<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From __________ To __________
DOMINION BRIDGE CORPORATION (formerly 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 12, 1996, there were 20,518,675 shares of Common Stock, par value
$.001 per share, outstanding.
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INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets at June 30, 1996 (unaudited) and
September 30, 1995 3
Consolidated Statement of Operations for the three months and
nine months ended June 30, 1996 and June 30, 1995 (unaudited) 4
Consolidated Statement of Cash Flows for the nine months ended
June 30, 1996 and June 30, 1995 (unaudited) 5-6
Notes to consolidated Financial Statements (Unaudited) 7-8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9-12
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13-14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
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DOMINION BRIDGE CORPORATION (FORMERLY CEDAR GROUP, INC.)
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and September 30, 1995
<TABLE>
<CAPTION>
JUNE 30, 1996 SEPTEMBER 30, 1995
------------- ------------------
<S> <C> <C>
Unaudited Audited
(in thousands of U.S. dollars)
ASSETS
CURRENT ASSETS
Cash......................................................... 25,317 4,765
Short term deposits and investments.......................... 1,420 4,467
Accounts receivable, net of allowances....................... 107,878 44,169
Inventories.................................................. 76,086 12,746
Prepaid expenses and other assets............................ 5,115 1,822
-------- --------
TOTAL CURRENT ASSETS......................................... 215,816 67,969
-------- --------
Property, plant and equipment, net........................... 39,037 20,661
Advances to a shareholder.................................... 738 1,198
Assets of business transferred under contractual arrangements
(preferred shares)......................................... 3,643 3,640
Pension assets............................................... 1,708 1,619
Other assets................................................. 5,977 1,312
-------- --------
TOTAL ASSETS................................................. 266,919 96,399
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank indebtedness............................................ 35,545 6,688
Accounts payable and accrued expenses........................ 125,880 31,991
Customer advances............................................ 12,165 6,062
-------- --------
TOTAL CURRENT LIABILITIES.................................... 173,590 44,741
-------- --------
Advances from unincorporated joint venture................... 350 750
Note payable................................................. 581 488
Deferred income taxes........................................ 13,628 5,994
Accrued post-retirement benefits other than pensions......... 2,184 522
Long-term debt............................................... -- --
Minority interest............................................ 34,540 10,161
-------- --------
51,283 17,915
======== ========
STOCKHOLDER'S EQUITY
Common stock................................................. 16 15
Additional paid-in capital................................... 40,770 36,345
Retained earnings (deficit).................................. 3,536 (874)
Cumulative translation adjustment............................ (391) 142
-------- --------
43,931 35,628
Subscriptions receivable..................................... (1,885) (1,885)
-------- --------
42,046 33,743
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................... 266,919 96,399
======== ========
</TABLE>
3
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DOMINION BRIDGE CORPORATION (FORMERLY CEDAR GROUP, INC.) AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months and three months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
3 MONTHS 3 MONTHS YEAR TO YEAR TO
ENDED ENDED DATE DATE
30/06/96 30/06/95 30/06/96 30/06/95
<S> <C> <C> <C> <C>
(In thousands of U.S. dollars), except per share data
SALES............................... 132,100 40,236 237,058 100,326
----------- ----------- ----------- -----------
Cost of Sales....................... 118,562 32,657 208,087 85,920
Selling, general and administrative
expenses.......................... 11,484 6,690 20,834 10,093
----------- ----------- ----------- -----------
130,046 39,347 228,921 96,013
----------- ----------- ----------- -----------
Profit from operations.............. 2,054 889 8,137 4,313
Interest income (expense) net....... (949) 147 (906) 145
Income -- operations of
joint-venture..................... 190 817 922 817
Other income........................ 461 824 695 1,740
----------- ----------- ----------- -----------
Net income before income taxes &
minority interest................. 1,756 2,677 8,848 7,015
Income tax provision................ 446 356 3,163 1,728
----------- ----------- ----------- -----------
Net income before minority
interest.......................... 1,310 2,321 5,685 5,287
Minority interest
Dividends on preferred shares..... (364) (70) (569) (70)
Common stock...................... (695) (248) (706) (159)
----------- ----------- ----------- -----------
NET INCOME.......................... 251 2,003 4,410 5,058
----------- ----------- ----------- -----------
Retained earnings (deficit),
beginning of period............... 3,285 1,086 (874) (1,969)
----------- ----------- ----------- -----------
RETAINED EARNINGS (DEFICIT), END OF
PERIOD............................ 3,536 3,089 3,536 3,089
Net income per common share and
common share equivalents
Primary........................... 0.02 0.14 0.27 0.36
Fully diluted..................... 0.01 0.14 0.22 0.36
Weighted average number of common
shares and common share
equivalents
Primary........................... 16,333,161 14,528,691 16,374,585 14,245,678
Fully diluted..................... 24,632,450 14,528,691 19,772,748 14,245,678
=========== =========== =========== ===========
</TABLE>
4
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CEDAR GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
<S> <C> <C>
(in thousands of U.S. dollars)
CASH FLOW FROM OPERATING ACTIVITIES
Net income....................................................... 4,410 5,058
Adjustments to reconcile net income to net cash provided by (used
in) operating activities
Minority interest in net income................................ 770 159
Gain on disposal of fixed assets............................... -- (879)
Depreciation and amortization.................................. 3,439 3,657
Deferred income tax............................................ 1,668 305
Common stock issued for services............................... 603 --
Income from operations of a joint venture...................... (922) (817)
Cash advances received from joint venture...................... 522 816
(Increase) decrease in accounts receivable..................... (8,256) (5,930)
(Increase) decrease in prepaid expenses and other assets....... 7,007 1,086
(Increase) decrease in inventories............................. (11,468) 6,414
(Decrease) increase in accounts payable........................ (3,195) (4,310)
(Decrease) increase in customer advances....................... 3,729 (3,529)
--------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES.............. (1,693) 2,030
--------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Decrease (Increase) in short term investments.................... 3,047 --
Net book value for acquired businesses........................... (37,565) (4,575)
Cash of acquired businesses...................................... 35,301 --
Repayment by a shareholder....................................... 460 238
Cash redemption of minority interest............................. (8,259) (7,070)
Decrease (increase) of pension assets............................ (89) --
Proceeds from sale of equipment.................................. 301 3,442
Investment in other assets....................................... (2,049) (985)
Investment in fixed assets....................................... (8,155) --
--------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES.............. (17,008) (8,950)
--------- --------
</TABLE>
5
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<TABLE>
<CAPTION>
June 30, 1996 JUNE 30, 1995
--------- --------
<S> <C> <C>
(in thousands of U.S. dollars)
CASH FLOW FROM FINANCING ACTIVITIES
Repayment of other long term liabilities......................... (1,083) (31)
Proceeds from issuance of common stock........................... 4,119 3,318
Post retirement benefits other than pension...................... (9) --
Minority interest (issue of preferred shares of subsidiary)...... 22,869 --
Net increase in bank indebtedness................................ 13,964 7,613
--------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES........................ 39,861 10,900
--------- --------
Effect of foreign exchange rate changes on cash.................. (608) (487)
--------- --------
NET INCREASE (DECREASE) IN CASH.................................. 20,552 3,493
--------- --------
Cash at beginning of period...................................... 4,765 5,578
--------- --------
CASH AT END OF PERIOD............................................ 25,317 9,071
--------- --------
SUPPLEMENTARY CASH FLOW INFORMATION
Non-cash investing and financing activities
Issuance of common stock on conversion of minority interest
preferred shares............................................... 1,505 --
Issuance of common stock for preferred share issue costs......... 1,273 --
========= ========
</TABLE>
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the consolidated
accounts of DOMINION BRIDGE CORPORATION (formerly Cedar Group, Inc.)
(the "Company") and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in the consolidation.
During the quarter ended June 30, 1996, the Company changed its name to
recognize the significance of the over 100 years of accumulated goodwill of
the company's principal North American operating subsidiary, Dominion
Bridge, Inc. The name change obtained approval and became effective July
31, 1996.
The condensed consolidated financial statements do not include footnotes
and certain financial information normally presented annually under
generally accepted accounting principles and, therefore, should be read in
conjunction with the Company's September 30, 1995 annual report on Form
10-KSB. Accounting measurements at interim dates inherently involve greater
reliance on estimates than at year-end. The results of operations for the
nine months ended June 30, 1996 are not necessarily indicative of results
that can be expected for the full year.
The condensed consolidated financial statements included herein are
unaudited, however, they contain all adjustments (consisting of normal
recurring accruals) which, in the opinion of the Company, are necessary to
present fairly its consolidated financial position at June 30, 1996 and its
consolidated results of operations for the three months and nine months
ended June 30, 1996 and cash flows for the nine months ended June 30, 1996.
PRINCIPLES OF CONSOLIDATION
Since the beginning of the current fiscal year, the Company has (1)
acquired the remaining minority interest in Steen Contractors Limited, (2)
acquired approximately 78% of the outstanding shares of McConnell Dowell
Corporation Limited and (3) acquired 100% of the issued share capital of
Groupe MIL Inc. for Cdn $1.00.
Each of the above acquisitions were accounted for under the purchase method
of accounting. Under the purchase method of accounting, the assets of the
acquired entity are reflected on the balance sheet at their fair market
value on the date of purchase, with the balance of the purchase price
attributed to goodwill. In the case of MIL, since the purchase price was
nominal, the difference between the fair market value of the assets and the
purchase price is treated as negative goodwill. Restructuring costs and
losses of MIL attributable to the intended restructuring will be charged
as incurred against the negative goodwill balance.
2. BUSINESS
The Company through its operating subsidiaries participates in
infrastructure engineering, manufacturing services and in shipbuilding.
3. 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
of cost (first-in, first-out) or net realizable value.
4. CONSTRUCTION CONTRACTS
Income on construction contracts is recognized on the
percentage-of-completion basis. Provisions for anticipated losses on
uncompleted contracts are made in the period in which such losses are first
determined.
7
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5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at June 30, 1996 include normal trade
payables, construction sub-contractor payables, job cost accruals based on
percentage of completion of individual contracts and recurring payroll and
overhead accruals.
6. CAPITAL STOCK
Preferred stock: $.001 par value; 5,000,000 shares authorized, none issued.
Common Stock: $.001 par value, 50,000,000 shares authorized; as of June 30,
1996, 16,482,582 shares were issued and outstanding and 14,534,625 shares
were issued and outstanding as of June 30, 1995.
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.
8. COMMITMENTS AND CONTINGENCIES
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.
The Company is subject to a risk of claims for product liability. If a
product liability claim exceeding the Company's insurance coverage or its
own available resources were to be successfully asserted against the
Company, it would have a material adverse effect on the Company's financial
condition. The Company has general liability insurance coverage of
approximately $5 million per occurrence, with a maximum of $5 million of
claims payable during any policy year. There is no assurance that such
coverage will be sufficient to fully insure against claims brought against
the Company and its subsidiaries, or that the Company will be able to
maintain such insurance at affordable rates or obtain additional insurance
covering the products.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
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) 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.
Effective March 31, 1996, Steen re-purchased the remaining 25% of its
common shares for cash consideration payable of Cdn $2,135,000 (US $1,571,000).
The full amount was paid on May 3, 1996.
The acquisitions have been accounted for under the purchase method of
accounting and have been given effect from April 1, 1995 for the first (75 %)
purchase and from March 31, 1996 for the second (25 %) purchase. Accordingly,
the results of operations for the nine months ended June 30, 1996 include the
varying proportionate interest in the operations of Steen for the entire period
and only three months of Steen results are included in the comparative nine
month period ended June 30, 1995.
The acquisition of Steen was funded originally by a bridge loan facility.
This loan was repaid in October of 1995 through partial use of proceeds raised
in the Company's subsidiary, Cedar Group (TCI) Inc. LLC. (See section: Liquidity
and Capital Resources).
Steen is presently an indirectly wholly-owned subsidiary of the Company as
the shares of Steen are owned by Cedar Group Canada Inc.
ACQUISITION OF MCCONNELL DOWELL CORPORATION LIMITED
On March 29, 1996, Cedar Group Australia Pty Ltd ("CGA"), an Australian
corporation and an indirect wholly-owned subsidiary of the Company, purchased
through the facilities of the Australian Stock Exchange 12,640,000 ordinary
shares of McConnell Dowell Corporation Limited ("MDC"), constituting
approximately 30.4% of the issued ordinary shares of MDC, at a purchase price of
A$20,224,000 (US $15,774,720), or A$1.60 (US $1.25) per share. CGA had made a
tender offer for all of the outstanding ordinary shares of MDC, which expired on
April 9, 1996, with 11,178,115 shares having been tendered into the offer,
constituting 26.89% of the issued ordinary shares of MDC. The tender offer was
for A$1.25 (US $.98) per share (later increased to A$1.60 (US $1.25), net to the
seller in cash. Prior to the commencement of the tender offer, CGA owned
approximately 19.9% of the issued ordinary shares of MDC, which it had acquired
from Morrison Knudsen Corporation. As a result of these transactions, CGA owns
as of April 11, 1996, 31,091,400 ordinary shares, constituting 77.2% of the
issued ordinary shares of MDC. The total amount of funds required to purchase
all of the shares of MDC owned by CGA and to pay related fees and expenses was
US $41,433,806.
The Company committed to provide these funds to CGA through another of its
wholly-owned subsidiaries, Cedar Group Canada Inc., a Canadian corporation
("CGC"). CGC obtained such funds from a newly created credit facility ($30
million) pursuant to that certain credit facility agreement dated as of March
29, 1996 (the "Credit Agreement") among CGC, the Company and BT Commercial
Corporation ("BTCC"), as the lender (the "Lender").
The Company funded the balance of the purchase price from funds raised
through its Cedar TCI subsidiary preferred share issue. (See section: Liquidity
and Capital Resources)
MDC's assets consist of cash, accounts receivable, inventories and
property, plant and equipment. These assets are utilized in its infrastructure,
including pipeline, mechanical and electrical, engineering and construction
groups operating throughout Asia, Australia, and New Zealand. The Company plans
for MDC to continue such course of business under its control.
9
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The Company has accounted for the acquisition of MDC using the purchase
method as of March 29, 1996, the date at which the Company achieved voting
control of MDC. Accordingly, the assets and liabilities of MDC as at June 30,
1996 are consolidated into the accounts of the Company. The minority interest of
22.8%, being the shares remaining outside of Cedar's control have been accounted
for as minority interest.
Prior to March 29, 1996, the Company accounted for its investment in MDC
using the equity method.
ACQUISITION OF GROUPE MIL INC.
On April 25, 1996, but effective March 31, 1996, the Company's wholly owned
subsidiary Cedar Group Canada Inc. acquired from Societe Generale de Financement
("SGF"), 100% of the equity of Groupe MIL Inc. ("MIL") for the purchase price of
Cdn $1.00. MIL is an industrial manufacturing concern, having the following
subsidiaries and divisions.
MIL DAVIE INC., founded in 1829 is Canada's oldest and largest shipbuilding
and ship repair facility. Subsequent to the acquisition, MIL Davie Inc.'s
assets, consisting of in excess of 1,000,000 square feet of manufacturing
space fabricating major industrial components for the energy, pulp and
paper and petro-chemical sectors, were rolled up into its parent, MIL.
INTERMODAL INC., is a designer and a manufacturer of road-rail
interchangeable systems, a recently developed proprietary technology which
provides significant economic and logistic advantages to the surface
transportation industry.
MIL SYSTEMS, the engineering division located in Ottawa, Canada, classified
ISO 9001 and specializing in advanced ship design software, naval systems,
computer aided logistic and global telecommunications.
SGF has assumed all current and contingent encumbrances and liabilities as
of the date of closing, including accumulated working capital deficiencies. In
addition, on May 15, 1996, SGF invested a further Cdn $25 million to provide MIL
with the resources to upgrade facilities and contribute to working capital
requirements over the next two years.
The Company has put in place an overall business development plan to
increase MIL's industrial and naval capability on a global scale. This
five-year plan will include the participation of SGF who has agreed to
contribute up to 25% of the investment in the development plan over the period
and up to a maximum of Cdn $25 million.
The Company intends to continue the existing shipbuilding and ship repair
activities for both commercial and military while extending MIL Davie's
capabilities to the manufacturing of offshore platforms, supply vessels and
large scale container handling systems.
The acquisition of MIL has been accounted for under the purchase method of
accounting and has been given effect at March 31, 1996. Accordingly, the balance
sheet accounts of MIL are included in the Company's balance sheet at June 30,
1996.
The Company commenced consolidating the revenues and expenses of MIL
effective April 1, 1996.
RESULTS OF OPERATIONS
Consolidated sales for the nine months of the fiscal year increased from
$100.3 million in 1995 to $237.0 million in 1996.
This increase is attributable to the inclusion of the new operating units
in the fiscal 1996 period and growth in the continuing operating units as
follows:
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<TABLE>
<CAPTION>
9 MONTHS TO 9 MONTHS TO PURCHASED INTERNAL
OPERATING UNIT JUNE 30, 1996 JUNE 30, 1995 GROWTH GROWTH
- ---------------------------------------------------- ------------- ------------- --------- --------
<S> <C> <C> <C> <C>
(In Thousands of U.S. dollars)
Dominion Bridge..................................... 106.9 85.5 -- 21.4
Steen............................................... 44.9 11.3 18.8 14.8
MDC................................................. 68.8 -- 68.8 --
MIL................................................. 13.2 -- 13.2 --
Fasteners........................................... 3.2 3.5 -- (0.3)
------ ------ --------- --------
Consolidated........................................ 237.0 100.3 100.8 35.9
========== ========== ======= ======
</TABLE>
Gross margins as a percentage of sales have decreased from 14.3% for the
first nine months of fiscal 1995 to 12.2% for the nine months ended June 30,
1996. This reduction in overall margins is due to the lower gross margin earned
on the new Steen and MDC contractor sales compared to the rest of the operating
units.
Income from joint venture relates to Steen's interest in an offshore
construction project. Steen accounts for this joint venture income using the
equity method.
Selling, general and administrative expenses have increased by $10.7
million for the nine months ended June 30, 1996 compared to 1995. Of this
increase, $8.9 million relates to the inclusion of the newly acquired
subsidiaries in fiscal 1996 ($3.0 million at Steen, $4.2 million at MDC and $1.7
million at MIL). The balance of the increase represents a mix of cost savings at
the DB and Steen operating levels and an increase in parent corporate overhead
expenses associated with the increased sales volume.
The selling, general and administration costs of the quarter ended June
30, 1996 are similarly increased from fiscal 1995. Of the net increase in the
quarter's costs of $4.8 million, $5.9 million relates to the addition of MDC and
MIL. These increases are partially offset by a net reduction in expenses of $1.1
million at the other operating units.
In calculating the fully diluted earnings per Share, the Company has
reflected the average trading price for the quarter ($4.44) to calculate the
potential dilution of all options and warrants outstanding, as this results in a
higher dilution factor compared to using the quarter ending share price of
$3.16. The potential dilution of all options and warrants amounts to
approximately 288,000 shares calculated under the treasury stock method.
In regard to the conversion of the preferred Shares of Cedar Group (TCI)
Inc. LLC, the Company has calculated the potential Shares of Common Stock
issuable at the quarter end closing price of $3.16. The TCI conversion dilution
is calculated as 24,141,000 preferred shares, divided by the quarter end price
($3.16), yielding approximately 7.6 million common shares issuable.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended March 31, 1996, the Company, through its wholly
owned subsidiary, Cedar Group Canada Inc. entered into a bridge loan facility
for US $30 million to partially fund the acquisition of MDC. This bridge loan
facility to the subsidiary was secured by the Company's parental guarantee,
pledge of the shares of the Company's principal operating subsidiaries (Dominion
Bridge, Steen and MDC) and lien's on certain real and moveable property of the
operating subsidiaries. The bridge loan was converted on April 30, 1996 into a
credit facility agreement. The above-mentioned credit facility agreement has
replaced the Company's previous Canadian chartered bank lines of credit.
Additionally, the Company has established Cedar Group (TCI) Inc. LLC,
("TCI") a limited life company under the laws of the Turks and Caicos Islands,
which has issued, by way of an offshore private placement, $24,141,776 6%
Convertible Preferred Shares at $8.50 per share (the "TCI Preferred Shares").
The TCI Preferred Shares pay cash dividends at the rate of 6% per annum.
The TCI Preferred Shares are convertible into the Company's Common Stock,
beginning May 31, 1996, at a conversion price which is equal to 12% less than
the market price of the Common Stock during the five trading days prior to
conversion if converted prior to June 30, 1996, or 15% less than the market
price of the Common Stock during the five trading days prior to conversion
if converted thereafter. All TCI Preferred Shares outstanding on October 31,
1998 will be automatically converted into the Company's Common Stock.
The TCI Preferred Shares have been classified as minority interest as they
are Preferred Shares of the Cedar TCI subsidiary and as at June 30, 1996 had not
yet been converted into common equity of the parent Company. As at August 12,
1996, 3,816,093 shares of Common Stock have been issued to satisfy conversions
of the TCI Preferred Shares. Accordingly, $15,181,323 of TCI Preferred Shares
remain outstanding.
At June 30, 1996 the Company has significantly increased cash and working
capital balances from previously reported position due to the inclusion of the
balance sheets of MDC and MIL. MDC has a net positive cash balance of $0.4
million and a net positive working capital position of $24 million. This
reflects
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MDC's current financial position of being heavily invested in inventories ($58.3
million) and accounts receivable ($48.0 million) on several major projects that
are only partially funded by accounts payable ($78.5 million). These projects
are expected to become cash flow positive in the Company's quarters ended
September 30, 1996 and December 31, 1996. MIL has a net positive cash position
of $14 million and positive working capital of $14.5 million. This reflects
MIL's current financial position of cash invested by SGF to defray expected
costs of internal investments and restructuring. The MIL cash balance is
restricted to investment within the MIL operating company group.
The Company expects to be able to fund its immediate cash requirements from
its operating cash flow but may require additional capital in the form of debt,
convertible debt or equity to fund continued internal expansion or potential
future acquisitions.
EFFECT OF INFLATION
The Company's operating costs are subject to general economic and
inflationary pressures. While operating costs have increased during the past
years, the Company does not believe that its operations have been significantly
affected by inflation.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently involved in any litigation or proceedings
which are material either individually or in the aggregate, and, to the
Company's knowledge, no other legal proceedings of a material nature
involving the Company are currently contemplated by any individuals,
entities or governmental authorities except as outlined below.
The Company commenced an action against Stelco Inc. on December 20, 1994 in
the Ontario Court to obtain a declaration that it is the rightful owner of
75% of the common shares of Stelco Fasteners Ltd. and for damages as a
result of a dispute that arose between the parties in connection with the
acquisition by the Company of 75% of the common shares of Stelco Fasteners
Ltd., a company owned by Stelco Inc. The Ontario Court (General Division)
denied the Company's claims in a judgment released on December 21, 1995.
Upon reviewing the elements of the case, the Company has accepted the
recommendation of its counsel and of a further legal opinion that, based
upon significant errors of law, an appeal is warranted. Consequently, on
January 19, 1996 the Company filed a notice of appeal with the Ontario
Court of Appeal from the decision of the Ontario Court General Division.
The parties have reached a preliminary settlement, subject to court and
Board approval, of the shareholder derivative suit in the Chancery Court of
Delaware against Michel L. Marengere, Micheline Prud'Homme and Rene Amyot,
individually. The settlement contemplates (i) the repayment prior to
December 31, 1996 of certain loans to affiliates of Mr. Marengere, (ii)
the guarantee by a company controlled by Mr. Marengere of certain payments
owed to the Company by the purchasers of Edinov Corporation, a former
subsidiary of the Company, (iii) an agreement that no further interest free
loans may be made to Mr. Marengere, and (iv) an agreement that all future
transactions not in the ordinary course of business between the Company and
Mr. Marengere will be subject to independent director approval.
By letter dated July 24, 1996, United Dominion Industries Limited ("UDIL")
has indicated that it intends to seek indemnification from the Company and
from one of its wholly-owned subsidiaries, Dominion Bridge, Inc. ("DB"), in
regards to legal proceedings instituted against UDIL in the Supreme Court
of Newfoundland by Loblaws Inc. The proceedings are based on the collapse
of the roof of a building owned by Loblaws Inc. The complaint seeks
unspecified damages. DB has informed UDIL that neither itself nor the
Company are liable towards UDIL in this matter.
ITEM 2. CHANGES IN SECURITIES
As described below, at the 1996 Annual Meeting of Stockholders (the "Annual
Meeting"), the Certificate of Incorporation of the Company was amended to
(i) change the name of the Company from Cedar Group, Inc. to Dominion
Bridge Corporation and (ii) increase the number of shares of Common Stock
the Company is authorized to issue from twenty million (20,000,000) to
fifty million (50,000,000).
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 15, 1996.
THE FOLLOWING ACTIONS WERE TAKEN:
1) The following directors were elected to serve on the Board of
Directors until the expiration of their term at the 1999 Annual Meeting
and until their respective successors shall be elected and qualified.
Tabulated voting results were as follows:
Reynald Lemieux (For 8,375,569; Withheld: 158,243)
Rene Amyot (For 8,375,558; Withheld: 158,254)
2) Amendment to the Certificate of Incorporation to change the name of the
Company from "Cedar Group, Inc." to "Dominion Bridge Corporation".
13
<PAGE> 14
Votes For: 8,358,687 Votes Against 101,719; Votes Abstained 73,406
3) Amendment to the Certificate of Incorporation to increase the number of
shares of Common stock the Company is authorized to issue from twenty
million (20,000,000) to fifty million (50,000,000).
Votes For: 7,998,127 Votes Against 441,092; Votes Abstained 94,593
4) Approval of Deloitte & Touche as the Independent auditing firm for the
Company for the fiscal year ending September 30, 1996.
Votes For: 8,421,695 Votes Against 61,830; Votes Abstained 43,287
THE FOLLOWING ACTION WAS DECLINED:
1) Amendment to the Certificate of Incorporation to increase the number of
Preferred Shares the Company is authorized to issue from five million
(5,000,000) to twenty-five million (25,000,000)
Votes For: 7,603,444 Votes Against 829,153 Votes Abstained
101,215
Delaware General Corporate Law requires the vote of a majority of the
outstanding shares of a Company, on the record date, to approve an
amendment to a company's Certificate of incorporation. Accordingly, with
regard to the increase of the number of authorized Preferred Shares,
such proposed amendment to the Certificate of Incorporation did not
receive the requisite number of votes required to approve the amendment,
as 7,948,792 shares of Common Stock were required to be voted in favour
of the amendment.
ITEM 5. OTHER INFORMATION
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
When used in this Quarterly Report on Form 10-Q and in other public
statements by the Company and Company officers, the words "expect",
"estimate", "project", "intend", and similar expressions are intended to
identify forward-looking statements regarding events and financial trends
which may affect the Company's future operating results and financial
condition. Such statements are subject to risks and uncertainties that
could cause the Company's actual results and financial condition to differ
materially. Such factors include, among others: (i) the Company's ability
to identify appropriate acquisition candidates, complete acquisitions on
satisfactory terms, or successfully integrate acquired businesses; (ii) the
risk of claims for product and construction liability; (iii) the Company's
ability to secure performance bonding on the projects it undertakes; (iv)
the intense competition and the bidding process in which the Company
competes; (v) the Company's ability to obtain financing on satisfactory
terms and the degree to which the Company is leveraged, including the
extent to which currently outstanding options, warrants and other
convertible securities are exercised; (vi) the sensitivity of the Company's
businesses to general economic conditions; (vii) the performance of
suppliers and subcontractors; (viii) the timing of completion of projects;
(ix) the Company's ability to avoid penalties for the delays in completion
of projects and cost overruns; (x) factors associated with international
ventures such as the relative strength of the dollar when compared to the
currencies of the countries in which the Company operates; (xi) the
Company's ability to remain in compliance with the numerous environmental,
health and safety requirements to which it is subject; (xii) changes in
accounting principles, policies or guidelines, and (xiii) other economic,
competitive, governmental and technological factors affecting the Company's
operations, markets, products, services and prices. Additional factors are
described in the Company's other public reports filed with the Securities
and Exchange Commission. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date made.
The Company undertakes no obligation to publicly release the result of any
revision of these forward-looking statements to reflect events or
circumstances after the date they are made or to reflect the occurrence of
unanticipated events.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3(i) Amended and Restated Certificate of Incorporation
4 Common Stock specimen Certificate
14
<PAGE> 15
(b) Reports on Form 8-K
(1) A Report on Form 8-K, dated March 29, 1996 was filed on April 15, 1996
reporting the acquisition of McConnell Dowell Corporation Limited, an
Australian corporation ("MDC").
(2) An Amendment Number 1 to Current Report on Form 8-K on Form 8-K/A,
dated March 29, 1996 was filed on June 13, 1996 reporting the required
financial statements regarding the acquisition of MDC.
(3) A Report on Form 8-K, dated April 3, 1996 was filed on April 10, 1996
reporting a change in the Company's certifying accountants.
(4) An Amendment Number 1 to Current Report on Form 8-K on Form 8-K/A,
dated April 3, 1996 was filed on April 30, 1996 reporting the Exhibit 16
letter required form the Company's prior accountant.
(5) A Report on Form 8-K dated April 25, 1996 was filed on May 10, 1996
reporting the agreement in principle of the Company to purchase Groupe
MIL Inc.
(6) An Amendment Number 1 to Current Report on Form 8-K on Form 8-K/A,
dated April 25, 1996 was filed on July 10, 1996 reporting the required
financial statements regarding the acquisition of Groupe MIL Inc.
15
<PAGE> 16
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>
DOMINION BRIDGE CORPORATION
Date: August 14, 1996
By: /s/ Michel L. Marengere
--------------------------------------------
Michel L. Marengere
Chairman and Chief Executive Officer
By: /s/ Robert Chartier
--------------------------------------------
Robert Chartier
Principal Accounting Officer
</TABLE>
<PAGE> 17
EXHIBIT INDEX
3(i) Amended and Restated Certificate of Incorporation
4 Common Stock Specimen Certificate
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 3(i)
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DOMINION BRIDGE CORPORATION
FIRST: NAME.
The name of the Corporation is DOMINION BRIDGE CORPORATION.
SECOND: REGISTERED OFFICE AND AGENT.
The address of the registered office of the Corporation in the State of
Delaware is 11th Floor, Rodney Square North, 11th & Market Streets, Wilmington,
DE 19899, New Castle County. The name of its registered agent at such address is
Corporation Guarantee and Trust Company.
THIRD: PURPOSE AND BUSINESS.
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law and to conduct and promote any business in connection therewith.
FOURTH: CAPITAL STOCK.
(a) AUTHORIZED SHARES. The total number of shares of all classes of
capital stock which the Corporation shall have authority to issue is
fifty-five million (55,000,000), consisting of fifty million (50,000,000)
shares of Common Stock, par value $.001 cents per share ("Common Stock"), and
five million (5,000,000) shares of Preferred Stock, par value $.001 per
share ("Preferred Stock").
(b) PREFERRED STOCK. The Board of Directors of the Corporation is hereby
authorized to issue, from time to time, shares of Preferred Stock in series and
to fix the number of shares in each series and the designations, powers,
preferences and relative, participating, optional or other special rights
thereof and the qualifications, limitations, or restrictions thereon, including
without limitation, any of the following: (i) provisions relating to voting
rights of each share in such series including multiple or fractional votes per
share, (ii) provisions relating to the call or redemption thereof, including,
without limitation, the times and prices for such calls or redemptions and
provisions relating to sinking funds therefor and the retirement thereof, if
any, (iii) provisions relating to the right to receive dividends, including
without limitation, participation in dividends with shares of any other class or
series of capital stock of the Corporation and/or preferential dividends, the
rate of such dividends, whether such dividends shall be cumulative or
noncumulative and the conditions on which dividends shall be accrued and paid,
and any preferential rights thereto or rights in relation to dividends payable
on any other classes or series of stock of the Corporation, (iv) the rights
thereof upon the dissolution of, or upon any distribution of the assets of the
Corporation, and (v) except as otherwise explicitly prohibited by the
Certificate of Incorporation, provisions relating to the conversion thereof
into, or the exchange thereof for shares of any class or any other series of the
same class of stock of the Corporation or exchange for any other security of the
Corporation or any other company.
FIFTH: INDEMNIFICATION AND INSURANCE.
(a) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or
is threatened to be made a party or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest of the
Corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
<PAGE> 2
(b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under paragraph (a) of
this Section is not paid in full by the Corporation within thirty days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(c) Notwithstanding any limitation to the contrary contained in
subparagraphs (a) and (b) herein, the Corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity, while holding such office and shall continue as to a
person who has ceased to be director, officer, employee or agent and shall
insure to the benefit of the heirs, executors and administrators of such a
person.
(d) INSURANCE: The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
SIXTH: LIABILITY OF DIRECTORS: Under Section 102(b)(7) of the Delaware
General Corporation Law, no director shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law: (i) for
breach of the director's duty of loyalty to the Corporation or its stockholders;
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law; (iii) pursuant to Section 174 of the
Delaware General Corporation Law; or (iv) for any transaction from which the
director derived an improper personal benefit. No amendment to or repeal of this
Article Sixth shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment.
THE UNDERSIGNED, being the President and Secretary, for the purpose of
declaring the aforesaid as the Amended and Restated Certificate of Incorporation
of Dominion Bridge Corporation pursuant to the General Corporation Law of
Delaware do make this certificate, hereby declaring and certifying that this is
their act and deed and the facts herein stated are true and accordingly have
hereunto set their hand and seal this day of August, 1996.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
Attest/Secretary President
</TABLE>
(Seal)
<PAGE> 1
EXHIBIT 4
The shares represented by this certificate are transferable at the offices of
Pacific Corporate Trust Company in Vancouver, Canada and Continental Stock
Transfer & Trust Co. of New York, New York, U.S.A.
LOGO DOMINION BRIDGE
DBCC
DOMINION BRIDGE CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR CERTAIN DEFINITIONS
COMMON STOCK CUSIP 257192 10 4
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES
OF THE COMMON STOCK, PAR VALUE $.001 PER SHARE, OF
DOMINION BRIDGE CORPORATION transferable on the books of the Corporation in
person or by duly authorized Attorney on surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed.
Dated:
SEAL
Secretary Chaiman & Chief
Executive Officer
Countersigned and Registered
CONTINENTAL STOCK TRANSFER & TRUST CO.,
Transfer Agent
and Registrar
Authorized Signature
<PAGE> 2
The Corporation has authorized 5,000,000 shares of Preferred Stock, par
value $.001 per share, which may be issued in one or more series. The dividends,
liquidation preferences, voting rights and other rights and preferences of each
series of the Preferred Stock may be established from time to time by the Board
of Directors. The Corporation will furnish without charge, to each stockholder
who so requests, a copy of the provision setting forth the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof which the Corporation is authorized to
issue, and the qualifications, limitations or restrictions of such preferences
and/or rights. Any such request should be addressed to the Secretary of the
Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- Custodian --
(Cust) Minor
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors Act
JT TEN -- as joint tenants with right of
survivorship and not as (State)
tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ________________________ hereby sells, assigns and
transfers unto
Please insert Social Security or other
identifying number of assignee
Please print or typewrite name and address including postal zip code of assignee
Shares
of the Common Stock represented by the within Certificate, and hereby
irrevocably constitutes and appoints
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated, ________________________
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the Certificate, in
every particular, without alteration or
enlargement, or any change whatever.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 25,317
<SECURITIES> 1,420
<RECEIVABLES> 107,878
<ALLOWANCES> 0
<INVENTORY> 76,086
<CURRENT-ASSETS> 215,816
<PP&E> 39,037
<DEPRECIATION> 0
<TOTAL-ASSETS> 266,919
<CURRENT-LIABILITIES> 173,590
<BONDS> 0
0
0
<COMMON> 16
<OTHER-SE> 42,030
<TOTAL-LIABILITY-AND-EQUITY> 266,919
<SALES> 237,058
<TOTAL-REVENUES> 237,058
<CGS> 208,087
<TOTAL-COSTS> 20,834
<OTHER-EXPENSES> (1,617)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 906
<INCOME-PRETAX> 8,846
<INCOME-TAX> 3,163
<INCOME-CONTINUING> 5,685
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,410
<EPS-PRIMARY> 0.27
<EPS-DILUTED> .22
</TABLE>
