UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter ended OCTOBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-5276
PROLER INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter.)
Delaware 74-1051251
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
4265 San Felipe, Suite 900 77027
Houston, Texas (Zip Code)
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: [713] 627-3737
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 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 Registrant's classes of
stock, as of December 12, 1995:
COMMON 4,714,158
(Title of Class) (Number of Shares Outstanding)
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
Condensed Consolidated Balance Sheet at October 31, 1995 and January 31, 1995.......................................... 1
Condensed Consolidated Statement of Operations for the three and nine months
ended October 31, 1995 and 1994........................................................................................ 2
Condensed Consolidated Statement of Cash Flows for the nine months ended
October 31, 1995 and 1994.............................................................................................. 3
Notes to Condensed Consolidated Financial Statements................................................................... 4
Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................................................................. 9
PART II. OTHER INFORMATION............................................................................................ 17
SIGNATURE PAGE......................................................................................................... 18
<PAGE>
PART I
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
ASSETS OCTOBER 31,1995 JANUARY 31, 1995
------ --------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents .............. $ 1,782 $ 3,829
Accounts receivable, net ............... 2,250 2,183
Inventories ............................ 2,653 1,752
Maintenance parts ...................... 708 906
Prepaid expenses ....................... 725 672
-------- --------
Total current assets ........... 8,118 9,342
Investments in joint operations, at equity . 32,849 34,776
Property, plant and equipment, net ......... 21,582 19,245
Other assets ............................... 4,601 2,076
-------- --------
Total assets ................ $ 67,150 $ 65,439
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable ....................... $ 1,977 $ 2,094
Accrued liabilities .................... 2,280 2,223
-------- --------
Total current liabilities ...... 4,257 4,317
Deferred compensation and other ............ 2,577 2,642
Contingencies
Stockholders' equity:
Common stock ........................... 5,351 5,351
Capital in excess of par value ......... 192 192
Retained earnings ...................... 60,861 59,025
-------- --------
66,404 64,568
Less treasury stock, at cost ........... (6,088) (6,088)
-------- --------
Total stockholders' equity ..... 60,316 58,480
-------- --------
Total liabilities and
stockholders' equity ...... $ 67,150 $ 65,439
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
1
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 31, NINE MONTHS ENDED OCTOBER 31,
------------------------------ -----------------------------
1995 1994 1995 1994
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Net sales ................................ $ 3,970 $ 3,699 $ 10,434 $ 15,103
Cost of sales ............................ 4,004 3,829 10,408 14,439
------- ------- -------- --------
Gross profit (loss) ................... (34) (130) 26 664
Earnings (loss) from joint operations .... 2,167 (488) 6,228 163
Selling, general and administrative
expense ................................ (1,098) (1,175) (3,527) (3,327)
Research and development expense ......... (327) (554) (844) (1,341)
------- ------- -------- --------
Operating income (loss) .............. 708 (2,347) 1,883 (3,841)
------- ------- -------- --------
Gain on sale of assets, net .............. -- -- 318 2,894
------- ------- -------- --------
Other income (expense):
Interest income ...................... 96 109 159 249
Interest expense ..................... (161) (154) (320) (403)
Other, net ........................... 111 (186) (2) (760)
------- ------- -------- --------
46 (231) (163) (914)
------- ------- -------- --------
Income (loss) before income taxes ........ 754 (2,578) 2,038 (1,861)
Provision for income taxes ............... 47 69 202 217
------- ------- -------- --------
Net income (loss) ........................ $ 707 $(2,647) $ 1,836 $ (2,078)
======= ======= ======== ========
Weighted average shares outstanding ...... 4,714 4,711 4,714 4,711
======= ======= ======== ========
Net income (loss) per share .............. $ .15 $ (.56) $ .39 $ (.44)
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
2
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED OCTOBER 31,
-----------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................................. $ 1,836 $(2,078)
Adjustments to reconcile net income (loss) to cash:
Depreciation ................................................... 702 714
Gain on sale of assets ......................................... (318) (2,894)
Earnings from joint operations ................................. (6,228) (163)
Distributions from (advances to) joint operations, net
of income taxes ............................................. 5,159 (6,880)
Other .......................................................... (196) --
Changes in assets and liabilities, net of effect of assets sold:
(Increase) decrease in accounts receivable ................... (67) 4,539
(Increase) decrease in inventories and maintenance parts ..... (703) 12
(Increase) decrease in prepaid expenses ...................... (53) 59
Decrease in other assets ..................................... 376 155
Decrease in accounts payable ................................. (117) (499)
Decrease in accrued liabilities .............................. (218) (547)
Decrease in deferred compensation and other .................. (169) (42)
------- -------
Net cash provided by (used in) operating activities ............... 4 (7,624)
------- -------
Cash flows from investing activities:
Purchases of property, plant and equipment, net ................... (6,354) (1,971)
Proceeds from asset sales ......................................... 4,303 7,670
------- -------
Net cash provided by (used in) investing activities ............... (2,051) 5,699
------- -------
Net decrease in cash and cash equivalents ........................... (2,047) (1,925)
Cash and cash equivalents, beginning of period ...................... 3,829 7,307
------- -------
Cash and cash equivalents, end of period ............................ $ 1,782 $ 5,382
======= =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Proler
International Corp. and subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments, consisting only of
normal, recurring adjustments considered necessary for a fair presentation, have
been included. For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended January 31, 1995, included
in the Company's 1995 Annual Report on Form 10-K filed pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934. The results for the three and nine
month periods included herein are not necessarily indicative of the results of
operations for the entire year. Certain reclassifications have been made in the
prior period financial statements to conform to current classifications.
NOTE 2: INVENTORIES
The Company's inventories are stated at the lower of cost or market using
the first-in, first-out (FIFO) method. As of October 31, 1995 and January 31,
1995 inventories were comprised of the following:
OCTOBER 31, 1995 JANUARY 31, 1995
---------------- ----------------
(In Thousands)
Processed scrap................... $ 1,785 $ 1,057
Unprocessed scrap and other....... 868 695
--------- --------
$ 2,653 $ 1,752
========= ========
NOTE 3: COMBINED JOINT OPERATIONS
A condensed summary of the financial position of the combined joint
operations (100% basis) is as follows:
OCTOBER 31, 1995 JANUARY 31, 1995
---------------- ----------------
(In Thousands)
Current assets...................... $ 50,789 $ 50,740
Property and other assets, net...... 28,508 26,400
--------- ---------
$ 79,297 $ 77,140
========= =========
Current liabilities................. $ 10,330 $ 8,882
Other liabilities................... 456 436
Stockholders' and partners' equity.. 68,511 67,822
--------- ---------
$ 79,297 $ 77,140
========= =========
4
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Two of the 50%-owned joint operations account for inventories using the
last-in, first-out (LIFO) method while the other joint operations follow FIFO.
Such LIFO inventories are carried at $22.6 million and $24.2 million at October
31, 1995 and January 31, 1995 and the excess of replacement cost over the LIFO
value at those dates was approximately $23.3 million and $19.1 million. The
determination of inventory under the LIFO method can be made only at the end of
the year when ending quantities and costs are known. While management cannot
currently estimate end of the year LIFO inventory quantities and costs with
certainty, the Company, based on current estimates, recorded additional costs of
approximately $0.6 million and $4.2 million ($0.3 million and $2.1 million net
to the Company's interest) during the three months and nine months ended October
31, 1995, respectively, to reflect the expected year-end excess of replacement
costs over LIFO values. This amount will be increased or decreased in the fourth
quarter when year-end quantities and costs are known.
The Company's investment in the joint operations and its percentage interest
in their assets and liabilities as of October 31, 1995 and January 31, 1995 are
set forth below:
OCTOBER 31, 1995 JANUARY 31, 1995
---------------- ----------------
(In Thousands)
Current assets ............................. $ 23,220 $ 23,889
Property and other assets, net ............. 12,481 11,609
Liabilities ................................ (4,836) (4,349)
Adjustment to conform reporting periods .... 1,984 3,627
-------- --------
Net investment ............................. $ 32,849 $ 34,776
======== ========
A summary of the results of operations of the combined joint operations is
as follows (in thousands):
Combined 100% Basis:
THREE MONTHS ENDED OCTOBER 31, NINE MONTHS ENDED OCTOBER 31,
------------------------------ -----------------------------
1995 1994 1995 1994
-------- -------- -------- --------
Net sales ....... $100,816 $ 53,674 $272,980 $199,729
======== ======== ======== ========
Gross profit .... $ 6,405 $ 1,135 $ 17,971 $ 4,924
======== ======== ======== ========
Earnings (loss) . $ 3,855 $ (144) $ 12,369 $ 538
======== ======== ======== ========
Company Percentage Interest:
THREE MONTHS ENDED OCTOBER 31, NINE MONTHS ENDED OCTOBER, 31,
------------------------------ ------------------------------
1995 1994 1995 1994
---- ---- ---- ----
Net sales ........ $42,549 $ 24,464 $114,967 $93,258
======= ======== ======== =======
Gross profit ..... $ 3,249 $ 302 $ 8,610 $ 2,403
======= ======== ======== =======
Earnings (loss) .. $ 2,167 $ (488) $ 6,228 $ 163
======= ======== ======== =======
5
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 4: ASSET SALES
In October, 1995, the Company sold its interest in HPI and HPNJ, joint
ventures engaged in a scrap metal processing business in Newark, New Jersey,
operating under the name of Metro Metal Recycling, to Hugo Neu Corporation, a
partner in the ventures. The Company received $3.3 million in cash from the sale
of its interests and an additional $4.4 million in cash representing
reimbursement of advances made to the joint ventures. The proceeds approximated
the Company's net book value of its investments, and accordingly, no gain or
loss was recognized. The Company's share of the pre-tax losses of these ventures
was $0.7 million for the third quarter of fiscal 1995 and $0.1 million and $1.7
million for the nine months ended October 31, 1995 and 1994, respectively. The
Company's share of HPI and HPNJ's results were essentially breakeven for the
third quarter of fiscal 1996.
In July, 1995, the Company sold a 65 acre tract of real estate in Houston to
an unrelated third party for $5.23 million. The consideration included $1.03
million in cash and a $4.2 million promissory note bearing interest at a bank's
prime rate. The note is payable in 66 monthly installments with the first six
payments of interest only, the next 59 payments of $61,000 of principal and
interest and a final payment of the remaining balance in January, 2001 (which
payment would approximate $2.0 million at current interest rates). The gain on
sale of $1.6 million is being accounted for using the installment method of
accounting and, accordingly, a $0.3 million gain on sale was recorded during the
quarter ended July 31, 1995 and $1.3 million of the gain was deferred. The note
receivable, net of the deferred gain, is included in other assets in the
accompanying balance sheet.
In February, 1994, Prolerized Steel Corporation, a wholly-owned subsidiary
of the Company, sold the assets of its scrap metal processing facility located
in Kansas City, Kansas to an unrelated third party for approximately $5.1
million. Also, in April, 1994, the assets of the Company's Vinton, Texas scrap
processing facility were sold to an unrelated third party for approximately $2.6
million. The Company recorded gains on these two sales totaling $2.9 million in
the quarter ended April 30, 1994. The Company recorded net sales of $4.7 million
and operating profit of $0.1 million attributable to the operations at the
Kansas City and Vinton plants during the nine months ended October 31, 1994.
NOTE 5: INCOME TAXES
Approximately $65,000 and $191,000 of the provision for income taxes relates
to the Company's share of income taxes attributable to its corporate joint
operations for the three and nine months ended October 31, 1995, respectively.
The provision for the comparable 1994 periods related to its corporate joint
operations. Most of the provision for federal income taxes otherwise payable in
all periods presented was eliminated by the utilization of net operating loss
carryforwards. Such loss carryforwards at January 31, 1995 for regular tax and
alternative minimum tax reporting purposes amounted to $15.5 million and $8.1
million, respectively.
6
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 6: BANK CREDIT FACILITIES
As of October 31, 1995, no borrowings were outstanding under the Company's
$15 million revolving line of credit and $6.2 million of letters of credit were
outstanding under the $7 million letter of credit facility. In December, 1995,
the Company and the bank amended its existing credit facility to provide for a
$23 million revolving line of credit and entered into a new credit agreement to
provide for a $5 million line of credit and a $6.5 million letter of credit
facility. The commitment level of the revolving line of credit reduces by
certain amounts at specified dates in 1996 from a total of $23 million to $15
million on May 1, 1996, and the facility terminates on December 31, 1996. The $5
million line of credit terminates on January 31, 1996, and the $6.5 million
letter of credit facility terminates June 30, 1997. Under the terms of the
agreements with the bank, the Company is required to maintain, among other
things, a minimum net worth and other specified financial covenants. In
addition, the Company is limited as to the payment of cash dividends, incurring
additional indebtedness and incurring capital expenditures in excess of certain
amounts. As of December 12, 1995, the Company has outstanding borrowings under
the $23 million revolving line of credit of $15.6 million.
NOTE 7: CONTINGENCIES
Certain materials resulting from the Company's operations must be handled
consistent with federal and state environmental laws and regulations. As with
any business that produces significant amounts of industrial wastes, the Company
could face substantial additional costs if past disposal practices would no
longer be deemed acceptable by the federal or state regulatory agencies,
although this result is not currently expected.
Hugo Neu-Proler Company ("HNP"), a 50% owned joint operation of the Company,
and the Port of Los Angeles are in the final stages of negotiating the renewal
of HNP's lease, the original term of which expired on August 30, 1994. In
December 1992, HNP signed a Memorandum of Understanding with the Port relating
to the lease renewal and in fiscal 1994 and 1995 provided letters of credit
totaling $9.78 million ($4.89 million each from the Company and HNP's other
owner) to secure HNP's remediation obligations under the lease. In connection
with the lease renewal, the Port has prepared and released for public comment an
Environmental Impact Report ("EIR"). The comment period for the EIR has
concluded and the Port is responding to the comments received. Under the current
lease, HNP would be responsible for remediating certain environmental conditions
on the property caused by HNP, the extent and cost of which are uncertain.
Currently, HNP estimates that it will incur capital expenditures of a minimum of
$4.0 million to $5.0 million in connection with environmental control facilities
at the Terminal Island location over the next four-year period. In addition, HNP
has accrued approximately $0.7 million as of October 31, 1995 to cover the costs
of anticipated remediation at this site.
As reported earlier, the EPA contacted the Company in August 1989 regarding
testing for possible contamination at a site in Tampa, Florida previously
operated by MRI Corporation, a wholly-owned
7
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
subsidiary of the Company. The Company and the EPA took split soil and
groundwater samples from the site for analysis. The Company has learned that in
late 1990, an EPA consultant issued a report recommending that further
consideration be given to the possibility of ranking this site using the EPA's
hazardous ranking package. Based on that recommendation the EPA took additional
samples at the site in 1992. The Company had previously conducted extensive
clean-up operations at the Tampa site when it was closed in 1988. The financial
implications of the Company's current investigation or any agency action are
uncertain at this time, and the Company is continuing to evaluate whether any
further corrective action is necessary or appropriate.
MRI Corporation has been notified that it may be a potentially responsible
party ("PRP") with respect to a site in Hillsborough County, Florida. In
addition, in October 1992, Hillsborough County filed an action seeking
contribution, response cost recovery, and damages from PRP's at this site and
named the Company, among others, as a defendant in this action. Based on
information provided to the Company, management believes that MRI Corporation's
involvement is de minimis and amounts ultimately payable, if any, will not have
a material adverse effect on the Company's financial position or results of
operations.
The Company is also subject to certain other litigation and claims arising
in the ordinary course of business. In the opinion of management, the ultimate
resolution of these claims and lawsuits will not have a material adverse effect
on the Company's financial position or results of operations.
NOTE 8: PER SHARE INFORMATION
Per share calculations are based on the average number of common shares
outstanding during the period. The per share calculations do not include the
common equivalent shares attributable to the assumed exercise of outstanding
stock options since the effect was not significant for all periods presented.
8
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is engaged, through its wholly-owned subsidiaries and its 50% or
less-owned joint operations, in buying, processing for recycling and selling
ferrous and other scrap metals. The Company's principal scrap processing
business is conducted through its joint operations, which primarily make export
sales. The Company's wholly-owned subsidiary, Proler Recycling, Inc. ("Proler
Recycling") owns and operates three plants which collectively sell precipitation
iron, low residual steel, tin and other products in the domestic market. The
Company's and its joint operations' business is characterized by cyclical
fluctuations in profitability depending on the availability and price of raw
scrap and the demand and prices for processed scrap by the domestic and foreign
iron and steel industries and the nonferrous metals industries.
The joint operations are structured so that the participants advance and
withdraw funds equally, and policy decisions require the unanimous consent of
the participants. As a result, the Company's control over the joint operations
is limited and must be exercised in concert with its partners in those
operations. The Company makes advances to the joint operations, on a regular
basis, primarily for the purchase of inventory and for operating costs. The
Company receives distributions from the joint operations, primarily from the
sales proceeds of shipments. During the first nine months of fiscal 1996, the
Company's distributions from joint operations exceeded advances to joint
operations by $5.0 million.
The Company continues to implement the business plan described in its 1993
Annual Report on Form 10-K with the goals of restructuring, selling or otherwise
disposing of certain underperforming and unproductive assets, and supplementing
its core commodity metals business by investing in technologies that profit from
processing and recycling waste and secondary materials. The Company continues to
believe that if it is successful in implementing this business plan, it will be
able to make a transition from its current participation in the highly cyclical
scrap processing business, primarily through joint operations over which it
exercises limited control, to a recycling company engaged in environmental
services, energy supply and metals recovery with majority control over its
significant assets. The Company is also seeking to enter into complementary
lines of business, including specialty chemicals and industrial energy
facilities.
In implementing its business plan during the past three years, the Company
has sold the assets of its domestic scrap facilities in Chicago, Houston, Kansas
City and Vinton. As described in Note 4 to the financial statements, in October,
1995 the Company sold its interest in its HPI and HPNJ joint ventures, which
operate under the name Metro Metal Recycling, and in July, 1995 sold a 65 acre
tract of real estate on the Houston ship channel. The Company has other real
estate assets for sale.
With the sale of the domestic steel scrap operations, the Company's
principal scrap processing business is conducted through its joint operations,
with the Company's remaining revenues derived from the Proler Recycling plants.
Proler Recycling has recently commenced operations at new plant facilities in
Coolidge, Arizona, which are designed to recover copper, tin and other metals
and chemicals derived from materials used in the production process of
electronic printed circuit boards. It has also begun the marketing of
9
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
specialty chemicals to a variety of industries.
The new facilities in Coolidge were completed in November, 1995, and the
Company currently has short-term supply agreements which will enable the plant
to operate at approximately 50% of capacity. At full capacity, the facility is
capable of annually reusing and recycling approximately 1.5 million gallons of
used etchants (etchants are the solutions used to etch pathways on printed
circuit boards) and reclaiming copper and tin from 5 million pounds of off-spec
printed circuit boards and associated trim. These recycling processes are
projected to recover over 2 million pounds of copper and 800,000 gallons of
regenerated etchants per year when the plant is operating at full capacity.
LIQUIDITY, FINANCING AND CAPITAL RESOURCES
The Company currently meets its working capital requirements principally
from distributions from the joint operations and, to the extent necessary,
borrowings under its revolving line of credit. As of October 31, 1995, the
Company had working capital of $3.9 million, a decline from the $5.0 million
reported as of January 31, 1995. In the first nine months of fiscal 1996, the
Company expended approximately $6.1 million for the construction of new plant
facilities in Coolidge, Arizona. In addition, the Company received net cash
proceeds of $4.3 million from asset sales and net cash distributions totalling
approximately $5.0 million from joint operations.
As more fully described in Note 6 to the condensed consolidated financial
statements, in December, 1995 the Company and the bank amended its existing
credit facility to provide for a $23 million revolving line of credit and
entered into a new credit agreement to provide for a $5 million line of credit
and a $6.5 million letter of credit facility. The revolving line of credit
facility is subject to a borrowing base of eligible receivables and inventory,
and the commitment level reduces by certain amounts at specified dates to $15
million with the facility terminating on December 31, 1996. The $5 million line
of credit terminates on January 31, 1996, and the $6.5 million letter of credit
facility terminates on June 30, 1997.
As of October 31, 1995, no borrowings were outstanding under the revolving
line of credit and $6.2 million of letters of credit were outstanding under the
letter of credit facility, including $4.89 million in letters of credit issued
in connection with a lease at a joint operation's Los Angeles facility.
Subsequent to October 31, 1995 and as of December 12, 1995, the Company has
borrowed $15.6 million under the revolving line of credit, primarily to fund
inventory purchases and operating expenses of the joint operations. The Company
expects to borrow additional amounts subsequent to December 12, 1995, and
believes that the amounts available under its credit facilities, together with
distributions from the joint operations, will be sufficient to meet its current
working capital requirements.
As noted in "General" above, the Company regularly makes advances to the
joint operations and receives periodic distributions primarily from the proceeds
of shipments. The Company's ability to borrow against assets of the joint
operations may be limited by the Company's inability to grant a direct security
10
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
interest in those assets to the bank and by certain limitations on the Company's
ability to pledge its interests in the joint operations. The joint operations
purchase inventory to maintain sources of supply, even in periods of lower
demand and lower sales prices. Given these factors and the cyclical nature of
the scrap markets, the Company's liquidity could be adversely affected if lower
sales, coupled with continued inventory purchases, result in accumulation of
excess inventories at the joint operations. Beginning in the third quarter and
continuing through late November, the joint operations experienced lower prices
and demand from foreign steel mills and higher levels of inventory purchases,
resulting in an accumulation of excess inventories and increased financing
requirements. In recent weeks, new sales orders have been entered into, and
currently approximately seventy percent of inventory is subject to outstanding
sales orders which represents an increase from approximately thirty percent of
inventory subject to outstanding sales orders in October, 1995. The Company is
financing its share of increased inventory purchases primarily through increased
borrowings under its bank credit facilities. Management anticipates that current
borrowings will be reduced in the first quarter of next year as sales are
completed.
The Company and its joint operations are engaged in ongoing proceedings and
communications with regulatory authorities concerning environmental matters, and
ongoing litigation regarding nonenvironmental matters. An adverse outcome in
these legal proceedings, or any significant additional expenditures that may be
required in order for the Company or its joint operations to operate in
accordance with environmental laws and regulations, or to clean up sites now or
formerly used by them, could affect the Company's financial position. In the
past, the Company has incurred significant environmental costs in connection
with the clean-up and handling of materials at sites operated by the Company.
See Note 7 to the condensed consolidated financial statements.
The Company's consolidated balance sheet included elsewhere herein presents
the Company's share of the joint operations using the equity method of
accounting in accordance with generally accepted accounting principles. The
following table presents a proforma condensed combined balance sheet of the
Company assuming its proportionate share of the joint operations is combined
with the Company. Management believes this presentation is informative of the
Company's financial condition since the majority of the Company's underlying
investment in its joint operations consists of net current assets.
11
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
PROFORMA CONDENSED COMBINED BALANCE SHEET
AS OF OCTOBER 31, 1995
PROPORTIONATE
SHARE OF COMBINED
COMPANY JOINT OPERATIONS COMPANY
------- ---------------- --------
(in thousands)
Current assets ....................... $ 8,118 $25,204 $33,322
Investments in joint operations ...... 32,849 -- --
Property and other assets, net ....... 26,183 12,481 38,664
------- ------- -------
$67,150 $37,685 $71,986
======= ======= =======
Current liabilities .................. $ 4,257 $ 4,608 $ 8,865
Other liabilities .................... 2,577 228 2,805
Stockholders' and partners' equity ... 60,316 32,849 60,316
------- ------- -------
$67,150 $37,685 $71,986
======= ======= =======
RESULTS OF OPERATIONS
The Company's consolidated results of operations included elsewhere
herein present the Company's share of the joint operations using the equity
method of accounting in accordance with generally accepted accounting
principles. The following table presents a proforma condensed combined statement
of operations of the Company assuming its proportionate share of the joint
operations is combined with the Company. Management believes this presentation
is informative of the Company's results of operations given that a significant
portion of the Company's business is conducted through the joint operations.
12
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED OCTOBER 31, 1995
PROPORTIONATE
SHARE OF COMBINED
COMPANY JOINT OPERATIONS COMPANY
------- ---------------- -------
(in thousands)
Net sales ................................ $ 10,434 $ 114,967 $ 125,401
Cost of sales ............................ 10,408 106,357 116,765
-------- --------- ---------
Gross profit ........................ 26 8,610 8,636
Earnings from joint operations ........... 6,228 -- --
Selling, general and administrative
expense ............................. (3,527) (2,815) (6,342)
Research and development expense ......... (844) -- (844)
-------- --------- ---------
Operating income ..................... 1,883 5,795 1,450
Other income, net ........................ 155 433 588
-------- --------- ---------
Income before income taxes ............... 2,038 6,228 2,038
Provision for income taxes ............... 202 -- 202
-------- --------- ---------
Net income ............................... $ 1,836 $ 6,228 $ 1,836
======== ========= =========
The Proler Recycling plants experienced a loss for the three months
ended October 31, 1995 and had a small gross profit for the nine months ended
October 31, 1995. Comparable prior year gross profit (loss) of $(130,000) and
$664,000, respectively, include the operations of sold plants, although such
plants operated at approximate breakeven results. Consolidated net sales and
cost of sales decreased 31% and 28%, respectively, during the nine months ended
October 31, 1995 as compared to the nine months ended October 31, 1994
principally due to the sale of the Company's Kansas City and Vinton plants
during the first quarter of fiscal 1995. The Company recorded $4.7 million in
net sales and $4.6 million in cost of sales attributable to these plants during
the nine months ended October 31, 1994.
Excluding the sold plants from the results of operations, the following
table highlights the more significant operating information of the Proler
Recycling plants (dollars in thousands):
13
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Three months Nine months
ended October 31, ended October 31,
----------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
Sales volumes (gross tons) ......... 22,408 26,317 60,215 75,615
Net sales .......................... $ 3,970 $ 3,699 $10,434 $10,360
Cost of sales ...................... 4,004 3,829 10,408 9,772
-------- -------- ------- -------
Gross profit (loss) ................ $ (34) $ (130) $ 26 $ 588
======== ======== ======= =======
The sales volume decrease during fiscal 1996 as compared to fiscal 1995
is primarily attributable to reduced demand for precipitation iron by the copper
mining customers and lower tin production and sales due to operational problems
experienced at the Coolidge tin recovery unit. Sales price increases for both
three and nine month periods ended October 31, 1995, for precipitation iron
substantially offset the effect of the reduced volumes sold. Actions taken
during the third quarter to increase precipitation iron volume sales resulted in
a 28% increase in sales volume over the quarter ended July 31, 1995. The decline
in gross profit for the nine months ended October 31, 1995 as compared to the
nine months ended October 31, 1994 is primarily attributable to higher costs
incurred in the tin recovery unit. Operational problems in the tin recovery unit
have been isolated and activities to remedy such problems have been completed.
Earnings from joint operations increased from a loss of $0.4 million
and earnings of $0.2 million in the third quarter and first nine months of
fiscal 1995 to $2.2 million and $6.2 million in the comparable periods of fiscal
1996. The third quarter and first nine months of fiscal 1995 included
non-recurring income of $0.6 million and $2.4 million, respectively,
attributable to the sale of inventory which had no cost basis and which
substantially offset losses incurred in certain of the joint ventures.
As more fully described in Note 4, in October, 1995 the Company
completed the sale of its joint venture interests in HPI and HPNJ. The Company's
share of pre-tax losses from these joint ventures was $0.7 million for the third
quarter of fiscal 1995 and $0.1 million and $1.7 million for the nine months
ended October 31, 1995 and 1994, respectively. The Company's share of HPI and
HPNJ's results were essentially breakeven for the third quarter of fiscal 1996.
Excluding the results from the sold joint venture interests, the
following table highlights the more significant per ton operating information
for the joint operations:
14
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Three months Nine months
ended October 31, ended October 31,
----------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
Sales volumes (gross tons) 612,000 330,000 1,681,000 1,328,000
Net sales ................ $ 151 $ 125 $ 148 $ 129
Cost of sales ............ 139 127(a) 137 131(a)
-------- --------- ---------- -----------
Gross profit (loss) ...... $ 12 $ (2) $ 11 $ (2)
======== ========= ========== ===========
(a) Excludes the effect of tonnage sold with no cost basis
Gross profit margins in the joint operations improved during the nine
months ended October 31, 1995 for several reasons. Increased foreign demand
resulted in a rise in ferrous sales volumes of 86% and 28% for the three and
nine months ended October 31, 1995, compared to the same periods in 1994.
Ferrous sales price increases of 29% for the 1995 nine month period were
partially offset by higher buying costs. Nonferrous sales prices more than
doubled this year contributing to over half the increase in gross profit.
As discussed in "Liquidity, Financing and Capital Resources" above,
demand and prices in the ferrous scrap export market declined from August
levels, but have rebounded somewhat in recent weeks. Given these circumstances,
management projects fourth quarter sales volumes and gross profits will be lower
than third quarter amounts.
Research and development expenses for the three and nine months ended
October 31, 1995 decreased 41% and 37% compared to the same periods in 1994 due
mainly to reduced research activities at Proler Recycling.
Selling, general and administrative expenses increased 6% for the nine
month period ended October 31, 1995 compared to the same period in 1994,
primarily due to increases in personnel related costs.
Interest income declined 12% and 36% for the three and nine months
ended October 31, 1995 compared to the same periods of 1994 due to a decline in
average cash balances. Interest expense decreased for the fiscal 1996 nine month
period due to a $0.1 million tax dispute being recorded in the first quarter of
the prior year.
15
<PAGE>
PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Other income (expense), net (which includes real estate costs of
$182,000 and $548,000 for the three and nine months ended October 31, 1995,
respectively and costs of $238,000 and $749,000 for the comparable 1994 periods)
increased significantly compared to the same periods in 1994 primarily due to
increased income from parts and equipment sales and lower real estate costs.
NEW ACCOUNTING STANDARD
In March, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 121 - " Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
of." This Statement requires that long-lived assets and certain identifiable
intangibles to be held by an entity be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable from future cash flows. This statement is effective for
financial statements for fiscal years beginning after December 15, 1995. The
Company has not estimated the impact, if any, of the provisions of SFAS No. 121.
16
<PAGE>
PART II
OTHER INFORMATION
ITEMS 1 THROUGH 5 ARE NOT APPLICABLE.
ITEM 6(A) EXHIBITS.
3.1 By-laws of Proler International Corp. as amended to date
27 Financial Data Schedule
ITEM 6(B) REPORTS ON FORM 8-K.
The Company filed a report on 8-K dated October 17, 1995 which contained
proforma financial statements regarding the sale of its joint venture interests
in Newark, New Jersey.
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 its behalf by the
undersigned thereunto duly authorized.
PROLER INTERNATIONAL CORP.
(Registrant)
Date: DECEMBER 14, 1995 /S/ STEVEN F. GILLILAND
----------------- -----------------------
Steven F. Gilliland
President and Chief Executive Officer
(Principal Executive Officer)
Date: DECEMBER 14, 1995 /S/ MICHAEL F. LOY
----------------- ------------------
Michael F. Loy
Vice President - Finance and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
18
<PAGE>
PROLER INTERNATIONAL CORPORATION
BYLAWS
ARTICLE I
OFFICES
Section 1.1. The principal office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 1.2. The corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. All meetings of the stockholders for the election of
directors shall be held in the City of Houston, State of Texas, at such place as
may be fixed from time to time by the board of directors. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed wavier of notice thereof.
Section 2.2. Annual meetings of stockholders, commencing with the year
1967, shall be held on the first Monday of May if not a legal holiday, and if a
legal holiday, then on the next secular day following, at 11:00 A.M., at which
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 2.3. Written notice of the annual meeting shall be given to each
stockholder entitled to vote thereat at least ten days before the date of the
meeting.
Section 2.4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order, showing the address of and the number
of shares registered in the
<PAGE>
name of each stockholder. Such list shall be open to the examination of any
stockholder, during ordinary business hours, for a period of at least ten days
prior to the election, either at a place within the city or town where the
election is to be held and which place shall be specified in the notice of the
meeting, or, if not specified, at the place where said meeting is to be held,
and the list shall be produced and kept at the time and place of election during
the whole time thereof, and subject to the inspection of any stockholder who may
be present.
Section 2.5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the chairman of the board of directors or by the
president or the board of directors and shall be called by the president or
secretary at the request in writing of any two members of the board of
directors, or at the request in writing of stockholders owning ten percent or
more in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 2.6. Written notice of a special meeting of stockholders, stating
the time, place and purpose thereof, shall be given to each stockholder entitled
to vote thereat, at least ten days before the date fixed for the meeting.
Section 2.7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 2.8. The holders of fifty percent of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 2.9. When a quorum is present at any meeting, the
<PAGE>
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes or of the certificate of incorporation, a different vote is required in
which case such express provision shall govern and control the decision of such
question.
Section 2.10. Each stockholder shall at every meeting of the stockholders
be entitled to one vote in person or by proxy for each share of the capital
stock having voting power held by such stockholder, but no proxy shall be voted
on after three years from its date, unless the proxy provides for a longer
period, and, except where the transfer books of the corporation have been closed
or a date has been fixed as a record date for the determination of its
stockholders entitled to vote, no shares of stock shall be voted on at any
election for directors which has been transferred on the books of the
corporation within twenty days next preceding such election of directors.
Section 2.11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken in connection with any corporate action by any
provisions of the statutes or of the certificate of incorporation, the meeting
and vote of stockholders may be dispensed with, if all the stockholders who
would have been entitled to vote upon the action if such meeting were held,
shall consent in writing to such corporate action being taken.
ARTICLE III
DIRECTORS
Section 3.1. The number of directors which shall constitute the whole
board shall be five. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 3.2 of this Article, and each
director elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 3.2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and shall qualify, unless sooner displaced.
<PAGE>
Section 3.3. The business of the corporation shall be managed by
its board of directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the certificate
of incorporation or by these by-laws directed or required to be exercised or
done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 3.4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 3.5. The first meeting of each newly elected board of directors
shall be held immediately following the adjournment of the annual meeting of the
stockholders and at the same place as such meeting of the stockholders, or at
such other time and place as shall be fixed by the vote of the stockholders at
the annual meeting, and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event such meeting is not held at the time and
place herein specified or so fixed by the stockholders, the meeting may be held
at such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the board of directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 3.6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 3.7. Special meetings of the board may be called by the chairman
of the board of directors or by the president on three days' notice to each
director, either personally or by mail, or upon twenty-four hours notice by
telegram; special meetings shall be called by the chairman of the board of
directors or the president or secretary in like manner and on like notice on the
written request of any director.
Section 3.8. At all meetings of the board, a majority of the total number
of the board shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
<PAGE>
quorum shall not be present at any meeting of the board of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 3.9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if prior to such action a written consent thereto is signed
by all members of the board or of such committee as the case may be, and such
written consent is filed with the minutes of proceedings of the board or
committee.
COMMITTEES OF DIRECTORS
Section 3.10. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of two or more of the directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the board
of directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the board of
directors.
Section 3.11. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 3.12. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
<PAGE>
Section 4.1. Notices to directors and stockholders shall be in
writing and delivered personally or mailed to the directors or stockholders at
their addresses appearing on the books of the corporation. Notice by mail shall
be deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram.
Section 4.2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 5.1. The officers of the corporation shall be chosen by the board
of directors and there shall be a chairman of the board of directors, and a
president, one or more vice-presidents, a secretary and a treasurer. The board
of directors may also choose one or more assistant secretaries and assistant
treasurers and one of the Vice Presidents may be designated the Executive Vice
President. Two or more offices may be held by the same person, except that where
the offices of president and secretary are held by the same person, such person
shall not hold any other office.
Section 5.2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer.
Section 5.3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 5.4. The salaries of all officers of the corporation shall
be fixed by the board of directors.
Section 5.5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation
<PAGE>
shall be filled by the board of directors.
CHAIRMAN OF THE BOARD OF DIRECTORS
Section 5.6. The chairman of the board of directors shall preside at all
meetings of the stockholders and the board of directors and shall perform such
other duties and exercise such other powers as the board may from time to time
prescribe.
THE PRESIDENT
Section 5.7. The president shall be the chief executive officer of the
corporation, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 5.8. The president shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 5.9. The vice-president, or if there shall be more than one, the
vice-presidents in the order determined by the board of directors, shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 5.10. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he,
<PAGE>
or an assistant secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by his signature
or by the signature of such assistant secretary. The board of directors may give
general authority to any other officer to affix the seal of the corporation and
to attest the affixing by his signature.
Section 5.11. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 5.12. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 5.13. The treasurer shall disburse the funds of the corporation
as may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 5.14. If required by the board of directors the treasurer shall
give the corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the board of
directors for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Section 5.15. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors,
shall, in the absence or disability of the treasurer; perform the duties and
exercise the powers of the
<PAGE>
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 6.1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation.
Section 6.2. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
CLOSING OF TRANSFER BOOKS
Section 6.3. The board of directors may close the stock transfer books of
the corporation for a period not exceeding fifty days preceding the date of any
meeting of stockholders or the date for payment of any dividend or the date for
the allotment of rights or the date when any change or conversion or exchange of
capital stock shall go into effect or for a period of not exceeding fifty days
in connection with obtaining the consent of stockholders for any purpose. In
lieu of closing the stock transfer books as aforesaid, the board of directors
may fix in advance a date, not exceeding fifty days preceding the date of any
meeting of stockholders, or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent, as a record date
<PAGE>
for the determination of the stockholders entitled to notice of, and to vote at,
any such meeting, and any adjournment thereof, or entitled to receive payment of
any such dividend, or to any such allotment of rights, or to exercise the rights
in respect of any such change, conversion or exchange of capital stock, or to
give such consent, and in such case such stockholders and only such stockholders
as shall be stockholders of record on the date so fixed shall be entitled to
such notice of, and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be
notwithstanding any transfer of any stock on the books of the corporation after
any such record date fixed as aforesaid.
REGISTERED STOCKHOLDERS
Section 6.4. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 7.1. Dividends upon the capital stock of the corporation, subject
to any provisions of the certificate of incorporation, may be declared by the
board of directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock, subject to
the provisions of the certificate of incorporation.
FISCAL YEAR
Section 7.2. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
<PAGE>
Section 7.3. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the word "Delaware". The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
Section 8.1. These by-laws may be altered or repealed at any regular
meeting of the stockholders or of the board of directors or at any special
meeting of the stockholders or of the board of directors if notice of such
alteration or repeal be contained in the notice of such special meeting. No
change of the time or place of the meeting for the election of directors shall
be made within thirty days next before the day on which such meeting is to be
held, and in case of any change of such time or place, notice thereof shall be
given to each stockholder in person or by letter mailed to his last known
postoffice address at least twenty days before the meeting is held.
BY-LAWS OF APRIL 22, 1966
<PAGE>
Amendments to the Bylaws of Proler International Corp.
Adopted by the Board of Directors on March 20, 1973
RESOLVED, that Article II, Section 2.2 of the Bylaws of the Corporation
be and it is hereby amended to read as follows:
Section 2.2 Annual meetings of stockholders, commending with
the year 1973, shall be held on such day and at such time during
the months of May or June as may be fixed from time to time by the
Board of Directors. At the annual meetings of stockholders, they
shall elect, by a plurality vote, a Board of Directors, and
transact such other business as may properly be brought before the
meeting. In the event that no date is fixed by the Board of
Directors, annual meetings of stockholders shall be held on the
second Tuesday in June, if not a legal holiday,and if a legal
holiday, then on the next secular day following, at 11:00 A.M.
<PAGE>
Amendment to the Bylaws of Proler International Corp. Adopted by
the Board of Directors on April 29, 1981
RESOLVED, that Section 6.3 of Article VI of the Company's Bylaws be
amended to read in its entirety as follows:
CLOSING OF TRANSFER BOOKS
Section 6.3 The Board of Directors may close the stock transfer
books of the Corporation for a period not exceeding sixty (60) days
preceding the date of any meeting of stockholders or the date for payment
of any dividend or the date for the allotment of rights or the date when
any change or conversion or exchange of capital stock shall go into
effect or for a period of not exceeding sixty (60) days in connection
with obtaining the consent of stockholders for any purpose. In lieu of
closing the stock transfer books as aforesaid, the Board of Directors may
fix in advance a date, not exceeding sixty (60) days preceding the date
of any meeting of stockholders, or the date for the allotment of rights,
or the date when any change or conversion or exchange of capital stock
shall go into effect, or a date in connection with obtaining such
consent, as a record date for the determination of the stockholders
entitled to notice of, and to vote at, any such meeting, and any
adjournment thereof, or entitled to receive payment of any such dividend,
or to any such allotment of rights, or to exercise the rights in respect
of any such change, conversion or exchange of capital stock, or to give
such consent, and in such case such stockholders and only such
stockholders as shall be stockholders of record on the date so fixed
shall be entitled to such notice of, and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights, or to give
such consent, as the case may be notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
<PAGE>
Amendments to the Bylaws of Proler International Corp.
Adopted by the Board of Directors on December 11, 1987
RESOLVED, that Article III, Section 3.1 of the Bylaws of the Corporation
be, and hereby is, amended to read as follows:
Section 3.1. The number of directors which shall constitute the
whole Board shall be six (6) to be made up of two Class A directors, two
Class B directors and two Class C directors in accordance with the
Corporation's Certificate of Incorporation. The directors shall be
elected at the annual meeting of the stockholders, except as provided in
Section 3.2 of this Article, and each director elected shall hold office
until his successor is elected and qualified. Directors need not be
stockholders.
RESOLVED FURTHER, that Article V, Section 5.6 of the Bylaws of the
Corporation be, and hereby is, amended to read in its entirety as follows:
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
Section 5.6. The Chairman of the Board and Chief Executive Officer
shall be the chief executive officer of the Corporation and, subject to
the direction of the Board of Directors, shall in general supervise and
control all business and affairs of the Corporation and shall perform all
duties and have all powers which are commonly incident to the office of
chief executive or which are delegated to him by the Board of Directors.
The Chairman of the Board and Chief Executive Officer shall preside when
present at all meetings of the stockholders and the Board of Directors.
RESOLVED FURTHER, that Article V, Section 5.7 of the Bylaws of the
Corporation be, and hereby is, amended to read in its entirety as follows:
THE PRESIDENT AND CHIEF OPERATING OFFICER
Section 5.7. The president shall be the chief operating officer of
the Corporation and, subject to the direction of the Board of Directors
and the Chairman and Chief Executive Officer, shall perform all duties
and
<PAGE>
have all powers which are commonly incident to the office of chief
operating officer or which are delegated to him by the Chairman of the
Board and Chief Executive Officer. In the event of the death or
disability of the Chairman and Chief Executive Officer, the President
shall perform the duties of the Chairman of the Board and Chief Executive
Officer, and, when so acting, shall have all the powers of and shall be
subject to all the restrictions upon the Chairman of the Board and Chief
Executive Officer.
<PAGE>
Amendments to the Bylaws of Proler International Corp.
Adopted by the Board of Directors on April 28, 1988
RESOLVED, that the Company's Bylaws be and hereby are amended to add a
new Section 7.4 which shall be and read in its entirety as follows:
INDEMNIFICATION OF
DIRECTORS, OFFICER AND OTHER PERSONS
Section 7.4. To the extent permitted by law, the corporation shall
indemnify each of its directors in their capacity as directors or
officers of the corporation, and may indemnify any other person, who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding whether civil, criminal,
administrative or investigative (other than an action by or in the right
of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
<PAGE>
The corporation shall indemnify each of its directors in their
capacity as directors or officers of the corporation, and may indemnify
any other person, who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such
person have been adjudged to be liable to the corporation unless and only
to the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem
proper.
Any indemnification under this section (unless ordered by a
court)shall be made by the corporation only upon a determination that
indemnification of the director, officer, employee or agent is proper
because he has met the applicable standard of conduct set forth above.
Such determination shall be made as follows: by the board of directors by
a majority vote of a quorum consisting of directors who are not parties
to such action, suit or proceeding, or if such a quorum is not
obtainable, or even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or by the
stockholders.
Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding
<PAGE>
may be paid by the corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the board of directors
upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified by the corporation as authorized in
this section. Such expenses incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
The indemnification and advance of expenses provided by this
section shall be a contract right and shall not be deemed exclusive of
any other rights to which those seeking indemnification or the
advancement of expenses may be entitled under the laws of the State of
Delaware, under any agreement, including any agreement to which the
corporation is a party, vote of stockholders or disinterested directors
or otherwise, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall insure to the benefit of
the heirs, executors and administrators of such a person. No amendment to
or repeal of this section 7.4 shall apply to or have any effect on the
contract rights of any person under this section 7.4 for or with respect
to acts or omissions of such person occurring prior to such amendment.
RESOLVED THAT, in accordance with the provisions of Section 203 Business
Combinations with Interested Stockholders of the Delaware General Corporation
Law, the bylaws of Proler International Corp. be amended to include a new
Article IX to be and read in its entirety as follows:
ARTICLE IX
BUSINESS COMBINATIONS
Section 9.1. The Company shall not be governed by the provisions of
Section 203 Business Combinations with Interested Stockholders of the
Delaware General Corporation Law.
<PAGE>
Amendments to the Bylaws of Proler International Corp.
Adopted by the Board of Directors on May 6, 1992
RESOLVED, that the first sentence of Article III, Section 3.1 of the
Bylaws be, and hereby is, amended to read in its entirety as follows:
The number of directors which shall constitute the whole Board shall be
five (5), to be made up of one Class A director, two Class B directors
and two Class C directors, in accordance with the Corporation's
Certificate of Incorporation.
<PAGE>
Amendments to the Bylaws of Proler International Corp.
Adopted by the Board of Directors on October 20, 1995
NOW, THEREFORE BE IT RESOLVED, that Section 5.6 and Section 5.7 of
Article V of the Bylaws of the Company be, and hereby are, amended to read in
their entirety as follows:
THE CHAIRMAN OF THE BOARD OF DIRECTORS
Section 5.6. The chairman of the board of directors shall preside
when present at all meetings of the board of directors. He shall be
available to advise and consult with the president and other officers of
the corporation on the corporation's business and affairs, and he shall
perform such other duties and exercise such other powers as the board of
directors may from time to time prescribe.
THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
Section 5.7. The president shall be the chief executive officer of
the corporation and, subject to the direction of the board of directors,
shall in general supervise and control all business and affairs of the
corporation and shall perform all duties and have all powers which are
commonly incident to the office of chief executive or which are delegated
to him by the board of directors. In the absence of the chairman of the
board of directors and any contrary delegation by the board of directors,
he shall preside when present at all meetings of the board of directors.
RESOLVED, FURTHER, that Section 2.1 of Article II of the Bylaws of the
Company be, and here is, amended to add the following as the last sentence of
such Section:
The chairman of the board of directors or the president of the
corporation, as designated by the board of directors of the corporation,
shall preside at all meetings of the stockholders.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONDENSED BALANCE SHEET OF PROLER INTERNATIONAL CORP. AND SUBSIDIARIES
AS OF OCTOBER 31, 1994 AND THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE NINE MONTHS PERIOD ENDED OCTOBER 31, 1994.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-END> OCT-31-1994
<CASH> 5,382
<SECURITIES> 0
<RECEIVABLES> 2,009
<ALLOWANCES> 0
<INVENTORY> 2,539
<CURRENT-ASSETS> 10,646
<PP&E> 33,617
<DEPRECIATION> 15,707
<TOTAL-ASSETS> 63,805
<CURRENT-LIABILITIES> 4,780
<BONDS> 0
<COMMON> 5,351
0
0
<OTHER-SE> 50,727
<TOTAL-LIABILITY-AND-EQUITY> 63,805
<SALES> 15,103
<TOTAL-REVENUES> 15,103
<CGS> 14,439
<TOTAL-COSTS> 14,439
<OTHER-EXPENSES> 1,341
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 403
<INCOME-PRETAX> (1,861)
<INCOME-TAX> 217
<INCOME-CONTINUING> (2,078)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,078)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> (.44)
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET OF PROLER INTERNATIONAL CORP. AND
SUBSIDIARIES AS OF OCTOBER 31, 1995 AND THE RELATED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE NINE MONTH PERIOD ENDED OCTOBER 31, 1995, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> OCT-31-1995
<CASH> 1,782
<SECURITIES> 0
<RECEIVABLES> 2,250
<ALLOWANCES> 0
<INVENTORY> 2,653
<CURRENT-ASSETS> 8,118
<PP&E> 37,043
<DEPRECIATION> 15,461
<TOTAL-ASSETS> 67,150
<CURRENT-LIABILITIES> 4,257
<BONDS> 0
<COMMON> 5,351
0
0
<OTHER-SE> 54,965
<TOTAL-LIABILITY-AND-EQUITY> 67,150
<SALES> 10,434
<TOTAL-REVENUES> 10,434
<CGS> 10,408
<TOTAL-COSTS> 10,408
<OTHER-EXPENSES> 844
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 320
<INCOME-PRETAX> 2,038
<INCOME-TAX> 202
<INCOME-CONTINUING> 1,836
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,836
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
