<PAGE> 1
CEDAR GROUP, INC.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From __________ To __________
CEDAR GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-10372 23-2577796
(State of Incorporation) (Commission File No.) (IRS Employer Identification No.)
500 Notre Dame Street
Lachine, Quebec CANADA H8S 2B2
(Address of principal executive offices)
Registrant's Telephone Number: (514) 634-3550
Indicate by ( X ) whether 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 and (2) has been subject to such filing requirements
for the past 90 days.
(1) Yes X No _____
(2) Yes X No _____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS.
Check whether Registrant filed all documents and reports required to be filed
by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a Court.
Yes X No _____
APPLICABLE ONLY TO CORPORATE ISSUERS.
As of August 11, 1995, there were 14,534,625 shares of Common Stock, par
value $.001 per share, outstanding.
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INDEX
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PAGE
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PART I FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets at June 30, 1995 and June 30,
1994 (Unaudited) 3
Consolidated Statements of Operations for the three months and
the nine months ended June 30, 1995 and June 30, 1994
(Unaudited) 4
Consolidated Statement of Cash Flows for the nine months ended
June 30, 1995 and June 30, 1994 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Events 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
2
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CEDAR GROUP, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, 1995 and 1994
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
<S> <C> <C>
Unaudited
(in thousands of U.S. dollars)
ASSETS
CURRENT ASSETS
Cash............................................................. 9,071 215
Investments...................................................... 692 1,192
Accounts receivable.............................................. 44,127 23,542
Current portion of assets transferred under contractual
arrangements................................................... 185 --
Inventories...................................................... 32,562 9,947
Prepaid expenses and other assets................................ 2,388 1,235
Cash surrender value of life insurance........................... 894 --
-------- --------
TOTAL CURRENT ASSETS............................................. 89,919 36,131
-------- --------
Property, plant and equipment, net............................... 21,250 26,090
Advances to a shareholder........................................ 327 --
Assets of business transferred under contractual arrangements
(preferred shares)............................................. 3,608 --
Other assets..................................................... -- 2,237
Pension assets................................................... 2,084 1,244
Goodwill net..................................................... -- 186
-------- --------
TOTAL ASSETS..................................................... 117,188 65,888
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank Indebtedness................................................ 7,613 2,216
Accounts payable and accrued expenses............................ 21,713 15,384
Customer Advances................................................ 5,409 9,779
Deferred revenue................................................. 31,469 --
Current portion of long term debt................................ -- 153
-------- --------
TOTAL CURRENT LIABILITIES........................................ 66,204 27,532
-------- --------
Long Term debt................................................... -- 183
Advance from unincorporated joint venture........................ 816 --
Deferred income taxes............................................ 5,289 4,532
Accrued post-retirement benefits other than pensions............. 508 517
Minority Interest................................................ 8,552 16,244
-------- --------
81,369 49,008
-------- --------
STOCKHOLDERS' EQUITY
Common stock (Note 6)............................................ 13 10
Additional paid-in capital....................................... 35,050 18,757
Retained earnings................................................ 3,089 96
Cumulative translation adjustment................................ (448) (91)
-------- --------
37,704 18,772
Subscription Receivable.......................................... (1,885) (1,892)
-------- --------
TOTAL STOCKHOLDERS' EQUITY....................................... 35,819 16,880
-------- --------
TOTAL LIABILITIES AND EQUITY..................................... 117,188 65,888
======== ========
</TABLE>
3
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CEDAR GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
3 MONTHS 3 MONTHS YEAR-TO- YEAR-TO-
ENDED ENDED DATE DATE
30/06/95 30/06/94 30/06/95 30/06/94
<S> <C> <C> <C> <C>
Note A
(in thousands of U.S. dollars, except share data)
SALES............................... $ 40,236 $ 25,907 $ 100,326 $ 43,711
---------- --------- ---------- ---------
Cost of Sales....................... 32,657 23,034 85,920 37,852
Selling, General and Administrative
Expenses.......................... 6,690 2,690 10,093 4,398
---------- --------- ---------- ---------
39,347 25,724 96,013 42,250
---------- --------- ---------- ---------
Profit from Operations.............. 889 183 4,313 1,461
Profit from Operations of Joint
Venture........................... 817 -- 817 --
Interest income (expense), net...... 147 (189) 145 (415)
Other Income........................ 824 801 1,740 678
---------- --------- ---------- ---------
Net income before taxes and minority
interest.......................... 2,677 795 7,015 1,724
---------- --------- ---------- ---------
Income Taxes
Current........................... (356) -- (1,729) --
Deferred.......................... -- -- 1 --
---------- --------- ---------- ---------
(356) -- (1,728) --
---------- --------- ---------- ---------
Net income before minority
interest.......................... 2,321 795 5,287 1,724
Dividend of preferred shares........ (70) -- (70) (248)
Minority interest................... (248) (122) (159) (420)
---------- --------- ---------- ---------
Net Income.......................... 2,003 673 5,058 1,056
Retained earnings beginning of
period............................ 1,195 (577) (1,860) (960)
Adjustment cash surrender value..... (109) -- (109) --
---------- --------- ---------- ---------
Retained earnings end of period..... 3,089 96 3,089 96
---------- --------- ---------- ---------
Income per common share and common
share equivalent.................. 0.14 0.08 0.36 0.17
---------- --------- ---------- ---------
Weighted average number of common
shares and common share
equivalents outstanding........... 14,528,691 8,234,245 14,245,678 6,344,551
========== ========= ========== =========
</TABLE>
Note A: The consolidated statements of operations contained in these financial
statements have been adjusted to reflect the Company's acquisition of
Dominion Bridge, Inc. effective March 9, 1994, and the acquisition of
Steen Contractors Limited, effective April 1, 1995.
4
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CEDAR GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine months ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
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<S> <C> <C>
Unaudited
(in thousands of U.S. dollars)
CASH FLOW FROM OPERATING ACTIVITIES
Net income....................................................... $ 5,058 $ 1,056
Adjustment to reconcile net income to net cash
provided by (used for) operating activities
Depreciation and amortization.................................. 3,657 399
Gain on sale of assets......................................... (879) -
Deferred income tax............................................ 305 --
(Increase) decrease in accounts receivable..................... (5,930) (19,460)
(Increase) decrease in prepaid expenses and other assets....... 289 (700)
(Increase) decrease in cash surrender value.................... 797 --
(Increase) decrease in inventories............................. 6,414 (8,937)
(Decrease) increase in accounts payable........................ (4,310) 15,776
(Decrease) increase in deferred revenue........................ (3,377) --
(Decrease) increase in customer advances....................... (152) 12,763
-------- ---------
Net cash used in operating activities............................ $ 1,872 $ 897
-------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Cash consideration paid for acquired businesses.................. $(4,575) --
Advance to a shareholder......................................... 238 --
Cash payment for purchase of equipment........................... (985) (22,500)
Investment in other assets....................................... -- (1,874)
Proceeds from sale of assets..................................... 3,442 --
-------- ---------
Net cash provided by (used in) investing activities.............. $(1,880) $ (24,374)
-------- ---------
</TABLE>
5
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CEDAR GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine months ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
<S> <C> <C>
Unaudited
(in thousands of U.S. dollars)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of stock.................................. $ 3,318 $11,418
Minority Interest................................................ (6,912) 15,584
Net borrowings (repayments) of line of credit.................... 7,613 (357)
Payment of other obligations..................................... (31) (381)
-------- --------
Net cash provided by financing activities........................ 3,988 26,264
-------- --------
Effect of foreign exchange rate changes on cash.................. (487) (673)
Net increase (decrease) in cash.................................. 3,493 2,114
Cash at beginning of period...................................... 5,578 1,135
-------- --------
Cash at end of period............................................ 9,071 3,249
======== ========
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest....................................................... $ (145) $ 226
======== ========
</TABLE>
6
<PAGE> 7
CEDAR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the consolidated
accounts of CEDAR GROUP, INC. and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in the
consolidation.
2. BUSINESS ACQUISITION
On July 31, 1995 (but effective April 1, 1995) Cedar Group, Inc. (the
"Company") acquired 75% of the outstanding common shares of Steen
Contractors Limited ("Steen") for a purchase price of Cdn$6,300,000
(US$4,575,000). Steen is an engineering company specializing in mechanical,
heating, ventilation, and air conditioning contracts for industrial,
commercial, manufacturing and processing plants. The Company is required to
purchase the remaining common shares of Steen in two instalments. The first
instalment amounting to 15% of Steen's outstanding shares are to be
acquired on May 1, 1996 at a price equal to the net book value per share of
Steen on December 31, 1995. The final instalment, amounting to the
remaining 10% of Steen's outstanding shares are to be purchased on May 1,
1997 at a price equal to the net book value per share of Steen on December
31, 1996.
The acquisition has been accounted for under the purchase method of
accounting and has been given effect from April 1, 1995, the date upon
which the Company's management assumed operational control of Steen.
Accordingly, the results of operations for the nine months ended June 30,
1995 include the operations of Steen for the period April 1, 1995 to June
30, 1995.
3. BUSINESS
The Company is an importer, manufacturer and distributor of industrial,
custom and specialty Fasteners for sale throughout Canada and the United
States and through its Dominion Bridge, Inc. and Steen Contractors Limited
subsidiary operates as a manufacturing, engineering prime mechanical
heating, ventilation air conditioning and infrastructure Company.
4. INVENTORIES
Work-in-process related to construction contracts is stated at accumulated
cost less amounts charged to income based on the percentage-of-completion
of individual contracts. Raw materials are stated at the lower of cost
(first-in, first-out) or net replacement cost. Finished goods comprise
steel and steel hardware products held for sale and are stated at the lower
(first-in, first-out) or net realizable value.
5. CONSTRUCTION CONTRACTS
Income on construction contracts is recognized on the
percentage-of-completion basis with the exception of one subsidiary that
follows the completed contracts only. Provisions for anticipated losses on
uncompleted contracts are made in the period in which such losses are first
determined.
6. CAPITAL STOCK
Preferred stock: $.001 par value; 5,000,000 shares authorized, none issued.
Common Stock: $.001 par value, 20,000,000 shares authorized; as of June 30,
1995: 14,524,625 shares were issued and outstanding and 9,555,744 shares
were issued and outstanding as of June 30, 1994.
7. FOREIGN CURRENCY TRANSLATION
Gains and losses on foreign currency transactions are recognized currently
in the Consolidated Statement of Operations, and are not significant. Gains
and losses on translation of the Company's subsidiaries operating outside
the United States are reported separately and accumulated in the
"Cumulative Foreign Currency Translation Adjustment" in the Consolidated
Balance Sheets.
7
<PAGE> 8
8. COMMITMENTS AND CONTINGENCIES
The Company's wholly-owned Canadian subsidiary, Dominion Bridge, Inc.,
periodically enters into forward exchange contracts to hedge specific
anticipated currency inflows. It does not engage in speculation. The
foreign exchange contracts do not subject the Company to operating risk due
to exchange rate movements because gains and losses on these contracts
offset losses and gains on the transactions being hedged. The forward
exchange contracts generally have maturities which do not exceed one year
and are agreed to at the inception of the contracts. No significant gains
or losses are deferred in the consolidated balance sheets.
The Company leases office and warehouse space under non-cancellable
operating leases. The terms of the various leases run between one and five
years, the last of which expires in November, 1997. Future minimum lease
payments under all non-cancellable leases for the years subsequent to
September 30, 1994 consist of the following:
<TABLE>
<S> <C>
1995............................ $968,000
1996............................ $730,000
1997............................ $343,000
</TABLE>
A number of claims and lawsuits seeking unspecified damages and other
relief are pending against the Company. It is impossible at this time for
the Company to predict with any certainty the outcome of such litigation.
However, management is of the opinion, based upon information presently
available, that it is unlikely that any liability, to the extent not
provided for through insurance or otherwise, would be material in relation
to the Company's consolidated financial position.
8
<PAGE> 9
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States (US GAAP) for interim financial information and the
instructions to Form 10-QSB and Regulation S-B. Accordingly, the statements
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 of normal recurring
accruals) considered necessary for a fair presentation have been included.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ACQUISITION OF STEEN CONTRACTORS LIMITED
On July 31, 1995 (but effective April 1, 1995) Cedar Group, Inc. (the
"Company") acquired 75% of the outstanding common shares of Steen
Contractors Limited ("Steen") for a purchase price of Cdn$6,300,000
(US$4,575,000). Steen is an engineering company specializing in mechanical,
heating, ventilation, and air conditioning contracts for industrial,
commercial, manufacturing and processing plants. The Company is required to
purchase the remaining common shares of Steen in two instalments. The first
instalment amounting to 15% of Steen's outstanding shares are to be
acquired on May 1, 1996 at a price equal to the net book value per share of
Steen on December 31, 1995. The final instalment, amounting to the
remaining 10% of Steen's outstanding shares are to be purchased on May 1,
1997 at a price equal to the net book value per share of Steen on December
31, 1996.
The acquisition has been accounted for under the purchase method of
accounting and has been given effect from April 1, 1995, the date upon
which the Company's management assumed operational control of Steen.
Accordingly, the results of operations for the nine months ended June 30,
1995 include the operations of Steen for the period April 1, 1995 to June
30, 1995.
In order to complete the acquisition, the Company obtained a bridge loan of
US$5,000,000, which has been secured by a pledge of the securities owned by
the Company it its two principal operating subsidiaries, namely, Dominion
Bridge, Inc. and Steen and is further secured by a guarantee and a pledge
of assets by Dominion Bridge, Inc. The bridge loan is to be repaid on or
before October 31, 1995. The Company is also currently negotiating with the
lender of the bridge loan for a revolving credit facility in order to
refinance the bridge loan and to provide additional working capital to the
Company.
RESULTS OF OPERATIONS
Consolidated sales for the nine months ended June 30, 1995 were
$100,326,000 as compared to $43,711,000 for the corresponding period in
1994.
During the quarter ended June 30, 1995, the Company earned $0.14 per share
on net income of $2,003,000. This compares to $0.08 on net income of
$673,000 for the same period in the previous year. Total sales for the
third quarter only, increased to $40,236,000 from $25,907,000 for the same
period in the previous year.
Net income for the nine months ended June 30, 1995 was $5,058,000 compared
to $1,056,000 for the same period in the previous year. This has resulted
in net income of $0.36 per share for the nine month period ended June 30,
1995 versus $0.17 per share for the same period in the previous year.
Minority interests consisted of the remaining balance of Cdn$9,552,000
(US$6,936,000) of Class A Preferred Shares of Dominion Bridge, Inc., a 30%
ownership by an unrelated shareholder of the common stock of Unimetric
Corporation, and the remaining 25% of the common shares of Steen.
The Company anticipates reaching a definitive agreement to acquire the
remaining Cdn$9,552,000 (US$6,936,000) Class A Preferred Shares of Dominion
Bridge, Inc. not held by the Company during the last quarter of fiscal
1995.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of operating capital have traditionally
been the private placement of its shares of Common Stock and cash generated
from operations. No private placements were undertaken during the quarter.
As indicated above, the Company received a US$5,000,000 bridge loan in
order to acquire 75% of the shares of Steen.
The Company's consolidated cash position at June 30, 1995 was $9,071,000.
10
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time disagreements with individual employees and disagreements
as to the interpretation, effect and nature of individual agreements arise
in the ordinary course of business and may result in legal proceeding being
commenced against the Company.
On June 2, 1994, the Company entered into a letter of intent (the "Letter
of Intent") with Stelco Inc. ("Stelco") and Stelco Fasteners Ltd. pursuant
to which the Company agreed to invest Cdn. $2 million into Stelco Fasteners
in exchange for 75% of the issued and outstanding common shares of Stelco
Fasteners. In addition, Stelco agreed to convert its indebtedness into
series A Preferred Shares of Stelco Fasteners having a value of Cdn.
$15,911,000 representing a reduction of approximately Cdn. $5 million of
indebtedness. The Series A Preferred Shares were to be convertible into
shares of Common Stock of the Company at Cdn. $8.50 per share (later
changed to Cdn. $8.00 per share). Stelco further agreed to receive Series B
Preferred Shares of Stelco Fasteners in exchange of the operating loan
advanced to Stelco Fasteners by Stelco to a maximum of Cdn. $4,659,000. The
Series B Preferred Shares were to be redeemed from 25% of the net after tax
profits of Stelco Fasteners. The Letter of Intent provided that the Company
and Stelco were to negotiate in good faith to complete definitive agreement
within a sixty day period. This period was subsequently extended by mutual
agreement.
As Stelco had failed to negotiate a collective bargaining agreement with
the Union representing Stelco Fasteners' employees and as Stelco advised
Stelco Fasteners' major customers that it could not guarantee their
requirements beyond July 31, 1994, on July 4, 1994, Stelco transferred
ownership of 75% of the common shares of Stelco Fasteners to the Company
and handed over management and control of Stelco Fasteners to the Company's
principals. In this connection, the Company Chairman, Michel L. Marengere,
and its President, Nicolas Matossian, were elected as two of three
directors on Stelco Fasteners' Board of Directors. In addition, Mr.
Marengere and Mr. Matossian were appointed as Stelco Fastener's senior
officers.
The certificate representing 75% of the common shares of Stelco Fasteners,
the Cdn. $2 million cheque by the Company payable to Stelco Fasteners and
other documents were placed in trust with a law firm pending completion of
the Company's due diligence and its assessment of Stelco Fasteners as a
viable enterprise.
In July, 1994, the Company was successful in negotiating a collective
bargaining agreement with the union representing Stelco Fasteners'
approximately 350 employees. By September 30, 1994 the Company also had an
opportunity to assess the loss of business in June, 1994 and in receiving
confirmation that Stelco Fasteners' major customers would continue doing
business with Stelco Fasteners.
In the period of September 30, 1994 to December 14, 1994, the Company
negotiated in good faith with Stelco to complete its due diligence and to
finalize definitive agreements and in the interim successfully operated
Stelco Fasteners and its business.
On December 15, 1994, Stelco purported to deem the transaction to be
abandoned and proceeded to remove all documents from trust and to assert
management control of Stelco Fasteners.
On December 17, 1994 the Company obtained a temporary court order requiring
both Stelco and the Company to remove themselves from operating control of
Stelco Fasteners pending the determination of a motion for an interim and
interlocutory injunction which would prohibit Stelco from, among other
things, exercising any powers as owner and controlling shareholder of
Stelco Fasteners, pending trial. On January 5, 1995 the motion was not
granted, however, in his oral reasons, Mr. Justice Kent indicated that
based on the evidence before him, it appeared that there were substantial
issues to be tried.
The Company also commenced an action against Stelco Inc. on December 20,
1994 to obtain a declaration that it is the rightful owner or 75% of the
Common Shares of Stelco Fasteners Ltd. and for damages and is presently
pursuing this action. The Company is not presently in any position to
predict the outcome of this litigation. Reference is made to the Company's
Form 10-KSB Annual Report under section 13 of the Securities Exchange Act
of 1934 for the fiscal year ended September 30, 1994.
11
<PAGE> 12
It is the Company's understanding that the trial for this matter is
scheduled to take place in November/December 1995.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER EVENTS
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
12
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON BEHALF OF THE UNDERSIGNED
THEREUNTO DULY AUTHORIZED.
<TABLE>
<S> <C>
CEDAR GROUP, INC
DATE : AUGUST 11, 1995
By: /s/ Michel L. Marengere
--------------------------------------------
Michel L. Marengere
Chairman and Chief Executive Officer
By: /s/ Robert Chartier
--------------------------------------------
Robert Chartier
Principal Accounting Officer
</TABLE>
13
