UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934, for the quarter ended May 31, 1998.
Commission File Number 0-17594
AMCOR CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 33-0329559
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
52300 ENTERPRISE WAY, COACHELLA, CALIFORNIA 92236
(Address of principal executive offices) (Zip Code)
(760) 398-9520
(Registrant's telephone number, including area code)
Check whether the registrant (1) has filed all reports required by Section
13 or 15(d) of the Securities 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 [ ]
The number of shares outstanding of issuer's only class of Common
Stock, $.002 par value, was 7,619,323 on July 15, 1998.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Introduction
The consolidated financial statements have been prepared by AMCOR Capital
Corporation ("Company"), without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The Company believes that the disclo-
sures are adequate to make the information presented not misleading when read
in conjunction with the Company's consolidated financial statements for the year
ended August 31, 1997. The financial information presented reflects all adjust-
ments, consisting only of normal recurring adjustments, which are, in the
opinion of management, necessary for a fair statement of the results for the
interim periods presented.
<PAGE>
<TABLE>
AMCOR CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEET
May 31, 1998 and August 31, 1997
(Amounts in thousands)
<CAPTION>
May 31,
1998 August 31,
(Unaudited) 1997
----------- ----------
<S> <C> <C>
A S S E T S
Current assets:
Cash and short-term investments $ 1,599 $ 180
Restricted cash 350 842
Accounts receivable, prepaids
and accrued interest 636 431
Notes receivable 109 1,715
Advances and accounts receivable due
from affiliated partnerships for farming
and land management 5,767 8,064
Inventories 5,752 1,213
Other current assets 560 847
----------- ----------
Total current assets 14,773 13,292
Land held for future development 9,949 9,412
Property and equipment, net 13,654 10,795
Contractual advances due from affiliates
for construction in progress 4,921 3,793
Notes receivable, other - 116
Customer lists and other intangibles 2,558 -
Investments 2,452 2,456
Other assets 368 871
----------- ----------
Total assets $ 48,675 $ 40,735
=========== ==========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
AMCOR CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEET, CONTINUED
May 31, 1998 and August 31, 1997
(Amounts in thousands)
<CAPTION>
May 31,
1998 August 31,
(Unaudited) 1997
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 3,206 $ 4,850
Due to affiliates 655 620
Lines of credit 3,250 1,129
Notes payable, affiliates 1,741 1,370
Notes payable, other 8,986 2,628
Accrued interest 991 377
Income taxes payable 798 1,037
Capitalized lease obligation 220 224
----------- ----------
Total current liabilities 19,847 12,235
Deferred income taxes 105 57
Notes and loans payable, net of current portion:
Affiliates 826 1,276
Other 6,748 8,847
Capitalized lease obligation, net of
current portion 348 539
Other liabilities 92 261
----------- ----------
Total liabilities 27,966 23,215
Shareholders' equity:
Preferred stock (1,250,000 shares
authorized, no shares outstanding) - -
Series A 9% Convertible Preferred Stock
($0.01 par value; 812,500 authorized,
747,500 shares issued and outstanding
at May 31, 1998) 7 -
Series B Convertible Preferred Stock
($.01 par value; 750,000 shares authorized,
no shares outstanding at May 31, 1998
and 404,414 shares outstanding at August 31,
1997) - 4
Common stock ($.002 par value; 25,000,000 and
15,000,000 shares authorized; and 7,619,323
and 7,172,710 shares issued and outstanding
at May 31, 1998 and August 31, 1997) 15 14
Paid-in capital 18,448 14,242
Accumulated earnings 2,357 3,260
Less Treasury Stock, at cost (118) -
----------- ----------
Total shareholders' equity 20,709 17,520
----------- ----------
Total liabilities and
shareholders' equity $ 48,675 $ 40,735
=========== ==========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
AMCOR CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
For the nine months ended May 31, 1998 and 1997
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Revenues:
Crop sales and other farm revenue $ 411 $ 3,482
Management and other fees from affiliates 1,800 1,845
Other operating revenues 1,263 225
----------- ----------
3,474 5,552
----------- ----------
Operating costs and expenses:
Farming costs and cost of crops sold 186 2,181
Other operating expenses 2,953 709
Wages and salaries 606 504
----------- ----------
3,745 3,394
----------- ----------
Income (loss) from operations (271) 2,158
Other income and expense:
Loss on sale of assets (323) -
Loss on investee (45) -
Interest income 253 591
Interest expense (414) (720)
----------- ----------
(529) (129)
----------- ----------
Income (loss) before extraordinary item
and income taxes (800) 2,029
Provision (benefit) for income taxes (287) 547
----------- ----------
Income (loss) before extraordinary item (513) 1,482
Extraordinary item - gain on reduction of
debt (net of income tax of $96) 187 -
----------- ----------
Net income (loss) (326) 1,482
Less preferred stock dividends (577) 0
----------- ----------
Net income (loss) available to common
shareholders ($ 903) $1,482
=========== ==========
Earnings(loss) per common share,
share equivalent basic:
Earnings(loss) before extraordinary item ($0.14) $0.21
Extraordinary item 0.02 -
----------- ----------
Net earnings(loss) ($0.12) $0.21
=========== ==========
Continued
</TABLE>
<PAGE>
<TABLE>
AMCOR CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS, Continued
For the nine months ended May 31, 1998 and 1997
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Earnings(loss) per common share,
share equivalent diluted:
Earnings(loss) before extraordinary item ($0.14) 0.20
Extraordinary item 0.02 -
----------- ----------
Net earnings(loss) ($0.12) $0.20
=========== ==========
Shares used in per share calculation:
Basic 7,388,593 6,231,288
========= =========
Diluted 7,813,948 6,396,842
========= =========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
AMCOR CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended May 31, 1998 and 1997
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Revenues:
Crop sales and other farm revenue - $ 3,332
Management and other fees from affiliates $ 289 323
Other operating revenues 696 152
----------- ----------
985 3,807
----------- ----------
Operating costs and expenses:
Farming costs and cost of crops sold - 2,181
Other operating expenses 1,324 215
Wages and salaries 183 198
----------- ----------
1,507 2,594
----------- ----------
Income (loss) from operations (522) 1,213
Other income and expense:
Loss on sale of assets (45) -
Loss on investee - -
Interest income 108 159
Interest expense (198) (376)
----------- ----------
(135) (217)
----------- ----------
Income (loss) before extraordinary item
and income taxes (657) 996
Provision (benefit) for income taxes (227) 191
----------- ----------
Income (loss) before extraordinary item (430) 805
Extraordinary item - gain on reduction of
debt (93) -
----------- ----------
Net income (loss) (523) 805
Less preferred stock dividends (168) -
----------- ----------
Net income (loss) available to common
shareholders ($ 691) $ 805
=========== ==========
Earnings(loss) per common share,
share equivalent basic:
Earnings(loss) before extraordinary item ($0.08) $0.11
Extraordinary item (0.01) -
------- -----
Net earnings(loss) ($0.09) $0.11
======= =====
</TABLE>
Continued
<PAGE>
<TABLE>
AMCOR CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS, Continued
For the three months ended May 31, 1998 and 1997
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Earnings(loss) per common share,
share equivalent diluted:
Earnings(loss) before extraordinary item ($0.08) $0.11
Extraordinary item (0.01) -
------- -----
Net earnings(loss) ($0.09) $0.11
======= =====
Shares used in per share calculation:
Basic 7,388,593 7,012,754
========= ==========
Diluted 7,813,948 7,157,702
========= ==========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
AMCOR CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the nine months ended May 31, 1998 and the year
ended August 31, 1997
(Unaudited)
<CAPTION>
Series A Series B
Preferred Preferred
Shares Shares
----------- ----------
<S> <C> <C>
Balance, August 31, 1996 - 628,972
Net income - -
Shares issued under consulting agreement - -
One-for-two reverse stock split
(including effect of fractional shares) - -
Shares issued upon exercise of options - -
Shares issued in acquisition of
partnership assets - -
Shares issued in payment for debt - -
Preferred stock retired as
payment of receivable - (171,983)
Common stock retired as
payment of receivable - -
Exchange of preferred stock
for common stock - (52,575)
Preferred stock dividends, accrued - -
----------- ----------
Balance, August 31, 1997 - 404,414
Net income (loss) - -
Preferred stock issuance 747,500 -
Shares issued to acquire
TransPacific Environmental, Inc. - -
Preferred stock dividends, accrued - -
Preferred stock exchanged
for affiliate receivable - (404,414)
Additional shares issued related to
debt retired in prior year - -
Shares issued upon exercise of options - -
Treasury shares purchased - -
---------- ----------
Balance, May 31, 1998 747,500 -
========== ==========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
AMCOR CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the nine months ended May 31, 1998 and the year
ended August 31, 1997
(Unaudited)
<CAPTION>
Common Treasury
Shares Shares
----------- ----------
<S> <C> <C>
Balance, August 31, 1996 11,596,566 -
Net income - -
Shares issued under consulting agreement 400,000 -
One-for-two reverse stock split
(including effect of fractional shares) (5,998,547) -
Shares issued upon exercise of options 30,000 -
Shares issued in acquisition of
partnership assets 271,017 -
Shares issued in payment for debt 912,622 -
Preferred stock retired as
payment of receivable - -
Common stock retired as
payment of receivable (200,000) -
Exchange of preferred stock
for common stock 161,052 -
Preferred stock dividends, accrued - -
----------- ----------
Balance, August 31, 1997 7,172,710 -
Net income (loss) - -
Preferred stock issuance - -
Shares issued to acquire
TransPacific Environmental, Inc. 406,109 -
Preferred stock dividends, accrued - -
Preferred stock exchanged
for affiliate receivable - -
Additional shares issued related to
debt retired in prior year 9,254 -
Shares issued upon exercise of options 31,250 -
Treasury shares purchased - (24,020)
----------- ----------
Balance, May 31, 1998 7,619,323 (24,020)
=========== ==========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
AMCOR CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY, Continued
For the nine months ended May 31, 1998 and the year
ended August 31, 1997
(Unaudited)
(Amounts in thousands)
<CAPTION>
----------- Par Value ----------
Series A Series B
Preferred Preferred Common
Stock Stock Stock
----------- ----------- ----------
<S> <C> <C> <C>
Balance, August 31, 1996 - $ 6 $ 24
Net income - - -
Shares issued under consul-
ting agreement - - 1
One-for-two reverse stock
split (including effect of
fractional shares) - - (12)
Shares issued upon exercise
of options - - -
Shares issued in acqui-
sition of partnership assets - - -
Shares issued in payment
for debt - - 2
Preferred stock retired as
payment of receivable - (2) -
Common stock retired as
payment of receivable - - (1)
Exchange of preferred stock
for common stock - - -
Preferred stock dividends,
accrued - - -
--------- ----------- ----------
Balance, August 31, 1997 - 4 14
Net income (loss) - - -
Preferred stock issuance $ 7 - -
Shares issued to acquire
TransPacific Environmental,
Inc. - - 1
Preferred stock dividends,
accrued - - -
Preferred stock exchanged
for affiliate receivable - (4) -
Additional shares issued
related to debt retired in
prior year - - -
Shares issued upon exercise
of options - - -
Treasury shares purchased - - -
--------- ----------- ----------
Balance, May 31, 1998 $ 7 - $ 15
========= =========== ==========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
AMCOR CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY, Continued
For the nine months ended May 31, 1998 and the year
ended August 31, 1997
(Unaudited)
(Amounts in thousands)
<CAPTION>
Par Value
Paid in Accumulated Treasury Total
Capital Earnings Stock Equity
------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Balance, August 31, 1996 $ 11,150 $1,454 - $12,634
Net income - 2,176 - 2,175
Shares issued under consul-
ting agreement 360 - - 360
One-for-two reverse stock
split (including effect of
fractional shares) 12 - - -
Shares issued upon exercise
of options 60 - - 60
Shares issued in acqui-
sition of partnership assets 1,437 - - 1,438
Shares issued in payment
for debt 3,791 - - 3,793
Preferred stock retired as
payment of receivable (1,718) - - (1,720)
Common stock retired as
payment of receivable (850) - - (850)
Exchange of preferred stock
for common stock - (370) - (370)
Preferred stock dividends,
accrued - - - -
------- --------- --------- ---------
Balance, August 31, 1997 14,242 3,260 - 17,520
Net income (loss) - (326) - (326)
Preferred stock issuance 6,142 - - 6,149
Shares issued to acquire
TransPacific Environmental,
Inc. 2,030 - - 2,031
Preferred stock dividends,
accrued - (577) - (577)
Preferred stock exchanged
for affiliate receivable (4,040) - - (4,044)
Additional shares issued
related to debt retired in
prior year 11 - - 11
Shares issued upon exercise
of options 63 - - 63
Treasury shares purchased - - (118) (118)
-------- --------- --------- ---------
Balance, May 31, 1998 $ 18,448 $ 2,357 ($118) $ 20,709
======== ========= ========= =========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
AMCOR CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine months ended May 31, 1998 and 1997
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(Amounts in thousands)
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Cash flows provided (used) in operating
activities $ (6,537) $ (3,032)
----------- ----------
Cash flows provided (used) in investing
activities:
Payments received on notes receivable 1,722 -
Purchases of property and equipment (1,040) (1,876)
Sales of property and equipment 1,407 -
Advances due from affiliated partnerships
for contractual construction in progress (1,876) (743)
Restricted cash 443 612
----------- ----------
Net cash provided (used) for investing
activities 656 (2,007)
----------- ----------
Cash flows provided (used) in financing
activities:
Proceeds from notes, loans, leases and
advances payable 5,639 4,332
Repayments of notes and advances payable (4,433) (38)
Issuance of stock 6,212 61
Purchase of treasury shares (118) -
----------- ----------
Net cash provided (used) in financing
activities 7,300 4,355
----------- ----------
Net increase/(decrease) in cash 1,419 (684)
Cash at beginning of period 180 1,087
----------- ----------
Cash at end of period $ 1,599 $ 403
=========== ==========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
AMCOR CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine months ended May 31, 1998 and 1997
(Unaudited)
(Amounts in thousands)
Supplemental Disclosure of Cash Flow Information
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Cash paid during the period for:
Interest $ 598 $ 389
Preferred dividends 336 -
Income taxes 330 -
Supplemental Schedule of Non-Cash Investing and Financing Activities
1998 1997
----------- ----------
Accrual of dividends on preferred stock
Liabilities incurred $ 241 $ 279
Reduction in retained earnings (241) (279)
Acquisition of TransPacific Environmental, Inc.
Increase in accounts receivable 196 -
Reduction in prepaid expenses (350) -
Property, plant and equipment acquired 500 -
Customer lists and other intangibles
acquired 2,549 -
Increase in other assets 1 -
Liabilities incurred (760) -
Notes payable assumed (105) -
Common stock issued (2,031) -
Acquisition of land and vineyards
Reduction in affiliate receivable (1,245) -
Land and vineyards acquired 3,028 -
Notes payable assumed (1,783) -
Exchange of preferred stock for affiliate
receivable
Advances and accounts receivable due from
affiliated partnerships 4,173 -
Accrued dividends - preferred stock (129) -
Series B Preferred Stock (4) -
Paid in capital (4,040) -
Satisfaction of debt through stock issuance
Liabilities satisfied - $1,869
Stock subscribed - (1,869)
Acquisition of partnership assets
Land and date gardens acquired - 1,143
Stock subscribed - (1,143)
Acquisition of land and vineyards
Land and vineyards acquired - 440
Reduction of amount due from affiliate (440)
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>
AMCOR CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1998
1. Income (loss) Per Common Share
Basic earnings per share are computed by dividing earnings available to
common stockholders by the weighted average number of common shares out-
standing during the period. Diluted earnings per share reflect per share
amounts that would have resulted if dilutive potential common stock had
been converted to common stock. The following reconciles amounts reported
in the financial statements:
For the Nine Months Ended May 31, 1998
------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Loss from continuing
operations ($326,000)
Less preferred stock
dividends (577,000)
---------
(Loss) available to
common stockholders
- basic earnings per
share (903,000) 7,388,593 ($0.12)
=========
Effect of dilutive
securities:
Options 0 425,355
--------- ----------
(Loss) available to
common stockholders
- diluted earnings
per share ($903,000) 7,813,948 ($0.12)
========= ========== =========
For the Three Months Ended May 31, 1998
------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Loss from continuing
operations ($523,000)
Less preferred stock
dividends (168,000)
---------
(Loss) available to
common stockholders
- basic earnings per
share (691,000) 7,388,593 ($0.09)
=========
Effect of dilutive
securities:
Options 0 425,355
--------- ----------
(Loss) available to
common stockholders
- diluted earnings
per share ($691,000) 7,813,948 ($0.09)
========= ========== =========
<PAGE>
AMCOR CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. Income (loss) Per Common Share, Continued
During 1998, the Company had 747,500 shares of Series A convertible
preferred stock (entitled to a 9% per share cumulative dividend) and
404,414 shares of Series B convertible preferred stock outstanding. Each
share of preferred stock is convertible into one share of common stock.
The convertible preferred stock was not included in the computation of
diluted earnings per share because the effect of conversion would be
antidilutive. The Series A convertible preferred stock was still
outstanding at May 31, 1998.
2. Advances Due from Affiliated Partnerships and Advances Due to Affiliated
Partnerships
Advances due from affiliated partnerships consist of:
1. Farming costs incurred by the Company on behalf of various
partnerships whose farm properties are located in the Coachella
Valley, California, with repayment anticipated from crop sales, and
2. Management and development fees charged by the Company to various
partnerships in California and Texas for the management of the
partnerships' assets and the development of their properties with
repayment anticipated from crop sales, lot sales, and the disposal
of other assets, and
3. Development costs advanced by the Company on behalf of various
partnerships for a residential development in Texas.
Advances due to affiliated partnerships consist primarily of receipts of
crop sales exceeding advances for farming costs on behalf of various
partnerships. These amounts are not collateralized and are due on demand.
3. Inventories
Inventories consist of:
1. Growing crops which represent the incurred costs of growing farm
products on the Company's own behalf, such as chemicals and certain
other farming supplies.
2. Costs associated with construction-in-progress of certain
residential structures at the Company's Texas development
property.
<PAGE>
AMCOR CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
4. Property and Equipment
<TABLE>
<CAPTION>
May 31, August 31,
1998 1997
----------- ----------
<S> <C> <C>
(Amounts in thousands)
Property and equipment consists
of the following:
Vineyard and date development costs $ 7,147 $ 5,294
Vehicles and equipment 4,971 3,406
Office furniture and equipment 84 51
Leasehold improvements 61 61
Buildings 302 302
------- ------
12,565 9,114
Less: accumulated depreciation (2,390) (2,088)
------- ------
10,175 7,026
Land 3,479 3,769
------ ------
$13,654 $10,795
====== ======
<FN>
Vehicles and equipment reported under capital lease at May 31, 1998,
was $853,591 with accumulated depreciation of $52,161. Depreciation expense
related to the capital leases was $32,551 for the nine months ended
May 31, 1998.
</TABLE>
5. Investments
May 31, August 31,
1998 1997
---------- ----------
(Amounts in thousands)
Investments consists of the
following:
Investment in P.S. III Farms,
L.L.C. utilizing the equity
method of accounting $ 2,452 $ 2,456
====== ======
The Company is a general partner in a number of the affiliated partnerships,
for which its investment and equity in operations is not material.
<PAGE>
AMCOR CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
6. Deferred Income Taxes
The components of the provision for income taxes are as
follows:
<TABLE>
<CAPTION> May 28, August 31,
1998 1997
---------- ----------
<S> <C> <C>
(Amounts in thousands)
Current expense (benefit):
Federal ($241) $682
State 2 $ 3
Deferred expense (benefit):
Federal 71 128
State (23) (184)
-------- --------
Total provision (benefit) ($191) $629
======== ========
</TABLE>
7. Commitments And Contingencies
The Company has operating leases for certain of its facilities and
office equipment. Future minimum lease payments at February 28, 1998
are as follows:
(Amounts in thousands)
1998 $ 251
1999 244
2000 202
2001 150
2002 and thereafter 195
--------
Total future minimum
lease payments $ 1,042
========
<PAGE>
AMCOR CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. Common Stock and Stock Options
The table below summarized stock option activity under current and prior
plans:
Nine Months Ended Year Ended
May 31, 1998 August 31, 1997
-------------------- --------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------- -------- ------- ---------
Options outstanding,
beginning of period 676,633 $1.73 541,633 $1.50
Options exercised (31,250) 2.00 (30,000) 2.00
Options granted 270,000 1.46 165,000 2.50
Options forfeited (17,500) 3.12 - -
--------- ---------
Options outstanding,
end of period 897,883 2.64 676,633 1.73
Option price range,
end of period $1.60 to $5.00 $1.60 to $4.00
Option price range
for exercised shares $2.00 $2.00
Options available for grant
at end of period 306,250 27,500
Weighted-average fair
value of options granted $4.11 $2.39
The following table summarizes information about fixed-price stock options
outstanding at May 31, 1998:
Weighted
Average
Number of Remaining Number
Outstanding at Contractual Exercisable at
Exercise Price May 31, 1998 Life May 31, 1998
-------------- --------------- ----------- --------------
$1.60 454,133 3 years 454,133
$1.30 87,500 7 years 87,500
$2.00 56,250 9 years 24,750
$4.00 30,000 9 years 7,500
$4.28 10,000 10 years -
$4.60 10,000 10 years -
$4.75 100,000 10 years -
$5.00 150,000 10 years -
<PAGE>
AMCOR CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
8. Common Stock and Stock Options, Continued
Fair Value Disclosures
----------------------
Stock option grants are set based upon the plan. Therefore, under the
principles of APB Opinion No. 25, the Company does not recognize
compensation expense associated with the grant of stock options.
SFAS No. 123, "Accounting for Stock-Based Compensation," requires the
use of option valuation models to provide supplemental information
regarding options granted after 1994. Pro forma information regarding
net income and earnings per share shown below was determined as if the
Company had accounted for its employee stock options and shares sold
under its stock purchase plan under the fair value method of that
statement.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in the nine months ended May 31,
1998: dividend yield of zero; expected volatility of .961; risk-free
interest rate of 5.12%; and expected life of 10 years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options. The Company's employee stock options have
characteristics significantly different from those of traded options such as
vesting restrictions and extremely limited transferability. In addition,
the assumptions used in option valuation models are highly subjective,
particularly the expected stock price volatility of the underlying stock.
Because changes in these subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do not
provide a reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting periods. The pro forma
effect on net income for the nine months ended May 31, 1998 and year
ended August 31, 1997 is not representative of the pro forma effect on net
income in future years because it does not take into consideration pro forma
compensation expense related to grants made prior to 1995. Pro forma
information in future years will reflect the amortization of a larger number
of stock options granted in several succeeding years. The Company's pro forma
information is as follows:
Nine Months Ended Year Ended
May 31, 1998 August 31, 1997
---------------- ----------
Net earnings (loss), as reported ($326,000) $2,176,366
Net earnings (loss), pro forma ($1,425,700) $2,171,566
Earnings (loss) per share, as
reported ($0.12) $0.33
Earnings (loss) per share, pro forma ($0.27) $0.33
<PAGE>
AMCOR CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
9. Sale of Preferred Stock
During the first quarter of fiscal year 1998, the Company sold 747,500
shares of its Series A 9% Convertible Preferred Stock at $10 per share.
The net proceeds of $6,802,250 (before expenses related to the offering)
were used principally to finance expansion of the agriculture and biomass
segments of the Company's business, which resulted in a significant reduction
in the Company's current liabilities in repayment of funds previously advanced
for expansion purposes. In conjunction with the creation, issuance, and sale
of the new preferred stock, the Company and the original Series A stockholders
approved changing the designation of the prior Series A Convertible Preferred
Stock to Series B Convertible Preferred Stock and making it subordinate to the
new Series A 9% Convertible Preferred Stock.
10. Acquisition of TransPacific Environmental, Inc.
On November 25, 1997, the Company completed the purchase of the assets of
TransPacific Environmental, Inc. ("TransPacific"). TransPacific is a Santa Fe
Springs, California company engaged in clean green waste processing and contract
tree trimming services for municipalities. The assets of TransPacific were
acquired for cash, 406,109 shares of the Company's common stock, and the
assumption of certain liabilities of TransPacific.
The following unaudited proforma summary presents the consolidated results
of operations as if the acquisition had been completed at the beginning of the
periods presented and does not purport to be indicative of what would have
occurred had the acquisition actually been made as of such date or of results
which may occur in the future.
Nine months ended May 31,
1997 1998
---------- ----------
Unaudited
---------
Net sales $7,015 $3,779
Net income (loss) 1,600 (535)
Earnings (loss) per share 0.22 (0.15)
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
OVERVIEW
As outlined below, the Company's overall financial condition as of May 31,
1998, as compared to August 31, 1997, has continued to improve. Total assets
have increased 19% to $48.7 million, due principally to three events: (i)
the funding in September 1997 of 747,500 shares of Series A Convertible
Preferred Stock, which netted $6.2 million of proceeds (after all expenses
related to the offering), (ii) the $2.5 million purchase of the two green
waste/tree maintenance companies in November 1997 and May 1998, and (iii) the
retirement of $4 million of Series B Preferred Stock during the second quarter.
The net effect of these three events resulted in shareholders' equity increasing
18% to $20.7 million.
The Company's current ratio decreased to .74 at May 31, 1998, from 1.09 at
August 31, 1997, primarily due to approximately $3.1 million of long term debt,
which matures September 30, 1998, being classified as current. The Company is
in the process of selling the real estate assets which secures this debt, after
which the current ratio will improve considerably. In fact, during the fourth
fiscal quarter the Company expects to close $16.9 million of development and
agricultural land sales, which will positively impact working capital.
Revenues for the three months ending May 31, 1998, of $985,000 were down from
$3,807,000 for the three months ending May 31, 1997, and revenues of $3,475,000
were also down from $5,552,000 for the previous nine month period due to
adverse weather which delayed the table grape harvest to the fourth quarter.
This resulted in a net loss of $523,000 (prior to $168,000 of preferred stock
dividends) for the three months ending May 31, 1998, compared to net income of
$805,000 for the three months ending May 31, 1997, and a net loss of $326,000
(prior to $577,000 of preferred stock dividends) for the nine months ended May
31, 1998, compared to $1,482,000 of income in the prior comparable nine month
period. However, the Company expects to realize over $18 million of revenue
during the fourth fiscal quarter ending August 31, 1998, principally from table
grape and real estate sales, which includes $12.5 million of property
transactions currently in escrow and scheduled to close in the fourth quarter.
This compares to revenues of $11.9 million for the fourth quarter of fiscal
1997. Overall, fiscal 1998 revenues are expected to be considerably higher
than fiscal 1997. However, no assurances can be made that the $12.5 million
of property in escrow will in fact close within the fourth quarter, or at all.
RESULTS OF OPERATIONS
Revenues
The Company's revenues are derived principally from the following three sources:
(i) farming operations (including packing and cold storage services), (ii)
management/development fees for real estate development-land partnerships, and
(iii) municipal tree maintenance contracts and related processing and recycling
of "clean green" biomass. For the three months ended May 31, 1998, total
revenues of $985,000 were down $2,822,000 (74%) from the comparable three month
period ending May 31, 1997, and for the nine months ended May 31, 1998, total
revenues of $3,475,000 were down $2,078,000 (37%) from the comparable 1997
period, mainly due to a delay in starting the spring table grape harvest from
May until June, due to a much cooler growing season caused by the "El Nino"
<PAGE>
phenomenon. During the comparable fiscal 1997 nine month period, $3.5 million
of revenues were generated from table grape sales, versus $0 for the current
period. Accordingly, all table grape revenue will be realized during the fourth
fiscal quarter. The decline in farm operating revenues was partially offset by
revenues from biomass activities reflecting operations of the two acquisitions
from the date acquired.
Crop Sales and Other Farm Income
The Company generates fees and profits from its table grape and date operations,
both from third parties and its affiliates. During past seasons, the table
grape processing facility (which is leased to the Company) processed approx-
imately 1.5 million boxes of table grapes, for which the combined gross
processing and cooling fees typically approximated $2 million. In future
years, the Company expects its crop sales to continue to increase as additional
properties are acquired and/or developed by the Company, although for the
current fiscal year these revenues will be lower due to the sale of some
marginally profitable acreage, for which replacement vineyards will most
likely not be acquired until the next fiscal year. Moreover, delays caused by
"El Nino" gave the Mexican table grape producers a competitive advantage,
resulting in Mexican table grapes available during May. California producers
did not begin harvest until early June. The disruption of the U.S. market
resulted in generally depressed market prices and, despite near record yields,
lower profit margins.
Crop sales and other farm income were $0 for the three months ended May 31,
1998, as compared to $3,332,000 for the three month period ended May 31, 1997,
and were $411,000 for the nine months ended May 31, 1998, as compared to
$3,482,000 for the nine months ended May 31, 1997, due to the delayed table
grape harvest. All current year grape revenues will fall into the fourth
quarter. The $411,000 in crop sales represents date crop proceeds received from
date roperties which were acquired earlier in the year from affiliates.
Substantially all of the Company's crop sales occur in the third and fourth
quarters of the fiscal year.
Management and Other Fees
The Company has earned in the past, and will continue to earn, management and
accounting fees from its managed affiliated partnerships. This source will
continue to decrease as additional partnership terminations are completed.
The accounting fees generally range from $5,000 to $10,000 per year per
partnership.
Management and other fee income of $289,000 for the three months ended May 31,
1998, as compared to $323,000 for the three months ended May 31, 1997, and
$1,800,000 for the nine months ended May 31, 1998, was slightly lower than
the $1,845,000 reported for the comparable nine month period ended May 31,
1997, due to the substantial completion of the first phase of a development
contract related to the Las Palomas subdivision, owned by an affiliate, located
30 miles southeast of San Antonio, Texas. Subsequent fee income from this
project is expected to diminish and be contingent on development of future
phases of Las Palomas and from California development activity, assuming the
real estate market continues its recovery.
<PAGE>
Operating Costs and Expenses
The Company's $1,507,000 of total operating costs decreased $1,087,000 (42%)
for the three month period ending May 31, 1998, from $2,594,000 in the three
month period ending May 31, 1997, due primarily to the delay of the grape
harvest, and $3,475,000 of total operating costs for the nine month period
ended May 31, 1998, increased $351,000 (10%) from $3,394,000 in the nine
month period ending May 31, 1997, due primarily to higher operating and
start-up costs related to the two acquisitions, and from increased
administrative costs related primarily to the Company's preferred stock
offering which closed in the first fiscal quarter.
Income from Operations
The Company posted an operating loss of $522,000 for the three month period
ending May 31, 1998, as compared to a profit of $1,213,000 for the three
month period ending May 31, 1997, and an operating loss of $271,000 for the
nine months ended May 31, 1998, as compared to income of $2,158,000 for the
prior year period, primarily due to the lack of table grape revenues (which
generated a $1.3 million operating profit in the comparable prior period) due
to substantially higher operating costs related to the two acquisitions and
related "El Nino" losses, which caused interruption and delays in municipal
contracts and related green waste operations.
Gain (Loss) on Sale of Assets
The Company realized a non-recurring $278,000 loss on the $2 million sale
during the second fiscal quarter of a vineyard property that was only
marginally profitable and had an uncertain water supply. The loss primarily
represents unreimbursed farming costs and certain deferred maintenance costs
incurred to consummate the sale. As a result of this liquidation, future
farming/operating costs are expected to be substantially lower.
Interest Income
The Company generates interest income from notes and advances receivable from
certain related partnerships, affiliates and third parties. This income of
$108,000 for the three months ended May 31, 1998, decreased $51,000 (32%)
from $159,000 in the comparable three month period ended May 31, 1997, and
total income for the nine month period ended May 31, 1998, of $253,000 which
decreased $338,000 (57%) from $591,000 for the comparable nine month period
ended May 31, 1997, due primarily to the acquisition in the fourth quarter
of fiscal 1997 of a 600-acre development parcel from an affiliate in exchange
for a $5.7 million note receivable which was due the Company, including assumed
debt.
Interest Expense
Interest expense of $198,000 for the three month period ended May 31, 1998,
decreased $178,000 (53%) from $376,000 in the comparable three month period
ended May 31, 1997, and interest expense of $414,000 for the nine months ended
May 31, 1998, decreased $306,000 (43%), due primarily from the retirement of
debt from proceeds of the preferred stock offering, and from the capitalization
of interest cost related to the development of a 600-acre parcel in Southern
California.
<PAGE>
Extraordinary Item
The Company realized a $283,000 discount ($187,000 net of tax benefit) of a
note in consideration for agreeing to prepay a $3.9 million note, prior to its
maturity date.
Liquidity and Capital Resources
The Company's liquidity, including its ability to access conventional credit
sources, has significantly improved over the last two years primarily due to
the following: (i) consistent management of cash flow, (ii) implementation of
effective cost cutting measures, (iii) profitable agricultural operations plus
potential new revenues from real estate and biomass activities, (iv) the
proceeds from its preferred stock offering, and (v) disposal of marginal or
non-producing assets. The Company anticipates that its December 1997 listing
on the Nasdaq SmallCap Market should provide access to additional capital
markets. All of these changes have positioned the Company to obtain credit
from more conventional, and less costly, sources.
Moreover, long and short term liquidity are expected to continue to improve
due to: (i) the Company having entered into satisfactory financing arrangements
to fund substantially all agricultural and farming costs related to the 1998
harvest, (ii) the generation of new revenues from the acquisition of
TransPacific Environmental, Inc., and related biomass sales, (iii) pending
real estate sales which are expected to generate $16.9 million of gross
proceeds in the fourth fiscal quarter, and (iv) a new exclusive five-year
contract (with two five-year options) with USA Waste of California for
transportation services and a separate agreement to direct green waste from
the waste stream for USA Waste and sell the resulting product to end users.
Year 2000 Compliance
Management of the Company believes that its computerized information systems
currently in use and expected to be in use prior to the year 2000 are compliant.
It has formed a task force to assess the effect, if any, the Company may
encounter in dealing with vendors and outside service entities who may have
year 2000 exposure. Management does not expect that the financial impact of
required modifications to its systems, if any, will be material to the Company's
financial position, cash flows or results of operations in any given year.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K:
Form 8-K, dated October 21, 1997, as filed with the
Commission on October 27, 1997, reporting on Item 5
(Other Events) in connection with the Company's
offering and sale of its Series A 9% Convertible
Preferred Stock.
Pursuant to the requirement 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.
Date: July 15, 1998 AMCOR CAPITAL CORPORATION
/S/EUGENE W. TIDGEWELL
Eugene W. Tidgewell,
Chief Financial Officer
<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE FORM
10-QSB FOR THE QUARTER ENDED MAY 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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