Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
For Quarter Ended June 30, 1996 Commission File Number 33-10280C
LAMCOR, INCORPORATED
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1478017
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
P.O. Box 70 Highway 169 North
LeSueur, MN 56058
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 665-6658
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 ___
1,356,542 Common Shares were outstanding as of August 15, 1996
LAMCOR, INCORPORATED
I N D E X
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets
June 30, 1996 (Unaudited) and
September 30, 1995 3
Statements of Income
Three months ended June 30, 1996 and
1995 (Unaudited) and nine months ended
June 30, 1996 and 1995 (Unaudited) 4
Condensed Statements of Cash Flows
Nine months ended June 30,
1996 and 1995 (Unaudited) 5
Selected Notes to Condensed Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 9
PART II. OTHER INFORMATION 10
Part I. FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
LAMCOR, INCORPORATED
CONDENSED BALANCE SHEETS
June 30, September 30,
Assets 1996 1995
-------------- ---------
(Unaudited)
<S> <C> <C>
Cash (including savings) $ 159,468 $ 62,872
Accounts receivable, less allowance for
uncollectibles of $10,000 at June 30,
1996 and $10,000 at September 30, 1995 1,237,044 1,046,302
Inventories (Note 2) 1,362,446 986,438
Prepaid expenses and other 31,765 14,498
Deferred income taxes 14,000 12,615
----------- -----------
Total current assets 2,804,723 2,122,725
Property, plant and equipment - net 2,009,540 2,037,197
Other assets 4,709 4,158
----------- -----------
$ 4,818,972 $ 4,164,080
=========== ===========
Liabilities and Stockholders' Equity
Checks issued in excess of bank balance $ 101,465 $ --
Current maturities of long-term debt 97,000 97,000
Accounts payable 878,834 503,645
Other accrued expenses 120,524 144,569
Income taxes payable 91,943 128,206
Current maturities of capital lease obligations 57,103 57,103
----------- -----------
Total current liabilities 1,346,869 930,523
Long-term debt - net of current maturities 786,081 852,093
Capital lease obligations, net of current maturities 372,539 425,706
Deferred income taxes 187,500 145,900
Stockholders' Equity (Note 3):
Common stock 965,309 952,809
Notes arising from sale of common stock (66,433) (66,433)
Retained earnings 1,227,107 923,482
----------- -----------
2,125,983 1,809,858
----------- -----------
$ 4,818,972 $ 4,164,080
=========== ===========
</TABLE>
Note: The balance sheet at September 30, 1995 has been taken from the audited
financial statements at that date, and condensed.
See Notes to Condensed Financial Statements.
<TABLE>
<CAPTION>
LAMCOR, INCORPORATED
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
June 30 June 30
----------------------------- -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 2,175,435 $ 1,943,603 $ 5,947,260 $ 5,442,721
Cost of sales 1,566,265 1,402,642 4,211,776 3,956,058
----------- ----------- ----------- -----------
Gross profit 609,170 540,960 1,735,484 1,486,663
Selling, general and administrative expense 359,567 313,816 1,062,644 922,633
----------- ----------- ----------- -----------
Income from operations 249,603 227,144 672,840 564,030
----------- ----------- ----------- -----------
Other income (expense):
Interest income 2,332 1,632 6,080 5,046
Interest expense (35,482) (32,867) (109,215) (98,419)
----------- ----------- ----------- -----------
(33,150) (31,235) (103,215) (93,373)
----------- ----------- ----------- -----------
Income before income taxes 216,453 195,909 569,625 470,657
Income taxes 101,000 65,300 266,000 166,200
----------- ----------- ----------- -----------
Net income $ 115,453 $ 130,609 $ 303,625 $ 304,457
=========== =========== =========== ===========
Earnings per common share (see Note 3 regarding
shares used to compute earnings per share):
Primary $ .07 $ .10 $ .17 $ .23
============= ============== ============== ==============
Fully diluted $ .07 $ .10 $ .17 $ .23
============= ============== ============== ==============
Shares used in computing earnings per
common equivalent shares:
Primary 1,742,500 1,325,542 1,742,500 1,325,542
============= ============== ============== ==============
Fully diluted 1,763,078 1,325,542 1,763,078 1,325,542
============= ============== ============== ==============
</TABLE>
See Notes to Condensed Financial Statements.
<TABLE>
<CAPTION>
LAMCOR, INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 303,625 $ 304,453
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 164,775 130,348
Deferred income taxes 40,215 21,500
Changes in current assets and liabilities:
Accounts receivable (190,742) (468,899)
Inventory (376,008) (19,433)
Prepaid expenses (17,267) (7,212)
Accounts payable 375,189 145,337
Income taxes payable (36,263) 69,515
Other liabilities and accrued items (24,045) 6,497
--------- ---------
Net cash provided by operating activities 239,479 182,106
Cash flows from investing and other activities:
Purchase of equipment (137,118) (366,604)
Other - deposits (551) 158,115
--------- ---------
Net cash used in investing activities (137,669) (208,489)
Cash flows from financing activities:
Proceeds from debt borrowings -- 182,846
Payments on debt (119,179) (62,305)
Collections on notes receivable from common stock -- 8,924
Proceeds from exercise of stock options 12,500 --
Payment of checks issued in excess of bank balance -- (82,381)
Checks issued in excess of bank balance 101,465 --
--------- ---------
Cash provided by (used in) financing activities (5,214) 47,084
--------- ---------
Net increase in cash 96,596 20,701
Cash and savings account:
Beginning of period 62,872 6,196
--------- ---------
End of period $ 159,468 $ 26,897
========= =========
</TABLE>
See Notes to Condensed Financial Statements.
LAMCOR, INCORPORATED
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Condensed Financial Statements:
The condensed balance sheet as of June 30, 1996, the statement of
operations for the three-month and nine periods ended June 30,
1996 and 1995, and the condensed statement of cash flows for the
nine-month periods then ended have been prepared by the Company,
without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and
changes in cash flows at June 30, 1996 and for all periods
presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It
is suggested that these condensed financial statements be read in
conjunction with the financial statements and notes thereto
included in the Company's September 30, 1995 audited financial
statements. The results of operations for the period ended June
30, 1996 is not necessarily indica tive of the operating results
for the full year.
Note 2. Inventories:
Inventories consist of the following:
June 30, September 30,
1996 1995
-------------- --------------
Materials $ 332,563 $ 246,576
Work in process 534,429 416,504
Finished goods 495,454 323,358
-------------- --------------
Totals $ 1,362,446 $ 986,438
============== ==============
Note 3. Stockholders' Equity:
During the six months ended June 30, 1996, stockholders' equity
changed for net income of $303,625, the exercising of stock
options of $12,500 and the stockholder rights offering of $53,281
which was rescinded on June 14, 1996.
Common stock equivalent shares used to compute earnings per share
have also increased as stock market prices have risen in excess of
exercise prices. If 1,742,500 shares had been used to compute
earnings per share for all periods presented, per share earnings
would have been $.07 and $.07 for the three months ended June 30,
1996 and 1995, respectively, and $.17 and $.17 for the nine months
ended June 30, 1996 and 1995, respectively.
The Company's effective tax rate has increased as more income is
taxed at the maximum tax rates and as deferred income taxes are
being increased accordingly.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the Company's
unaudited interim financial statements and notes to the statements.
Lamcor, Incorporated ("Lamcor" or "Company") is a manufacturer of laminated
plastic packaging materials used primarily in the food industry. Net sales for
the third quarter of 1996 were slightly higher than the previous quarter's net
sales, but were marginally below budget. Net sales for the first nine months of
1996 are slightly ahead of budget, however, management cannot predict net sales
for the fourth quarter. In July 1996, the Company hired a new sales person to
replace a member of the sales staff who resigned in June 1996. Since it
typically requires eight to twelve months for a new sales person to achieve
budget, this change in the Company's sales staff may affect fourth quarter
sales. Increases in resin pricing, which began in March 1996 will also affect
this year's results. Because of contractual commitments with customers and
competitive conditions, there is generally a lag between increases in resin
prices and increases in prices for the Company's products.
PROPOSED MERGER AND SALE OF LAMCOR
In June 1996, the Company announced that it had signed a non-binding letter of
intent with Packaging Acquisition Corporation for the possible sale and merger
of Lamcor in a cash transaction. Packaging Acquisition Corporation is an
affiliate of POLYFLEX Film and Converting Inc. The proposed purchase price would
range from $4.00 to $4.12 per share, subject to adjustment based on the number
of shares of common stock of the Company outstanding at time of the merger. The
merger is subject to the negotiation of a definite agreement and shareholder
approval, and there is no certainty that the transaction will be consummated.
RESULTS OF OPERATIONS
The following table sets forth percentages of net sales represented by selected
items in the unaudited statements of income of the Company for the three months
and nine months ended June 30, 1996 and 1995. The operating results for any
period are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
-------------------------------- -----------------------------
1996 1995 1996 1995
-------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
Cost of sales 72.00% 72.17% 70.82% 72.69%
Selling, general and
administrative expense 16.53% 16.15% 17.87% 16.95%
Income from operations 11.47% 11.69% 11.31% 10.36%
Other income (expense) (1.52)% (1.61)% (1.74)% (1.72)%
Income before income taxes 9.95% 10.08% 9.58% 8.65%
Income taxes 4.64% 3.36% 4.47% 3.05%
Net income 5.31% 6.72% 5.11% 5.59%
</TABLE>
THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
NET SALES
Net sales increased $231,832 or 11.93% during the three months ended June 30,
1996 compared with the three months ended June 30, 1995. This increase was due
primarily to gains in market share. Net sales increased $504,539 or 9.27% during
the comparable nine month periods principally because of the same reason. The
Company's sales and marketing departments continue to make proposals to new
prospective customers and attend trade shows to generate new leads. The sales
person hired in July 1996 has experience in the packaging industry, and in
particular Fortune 500 companies. The Company has also hired a sales assistant
to serve as a liaison between the sales staff and customers, and provide the
sales staff with more time to pursue new business. Competition continues to be a
major factor, including competitors based in Mexico with lower labor costs.
COST OF SALES
Cost of sales increased $163,623 or 11.67% during the three months ended June
30, 1996 compared with the three months ended June 30, 1995, and $255,718 or
6.46% during the comparable nine month periods. These increases were due
primarily to the higher levels of net sales in 1996. The decrease in cost of
sales as a percentage of net sales was attributable to the increase in gross
margin on the sale of more value added products.
During the third quarter of fiscal 1996, inventory has been kept at historical
levels and in line with projected sales. If raw material prices continue to
escalate, it may be necessary to increase these levels as a means of postponing
or diluting the effects of higher prices. The Company also monitors inventory
levels for cash flow purposes. The Company continues to inventory items for
several customers to satisfy their require ments and carry a certain amount of
"unattached" raw material to enable Lamcor to provide product for customers with
emergency needs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expense increased $45,751 or 14.58% during
the three months ended June 30, 1996 compared with the three months ended June
30, 1995, and $140,011 or 15.18% during the comparable nine month periods. These
increases were due primarily to the addition of sales and support personnel as
well as costs connected with the proposed merger.
OTHER INCOME (EXPENSE)
Interest expense increased $2,615 and $10,796 for the three month and nine month
periods ended June 30, 1996 compared with the year earlier periods because of
debt financing of the pouch machine put into service in May 1995, which was
slightly offset with a decrease in the use of the Company's bank line of credit.
These increases were also offset in part by an increase of $700 and $1,034 of
interest income during the comparable periods.
INCOME TAXES
Income taxes increased $35,700 or 54.67% during the three months ended June 30,
1996 compared with the three months ended June 30, 1995 and $99,800 or 60.05%
during the comparable nine month periods. These increases were due primarily to
the Company's effective tax rate increasing as more income is taxed at the
maximum tax rates and as deferred income taxes are being increased accordingly.
NET INCOME
Net income decreased $15,156 or 11.60% during the three months ended June 30,
1996 compared with the three months ended June 30, 1995, and was relatively
constant during the comparable nine month periods. Net income per share was
lower during the 1996 periods principally because of an increase in the number
of outstanding common shares and common share equivalents compared to the fiscal
1995 periods.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had working capital of $1,457,854, representing an
increase of $265,652 since September 30, 1995. The Company had cash flows of
$239,479 resulting from operating activities, consisting of approximately
$303,625 in net income, $164,775 in depreciation and the remainder from the net
change in other working capital items. There were capital expenditures of
approximately $137,118 related to purchase of equipment and financing activities
resulting in the payments on debt of $119,179 and cash provided by other
financing of $101,465.
Management believes that the financial resources available to it, including its
bank line of credit, trade credit and internally generated funds, will be
sufficient to finance the Company's operations in the foreseeable future. At
June 30, 1996, the Company has access to a $600,000 bank line of credit with all
funds being available to finance any future operating activity.
In March 1996, the Company initiated an offering of up to 345,454 shares of
common stock to its existing shareholders at an offering price of $2.75 per
share. This $950,000 of new equity capital was part of a $1.4 million plant
expansion project. The Company received subscriptions totaling approximately
$158,000, but terminated the offering and returned the subscriptions in June
1996 because of the unsolicited inquiry by an affiliate of POLYFLEX Film and
Converting Inc. to acquire the Company. That acquisition is pending, but is
subject to negotiation of a definitive merger agreement and shareholder
approval. The Company intends to continue with the plant expansion project
whether or not the acquisition proceeds, and has received a bank commitment for
a $480,000 construction mortgage to finance the land and building portions of
the project. If the acquisition does not proceed, the Company will need to
attempt to raise additional equity capital to finance the equipment and
remainder of the $1.4 million expansion cost.
FORWARD LOOKING STATEMENT
Information contained in this report, other than historical information, should
be considered forward looking and reflects management's current views of future
events and financial performance that involve a number of risks and
uncertainties. The factors that could cause actual results to differ materially
include, but are not limited to, the following: resin and other raw material
pricing; the ability and timing concerning the passing on of price increases to
the Company's customers; general economic conditions and developments in the
food and packaging industries; competition and pricing pressures; length of
sales cycle; and management of growth.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is aware of no legal proceeding which is pending or
threatened to which the Company is a party or of which its property
is subject.
Item 5. Other Information
On June 14, 1996, the Company announced that it had signed a
non-binding letter of intent with Packaging Acquisition Corporation
for the possible sale and merger of Lamcor in a cash transaction.
Packaging Acquisition Corporation is an affiliate of POLYFLEX Film
and Converting inc. The proposed purchase price would range from
$4.00 to $4.12 per share, subject to adjustment based on the number
of shares of common stock of the Company out standing at time of
the merger. The merger is subject to the negotiation of a
definitive agree ment and shareholder approval, and there is no
certainty that the transaction will be consum mated.
Item 6. Exhibits and Reports on Form 8-K
(b) No reports on Form 8-K were filed during the three months ended June 30,
1996.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Date: August 15, 1996 LAMCOR, INCORPORATED
Leo W. Lund
Chairman of the Board and Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 159,468
<SECURITIES> 0
<RECEIVABLES> 1,247,044
<ALLOWANCES> 10,000
<INVENTORY> 1,362,446
<CURRENT-ASSETS> 2,804,723
<PP&E> 3,020,888
<DEPRECIATION> 1,011,348
<TOTAL-ASSETS> 4,818,972
<CURRENT-LIABILITIES> 1,346,869
<BONDS> 1,158,620
0
0
<COMMON> 965,309
<OTHER-SE> (66,433)
<TOTAL-LIABILITY-AND-EQUITY> 4,818,972
<SALES> 2,175,435
<TOTAL-REVENUES> 2,175,435
<CGS> 1,566,265
<TOTAL-COSTS> 1,566,265
<OTHER-EXPENSES> (2,332)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,482
<INCOME-PRETAX> 216,453
<INCOME-TAX> 101,000
<INCOME-CONTINUING> 115,453
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115,453
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
