SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 0-25384
LAFAYETTE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-3190678
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
140 HINSDALE STREET, BROOKLYN, NY 11207
(Address of principal executive offices)
(718) 346-3099
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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 ____ NO __X__
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: At March 31, 1996 there were
outstanding 2,532,500 shares of the Registrant's Common Stock, $.01 par value.
<PAGE>
LAFAYETTE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page(s)
PART I. Financial Information
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets - March 31, 1996
(Unaudited) and December 31, 1995 3.
Consolidated Condensed Statements of Operations -
Three Months Ended March 31, 1996 and 1995 (Unaudited) 4.
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995 (Unaudited) 5.
Notes to Interim Consolidated Condensed Financial
Statements (Unaudited) 6.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10.
PART II. Other Information 14.
Exhibit 11 - Computation of Earnings Per Common Share 15.
Exhibit 27 - Financial Data Schedule 16.
SIGNATURES 17.
2
<PAGE>
PART I. Financial Information
ITEM 1. Financial Statements
LAFAYETTE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
- ASSETS -
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 42,283
Accounts receivable - net of allowance for doubtful accounts of
$100,007 and $99,268, respectively 942,469 2,405,976
Inventories 726,395 743,937
Due from affiliate 50,337 50,337
Due from officers 104,610 104,610
Prepaid expenses and other current assets 117,851 143,895
Refundable income taxes 349,664 349,664
Due from supplier 356,684 330,714
Net assets of discontinued subsidiaries (Note 3) 183,530 130,060
------------ ------------
TOTAL CURRENT ASSETS 2,831,540 4,301,476
FIXED ASSETS (Note 4) 5,316,749 5,315,323
OTHER ASSETS (Note 5) 591,869 547,641
------------ ------------
$ 8,740,158 $ 10,164,440
============ ============
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Note payable (Note 2) $ 2,080,872 $ 2,852,989
Bank overdraft 35,306 --
Accounts payable and accrued expenses 2,357,396 2,220,523
Due to related party 216,631 37,000
Mortgages payable (Note 2) 2,078,718 1,353,718
Current portion of long-term debt (Note 2) 255,000 255,000
Capitalized lease obligations - current portion 148,959 140,788
------------ ------------
TOTAL CURRENT LIABILITIES 7,172,882 6,860,018
------------ ------------
CAPITALIZED LEASE OBLIGATIONS - NET OF CURRENT PORTION 333,362 390,414
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 2 and 3)
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value; 20,000,000 shares authorized, 2,532,500
shares issued and outstanding, (including 982,500 shares placed in escrow) 25,325 25,325
Additional paid-in capital 4,249,040 4,249,040
Retained earnings (deficit) (3,028,679) (1,348,585)
Foreign currency translation (11,772) (11,772)
------------ ------------
1,233,914 2,914,008
------------ ------------
$ 8,740,158 $ 10,164,440
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
3
<PAGE>
LAFAYETTE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1996 1995
(As restated -
see Note 3)
<S> <C> <C>
NET SALES $ 1,987,527 $ 3,729,562
COST OF GOODS SOLD 1,967,320 2,480,319
----------- -----------
GROSS PROFIT 20,207 1,249,243
----------- -----------
OPERATING EXPENSES:
Selling expenses 293,310 346,919
General and administrative expenses 893,381 585,769
----------- -----------
TOTAL OPERATING EXPENSES 1,186,691 932,688
----------- -----------
INCOME (LOSS) FROM OPERATIONS (1,166,484) 316,555
----------- -----------
OTHER INCOME (EXPENSES):
Interest expense (93,535) (59,420)
Interest and other income 3,336 3,000
----------- -----------
(90,199) (56,420)
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES (1,256,683) 260,135
Provision (credit) for income taxes -- 119,013
----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (1,256,683) 141,122
Income (loss) from operations of discontinued
subsidiaries - net of income tax
effect of $-0- and $9,831, for 1996
and 1995, respectively (Note 3) (423,411) 46,495
----------- -----------
NET INCOME (LOSS) $(1,680,094) $ 187,617
=========== ===========
EARNINGS (LOSS) PER COMMON SHARE (Note 6):
Continuing operations $ (.81) $ .10
Discontinued operations (.27) .04
----------- -----------
$ (1.08) $ .14
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (Note 6) 1,550,000 1,368,016
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
4
<PAGE>
LAFAYETTE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(1,680,094) $ 187,617
Adjustments to reconcile net income (loss) to net cash provided (used) by
operating activities:
Depreciation and amortization 220,290 52,958
Consulting fees 9,375 --
Provision for losses on accounts receivable -- 7,500
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 1,464,462 (531,282)
(Increase) in inventories (31,526) (499,422)
Decrease (increase) in prepaid expenses and other current assets 605 (104,237)
Decrease in security deposits and other assets 4,500 --
Increase in accounts payable, accrued expenses and bank overdraft 317,585 593,639
(Decrease) increase in due to related party (22,162) 127,478
(Decrease) in income taxes payable -- (218,202)
----------- -----------
Net cash provided (used) by operating activities 283,035 (383,951)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (80,708) (574,829)
Organization costs (30,087) (30,129)
----------- -----------
Net cash (used) by investing activities (110,795) (604,958)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) proceeds from notes payable (760,822) 788,656
Repayment of capitalized leases (60,606) (8,524)
Repayment of loans payable -- (7,125)
Proceeds from mortgage and equipment financing 725,000 --
Financing costs (118,095) --
----------- -----------
Net cash (utilized) provided by financing activities (214,523) 773,007
----------- -----------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (42,283) (215,902)
Cash and cash equivalents, at beginning of year 42,283 295,795
----------- -----------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ -- $ 79,893
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
(a) Cash paid during the period for:
Interest - net of amounts capitalized $ 56,535 $ 61,282
Taxes -- 347,046
(b) In 1995, the Company purchased certain
buildings by utilizing temporary bridge
mortgage financing in the amount of $1,005,530
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
5
<PAGE>
LAFAYETTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION:
In the opinion of management, the accompanying unaudited interim
consolidated condensed financial statements of Lafayette Industries,
Inc. (the "Company") and its subsidiaries, contain all adjustments
necessary (consisting of normal recurring accruals or adjustments
only) to present fairly the Company's financial position as of March
31, 1996 and the results of its operations and cash flows for the
three month periods ended March 31, 1996 and 1995.
The consolidated financial statements include the accounts of
Lafayette Industries, Inc. ("the Company") and its wholly-owned
subsidiaries, TDH Lafayette Industries, Inc. ("TDH"), Sunrise Display
Fixtures, Inc. ("Sunrise"), Ridgewood Displays, Inc. ("Ridgewood"),
Sun Belt Fixtures, Inc. ("Sun Belt"), Wood Techniques, Inc. ("Wood
Techniques"), Lafayette Products, S.A. de C.V. ("Lafayette Mexico")
and Enterprise Realty II, ("Realty II"). All material intercompany
balances and transactions have been eliminated in consolidation.
See also Note 3 re: discontinued operations.
The accounting policies followed by the Company are set forth in Note
2 to the Company's consolidated financial statements for the year
ended December 31, 1995 included in its Annual Report on Form 10-KSB,
which is incorporated herein by reference. Specific reference is made
to this report for a description of the Company's securities and the
notes to consolidated financial statements included therein.
The results of operations for the three month periods ended March 31,
1996 and 1995 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2 - GOING CONCERN UNCERTAINTY:
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. However, the Company
sustained losses of approximately $1,912,000 for the year ended
December 31, 1995, losses for the current quarter ended March 31, 1996
of $1,680,094 and has used substantial amounts of working capital in
its operations. At March 31, 1996, the Company reflected negative
working capital of $4,341,342. At December 31, 1995 current
liabilities exceeded current assets by $2,558,542. Further, in
February 1996, the lender which had provided an asset based line of
credit to the Company, suspended making advances under this line
because the Company submitted accounts receivable to the lender which
were in violation of the terms of the agreement. In April 1996, a bank
which had provided the
6
<PAGE>
LAFAYETTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - GOING CONCERN UNCERTAINTY (Continued):
Company with mortgage financing for a building located in Islandia,
New York, notified the Company that it was in both technical and
monetary default of the agreements and a demand for full payment of
principal and accrued interest was made. In January 1996, the Company
obtained mortgage financing for its building in Brooklyn, New York. In
April 1996, the bank which provided this mortgage financing notified
the Company that it was accelerating the full balance of the notes due
to non-payment and required immediate payment of all principal,
accrued interest, late charges and attorney's fees.
Subsequent to the Company's year end of December 31, 1995, the
landlord of a facility being leased in Juarez, Mexico filed a suit
against Lafayette Products, S.A. de C.V. (Lafayette Mexico),
requesting the eviction of Lafayette Mexico due to non-payment of rent
for October, November and December 1995. Subsequently, Lafayette
Mexico and the landlord entered into an agreement before the Court
whereby Lafayette would pay the rent owed plus judicial costs. In the
case of non-payment of two or more monthly rental payments in the
future, the landlord could evict Lafayette without further litigation.
In May 1996, the Company was ordered to vacate the premises.
In view of the above matters, realization of a major portion of the
assets in the accompanying balance sheet is dependent upon continued
operations of the Company, which in turn is dependent upon the
Company's ability to meet its financing requirements, and the success
of its future operations. Management believes that actions presently
being taken to revise the Company's operating and financial
requirements and to raise additional capital, provide the opportunity
for the Company to continue as a going concern.
Management of the Company is working with the asset based line of
credit lender and has reached an agreement to repay the amounts due.
In addition, subsequent to March 31, 1996 the Company raised
approximately $1,000,000 of capital through the sale of convertible
debentures in a Regulation S offering. The convertible debentures bear
interest at 8 1/2% per annum and are convertible at a conversion price
per each share of common stock equal to the lesser of $4 per share or
75% of the market value of the common stock on the day immediately
preceding the conversion date.
NOTE 3 - ACQUISITIONS/DISCONTINUED OPERATIONS:
Effective June 1, 1994, the Company acquired all of the issued and
outstanding stock of two of its suppliers, Sunrise Display Fixtures,
Inc. ("Sunrise") and Ridgewood Displays, Inc. ("Ridgewood"). The
$500,000 aggregate cost of these acquisitions, including goodwill of
$177,896, was paid for by utilizing a portion of the cash proceeds
from the Company's initial public offering which was completed in May
1994. The acquisitions were accounted for using the purchase method of
accounting.
7
<PAGE>
LAFAYETTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - ACQUISITIONS/DISCONTINUED OPERATIONS (Continued):
During the first quarter of 1996, the Company adopted a plan to sell
the operating assets subject to the assumption of certain liabilities
of Sunrise, Ridgewood, Wood Techniques and Realty II "the discontinued
subsidiaries". The effective date of the sale is April 1, 1996.
Sunrise and Ridgewood are selling assets of approximately $633,000
subject to liabilities of approximately $578,000 to East End Display
Corp. Wood Techniques is selling assets approximating $682,000 subject
to liabilities of $905,000 to AJK Associates, Inc. Enterprise Realty
II is selling land and building with a book value of approximately
$1,587,000 subject to mortgage financing of approximately $1,364,000,
also to AJK Associates, Inc. It is expected that these subsidiaries
will still continue to supply merchandise to the Company subsequent to
the sales.
Operating results of the discontinued subsidiaries for the three
months ended March 31, 1996 are shown separately in the accompanying
statements of operations. The statement of operations for 1995 has
been restated and operating results of the discontinued subsidiaries
are also shown separately.
These subsidiaries manufactured product for ultimate sale by TDH. As
such, sales from these subsidiaries to TDH are not included in net
sales in the accompanying statements of operations since they were
eliminated in consolidation.
Net assets of the discontinued subsidiaries have been separately
classified in the accompanying balance sheets at their net realizable
value at March 31, 1996 and December 31, 1995.
NOTE 4 - FIXED ASSETS:
Fixed assets consist of the following as of:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
Machinery and equipment (i) $2,101,489 $2,063,375
Tools and dies 125,823 114,873
Leasehold improvements 335,214 335,214
Building and improvements (ii) 1,493,853 1,493,103
Furniture and fixtures 178,124 178,124
Assets held under capitalized leases 557,516 557,516
---------- ----------
4,792,019 4,742,205
Less: accumulated depreciation and amortization 320,270 271,882
---------- ----------
4,471,749 4,470,323
Add: land (ii) 845,000 845,000
---------- ----------
$5,316,749 $5,315,323
========== ==========
<FN>
(i) Included in machinery and equipment is $111,000 of interest
costs which have been capitalized as part of the cost of the
equipment which was being readied for use at the Company's
facility in Mexico.
(ii) This includes the real property located in Islandia, New
York, owned by Realty II (see discontinued operations - Note
3) and the real property located in Brooklyn, New York,
which is currently for sale. Included in the cost of
building is $62,658 of interest costs which were capitalized
while the building in Islandia was being prepared for its
intended use.
</FN>
</TABLE>
8
<PAGE>
LAFAYETTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 - OTHER ASSETS:
Other assets consisted of the following as of:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
Organization costs $384,748 $449,240
Deferred financing costs 118,095 --
Deferred consulting fees 81,250 90,625
Security deposits and other assets 7,776 7,776
-------- --------
$591,869 $547,641
======== ========
</TABLE>
NOTE 6 - EARNINGS PER SHARE:
Earnings per share have been computed on the basis of the weighted
average number of common shares and common equivalent shares
outstanding during each period presented. All shares issued are being
treated as outstanding for all periods presented, except for shares
previously held in escrow which were not released, and which are to be
returned to the Company for cancellation.
Earnings per share has been retroactively restated for the
cancellation of the escrow shares for all periods presented.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
On January 16, 1992, TDH Group acquired substantially all of the
assets of a corporation in debtor-in-possession status, subject to
certain liabilities. Simultaneously, TDH Group contributed, as
capital, the assets and liabilities acquired, to TDH Lafayette
Industries, Inc., a New York corporation incorporated in January 1992
("TDH Lafayette"). On December 22, 1993 Lafayette Industries, Inc.
(the "Company"), through an exchange of stock with TDH Lafayette,
accounted for as the reorganization of entities under common control
(similar to a pooling of interests), became the parent company of TDH
Lafayette.
Lafayette Industries, Inc. and its subsidiaries (collectively,
"Lafayette" or the "Company") design, manufacture and sell customized
store fixtures and merchandising systems to retail stores. Store
fixtures include display racks, showcases and cabinets for merchandise
display. Lafayette sells large quantities of individual items designed
for a particular purpose as well as systems used to outfit entire
stores. The vast majority of the store fixtures sold by the Company
are made of metal. The Company has also expanded into manufacturing
wood store fixtures.
In the first quarter of 1996, the Company began plans to discontinue
three of its operating manufacturing subsidiaries (Sunrise, Ridgewood
and Wood Techniques) and one real estate subsidiary Realty II.
Effective April 1, 1996, the Company intends to sell the assets
subject to certain liabilities of these subsidiaries to the
individuals currently managing these companies. The Company will
continue to use these entities to manufacture the products it sells on
an arms length transaction basis. The results of operations of the
subsidiaries which are to be disposed of are reflected separately on
the statement of operations as discontinued operations in accordance
with Accounting Principles Board Opinion (APB) No. 30.
The financial information presented herein includes: (i) balance
sheets as of March 31, 1996 and as of the year ended December 31,
1995; (ii) statements of operations for the three month periods ended
March 31, 1996 and 1995 and (iii) statements of cash flows for the
three month periods ended March 31, 1996 and 1995.
Results of Operations
Net sales for the three months ended March 31, 1996 aggregated
$1,987,527 as compared to $3,729,562 for the three months ended March
31, 1995, a decrease of $1,742,035 or 47%. Management attributes this
decrease to uncertainties in the retail industry which resulted in the
major retailers holding back on buying the products offered by the
Company. In addition, due to the poor results achieved in the prior
year and the problems encountered with it's primary funding source
(see Note 2), the Company did not have the funds necessary to
manufacture product for sale during the current quarterly period.
10
<PAGE>
During the quarter ended March 31, 1995, the Company reflected a gross
profit percentage of approximately 33%. During the quarter ended March
31, 1996 the Company's gross profit percentage was slightly over 1%.
The Company, during this current quarter, was selling product it had
on hand at virtually no profit, in order to generate cash to pay
expenses.
Operating expenses increased from approximately $933,000 for the
quarter ended March 31, 1995 to approximately $1,187,000 for the
quarter ended March 31, 1996. This increase of $254,000 was primarily
caused by the expenses at the Company's new manufacturing facility in
Mexico.
Interest expenses increased from $59,000 to $94,000 when comparing the
quarter ended March 31, 1995 to 1996. This increase was due to
increased borrowings during the current quarter.
The Company reflected income from continuing operations of $141,122
($.10 per share) for the period ended March 31, 1995. The Company
reflected a loss of $1,256,683 ($.81 per share) for the three month
period ended March 31, 1996. The principal reason for the significant
loss in the current quarter was the reduction in sales and gross
profit dollars as described above.
The Company reflected net income of $187,617 ($.14 per share) for the
three months ended March 31, 1995. During the three months ended March
31, 1996, the Company reflected a net loss of $1,680,094 ($1.08 per
share) due to losses from the operations of discontinued subsidiaries
($423,000 or $.27 per share) that added to the net loss (see Note 3).
Liquidity and Capital Resources
At the year ended December 31, 1995 the Company reflected negative
working capital (current liabilities in excess of current assets) of
$2,558,542. At March 31, 1996, the Company reflected negative working
capital of $4,341,342.
On February 29, 1996 the finance company that was providing the
Company with a $5,000,000 asset based line of credit, suspended making
advances because the Company submitted accounts receivable which were
in violation of the terms of the financing agreement. At the time, the
Company owed approximately $2,800,000 to the finance company.
In April 1996, the bank which had provided the Company with mortgages
aggregating $1,350,000 for the building it acquired in Islandia, New
York, notified the Company that it was in both technical and monetary
default of the agreements and made a demand for full payment of
principal and accrued interest.
In addition, in April 1996, another bank which in January 1996
provided mortgage financing aggregating $675,000 for two buildings
acquired in Brooklyn, New York, notified the Company that they were
accelerating the full balance of the notes due to non-payment and that
they required full payment of all principal, accrued interest, late
charges and attorneys fees.
During the quarter ended March 31, 1996, the Company was notified by a
finance company which had provided equipment financing that it was in
default of the agreement due to non-payment. At March 31, 1996, the
Company owed $255,000 on this financing.
11
<PAGE>
During the quarter ended March 31, 1996, the landlord of the facility
being leased in Juarez, Mexico, filed a suit against Lafayette
Products, S.A. de C.V. (Lafayette Mexico), requesting the eviction of
Lafayette Mexico due to non-payment of rent for October, November and
December 1995. Subsequently, Lafayette Mexico and the landlord entered
into an agreement before the Court whereby Lafayette would pay the
rent owed plus judicial costs. In the future and in the case of
non-payment of two or more monthly rental payments, the landlord could
evict Lafayette without further litigation. In May 1996, the Company
was ordered to vacate the premises.
As a result of the aforementioned items the Company's auditors
included a going concern qualification in the audit report for the
year ended December 31, 1995. This qualification states that the
financial statements by their nature assume that the Company will
continue as a going concern but that the significance of the above
items raise doubt that this is so. In addition, generally accepted
accounting principles require the Company to state management's plans
to ensure that the Company will be able to continue as a going
concern.
Management's Plans
On May 10, 1996, subsequent to the balance sheet date, the Company
signed a new agreement with the financing company that had provided an
asset based line of credit. At the time of signing this agreement, the
Company owed the lender approximately $1,800,000 and made a $500,000
payment to make the agreement effective. In addition to several other
terms and conditions, the Company agreed to reduce the remaining
outstanding balance to no more than $500,000, at which time the
balance will become subject to a term loan agreement. The term loan
will be payable in 12 equal quarterly installments and will bear
interest at a rate of prime plus 2% per annum. The lender will release
its security interest in the Company's assets if the loan balance is
reduced to $500,000 or less, however guarantees of certain officers of
the Company will remain in force until the entire amount owed is paid
in full.
The ultimate goal of the renegotiated agreement is to have the
security interest in the Company's assets released so that management
can seek and obtain new working capital financing.
As mentioned above, the Company has decided to restructure its'
operations and sell three of its' manufacturing subsidiaries and one
realty subsidiary to the current management of these subsidiaries, to
be effective April 1, 1996.
The Company will sell substantially all of the assets ($682,000)
subject to certain liabilities ($905,000) of its' Wood Techniques
subsidiary to AJK Associates, Inc.
In addition, the Company intends to sell the land and building in
Islandia, New York (with a book value of approximately $1,587,000) to
AJK who will also assume the mortgages payable which approximate
$1,364,000.
The Company will sell substantially all the assets (approximately
$633,000), subject to certain liabilities (approximately $578,000) of
both its' Ridgewood and Sunrise subsidiaries to East End Display Corp.
The planned impact of these sales is both to reduce debt and to reduce
operating costs and working capital requirements by having
approximately 50% of the manufacturing of product available for sale
done by outside vendors.
12
<PAGE>
The Company has placed both buildings it presently owns in Brooklyn,
New York up for sale. The ultimate goal of this sale is to use the
proceeds therefrom to satisfy the outstanding mortgage obligations.
The Company is in negotiations with the landlord of the facility in
Mexico and hopes to resolve the matter shortly.
Subsequent to March 31, 1996 the Company raised approximately
$1,000,000 of capital through the sale of convertible debentures in a
Regulation S (overseas) offering. The convertible debentures bear
interest at 8 1/2% per annum and are convertible at a conversion price
per each share of common stock equal to the lesser of $4 per share or
75% of the market share of common stock on the day immediately
proceeding the conversion date.
During 1996 the Company will attempt to obtain equipment financing for
various equipment already purchased during 1995 for approximately
$1,150,000 in cash. If successful, the Company will utilize these
funds for working capital purposes.
Other Items
The Company needs to acquire approximately $1,000,000 of equipment for
its' chrome plating line in Mexico. In addition, the Company needs
approximately $250,000 to complete the acquisition of the Sunbelt
subsidiary. Management of the Company is seeking financing for each of
these items but there is no assurance that they will be successful.
In order for the Company to continue as a going concern they will have
to achieve positive cash flow from operations, obtain new financing,
reduce or restructure outstanding debt and/or raise additional equity
capital. As mentioned above, plans for each of these items are
currently being worked on by Company management.
Inflationary Impact
Since the inception of operations, inflation has not significantly
affected the operating results of the Company. However, in past years
inflation and changing interest rates have had a significant effect on
the economy in general and therefore could affect the operating
results of the Company in the future.
13
<PAGE>
PART II: OTHER INFORMATION
ITEM 1. Legal Proceedings:
During the quarter ended March 31, 1996, the landlord of the facility
being leased in Juarez, Mexico, filed a suit against Lafayette
Products, S.A. de C.V. (Lafayette Mexico), requesting the eviction of
Lafayette Mexico due to non-payment of rent for October, November and
December 1995. Subsequently, Lafayette Mexico and the landlord entered
into an agreement before the Court whereby Lafayette would pay the
rent owed plus judicial costs. In the future and in the case of
non-payment of two or more monthly rental payments, the landlord could
evict Lafayette without further litigation.
In May 1996, the Company was ordered to vacate the premises.
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 Information:
None
ITEM 6. Exhibits and Reports:
(a) Exhibits:
(11) Computation of Earnings per Common Share - See Exhibit 11
(27) Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a current report on Form 8-K with the
Securities and Exchange Commission dated February 29, 1996
regarding Item 5 - Other Events.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LAFAYETTE INDUSTRIES, INC.
-----------------------------------------
Registrant
Date: May 29, 1996 /s/ Robert L. Jessen
-----------------------------------------
Robert L. Jessen, Chief Executive Officer
Chairman of the Board
Date: May 29, 1996 /s/ Lloyd C. Robinson
-----------------------------------------
Lloyd C. Robinson, Vice President-Finance
and Chief Financial Officer
17
LAFAYETTE INDUSTRIES INC. AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<C> <C>
PRIMARY EARNINGS:
Earnings (loss) from continuing operations $(1,256,683) $ 141,122
Earnings (loss) from discontinued operations (423,411) 46,495
----------- -----------
$(1,680,094) $ 187,617
=========== ===========
SHARES:
Weighted average number of common shares outstanding 2,532,500 2,132,500
Weighted average number of common shares treated as held
in escrow and canceled subsequent to March 31, 1996 (982,500) (982,500)
Assuming conversion of stock options and warrants -- 218,016
----------- -----------
1,550,000 1,368,016
EARNINGS (LOSS) PER COMMON SHARE:
Continuing operations $ (.81) $ .10
Discontinued operations (.27) .04
----------- -----------
$ (1.08) $ .14
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated condensed financial statements for the first quarter ended
March 31, 1996 and is qualified in its entirety by reference to such
statements.
</LEGEND>
<CIK> 0000918377
<NAME> LAFAYETTE INDUSTRIES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,042,476
<ALLOWANCES> 100,007
<INVENTORY> 726,395
<CURRENT-ASSETS> 2,831,540
<PP&E> 5,637,019
<DEPRECIATION> 320,270
<TOTAL-ASSETS> 8,740,158
<CURRENT-LIABILITIES> 7,172,882
<BONDS> 0
0
0
<COMMON> 25,325
<OTHER-SE> 1,208,589
<TOTAL-LIABILITY-AND-EQUITY> 8,740,158
<SALES> 1,987,527
<TOTAL-REVENUES> 1,987,527
<CGS> 1,967,320
<TOTAL-COSTS> 1,186,691
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93,535
<INCOME-PRETAX> (1,256,683)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,256,683)
<DISCONTINUED> (423,411)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,680,094)
<EPS-PRIMARY> (1.08)
<EPS-DILUTED> (1.08)
</TABLE>
