAGE> 12
ROTONICS MANUFACTURING INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Statement Regarding Computation of Per Share Earnings.
(b) Reports on Form 8-K
None.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on behalf by the undersigned
thereunto duly authorized.
Rotonics Manufacturing Inc.
Registrant
Date: January, 20 1997 /s/ SHERMAN MCKINNISS
--------------------------
Sherman McKinniss
President and
Chief Executive Officer
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
11 Statement Regarding Computation of Per Share Earnings 15
</TABLE>
14
<PAGE> 1
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
EXHIBIT 11
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31,
----------------------------- -----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PRIMARY
Net income $ 434,400 $ 189,900 $ 951,600 $ 557,300
Less preferred stock dividends - - - (62,000)
------------ ------------ ------------ ------------
Income applicable to common shares $ 434,400 $ 189,900 $ 951,600 $ 495,300
============ ============ ============ ============
Weighted average number of
common shares outstanding 14,167,808 14,155,393 14,166,177 13,523,669
Add -common equivalent shares:
Shares issuable upon exercise of
options to purchase common stock - 9,804 1,183 10,285
------------ ------------ ------------ ------------
Weighted average number of common shares
used in computation of primary earnings
per common share 14,167,808 14,165,197 14,167,360 13,533,954
============ ============ ============ ============
Primary earnings per common share $ .03 $ .01 $ .07 $ .04
============ ============ ============ ============
FULLY DILUTED
Net income $ 434,400 $ 189,900 $ 951,600 $ 557,300
Less preferred stock dividends - - - (62,000)
------------ ------------ ------------ ------------
Income applicable to common shares $ 434,400 $ 189,900 $ 951,600 $ 495,300
============ ============ ============ ============
Weighted average number of
common shares outstanding 14,167,808 14,155,393 14,166,177 13,523,669
Add -common equivalent shares:
Shares issuable upon exercise of options to
purchase common stock - 10,184 1,183(1) 11,067
------------ ------------ ------------ ------------
Weighted average number of common shares
used in computation of primary earnings
per common share 14,167,808 14,165,577 14,167,360(1) 13,534,736
============ ============ ============ ============
Fully diluted earnings per common share $ .03 $ .01 $ .07 $ .04
============ ============ ============ ============
</TABLE>
(1) The result of the fully diluted earnings per share computation is
anti-dilutive.
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 13,800
<SECURITIES> 0
<RECEIVABLES> 4,980,800
<ALLOWANCES> 57,200
<INVENTORY> 5,282,000
<CURRENT-ASSETS> 12,597,100
<PP&E> 15,642,700
<DEPRECIATION> 7,020,500
<TOTAL-ASSETS> 28,119,300
<CURRENT-LIABILITIES> 5,039,800
<BONDS> 0
0
0
<COMMON> 24,531,900
<OTHER-SE> 5,868,100
<TOTAL-LIABILITY-AND-EQUITY> 28,119,300
<SALES> 19,708,100
<TOTAL-REVENUES> 19,708,100
<CGS> 14,625,400
<TOTAL-COSTS> 17,589,800
<OTHER-EXPENSES> 76,600
<LOSS-PROVISION> 21,000
<INTEREST-EXPENSE> 260,200
<INCOME-PRETAX> 1,781,500
<INCOME-TAX> 829,900
<INCOME-CONTINUING> 951,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 951,600
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
