<PAGE>
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: March 31, 1998
--------------
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 March 31, 1998
----- -----------------------------
Common Shares 15,808,120 Shares
($.01 stated value)
Total Pages 20
Exhibit Index at Page 19
<PAGE>
ROTONICS MANUFACTURING INC.
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance Sheets -
March 31, 1998 (Unaudited)
and June 30, 1997 (Audited) 3
Statements of Income and
Accumulated Deficit -
Three Months and Nine Months Ended March 31,
1998 and 1997 (Unaudited) 4
Statements of Cash Flows -
Nine Months Ended March 31, 1998
and 1997 (Unaudited) 5
Notes to Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ROTONICS MANUFACTURING INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
------------ ------------
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 21,500 $ 12,100
Accounts receivable, net of allowance for doubtful accounts
of $114,800 and $90,000, respectively (Notes 6 and 7) 6,604,700 5,334,400
Notes receivable 68,100 48,100
Inventories (Notes 3, 6 and 7) 7,263,300 5,602,700
Deferred income taxes, net (Note 11) 1,594,700 1,574,600
Prepaid expenses and other current assets 374,000 242,100
------------ ------------
Total current assets 15,926,300 12,814,000
Notes receivable, less current portion 455,000 455,000
Deferred income taxes, net (Note 11) 1,377,700 1,441,400
Property, plant and equipment, net (Notes 4, 6 and 7) 16,273,100 10,799,500
Investment in Partnership 135,500 -
Intangible assets, net (Note 5) 4,854,000 5,065,500
Other assets 103,300 59,000
------------ ------------
$39,124,900 $30,634,400
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 7) $ 3,179,000 $ 1,281,300
Accounts payable (Note 13) 3,458,500 2,953,100
Accrued liabilities (Note 9) 1,014,100 865,300
------------ ------------
Total current liabilities 7,651,600 5,099,700
Bank line of credit (Note 6) 4,500,000 2,373,400
Long-term debt, less current portion (Note 7) 3,728,300 4,112,700
Long-term debt due related parties (Note 8) 2,000,000 -
Other liabilities - 4,000
------------ ------------
Total liabilities 17,879,900 11,589,800
------------ ------------
Stockholders' equity:
Common stock, stated value $.01: authorized 20,000,000
shares; issued and outstanding 15,806,362 and 14,065,995
shares, respectively,
net of treasury shares (Note 10) 26,921,400 24,422,500
Accumulated deficit (5,676,400) (5,377,900)
------------ ------------
Total stockholders' equity 21,245,000 19,044,600
------------ ------------
$39,124,900 $30,634,400
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ROTONICS MANUFACTURING INC.
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 8,099,600 $ 9,560,300 $25,260,500 $29,268,400
----------- ----------- ----------- -----------
Costs and expenses:
Cost of goods sold 6,399,400 7,373,700 19,882,700 21,999,100
Selling, general and
and administrative expenses 1,530,400 1,652,000 4,656,300 4,616,400
----------- ----------- ----------- -----------
Total costs and expenses 7,929,800 9,025,700 24,539,000 26,615,500
----------- ----------- ----------- -----------
Income from operations 169,800 534,600 721,500 2,652,900
----------- ----------- ----------- -----------
Other (expense)/income:
Interest expense (179,600) (132,000) (522,100) (392,200)
Lawsuit settlement - (484,800) - (622,300)
Other income/(expense), net 31,700 11,900 101,000 72,800
----------- ----------- ----------- -----------
Total other expenses (147,900) (604,900) (421,100) (941,700)
----------- ----------- ----------- -----------
Income/(loss) before income taxes 21,900 (70,300) 300,400 1,711,200
Income tax benefit/(provision) (Note 11) 26,500 56,100 (46,100) (773,800)
----------- ----------- ----------- -----------
Net income/(loss) 48,400 (14,200) 254,300 937,400
Accumulated deficit, beginning of period (5,724,800) (5,868,100) (5,377,900) (6,254,300)
Common stock dividends - - (552,800) (565,400)
----------- ----------- ----------- -----------
Accumulated deficit, end of period $(5,676,400) $(5,882,300) $(5,676,400) $(5,882,300)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income per common share (Note 12):
Net income:
Basic $.00 $.00 $.02 $.07
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted $.00 $.00 $.02 $.07
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of common and
common equivalent shares outstanding:
Basic 13,802,979 14,137,796 13,939,654 14,156,852
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted 13,802,979 14,137,796 13,939,654 14,157,640
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ROTONICS MANUFACTURING INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 254,300 $ 937,400
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,365,800 1,200,200
(Gain)/loss on sale of equipment (5,200) 14,700
Deferred income tax provision 43,400 677,900
Provision for doubtful accounts 5,200 45,500
Changes in assets and liabilities:
Decrease in accounts receivable 195,700 525,900
Increase in inventories (448,400) (177,600)
Decrease/(increase) in prepaid expenses and other current assets 11,400 (52,600)
(Increase)/decrease in other assets (30,400) 13,900
(Decrease)/increase in accounts payable (438,300) 109,000
Decrease in accrued liabilities (215,400) (288,400)
----------- -----------
Net cash provided by operating activities 738,100 3,005,900
----------- -----------
Cash flows from investing activities:
Acquisition of Rotocast, net of cash obtained (39,900) -
Advances on notes receivable, net (17,100) (1,500)
Capital expenditures (1,504,900) (2,445,200)
Proceeds from sale of equipment 12,000 3,200
----------- -----------
Net cash used in investing activities (1,549,900) (2,443,500)
----------- -----------
Cash flows from financing activities:
Borrowings under line of credit 8,838,700 6,495,200
Repayments under line of credit (6,712,100) (5,933,100)
Proceeds from issuance of long-term debt 700,000 526,400
Repayment of long-term debt (962,500) (935,100)
Payment of common stock dividends (541,800) (554,000)
Proceeds from exercise of stock options - 6,100
Repurchases of common stock (501,100) (161,000)
----------- -----------
Net cash provided by/(used in ) financing activities 821,200 (555,500)
----------- -----------
Net increase in cash 9,400 6,900
Cash at beginning of period 12,100 11,600
----------- -----------
Cash at end of period $ 21,500 $ 18,500
----------- -----------
----------- -----------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 514,600 $ 392,000
----------- -----------
----------- -----------
Income taxes $ 92,000 $ 165,500
----------- -----------
----------- -----------
Noncash investing activity:
Acquisition of Rotocast by issuance of common stock $ 2,990,300 $ -
----------- -----------
----------- -----------
Noncash financing activities:
Common dividends declared but not paid $ 11,400 $11,800
----------- -----------
----------- -----------
Acquisition of Rotocast by issuance of note payable $ 2,000,000 $ -
----------- -----------
----------- -----------
Conversion of Rotocast bank debt to new note payable $ 1,750,000 $ -
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
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, 1997.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of accounts receivable and trade payables approximates the
fair value due to their short-term maturities. The carrying value of the
Company's line of credit and notes payable is considered to approximate fair
market value because the interest rates of these instruments are based
predominately on variable reference rates.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings per
Share". SFAS No. 128 replaces primary EPS with basic EPS and fully diluted
EPS with diluted EPS. Basic EPS is computed by dividing reported earnings by
weighted average shares outstanding. Diluted EPS is computed the same way as
fully diluted EPS except that the calculation now uses the average share
price for the reporting period to compute dilution from options under the
treasury stock method. The adoption of this pronouncement did not have an
impact on the Company's earnings per share.
NOTE 2 - ACQUISITIONS OF ASSETS:
Pursuant to an Agreement and Plan of Merger and Reorganization dated March
24, 1998 between the Company and GSC Industries, Inc. ("GSC"), the Company
acquired all of GSC's outstanding common stock holdings in Rotocast
International, Inc. ("Rotocast") and Rotocast's wholly owned subsidiaries
Rotocast Plastic Products Inc.; Wonder Products, Inc.; Nutron Plastic, Inc.;
Rotocast Plastic Products of Texas Inc.; Rotocast Plastic Products of Nevada,
Inc.; Rotocast Plastic Products of Tennessee, Inc.; and Rotocast Management
Corporation. In accordance with the merger and reorganization Rotocast was
merged into the Company and the Company issued to GSC 2,072,539 shares of its
own common stock and a $2,000,000 eighteen month promissory note bearing
interest at 5.26% per annum. The promissory note is secured by a $2,000,000
irrevocable standby letter of credit issued by Wells Fargo Bank which can
only be called upon if the principal balance of the note is not paid with ten
days of maturity. Pursuant to the merger agreement the transaction was
effective March 31, 1998.
To provide recourse to the Company, five percent of the common shares issued
to GSC will be held in an escrow account to cover any claims by the Company
in the event of any breaches of representations, warranties or covenants by
GSC as outlined in the agreement. The Company has incurred approximately
$80,000 of fees and expenses in conjunction with the merger. In addition the
Company obtained an appraisal on Rotocast's machinery and equipment. The
fair market value of these assets appraised at approximately $7.2 million.
As such, a write-up of Rotocast's machinery and equipment over their net book
value of approximately $4.6 million was made and will be amortized over their
estimated useful life of 10 years.
As part of the reorganization of Rotonics and Rotocast, the Company will be
relocating its current operations in Warminster, Pennsylvania and Arleta,
California into its other operating facilities. The relocation of these
plants will result in non-recurring costs of approximately $200,000 over the
next three months.
PROFORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited proforma condensed statement of operations of the
combined operations of the Company and Rotocast have been prepared as thought
he merger had occurred at the beginning of the Company's 1998 and 1997 fiscal
year:
6
<PAGE>
THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Rotonics Rotocast Adjustments Combined
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 8,099,600 $2,620,600 $10,720,200
------------ ---------- -----------
------------ ---------- -----------
Income/(loss) from continuing operations
before income taxes $21,900 $ (118,700) $ (114,900)(A) $ (238,000)
(26,300)(B)
Benefit/(provision) for income taxes 26,500 41,400 (67,900)(C) -
------------ ---------- ----------- -----------
Income/(loss) from continuing operations $48,400 $ (77,300) $ (209,100) $ (238,000)
------------ ---------- ----------- -----------
------------ ---------- ----------- -----------
Net income/(loss) $48,400 $ (141,600) $ (209,100) $ (302,300)
------------ ---------- ----------- -----------
------------ ---------- ----------- -----------
Income/(loss) from continuing operations
per common share $ .00 $ (.01)
------------ -----------
------------ -----------
Net income/(loss) per common share $ .00 $ (.02)
------------ -----------
------------ -----------
Average shares outstanding 13,802,979 15,875,518(D)
------------ -----------
------------ -----------
NINE MONTHS ENDED MARCH 31, 1998
<CAPTION>
Pro Forma Pro Forma
Rotonics Rotocast Adjustments Combined
------------ ---------- ----------- -----------
Net Sales $25,260,500 $7,687,900 $32,948,400
------------ ---------- -----------
------------ ---------- -----------
Income/(loss) from continuing operations
before income taxes $ 300,400 $(326,800) $ (344,700)(A) $ (450,000)
(78,900)(B)
(Provision)/benefit for income taxes (46,100) 124,800 (78,700)(C) -
------------ ---------- ----------- -----------
Income/(loss) from continuing operations $ 254,300 $(202,000) $ (502,300) $ (450,000)
------------ ---------- ----------- -----------
------------ ---------- ----------- -----------
Net income/(loss) $ 254,300 $(387,400) $ (502,300) $ (635,400)
------------ ---------- ----------- -----------
------------ ---------- ----------- -----------
Income/(loss) from continuing operations
per common share $ .02 $ (.03)
------------ -----------
------------ -----------
Net income/(loss) per common share $ .02 $ (.04)
------------ -----------
------------ -----------
Average shares outstanding 13,939,654 16,012,193(D)
------------ -----------
------------ -----------
</TABLE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS:
(A) Depreciation adjustment on $4,596,500 write-up of Rotocast's plant and
equipment, calculated using an estimated useful life of
ten (10) years.
(B) Interest adjustment for $2,000,000, eighteen (18) month note issued in
connection with merger transaction.
(C) Reduction of income tax provision/(benefit) relating to the foregoing
adjustments and the Company's available net operating loss
carryforwards.
(D) Average shares outstanding include the 2,072,539 shares of Rotonics common
stock issued in connection with the merger transaction.
7
<PAGE>
RMI-CORPORATE
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Rotonics Rotocast Adjustments Combined
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 9,560,300 $ 2,351,900 $11,912,200
------------ ---------- -----------
------------ ---------- -----------
Income/(loss) from continuing operations
before income taxes $ (70,300) $ (142,500) $(114,900)(A) $(354,000)
$ (26,300)(B)
Benefit/(provision) for income taxes 56,100 48,400 $(104,500)(C) -
------------ ---------- ----------- -----------
Income/(loss) from continuing operations $ (14,200) $ (94,100) $(245,700) $ (354,000)
------------ ---------- ----------- -----------
------------ ---------- ----------- -----------
Net income/(loss) $ (14,200) $ 298,100 $(245,700) $ 38,200
------------ ---------- ----------- -----------
------------ ---------- ----------- -----------
Income/(loss) from continuing operations
per common share $ .00 $ (.02)
------------ -----------
------------ -----------
Net income/(loss) per common share $ .00 $ .00
------------ -----------
------------ -----------
Average share outstanding 14,137,796 16,210,335(D)
------------ -----------
------------ -----------
NINE MONTHS ENDED MARCH 31, 1997
<CAPTION>
Pro Forma Pro Forma
Rotonics Rotocast Adjustments Combined
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $29,268,400 $6,801,800 $36,070,200
------------ ---------- -----------
------------ ---------- -----------
Income/(loss) from continuing operations
before income taxes $ 1,711,200 $ (405,800) $ (344,700)(A) $ 881,800
(78,900)(B)
(Provision)/benefit for income taxes (773,800) 148,000 273,100(C) (352,700)
------------ ---------- ----------- -----------
Income/(loss) from continuing operations $ 937,400 $ (257,800) $ (150,500) $ 529,100
------------ ---------- ----------- -----------
------------ ---------- ----------- -----------
Net income/(loss) $ 937,400 $ 134,500 $ (150,500) $ 921,400
------------ ---------- ----------- -----------
------------ ---------- ----------- -----------
Income/(loss) from continuing operations
per common share $ .07 $ .03
------------ -----------
------------ -----------
Net income/(loss) per common share $ .07 $ .06
------------ -----------
------------ -----------
Average share outstanding 14,156,852 16,229,391(D)
------------ -----------
------------ -----------
</TABLE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS:
(A) Depreciation adjustment on $4,596,500 write-up of Rotocast's plant and
equipment, calculated using an estimated useful life of ten (10) years.
(B) Interest adjustment for $2,000,000, eighteen (18) month note issued in
connection with merger transaction.
(C) Reduction of income tax provision/(benefit) relating to the foregoing
adjustments and the Company's available net operating loss carryforwards.
(D) Average shares outstanding include the 2,072,539 shares of Rotonics common
stock issued in connection with the merger transaction.
8
<PAGE>
NOTE 3- INVENTORIES:
Inventories consist of:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
----------- ----------
<S> <C> <C>
Raw materials $ 3,951,100 $ 3,160,000
Finished goods 3,312,200 2,442,700
----------- ----------
$ 7,263,300 $ 5,602,700
----------- ----------
----------- ----------
</TABLE>
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
----------- ----------
<S> <C> <C>
Land $ 1,039,500 $ 1,039,500
Buildings and building improvements 4,072,000 3,274,500
Machinery, equipment, furniture and fixtures 19,844,500 13,762,700
Construction in progress 58,800 359,900
----------- ----------
25,014,800 18,436,600
Less - accumulated depreciation (8,741,700) (7,637,100)
----------- ----------
$16,273,100 $10,799,500
----------- ----------
----------- ----------
</TABLE>
NOTE 5 - INTANGIBLE ASSETS:
Intangible assets consist of:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
----------- ----------
<S> <C> <C>
Patents, net of accumulated amortization of
$99,300 and $95,200 $ 49,500 $ 35,200
Goodwill, net of accumulated amortization
of $2,295,700, and $2,070,000 4,804,500 5,030,300
----------- ----------
$ 4,854,000 $5,065,500
----------- ----------
----------- ----------
</TABLE>
NOTE 6 - BANK LINE OF CREDIT:
The Company has a $5,000,000 revolving line of credit with Wells Fargo Bank.
The line matures October 1, 2000 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 March 31, 1998
was 8.5% 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 March 31, 1998, total borrowings under the
Company's line of credit was $4,500,000 of which $4,500,000 was borrowed
under the LIBOR option. The LIBOR borrowings consist of two borrowings of
$2,250,000 each, bearing a LIBOR interest rate of 8.1875% per annum and
maturing April 6, 1998 and April 22, 1998, respectively. Proceeds from the
loan were used for working capital purposes. At March 31, 1998 the Company
had approximately $500,000 available for future borrowings under the
revolving line of credit.
In April 1998, pursuant to an appraisal of Rotocast's machinery and
equipment, the Company's revolving line of credit maximum principal amount
was increased from $5,000,000 to $7,000,000.
9
<PAGE>
NOTE 7 - LONG-TERM DEBT:
Long-term debt consists of:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
----------- ----------
<S> <C> <C>
Note payable - Bank (A) $1,733,300 $2,333,300
Note payable - Bank (B) 316,700 391,700
Note payable - Bank (C) 415,200 491,500
Note payable - Bank (D) 850,000 1,000,000
Note payable - Bank (E) 700,000 -
Note payable - Bank (F) 1,750,000 -
Note payable - Bank (G) 1,097,300 1,147,100
Other 44,800 30,400
----------- ----------
6,907,300 5,394,000
Less current portion (3,179,000) (1,281,300)
----------- ----------
$3,728,300 $4,112,700
----------- ----------
----------- ----------
</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 (8.5% at March 31, 1998). 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 March 31, 1998, the
Company had $1,500,000 of the outstanding principal balance under the
LIBOR option at 8.1875% per annum maturing on April 22, 1998. The note
is secured by the Company's machinery and equipment, accounts receivable
and inventories and matures on May 16, 2000.
(B) 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 (8.5% at
March 31, 1998) or LIBOR interest rate option for periods up to six
months. At March 31, 1998, the total outstanding principal was under
the LIBOR option at 8.1875% per annum maturing April 22, 1998. The note
is secured by the Company's machinery and equipment and matures on May
15, 2001.
(C) In March 1997, the Company was advanced $500,000 on its second 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 $625,000 in machinery
and equipment purchased. The note is due in monthly principal
installments of approximately $8,500 plus interest at the bank's prime
rate (8.5% per annum at March 31, 1998) or LIBOR interest rate option
for periods up to six months. At March 31, 1998, the total outstanding
principal was under the LIBOR option at 8.125% per annum maturing April
22, 1998. The note is secured by the Company's machinery and equipment
and matures on May 15, 2002.
(D) In June 1997, the Company was advanced $1,000,000 on its third 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 $1,250,000 in
machinery and equipment purchases. The note is due in monthly principal
installments of approximately $16,700 plus interest at the bank's prime
rate (8.5% per annum at March 31, 1998) or LIBOR interest rate option
for periods up to three months. At March 31, 1998, the total
outstanding principal was under the LIBOR option at 8.1875% per annum
maturing April 6, 1998. The note is secured by the Company's machinery
and equipment and matures on June 15, 2002.
(E) In January 1998, the Company was advanced $700,000 on its fourth
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 $875,000 in
machinery and equipment purchases. The note is due in monthly interest
only payments at the bank's prime rate (8.5% per annum at March 31,
1998) or LIBOR interest rate option for periods up to three months until
July 15, 1998. At such time the note will convert to a sixty month
fully amortizable loan. At March 31, 1998, the total outstanding
principal was under the LIBOR option at 8.1875% per annum maturing April
6, 1998. The note is secured by the Company's machinery and equipment
and matures on June 15, 2003.
At March 31, 1998, 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 rates until July 15, 1998
at which time amounts borrowed will convert to a sixty month fully
amortizable loan.
10
<PAGE>
(F) In connection with the Rotocast acquisition, the Company retired
Rotocast's existing line of credit and long-term debt with a 90 day note
issued by Wells Fargo Bank in the amount of $1,750,000. The note is
payable in interest only payments at the bank's prime rate which was
8.5% per annum at March 31, 1998.
In April 1998, pursuant to an appraisal of Rotocast's machinery and
equipment, this note was replaced with a $2,000,000 sixty month fully
amortizable note. The note will be due in monthly principal
installments of approximately $33,300 beginning May 15, 1998, plus
interest at the bank's prime or LIBOR interest rate options. The loan
will mature on April 15, 2003.
(G) 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 (8.5% per annum at March
31, 1998) 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 on September 15, 1999.
NOTE 8 - RELATED PARTY DEBT:
Related party debt consists of:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
----------- ---------
<S> <C> <C>
Note payable (A) $2,000,000 $ -
----------- ---------
----------- ---------
</TABLE>
(A) This note was issued to GCS Industries, Inc. in connection with the
acquisition of Rotocast of which a director of the Company is a
shareholder. The note bears interest at 5.26% per annum and is payable
with one interest only payment due on March 25, 1999 and a second
principal and interest payment due upon maturity of the note on
September 25, 1999.
The note is secured by a $2,000,000 irrevocable standby letter of credit
which may be called upon only if the principal balance of the note is
not paid within ten days of maturity.
NOTE 9 - ACCRUED LIABILITIES:
Accrued liabilities consist of:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
----------- ---------
<S> <C> <C>
Salaries, wages, commissions and related payables $ 565,300 $ 640,500
Other 448,800 224,800
----------- ---------
$1,014,100 $ 865,300
----------- ---------
----------- ---------
</TABLE>
NOTE 10 - COMMON STOCK:
Treasury stock is recorded at cost. At March 31, 1998, treasury stock
consisted of 1,758 shares of common stock at a cost of $1,500 and at June 30,
1997, treasury stock consisted of 1,776 shares of common stock at a cost of
$1,500.
On December 9, 1997, the Board of Directors declared at its Annual Meeting of
Stockholders a common stock dividend of $.04 per common share payable on
January 28, 1998 to stockholders of record on January 8, 1998.
During fiscal 1998, the Company retired 332,100 shares of its own common
stock which it had purchased in connection with the Company's Buy Back
Program at a total cost of $501,000.
In March 1998, the Company issued 2,072,539 shares of the Company's common
stock in connection with the Rotocast merger transaction (See Note 2).
11
<PAGE>
NOTE 11 - INCOME TAXES:
The components of the income tax provision/(benefit) were:
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
March 31, March 31
-------------------------- -------------------------
1998 1997 1998 1997
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Current:
Federal $ (4,200) $ (1,500) $ - $ 41,000
State (11,200) (69,100) 2,700 54,900
---------- ----------- ---------- -----------
(15,400) (70,600) 2,700 95,900
---------- ----------- ---------- -----------
Deferred:
Federal (5,700) 12,000 55,500 653,200
State (5,400) 2,500 (12,100) 24,700
---------- ----------- ---------- -----------
(11,100) 14,500 43,400 677,900
---------- ----------- ---------- -----------
$(26,500) $(56,100) $ 46,100 $773,800
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
At March 31, 1998, the Company had net operating loss (NOL) carryforwards of
approximately $9,300,000 for federal income tax purposes. The NOL
carryforwards, which are available to offset taxable income 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 2003 if not
utilized. The federal NOL carryforwards expire as follows:
<TABLE>
<CAPTION>
Amount of unused operating Expiration during year
loss carryforwards ended June 30,
-------------------------- ----------------------
<S> <C>
$4,600,000 2003
3,400,000 2004
600,000 2005
500,000 2006
200,000 2009
----------
$9,300,000
----------
----------
</TABLE>
At March 31, 1998, the Company had a federal alternative minimum tax credit
of approximately $190,000 which is available to offset future federal income
tax once the Company is no longer subject to an alternative minimum tax for
federal income tax purposes.
NOTE 12 - COMPUTATION OF EARNINGS PER SHARE:
Basic and diluted earnings per share have been computed in accordance with
SFAS No. 128 "Earnings per Share", using the treasury stock method for
applicable common stock warrants and options when computing diluted earnings
per share.
NOTE 13 - LAWSUIT SETTLEMENT:
On April 16, 1996, the Company was named as a defendant in a complaint filed
by Bonar U.S., Inc. in Delaware Superior Court. The complaint alleged claims
for breach of contract and promissory estoppel relating to an Agreement in
Principle entered into in connection with a proposed acquisition of the
Company by Bonar U.S., Inc. On April 3, 1996, the Company announced that it
had terminated the Agreement in Principle pursuant to its terms. The
complaint requested damages of $7,011,484. On May 17, 1996, the Company
filed a counterclaim against Bonar U.S., Inc. and Bonar Plastic, Inc. seeking
damages totaling $25,237,725 for breach of the Confidentiality Agreement with
the Company, misappropriation of trade secrets, intentional interference with
a prospective economic advantage which the Company obtained as a result of an
indication of interest from a third party and breach of a Royalty Agreement
between Bonar Plastics, Inc. and one of the Company's operating divisions
(formally known as Custom Rotational Molding, Inc.) In March 1997, the
Company reached an amicable out of court settlement with Bonar. The
settlement involved mutual general releases by the parties, dismissals of the
actions brought by the parties and payments to Bonar of $400,000 in March
1997 and $350,000 in September 1997. The $350,000 payment had been
previously accrued for and was included in accounts payable in the
accompanying June 30, 1997 balance sheet.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
To the extent that this 10-Q Quarterly Report discusses matters which are not
historical, including statements regarding future financial results,
information or expectation about products or markets, or otherwise makes
statements about future events, such statements are forward-looking and are
subject to a number of risks and uncertainties that could cause actual
results to differ materially from the statements made. These include, among
others, fluctuations in costs of raw materials and other expenses, costs
associated with plant closures, downturns in the markets served by the
Company, the costs associated with new product introductions, as well as
other factors described under this Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", and Footnote 1 to
Financial Statements.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Net sales for the three months ended March 31, 1998, decreased 15.3% to
$8,099,600 compared to $9,560,300 for the same period last year. The Company
continued to encounter a slow down in the marketplace during the current
period. Although the Company has had to contend with these adverse market
conditions during fiscal 1998, management perceives a possible strengthening
in the marketplace. This coupled with increases in several proprietary
product lines as well as customer tooling sales during the current period
also exhibit a positive trend for the Company. In addition, backlog levels,
which help provide a benchmark for future performance, are currently $700,000
above prior year levels. These positive trends are also reflected of
management efforts to strengthen and refine its sales and marketing tactics
including adding additional sales representatives to regain sales volumes and
improve the Company's overall marketshare. The Company also supports its
commitment to improve operating results with its recent merger with Rotocast
which will increase market exposure and add several new retail product lines
and distribution channels.
Cost of goods sold increased 1.9% to 79% of net sales for the three months
ended March 31, 1998, compared to 77.1% for the same period last year. The
increase in cost of goods sold is directly related to the lackluster sales
volumes during the current period. Although the Company continues to
encounter difficult market conditions which have resulted in lower gross
margins when compared to prior year operations, management remains optimistic
that its current backlog levels, more aggressive marketing efforts and the
new product mix obtained in connection with the Rotocast merger should
translate and improve sales volumes and gross margins in the ensuing months.
Selling, general, and administrative expenses were $1,530,400, or 18.9% of
net sales for the three months ended March 31, 1998, compared with
$1,652,000, or 17.3% for the same period last year. Selling, general and
administrative expenses remained consistent with previous quarter levels but
have decreased $121,600 over prior year results. The decrease is attributed
to insurance cost savings net of increased personnel and marketing costs
associated with the Company's increased marketing efforts as well as
additional administrative staffing requirements consistent with future growth
plans. Management will continue to monitor these costs in correlation to
future sales volumes levels.
Total interest expense increased $47,600 to $179,600 for the three months
ended March 31, 1998, compared to $132,000 for the same period last year.
The increase is primarily related to an increase in the Company's debt
structure when compared to the same period last year. The increase in the
Company's debt structure is attributed to the Colorado facility purchase and
its subsequent improvements in the later part of fiscal 1997 and during
fiscal 1998 (approximately 1.4 million), one million in machinery and
equipment purchases in fiscal 1998 and an increase in short-term borrowings
in connection with raw material purchasing strategies. The aforementioned
events have also caused an increase in short term borrowings due to a notable
decrease in cash flows from operations. The Company anticipates it will
incur additional interest cost during the remaining portion of fiscal 1998
due to the debt issued in connection with the Rotocast merger as well as the
debt assumed in the transaction which together amount to approximately $3.8
million. Management believes these increased costs should not have a
significant impact due to the potential improved operating results which will
be obtained as a result of the Rotocast merger.
Income tax benefit was $26,500 for the three months ended March 31, 1998,
compared to a benefit of $56,100 for the same period last year. The change
was primarily due to the Bonar lawsuit settlement which increased the overall
net loss reported in the prior period.
13
<PAGE>
Net income was $48,400, or zero earnings per common share, for the three
months ended March 31, 1998, compared to a loss of $14,200, or zero earnings
per common share for the same period last year. The increase is directly
related to the lawsuit settlement costs incurred in the prior period net of
the effect of an overall reduction in sales volume levels which impeded the
preservation of the Company's gross margin goals coupled with increase in
interest expenses as outlined above. Management realizes that an on going
down turn in the Company's marketplace or increases in raw material costs
could hinder the Company's drive to improve its performance, but remains
optimistic that current conditions are an indication of improved sales
volumes and operating results during the balance of fiscal 1998. The Company
is extremely pleased with the potential benefits which will come from the
Rotocast merger. Management acknowledges it will incur additional costs
during the reorganization of its operating facilities, but believes the
Rotocast merger will provide the unique opportunity to capitalize on
expanding its marketshare with the newly acquired product lines and
distribution channels as well as future cost savings obtainable by combining
manufacturing, sales and administrative functions.
RESULTS OF OPERATIONS - NINE MONTHS ENDED MARCH 31 , 1998 & 1997
Net sales for the nine months ended March 31, 1998, decreased 13.7% to
$25,260,500 compared to $29,268,400 for the same period last year. The
reduction is attributed to a lackluster marketplace which has resulted in
notable volume reductions in several of the Company's main product lines as
well as the custom molded product arena. Although the Company is currently
below prior year results, management has seen positive trends during the last
quarter which should improve results as we move forward. Several proprietary
product lines realized improved volume momentum as well as an overall
increase in customer tooling sales of $440,000 during the current period.
Notable increases in customer tooling sales usually signifies increased
activity for custom molded products. Management is optimistic that this
trend along with current backlog levels will provide the thrust for overall
improved sales volumes and operating results. Management also anticipates a
20-25% increase in sales volumes during the next quarter as a result of the
recent Rotocast merger. The merger will provide new product lines, increased
market share of existing product lines, new marketing/distribution channels
and increase production capabilities.
Cost of goods sold increased 3.5% to 78.7% of net sales for the nine months
ended March 31, 1998, compared to 75.2% for the same period last year. The
increase is directly related to the lackluster sales volumes during the
current period. These lower sales volume levels have not been sufficient to
sustain gross margins consistent with prior years. During this period
management has also focused on reducing inefficiencies caused by operating at
these sales volume levels which will also continue to benefit the Company
once we regain higher sales volume levels. The Company continues to see the
significant efficiencies obtained at the operating facilities that are fully
utilizing the automated routing machines and expects that all facilities will
be obtaining cost benefits from these machines by fiscal year end.
Management also perceives future benefits will be realized with the recent
Rotocast merger. During the next several months the Company will be
reorganizing its manufacturing facilities to take advantage of the
opportunities to increase production, increase efficiencies and streamline
operations. The Company will begin this process by relocating its existing
facilities in Warminster, Pennsylvania and Arleta, California into other
facilities. These changes should provide significant cost reductions and
promote improved efficiencies. The facility consolidations coupled with
Rotocast diverse retail product lines are anticipated to translate into
improved gross margins during the ensuing months.
Selling, general and administrative expenses were $4,656,300, or 18.4% of net
sales for the nine months ended March 31, 1998, compared to $4,616,400 or
15.8% for the same period last year. Although, selling, general and
administrative have increased as a percentage of sales, due to the lower
sales volumes during the current period, these costs have remained fairly
consistent with prior year results. The increase of $39,900 during the
current nine month period is attributed to increases in personnel and
marketing costs associated with the Company's advanced marketing efforts as
well as additional administrative staffing requirements consistent with
future growth plans, net of insurance cost savings. Management will continue
to monitor these costs in correlation to future sales volumes levels.
Total interest expense increased $129,900 to $522,100 for the nine months
ended March 31, 1998, compared to $392,200 for the same period last year.
The increase is primarily related to an increase in the Company's debt
structure when compared to the same period last year. The increase in the
Company's debt structure is attributed to the Colorado facility purchase and
its subsequent improvements in the later part of fiscal 1997 and 1998
(approximately 1.4 million), one million in machinery and equipment purchases
in fiscal 1998 and an increase in short-term borrowings in connection with
raw material purchasing strategies. The aforementioned events have also
caused an increase in short term borrowings due to a notable decrease in cash
flows from operations. The Company anticipates it will incur additional
interest cost during the remaining portion of fiscal 1998 due to the debt
issued in connection with the Rotocast merger as well as the debt assumed in
the transaction
14
<PAGE>
which together amount to approximately $3.8 million. Management believes
these increased costs should not have a significant impact due to the
potential improved operating results which will be obtained as a result of
the Rotocast merger.
Income taxes were $46,100 for the nine months ended March 31, 1998, compared
to $773,800 for the same period last year. The decrease is directly related
to the reduced level of income from operations.
Net income was $254,300, or $.02 per common share, for the nine months ended
March 31, 1998, compared to $937,400, or $.07 per common share for the same
period last year. The decrease is directly related to the reduction in sales
volume levels which impeded the preservation of the Company's gross margin
goals coupled with increases in selling, general, administrative and interest
expenses as outlined above. Management realizes that an on going down turn
in the Company's marketplace or increases in raw material costs could hinder
the Company's drive to improve its performance, but remains optimistic that
current conditions are an indication of improved sales volumes and operating
results during the balance of fiscal 1998. Management is extremely pleased
with the potential benefits which will result from the Rotocast merger.
Management realizes it will incur additional costs during the reorganization
of its operating facilities, but believes the Rotocast merger will provide
the Company a unique opportunity to capitalize on expanding its marketshare
with the newly acquired product lines and distribution channels as well as
future cost savings obtainable by combining various manufacturing, sales and
administrative functions.
FINANCIAL CONDITION
Working capital increased by $560,400 to $8,274,700 at March 31, 1998
compared to $7,714,300 at June 30, 1997. The increase is primarily related to
the inclusion of Rotocast's net current assets as of March 31, 1998, net of
normal fluctuations in accounts receivables, a decrease in accounts payable
related to the payment of litigation settlement costs previously accrued for
in fiscal 1997 and an increase in inventories related to raw material
purchasing strategies.
Cash provided by operations was $738,100 for the nine months ended March 31,
1998, which reflected a decrease of $2,267,800 in relation to prior period
results. The reduction is primarily attributed to the lower sales volume
levels reported during the current period which resulted in a decrease in
income from operations of approximately 1.9 million, as well as a notable
decrease in accounts payable and an increase in inventories, as indicated
above, which increased cash used by operating activities by $886,700.
The Company expended a total of $1,504,900 for property, plant and equipment
during the nine months ended March 31, 1998, compared to $2,445,200 for the
same period last year. The decrease over prior year is directly related to
the costs incurred to purchase the Commerce City, Colorado facility. The
Company continued to complete its internal expansion project that it began in
fiscal 1997. During the current period the Company acquired two additional
roto-molding machines for its Idaho facility, a second CNC router at its
Chicago facility, as well as resin silo projects in Florida and Colorado.
The Company also substantially completed its building improvement project at
its new Commerce City, Colorado facility. Now that the majority of the
Company's internal expansion project is completed, management believes the
Company is primed to meet its future growth plans.
In January 1998, the Company advanced $700,000 on its fourth 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 $875,000 in machinery and equipment
purchases. The note is due in monthly interest only payments through July
15, 1998, at which time it will convert to a sixty month fully amortizable
note.
In connection with the Rotocast merger, the Company issued an eighteen month
$2,000,000 note payable to the seller and also replaced Rotocast's existing
line of credit and term debt with a 90 day bank note in the amount of
$1,750,000. The note to the seller is payable with one interest only payment
due on March 25, 1999 and a second principal and interest payment due upon
maturity on September 25, 1999. The $2,000,000 note is secured by an
irrevocable standby letter of credit which can only be called upon if the
principal balance is not paid within 10 days of maturity.
In April 1998, the bank increased the Company's total loan facility to $16.5
million. This was done in conjunction with an appraisal of Rotocast's
assets. The ninety day note which was issued to retire Rotocast's existing
debt was replaced with a $2,000,000 sixty month fully amortizable note
payable in monthly principal payments of approximately $33,300 plus interest
and will mature on April 15, 2003. The other
15
<PAGE>
major change to the Company's total debt structure with the bank was an
increase to the total principal available on the Company's line of credit
from $5 million to $7 million. In addition, the maturity date of the line of
credit was extended to October 1, 2000. Net borrowings under the line of
credit increased $2.1 million to $4.5 million between June 30, 1997 and March
31, 1998. Current increases in the line are related to ongoing capital
expenditures, including the building improvements in Commerce City, Colorado,
payments made during the year in connection with the Bonar litigation
settlement, the fiscal 1998 common stock dividend payment and an increased
reliance on the line of credit due to the reduction in income from
operations. At March 31, 1998, the Company had $500,000 available for future
borrowings under the line of credit. With the change in the Company's debt
structure in April 1998 the available borrowings under the line of credit
increased by an additional $2,000,000.
The Company initiated a Stock Buy Back Program in fiscal 1998. As a result
the Company purchased and retired a total of 332,100 shares of common stock
at a cost of $501,000.
On December 9, 1997 the Board of Directors declared at its Annual Meeting of
Stockholders its third annual cash dividend on the Company's common stock. A
regular dividend of $.04 per common share was paid on January 28, 1998 to
stockholders of record on January 8, 1998. The Board of Directors is
confident with the Company's continued success and believes our loyal
shareholders should continue to receive a return on their investments for
their continued support.
On April 16, 1996, the Company was named as a defendant in a complaint filed
by Bonar U.S., Inc. in Delaware Superior Court. The complaint alleged claims
for breach of contract and promissory estoppel relating to an Agreement in
Principle entered into in connection with a proposed acquisition of the
Company by Bonar U.S., Inc. On April 3, 1996, the Company announced that it
had terminated the Agreement in Principle pursuant to its terms. The
complaint requested damages of $7,011,484. On May 17, 1996, the Company
filed a counterclaim against Bonar U.S., Inc. and Bonar Plastic, Inc. seeking
damages totaling $25,237,725 for breach of the Confidentiality Agreement with
the Company, misappropriation of trade secrets, intentional interference
with a prospective economic advantage which the Company obtained as a result
of an indication of interest from a third party and breach of a Royalty
Agreement between Bonar Plastic, Inc. and one of the Company's operating
divisions (formally known as Custom Rotational Molding Inc.) In March 1997,
the Company reached an amicable out of court settlement with Bonar. The
settlement involved mutual general releases by the parties, dismissals of the
actions brought by the parties and payments to Bonar of $400,000 in March
1997 and $350,000 in September 1997. The $350,000 payment had been
previously accrued for and was included in accounts payable in the
accompanying June 30, 1997 balance sheet.
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 and repayment
of long-term debt for the foreseeable future.
16
<PAGE>
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.
17
<PAGE>
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: May 15, 1998 /s/ Sherman McKinniss
-------------------------
Sherman McKinniss
President and
Chief Executive Officer
18
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
11 Statement Regarding Computation of Per Share Earnings 20
</TABLE>
19
<PAGE>
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
EXHIBIT 11
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------------- ---------------------------
1998 1997 1998 1997
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
BASIC EPS
Net income/(loss) $ 48,400 $ (14,200) $ 254,300 $ 937,400
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
Weighted average number of
common shares outstanding 13,802,979 14,137,796 13,939,654 14,156,852
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
Basic earnings per common share $ .00 $ .00 $ .02 $ .07
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
DILUTED EPS
Net income/(loss) $ 48,400 $ (14,200) $ 254,300 $ 937,400
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
Weighted average number of
common shares outstanding 13,802,979 14,137,796 13,939,654 14,156,852
Add -common equivalent shares:
Shares issuable upon exercise of options to
purchase common stock - - - 788
------------ ----------- ------------ -----------
Weighted average number of common shares
used in computation of diluted earnings per
common share 13,802,979 14,137,796 13,939,654 14,157,640
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
Diluted earnings per common share $ .00 $ .00 $ .02 $ .07
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
</TABLE>
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 21,500
<SECURITIES> 0
<RECEIVABLES> 6,787,600
<ALLOWANCES> 114,800
<INVENTORY> 7,263,300
<CURRENT-ASSETS> 15,926,300
<PP&E> 25,014,800
<DEPRECIATION> 8,741,700
<TOTAL-ASSETS> 39,124,900
<CURRENT-LIABILITIES> 7,651,600
<BONDS> 0
0
0
<COMMON> 26,921,400
<OTHER-SE> (5,676,400)
<TOTAL-LIABILITY-AND-EQUITY> 39,124,900
<SALES> 25,260,500
<TOTAL-REVENUES> 25,260,500
<CGS> 19,882,700
<TOTAL-COSTS> 24,539,000
<OTHER-EXPENSES> (101,000)
<LOSS-PROVISION> 2,700
<INTEREST-EXPENSE> 522,100
<INCOME-PRETAX> 300,400
<INCOME-TAX> 46,100
<INCOME-CONTINUING> 254,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 254,300
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
