<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended August 31, 2000
--------------------
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: 1-13484
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COHESANT TECHNOLOGIES INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 34-1775913
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
5845 West 82nd Street, Suite 102, Indianapolis, Indiana 46278
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code 317-875-5592
--------------
----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
YES X NO
--- ---
As of September 28, 2000, the Company has 2,348,608 shares of Common
Stock, $.001 par value, outstanding.
Transitional Small Business Disclosure Format (check one)
YES NO X
--- ---
<PAGE> 2
COHESANT TECHNOLOGIES INC.
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information PAGE
------------------------------ ----
<S> <C>
Cohesant Technologies Inc. Condensed Consolidated
Balance Sheet as of August 31, 2000.................................... 1
Cohesant Technologies Inc. Condensed Consolidated
Statements of Operations for the Three Months Ended
August 31, 2000 and August 31, 1999.................................... 2
Cohesant Technologies Inc. Condensed Consolidated
Statements of Operations for the Nine Months Ended
August 31, 2000 and August 31, 1999.................................... 3
Cohesant Technologies Inc. Condensed Consolidated
Statements of Cash Flows for the Nine Months Ended
August 31, 2000 and August 31, 1999.................................... 4
Notes to Condensed Consolidated Financial Statements............................ 5
Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................. 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K........................................ 12
Signature................................................................................. 13
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
August 31, 2000
---------------
ASSETS:
Cash $ 116,201
Accounts receivable, net of allowance
for doubtful accounts of $213,579 3,439,412
Inventories, net 4,058,635
Prepaid expenses and other 184,799
Deferred tax assets 274,200
---------------
Total Current Assets 8,073,247
Property, plant and equipment, net 554,320
Investment and advances in unconsolidated affiliate 81,106
Patents and other intangibles, net 119,233
Goodwill, net 685,064
Other noncurrent assets 4,536
---------------
Total Assets $ 9,517,506
===============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Revolving line of credit $ 1,025,000
Current maturities of long-term liabilities 48,336
Accounts payable 1,178,821
Accrued salaries, benefits and commissions 405,202
Accrued income taxes 623,161
Other current liabilities 249,454
---------------
Total Current Liabilities 3,529,974
Commitments and contingencies
Shareholders' Equity:
Common stock ($.001 par value, 10,000,000
shares authorized, 2,688,343 issued) 2,688
Additional paid-in capital 6,444,180
Retained earnings 147,864
Treasury stock at cost, (339,735 shares) (607,200)
---------------
Total Shareholders' Equity 5,987,532
---------------
Total Liabilities and Shareholders' Equity $ 9,517,506
===============
See Notes to Condensed Consolidated Financial Statements.
1
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COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended
August 31, 2000 August 31, 1999
--------------- ---------------
NET SALES $ 4,123,238 $ 3,844,303
COST OF SALES 2,244,322 2,126,601
--------------- ---------------
Gross profit 1,878,916 1,717,702
RESEARCH, DEVELOPMENT AND
ENGINEERING EXPENSES 269,936 265,990
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,223,975 1,099,669
--------------- ---------------
TOTAL OPERATING EXPENSES 1,493,911 1,365,659
Income from operations 385,005 352,043
OTHER INCOME (EXPENSE):
Interest expense (21,771) (32,404)
Interest income 0 1,907
Equity in income of
unconsolidated affiliate 37,277 17,203
Other income, net 36,207 33,794
--------------- ---------------
INCOME BEFORE INCOME TAXES 436,718 372,543
INCOME TAX PROVISION (147,793) (131,476)
--------------- ---------------
NET INCOME 288,925 241,067
=============== ===============
BASIC AND DILUTED EARNINGS PER
COMMON SHARE $ 0.12 $ 0.10
=============== ===============
WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING:
BASIC 2,343,695 2,336,733
=============== ===============
DILUTED 2,404,653 2,374,953
=============== ===============
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 5
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Nine Months Ended
August 31, 2000 August 31, 1999
--------------- ---------------
NET SALES $ 11,878,793 $ 10,816,041
COST OF SALES 6,714,291 6,040,178
--------------- ---------------
Gross profit 5,164,502 4,775,863
RESEARCH, DEVELOPMENT AND
ENGINEERING EXPENSES 820,981 741,236
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 3,464,076 3,185,135
--------------- ---------------
TOTAL OPERATING EXPENSES 4,285,057 3,926,371
Income from operations 879,445 849,492
OTHER INCOME (EXPENSE):
Interest expense (54,714) (93,352)
Interest income 0 5,990
Equity in income of
unconsolidated affiliate 99,151 33,182
Other income, net 107,713 102,540
--------------- ---------------
INCOME BEFORE INCOME TAXES 1,031,595 897,852
INCOME TAX PROVISION (345,005) (319,928)
--------------- ---------------
NET INCOME 686,590 577,924
=============== ===============
BASIC AND DILUTED EARNINGS PER
COMMON SHARE $ 0.29 $ 0.24
=============== ===============
WEIGHTED AVERAGE SHARES OF COMMON
STOCK OUTSTANDING:
BASIC 2,339,980 2,360,927
=============== ===============
DILUTED 2,402,428 2,389,002
=============== ===============
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 6
COHESANT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
August 31, 2000 August 31, 1999
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 686,590 $ 577,924
Adjustments to reconcile net income to net cash
used in continuing operations -
Depreciation and amortization 215,245 205,061
Provision for doubtful accounts 45,500 84,162
Equity in income of unconsolidated subsidiary (99,151) (33,182)
Net change in current assets and
current liabilities-
Accounts receivable (1,133,365) (1,158,826)
Inventories, net (729,882) (27,873)
Prepaid expenses and other (39,463) (529)
Accounts payable 260,856 86,714
Other current liabilities 252,640 234,596
Other noncurrent assets (14,534) 5,313
Other noncurrent liabilities (9,727) (102,614)
--------------- ---------------
Net cash used in operating activities (565,291) (129,254)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions (98,276) (164,568)
Change in noncurrent assets of discontinued
operations -- (86,329)
Advances to unconsolidated affiliate 86,797 19,551
--------------- ---------------
Net cash used in investing activities (11,479) (231,346)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving line of credit 325,000 480,000
Proceeds from sale of treasury stock 15,076 101,351
Purchase of treasury stock -- (224,053)
--------------- ---------------
Net cash provided by financing activities 340,076 357,298
--------------- ---------------
NET DECREASE IN CASH (236,694) (3,302)
CASH AT BEGINNING OF PERIOD 352,895 119,967
--------------- ---------------
CASH AT END OF PERIOD $ 116,201 $ 116,665
=============== ===============
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for
Interest $ 54,714 $ 82,685
--------------- ---------------
Income Taxes $ 24,949 $ 20,833
=============== ===============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 7
COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BACKGROUND
Cohesant Technologies Inc. ("Company") designs, develops and manufactures plural
component dispensing systems, specialized spray finishing and coating
application equipment and specialty two component epoxy coating and grout
products through two subsidiaries--Glas-Craft, Inc. ("GCI") and Raven Lining
Systems, Inc. ("Raven").
NOTE 2 - BASIS OF PRESENTATION
The condensed consolidated interim financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission for certain small business
issuers. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. However, in the opinion of management of the Company, the condensed
consolidated interim financial statements include all adjustments, which consist
only of normal recurring accruals, necessary to present fairly the financial
information for such periods.
These interim financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's November
30, 1999 Annual Report to Shareholders on Form 10-KSB.
The accompanying condensed consolidated financial statements include the
accounts of the Company and its direct wholly owned subsidiaries. The Company's
noncontrolling investment in an affiliate is accounted for under the equity
method. All significant intercompany amounts have been eliminated.
NOTE 3 - NEW ACCOUNTING STANDARD
In June 1998, the FASB issued SFAS No. 133, which establishes accounting and
reporting standards for a comprehensive and consistent standard for the
recognition and measurement of derivatives and hedging activities. The new
statement requires all derivatives to be recorded in the balance sheet as either
an asset or liability measured at its fair value. The Company believes the
adoption of Statement No. 133 will not have a material impact in the Company's
financial position or results of operations. Implementation of this standard has
been delayed by the FASB for a 12-month period. The Company will adopt SFAS No.
133 December 1, 2000.
5
<PAGE> 8
COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - REVOLVING LINE OF CREDIT FACILITY
On May 1, 2000, the Company entered into an amendment to an existing revolving
line of credit agreement with a bank. This $3,500,000 credit facility is subject
to a borrowing base and accrues interest at the bank's prime lending rate (9.50%
as of August 31, 2000). The credit facility is fully secured by a lien on all
the assets of the Company and its operating subsidiaries. The credit facility
expires on May 1, 2001. This agreement requires that the Company meet certain
covenants including financial ratios. As of August 31, 2000, the Company was in
compliance with the covenants and financial ratios. As of August 31, 2000, the
outstanding balance under this agreement was $1,025,000.
NOTE 5- COMMON STOCK
During the first nine months of fiscal 2000 several employees exercised 11,875
stock options, which were sold out of the Company's treasury stock.
NOTE 6- SEGMENT INFORMATION
The Company monitors its operations in two business segments: Equipment and
Parts and Coatings and Grouts. Certain corporate costs and income taxes are not
allocated to the business segments. Financial information for the Company's
business segments as of the third quarter and first nine months of fiscal 2000
and 1999, respectively is as follows:
<TABLE>
<CAPTION>
Three Months Ended Equipment Coatings Discontinued
August 31, 2000 & Parts & Grouts Operations Corporate Consolidated
--------------- ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales $3,311,928 $ 811,310 $ -- $ -- $4,123,238
Depreciation and amortization: 44,907 23,093 -- 16 68,016
Interest expense: 352 -- -- 21,419 21,771
Income before taxes: 427,098 149,374 -- (139,754) 436,718
Assets: 7,098,642 1,997,344 -- 421,520 9,517,506
Capital expenditures: 10,046 204 -- -- 10,250
</TABLE>
6
<PAGE> 9
COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Equipment Coatings Discontinued
August 31, 1999 & Parts & Grouts Operations Corporate Consolidated
--------------- ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 3,326,675 $ 517,628 $ -- $ -- $ 3,844,303
Depreciation and amortization: 49,987 21,157 -- 16 71,160
Interest expense: 649 -- -- 31,755 32,404
Income before taxes: 479,130 18,032 -- (124,619) 372,543
Assets: 6,327,242 1,793,208 157,566 447,383 8,725,399
Capital expenditures: 9,956 1,196 -- -- 11,152
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Equipment Coatings Discontinued
August 31, 1999 & Parts & Grouts Operations Corporate Consolidated
--------------- ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 9,680,646 $ 2,198,147 $ -- $ -- $11,878,793
Depreciation and amortization: 146,154 69,043 -- 48 215,245
Interest expense: 1,157 -- -- 53,557 54,714
Income before taxes: 1,228,160 222,357 -- (418,922) 1,031,595
Assets: 7,098,642 1,997,344 -- 421,520 9,517,506
Capital expenditures: 77,512 20,764 -- -- 98,276
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Equipment Coatings Discontinued
August 31, 1999 & Parts & Grouts Operations Corporate Consolidated
--------------- ------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 9,135,935 $ 1,680,106 $ -- $ -- $10,816,041
Depreciation and amortization: 142,061 62,952 -- 48 205,001
Interest expense: 1,725 -- -- 91,627 93,352
Income before taxes: 1,198,041 63,023 -- (363,212) 897,852
Assets: 6,327,242 1,793,208 157,566 447,383 8,725,399
Capital expenditures: 144,191 20,377 -- -- 164,568
</TABLE>
The following table presents percentage of total revenues by region.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
Region August 31, 2000 August 31, 1999 August 31, 2000 August 31, 1999
------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
United States 67% 73% 64% 71%
Asia/Pacific Rim 14 12 15 11
Europe/Middle East
13 11 15 14
Other 6 4 6 4
--- --- --- ---
Total 100% 100% 100% 100%
</TABLE>
7
<PAGE> 10
COHESANT TECHNOLOGIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7- DISCONTINUED OPERATIONS
On November 30, 1997, the Company's Board of Directors signed an agreement to
sell certain assets of American Chemical Company's ("ACC") adhesive, private
label and toll manufacturing business and decided to account for such business
as a discontinued operation for all periods presented in accordance with
Accounting Principles Board No. 30, "Reporting the Results of Operations -
Reporting the Effects of a Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions."
In November 1999, the Company contributed the ACC land and building to Marine
Learning Institute ("MLI"), a not-for-profit environmental educational
organization operating under section 501(c)(3) of the United States Internal
Revenue Code. In connection with the contribution agreement, MLI has indemnified
the Company and has agreed to assume any environmental costs arising from or out
of the past, present or future condition of the site. As a measure of additional
protection, the Company obtained an additional environmental insurance policy.
Management believes the Company is adequately insured in the unlikely event of
being assessed a future liability. In connection with the contribution of the
ACC land and building to MLI, the carrying value of the real estate and the
direct costs associated therewith were appropriately charged to discontinued
operations in the fourth quarter of fiscal 1999. No related income tax benefit
was provided.
8
<PAGE> 11
COHESANT TECHNOLOGIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 2000 AND 1999
RESULTS OF OPERATIONS
Net sales for the three months ended August 31, 2000 were $4,123,238 compared to
$3,844,303 for the same period of the prior year, an increase of $278,935 or
7.3%. Specialty grout and epoxy products net sales increased $293,682 or 56.7%.
This increase was a result of higher sales to established Certified Applicators
as well as increased orders from recently signed Certified Applicators.
Equipment and parts net sales decreased slightly by $14,747, from sales in the
comparable 1999 period. This decrease was a result of decreased sales to OEM
accounts, which were partially offset by increased sales of polyurethane
equipment and to a lesser extent increased sales of fiberglass equipment.
Foreign equipment and parts net sales increased 34%, whereas domestic equipment
and parts net sales decreased 18%. The increase in foreign sales was primarily
led by an increase in sales to Europe/Middle East and the Asian/Pacific Rim.
The Company's gross margin increased to $1,878,916, or 45.6% of net sales, in
the current quarter from $1,717,702, or 44.7% of net sales, in the 1999 period.
This increase was due to the increased sales volume and the increase in gross
margin percentage was a result of increased sales of the higher margin epoxy and
grout products.
Operating expenses for the three months ended August 31, 2000 was $1,493,911
compared to $1,365,659 for the same period of the prior year, an increase of
$128,252, or 9.4%. This increase was principally due to additional selling
expenses. The increased selling expenses are a result of the increased sales
volume and higher personnel costs.
During the third quarter of 2000, other income, net of other expenses, increased
from the same period in the prior year by $31,213, due principally to increased
income derived from the unconsolidated affiliate and decreased interest expense.
NINE MONTHS ENDED AUGUST 31, 2000 AND 1999
RESULTS OF OPERATIONS
Net sales for the nine months ended August 31, 2000 were $11,878,793 compared to
$10,816,041 for the same period of the prior year, an increase of $1,062,752 or
9.8%. Of this amount, $544,711, represented increased net sales of equipment and
parts. This increase was a result of increased sales of polyurethane equipment
and to a lesser extent increased sales of
9
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COHESANT TECHNOLOGIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
fiberglass equipment, which was somewhat offset by decreased sales to OEM
accounts. Foreign equipment and parts net sales increased 40%, whereas domestic
equipment and parts net sales decreased 14%. The increase in foreign sales was
led by an increase in sales to the Asian/Pacific Rim and to a lesser extent
South America and Europe/Middle East. Specialty grout and epoxy products net
sales increased $518,041 or 30.8%. This increase was a result of orders from
recently signed Certified Applicators.
The Company's gross margin increased to $5,164,502, or 43.5% of net sales, in
the current period from $4,775,863, or 44.2% of net sales, in the 1999 period.
This increase was due to the increased sales volume, where as the decrease in
gross margin percentage was a result of a change in product mix.
Operating expenses for the nine months ended August 31, 2000 were $4,285,057
compared to $3,926,371 for the same period of the prior year, an increase of
$358,686, or 9.1%. This increase was principally due to additional selling,
research, development and engineering expenses. The increased selling expenses
are attributable to the increased sales volume, elevated attendance of
tradeshows, higher personnel costs and increased general marketing expenses. The
increased research, development and engineering expenses are primarily
reflective of higher personnel costs.
During the nine months ended August 31, 2000, other income, net of other
expenses, increased from the same period in the prior year by $103,790, due
principally to increased income derived from the unconsolidated affiliate and
decreased interest expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash provided by operations and
availability under the revolving line of credit. At August 31, 2000 the Company
has cash of $116,201.
The Company's net inventory increased to $4,058,635 at August 31, 2000 from
$3,367,160 at November 30, 1999. This increase is primarily attributable to the
introduction of new dispensing systems at GCI.
On May 1, 2000, the Company entered into an amendment to an existing revolving
line of credit agreement with a bank. This $3,500,000 credit facility is subject
to a borrowing base and accrues interest at the bank's prime lending rate (9.50%
as of August 31, 2000). The credit facility is fully secured by a lien on all
the assets of the Company and its operating subsidiaries. The credit facility
expires on May 1, 2001. This agreement requires that the Company meet
10
<PAGE> 13
COHESANT TECHNOLOGIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
certain covenants including financial ratios. As of August 31, 2000 the Company
was in compliance with the covenants and financial ratios. As of August 31,
2000, the outstanding balance under this agreement was $1,025,000. As of August
31, 2000, the Company's working capital increased to $4,543,273 from $3,799,660
at November 30, 1999.
FORWARD LOOKING STATEMENTS
Certain statements contained in this report that are not historical facts are
forward looking statements that are subject to certain risks and uncertainties
that could cause actual results to differ materially from those set forth in the
forward looking statement. These risks and uncertainties include, but are not
limited to, a slow-down in domestic and foreign markets for plural component
dispensing systems and a reduction in growth of markets for the Company's epoxy
coating systems.
11
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COHESANT TECHNOLOGIES INC.
PART II. OTHER INFORMATION
----------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits 27 - Financial Data Schedule
(b) Reports on Form 8-K - none
12
<PAGE> 15
SIGNATURE
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 there unto duly authorized.
Dated: September 28, 2000
COHESANT TECHNOLOGIES INC.
BY: /s/ Robert W. Pawlak
----------------------------------
Robert W. Pawlak
Chief Financial Officer
13
