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Previous: PRICE T ROWE REA INCOME FD IV AMERICAS SALE COMM FR REA EST, 10-Q, 1996-05-15 |
Next: NORTHERN ILLINOIS FINANCIAL CORP, 10-Q, 1996-05-15 |
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1996 Commission File Number 000-17577
-------------- ---------
CORE TECHNOLOGIES (PENNSYLVANIA), INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2537194
- -------------------------------------------------------------------------------
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
110 Summit Drive , Exton, PA 19341-2838
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 524-7000
--------------
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 and
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
------- -------
Number of shares outstanding as of May 3, 1996
Common Stock 8,887,326
<PAGE>
CORE TECHNOLOGIES (PENNSYLVANIA), INC.
QUARTERLY REPORT FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION
Page
Item 1 - Financial Statements:
Consolidated Balance Sheets -
March 31, 1996 (unaudited) and December 31, 1995.............. 3
Consolidated Statements of Operations -
Three Months Ended March 31, 1996 and 1995 (unaudited)........ 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995 (unaudited)........ 5
Note to Consolidated Financial Statements..................... 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 7
PART II - OTHER INFORMATION
Item 6 - Exhibits...................................................... 9
Signatures............................................................. 10
2
<PAGE>
PART 1
CORE TECHNOLOGIES (PENNSYLVANIA), INC.
- -------------------------------------------------------------------------------
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------- ------------
Assets (Unaudited)
<S> <C> <C>
Current assets
Cash $ 75,900 $ 106,500
Receivables, less allowances ($237,200--1996; $338,220--1994) 3,990,500 3,709,700
Costs and estimated earnings in excess of billings on uncompleted contracts 1,674,100 401,300
Inventories 645,300 679,500
Notes receivable 988,400 848,200
Other current assets 554,300 871,500
------------- ------------
Total current assets 7,928,500 6,616,700
Plant and equipment
Leasehold improvements 168,200 168,200
Machinery and equipment 1,043,900 987,000
------------- ------------
1,212,100 1,155,200
Less accumulated depreciation and amortization (726,500) (652,900)
------------- ------------
Net plant and equipment 485,600 502,300
Other assets
Excess of cost over fair value of net assets of businesses acquired 173,800 177,500
Notes receivable 1,822,100 1,962,300
Other 413,500 421,900
------------- ------------
Total other assets 2,409,400 2,561,700
------------- ------------
$ 10,823,500 $ 9,680,700
============= ============
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ 3,225,900 $ 2,319,300
Accrued expenses 2,098,000 2,547,200
Billings in excess of costs and estimated earnings on uncompleted contracts 856,400 681,100
Current debt 135,900 136,600
------------- ------------
Total current liabilities 6,316,200 5,684,200
Long-term debt 6,108,400 5,744,200
Other liabilities 981,200 981,200
Redeemable convertible preferred stock issued to Safeguard Scientifics, Inc. 1,500,000 1,500,000
Stockholders' deficit
Common stock, $.01 par value; Authorized -- 20,000,000 shares;
Issued - (9,217,326 shares--1996; 9,217,326 shares--1995) 92,200 92,200
Additional paid-in capital 7,983,900 7,983,900
Accumulated deficit (11,737,900) (11,884,500)
Treasury stock at cost - 330,000 shares (420,500) (420,500)
------------- ------------
Total stockholders' deficit (4,082,300) (4,228,900)
------------- ------------
$ 10,823,500 $ 9,680,700
============= ============
See notes to consolidated financial statements
</TABLE>
3
<PAGE>
CORE TECHNOLOGIES (PENNSYLVANIA), INC.
- -------------------------------------------------------------------------------
Consolidated Statements of Operations
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
1996 1995
--------- ----------
<S> <C> <C>
Net sales $ 4,618,200 $ 4,187,800
Cost of goods sold 3,462,700 3,322,500
----------- -----------
Gross profit 1,155,500 865,300
Expenses
Sales and marketing 394,000 518,300
General and administrative 474,900 579,400
Interest 140,000 171,500
----------- -----------
1,008,900 1,269,200
----------- -----------
Income (loss) before provision for income taxes 146,600 (403,900)
Provision for income taxes 0 0
----------- -----------
Net earnings (loss) $ 146,600 $ (403,900)
=========== ===========
Net earnings (loss) per share:
Primary $ .02 $ (.04)
=========== ===========
Fully diluted $ .01 $ (.04)
=========== ===========
Weighted average common and common
equivalent shares outstanding:
Primary 8,887,000 10,437,000
Fully diluted 10,387,000 10,437,000
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
CORE TECHNOLOGIES (PENNSYLVANIA), INC.
- ------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
------------- ----------
<S> <C> <C>
Operations
Net earnings (loss) $ 146,600 $ (403,900)
Adjustments to reconcile net earnings (loss) to cash from operations
Depreciation and amortization 85,700 81,600
Cash provided by discontinued operations 376,200 1,366,100
Cash provided by (used in) changes in working capital items
Receivables (280,800) 675,400
Inventories 34,200 (201,700)
Contracts in progress (1,097,500) (309,100)
Other current assets (59,000) (248,200)
Accounts payable 906,600 (653,500)
Accrued expenses (449,200) (505,000)
Taxes on income 0 (41,600)
----------- ----------
Cash used by operations (337,200) (239,900)
Financing activities
Borrowings of debt 363,500 44,900
----------- ----------
Cash provided by financing activities 363,500 44,900
Investing activities
Expenditures for plant and equipment (56,900) (30,500)
----------- ----------
Cash used by investing activities (56,900) (30,500)
----------- ----------
Decrease in cash (30,600) (225,500)
Cash beginning of period 106,500 583,600
----------- ----------
Cash end of period $ 75,900 $ 358,100
============ ==========
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
CORE TECHNOLOGIES (PENNSYLVANIA), INC.
Note to Consolidated Financial Statements
March 31, 1996
1. The accompanying unaudited interim consolidated financial statements were
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The Summary of Accounting
Policies and Notes to Consolidated Financial Statements included in the
1995 Annual Report should be read in conjunction with the accompanying
statements. These statements include all adjustments (consisting only of
normal recurring adjustments) which the Company believes are necessary for
a fair presentation of the statements. The interim operating results are
not necessarily indicative of the results for a full year.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Review of operations
Net sales for the quarter ended March 31, 1996 were $4.6 million
compared to $4.2 million for the comparable period in 1995. The Company reported
net earnings of $146,600, or $.02 per share, compared to a net loss of $403,900,
or $.04 per share in the same period in 1995. Gross margin, as a percentage of
sales, was 25.0% in 1996 and 20.7% for the same period in 1995. The increase in
gross margin in 1996 reflects the continuing improvement in both Airo Clean and
Maris Equipment product and project margins.
First quarter 1996 Maris sales were $3.1 million compared to $2.9
million in 1995. Maris gross margins, as a percentage of sales, increased to
23.4% in the first quarter of 1996 from 18.9% in the same period in 1995. Maris'
improved margins can be attributed to better project management and controls and
the selection of new projects with better profit potential.
First quarter 1996 Airo Clean sales were $1.5 million compared to $1.3
in million in 1995. The first phase of a $2.8 million clean room project
commenced in the first quarter of 1996, and it is anticipated that this project
will be substantially completed in the second quarter 1996. Airo Clean's gross
margin as a percentage of sales increased to 28.8% in 1996 from 24.4% in the
same period in 1995. Airo Clean's improved margins in 1996 can be attributed to
more efficient manufacturing and obtaining price concessions from its vendors.
Sales and marketing expenses decreased in the first quarter 1996 by
$124,300, compared to 1995, due to cost reductions implemented at Maris and Airo
Clean. These costs, as a percentage of sales, were 8.5% in the first quarter of
1996, compared to 12.4% in same period in 1995. Sales efforts at Maris are being
concentrated in expanding the electronic security systems business to take
advantage of the Company's expertise. The sales effort at Airo Clean continues
to focus on promoting the BioShield, Ultraguard and laminar air flow products.
These are air scrubbing devices for controlling airborne contaminants and are
targeted for the health care and hospital industries.
General and administrative expenses decreased in the first quarter of
1996 by $104,500 compared to 1995, due to staff reductions and salary freezes
implemented at Maris and Airo Clean. These costs, as percentage of sales, were
10.3% in the first quarter of 1996 compared to 13.8% in the same period in 1995.
The Company continues to closely monitor and control costs and believes that
additional sales can be achieved without a proportional increase in the business
infrastructure.
Interest expense in the first quarter of 1996 was $140,000 compared to
$171,500 in the same period in 1995. The decrease in 1996 reflects the lower
average debt level compared to the same period in 1995.
The Company plans to utilize its net operating loss carryforwards to
offset taxable income. The Company has net operating loss carryforwards of
approximately $7.3 million that may be used in future years to offset taxable
income until the year 2010.
7
<PAGE>
Liquidity and Capital Resources
In August 1995, the Company successfully negotiated an amendment to its
existing bank credit agreement which provides a $6.0 million credit line
facility through March 31, 1997. Under this facility, Safeguard Scientifics
(Delaware), Inc. has provided guarantees of $4.5 million in the form of letters
of credit through June 30, 1997. Borrowings bear interest at prime plus 1 1/4%.
The Company believes that the combination of the bank credit agreement,
Safeguard's letters of credit, and the working capital assets of the Company
will be sufficient to satisfy the Company's operating cash requirements during
1996. As of May 3, 1996 outstanding borrowings under the credit facility were
$5.1 million.
8
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Change in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
No matter were submitted to a vote of security
holders in the first quarter of 1996.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
(a) Exhibits
Number Description
27 Financial Data Schedule
(electronic filing only)
(b) No reports on Form 8-K have been filed by the
registrant during the quarter ended
March 31, 1996.
9
<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.
CORE TECHNOLOGIES (PENNSYLVANIA), INC.
(Registrant)
Date: May 15, 1996 /S/ George E. Mitchell
--------------------------------------
George E. Mitchell,
President and Chief Executive Officer
Date: May 15, 1996 /S/ Frederick B. Franks, III
--------------------------------------
Frederick B. Franks, III
Vice President Finance and Treasurer
(Principal Financial and
Principal Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet as of March 31, 1996 and the consolidated statement
of operations for the three months ended March 31, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 75,900
<SECURITIES> 0
<RECEIVABLES> 4,227,700
<ALLOWANCES> 237,200
<INVENTORY> 645,300
<CURRENT-ASSETS> 7,928,500
<PP&E> 1,212,100
<DEPRECIATION> 726,500
<TOTAL-ASSETS> 10,823,500
<CURRENT-LIABILITIES> 6,316,200
<BONDS> 0
1,500,000
0
<COMMON> 92,200
<OTHER-SE> (4,174,500)
<TOTAL-LIABILITY-AND-EQUITY> 10,823,500
<SALES> 4,618,200
<TOTAL-REVENUES> 4,618,200
<CGS> 3,462,700
<TOTAL-COSTS> 3,462,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140,000
<INCOME-PRETAX> 146,600
<INCOME-TAX> 0
<INCOME-CONTINUING> 146,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 145,600
<EPS-PRIMARY> .02
<EPS-DILUTED> .01
</TABLE>
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