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 March 31, 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 March 31, 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 May 15, 1996
LAMCOR, INCORPORATED
I N D E X
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets
March 31, 1996 (Unaudited) and
September 30, 1995 3
Statements of Income
Three months ended March 31, 1996 and
1995 (Unaudited) and six months ended
March 31, 1996 and 1995 (Unaudited) 4
Condensed Statements of Cash Flows
Six months ended March 31,
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
March 31, September 30,
Assets 1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Cash (including savings) $ 77,263 $ 62,872
Accounts receivable, less allowance for
uncollectibles of $10,000 at March 31,
1996 and $10,000 at September 30, 1995 1,211,546 1,046,302
Inventories (Note 2) 1,298,643 986,438
Prepaid expenses and other 29,568 14,498
Deferred income taxes 13,900 12,615
----------- -----------
Total current assets 2,630,920 2,122,725
Property, plant and equipment - net 1,956,033 2,037,197
Other assets 4,504 4,158
----------- -----------
$ 4,591,457 $ 4,164,080
=========== ===========
Liabilities and Stockholders' Equity
Checks issued in excess of bank balance $ 120,485 $ --
Current maturities of long-term debt 97,000 97,000
Accounts payable 721,565 503,645
Other accrued expenses 111,182 144,569
Income taxes payable 51,743 128,206
Current maturities of capital lease obligations 57,103 57,103
----------- -----------
Total current liabilities 1,159,078 930,523
Long-term debt - net of current maturities 809,404 852,093
Capital lease obligations, net of current maturities 386,065 425,706
Deferred income taxes 173,100 145,900
Stockholders' Equity (Note 3):
Common stock 1,018,590 952,809
Notes arising from sale of common stock (66,433) (66,433)
Retained earnings 1,111,653 923,482
----------- -----------
2,063,810 1,809,858
----------- -----------
$ 4,591,457 $ 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 Six Months Ended
March 31 March 31
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 2,000,918 $ 1,785,032 $ 3,771,825 $ 3,499,118
Cost of sales 1,409,897 1,283,984 2,645,512 2,553,416
----------- ----------- ----------- -----------
Gross profit 591,021 501,048 1,126,313 945,702
Selling, general and administrative expense 368,073 298,550 703,077 608,820
----------- ----------- ----------- -----------
Income from operations 222,948 202,498 423,236 336,882
----------- ----------- ----------- -----------
Other income (expense):
Interest income 1,083 1,823 3,747 3,414
Interest expense (38,132) (34,154) (73,812) (65,552)
----------- ----------- ----------- -----------
(37,049) (32,331) (70,065) (62,138)
----------- ----------- ----------- -----------
Income before income taxes 185,899 170,167 353,171 274,744
Income taxes 84,800 53,400 165,000 100,900
----------- ----------- ----------- -----------
Net income $ 101,099 $ 116,767 $ 188,171 $ 173,844
=========== =========== =========== ===========
Earnings per common share (see Note 3
regarding shares used to compute
earnings per share):
Primary $ .06 $ .09 $ .11 $ .13
=========== =========== =========== ===========
Fully diluted $ .06 $ .09 $ .11 $ .13
=========== =========== =========== ===========
Shares used in computing earnings per
common equivalent shares:
Primary 1,741,951 1,328,542 1,741,951 1,328,542
=========== =========== =========== ===========
Fully diluted 1,741,951 1,328,542 1,741,951 1,328,542
=========== =========== =========== ===========
</TABLE>
See Notes to Condensed Financial Statements.
LAMCOR, INCORPORATED
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
March 31,
----------------------
1996 1995
--------- ---------
Cash flows from operating activities:
Net income $ 188,171 $ 173,844
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 107,850 75,362
Deferred income taxes 25,915 6,500
Changes in current assets and liabilities:
Accounts receivable (165,244) (263,878)
Inventory (312,205) (46,480)
Prepaid expenses (15,070) (8,959)
Accounts payable 217,920 (40,787)
Income taxes payable (76,463) 35,075
Other liabilities and accrued items (33,387) 9,510
--------- ---------
Net cash used in operating activities (62,513) (59,813)
Cash flows from investing and other activities:
Purchase of equipment (26,686) (83,203)
Other - deposits (346) (75,469)
--------- ---------
Net cash used in investing activities (27,032) (158,672)
Cash flows from financing activities:
Proceeds from debt borrowings -- 242,846
Payments on debt (82,330) (53,494)
Collections on notes receivable from common stock -- 8,924
Proceeds from exercise of stock options 12,500 --
Proceeds from stockholder rights offering 53,281 --
Payment of checks issued in excess of bank balance -- (82,381)
Checks issued in excess of bank balance 120,485 110,701
--------- ---------
Cash provided by financing activities 103,936 226,596
--------- ---------
Net increase in cash 14,391 8,111
Cash and savings account:
Beginning of period 62,872 6,196
--------- ---------
End of period $ 77,263 $ 14,307
========= =========
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 March 31, 1996, the statement of
operations for the three-month and six-month periods ended March
31, 1996 and 1995, and the condensed statement of cash flows for
the six-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 March 31, 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 March
31, 1996 is not necessarily indica tive of the operating results
for the full year.
Note 2. Inventories:
Inventories consist of the following:
March 31, September 30,
1996 1995
Materials $ 111,293 $ 246,576
Work in process 636,090 416,504
Finished goods 551,260 323,358
-------------- --------------
Totals $ 1,298,643 $ 986,438
============== ==============
Note 3. Stockholders' Equity:
During the six months ended March 31, 1996, stockholders' equity
changed for net income of $188,171, the exercising of stock
options of $12,500 and the stockholder rights offering of $53,281.
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 1,741,951 shares had been used to compute
earnings per share for all periods presented, per share earnings
would have been $.06 and $.07 for the three months ended March 31,
1996 and 1995, respectively, and $.11 and $.10 for the six months
ended March 31, 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 Second Quarter of 1995 produced the largest sales levels in our company's
history. This success occurred despite having experienced one of the more severe
and lengthy winters on record, which at times created logistic problems on our
production floor.
Net income would have approached record levels had it not been for two
occurrences: 1) a retroactive insurance surcharge which was tied to our record
sales increase in 1995 and 2) an $11,000 give back which was the result of a
customer's bankruptcy. In this instance, we were forced to return the above
amount since it had been remitted to us within ninety days of their bankruptcy
filing. Although we have written off the total amount, our company attorneys
continue to work on a settlement. We are confident that a portion of these
monies will be returned to us.
We continue to be excited about two projects currently underway. Both are in the
medical field. One project is being developed with one of the dominant
participants in their field and the other is in conjunction with a major Fortune
500 company. We are confident that at least one of the two will yield results
not later than the fourth quarter of this year.
The raw material market continues to be a mixed bag. While some substrates are
dropping in price, others continue to hover at historical highs. As a group,
their average actually produces levels which are manageable. Unless a round of
inflation would develop, we anticipate steady or slightly decreasing costs in
raw materials over the next two quarters.
OPERATIONS
Lamcor sales for the Second Quarter of 1996 were $2,000,918 compared to
$1,785,032 for the same period in 1995. This represents an increase of over 11%
finding us, at this time, over our year-to-date projected budget. Half year
sales are $3,771,825 compared to $3,499,118 in 1995.
Net income was $101,099 compared to $116,767 in 1995 and $75,369 in 1994 for the
same period. As stated earlier, profits were less than expected due to the
aforementioned occurrences.
INTERNATIONAL COFFEE SHOW
As mentioned in last quarter's report, Lamcor was the official Platinum Sponsor
of the 1996 International Coffee Exposition. Approximately 6,500 attendees were
at the Minneapolis Convention Center where Lamcor had a booth and exhibit.
Traffic at our site was extremely heavy with great interest being expressed in
our Savor-Loc(TM) pouch. In addition, Lamcor sponsored a Saturday evening gala
at the Minnesota History Museum. This get-together was well attended and gave us
an additional opportunity to promote our products. Somewhat coincidentally, it
was during this week when we were issued a patent number from the United States
Patent Office for our Savor-Loc(TM) System. This provides a stepping stone which
will further enhance our position in the coffee and fancy food markets.
RIGHTS OFFERING
On March 1, 1996, a prospectors and rights offering was sent to shareholders of
record. Shareholders were allowed to purchase one share for every four shares
owned.
Due to unexpectedly low subscription levels, it was decided by the Board of
Directors to extend the closing date until June 15, 1996. It is hoped that this
extension will generate additional funds needed for our capital expansion.
The capital raised from this offering is earmarked for a building addition which
will house a new printing press. Our strategic plan requires these additions if
we are to present ourselves as a fully integrated manufacturer.
INVENTORY
Inventories have remained steady and are in line with projected sales. Raw
materials are brought in on an as needed basis with some kept in reserve for
emergency use. Much of the inventory cost is work in progress since an order
(from material procurement to shipping) may take as long as three months. In
addition, we have agreements with several customers to keep stock on the floor.
Close watch is kept on inventory amounts but we continue to carry slightly more
than required due to opportunities that arise because we have raw stock on hand
and can respond quickly.
SALES AND MARKETING
Our sales and marketing group continue to be aggressive in its pursuit of new
markets as well as servicing our core group of clients. We have been most
gratified that after being given a chance, we are presented with more
opportunities to increase our presence with these existing accounts.
Our biggest challenge is in creating more overall awareness of our company in
the market place. To this end, we continue to search out more representations,
particularly in those areas that we don't cover on a direct basis. At the
current time, we are in discussion with several groups that have expressed an
interest in representing our products.
In addition to the Specialty Coffee Show, we have attended the Boston Sea Food
Show, the Midwestern Meat Exposition, the International Poultry Convention, and
a National Training Seminar in Chicago. Furthermore, we have increased our
advertising budget in an effort to increase Lamcor's exposure.
The concept of "partnering" is being explored and investigated. This involved
forming alliances with other related companies, generally larger, where a
mutually beneficial relationship can be created between the two. In a typical
scenario, a supplier may provide sales leads in return for us using their
products if a sale is made. This concept has traditionally been developed
between larger companies but is finding its way amongst smaller entities as
well. A medium size order has already been taken utilizing this type of
alliance.
CONCLUSION
Activity at Lamcor has increased markedly within the past several weeks. The
winter doldrums appear to be behind us and new customer inquiries are on the
rise. It has been known for some time that actions in the market precede a rise
in sales orders. Quotations and sales calls have increased to such a point that
a sales assistant has been hired to organize the various sales functions. This
in turn frees up our sales representatives to make additional sales calls and
follow-ups. Accordingly, greater efficiency will enable us to reach the
aggressive goals established at the beginning of our fiscal year.
As always, we remain firmly committed to growth and profitability. The team
assembled at Lamcor is one of the best to be found and their dedication is, I
believe, second to none. Together they pursue a singular focus that benefits not
only themselves, but our trusted shareholders as well.
Thank you for your support . . .
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 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the three months ended March 31,
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: May 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> MAR-31-1996
<CASH> 77,263
<SECURITIES> 0
<RECEIVABLES> 1,221,546
<ALLOWANCES> 10,000
<INVENTORY> 1,298,643
<CURRENT-ASSETS> 2,630,920
<PP&E> 2,910,456
<DEPRECIATION> 954,423
<TOTAL-ASSETS> 4,591,457
<CURRENT-LIABILITIES> 1,159,078
<BONDS> 1,195,469
0
0
<COMMON> 1,018,590
<OTHER-SE> 66,433
<TOTAL-LIABILITY-AND-EQUITY> 4,591,457
<SALES> 2,000,918
<TOTAL-REVENUES> 2,000,918
<CGS> 1,409,897
<TOTAL-COSTS> 1,409,897
<OTHER-EXPENSES> (1,083)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,132
<INCOME-PRETAX> 185,899
<INCOME-TAX> 84,800
<INCOME-CONTINUING> 101,099
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,099
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
