SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For Quarterly Period Ended May 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: 33-84262
_________________________
MVE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1641718
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
MVE, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1396485
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
Two Appletree Square, Suite 100
8011 34th Avenue, South
Bloomington, MN 55425
(Address of principal executive offices)
Telephone: (612) 853-9600
(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 and Exchange Act of 1934 during 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 ninety (90) days.
Yes X No ___
Applicable only to issuers involved in bankruptcy
proceedings during the preceding five years:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes ___ No ___
Applicable Only To Corporate Issuers:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Outstanding at
Class May 31, 1996
MVE Holdings, Inc. Common Stock 510,000 Shares
MVE, Inc. Common Stock 1,000 Shares
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
MVE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
May 31, February 29,
1996 1996
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 986 $ 1,306
Accounts receivable, net 31,948 30,877
Inventories, net 28,297 24,428
Prepaids and prepaid income tax 5,896 5,907
Total Current Assets 67,127 62,518
Property, Plant and Equipment, net 24,876 22,276
Other Assets, net 10,419 9,835
Goodwill, net 38,240 39,259
$140,662 $133,888
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Current maturities of long
term debt $ 532 $ 2,142
Accounts payable 18,294 18,368
Accrued expenses and other
liabilities 18,558 14,205
Total Current Liabilities 37,384 34,715
Long-term Debt, less current
maturities 134,753 131,024
Deferred Income Taxes 2,206 2,470
Minority Interest and Other
Non-Current Liabilities 3,179 3,470
Total Liabilities 177,522 171,679
Stockholders' Deficit
Common stock $ 5 $ 5
Additional paid-in deficit (449) (449)
Common stock warrants 770 770
Accumulated deficit (37,186) (38,117)
Total Stockholders' Deficit (36,860) (37,791)
Total Liabilities and Stockholders'
Deficit $140,662 $133,888
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
MVE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
May 31, February 29,
1996 1996
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 986 $ 1,306
Accounts receivable, net 31,948 30,877
Inventories, net 28,297 24,428
Prepaids and prepaid income tax 5,896 5,907
Total Current Assets 67,127 62,518
Property, Plant and Equipment, net 24,876 22,276
Due from MVE Holdings, Inc. 31,015 31,015
Other Assets, net 10,419 9,835
Goodwill, net 38,240 39,259
$171,677 $164,903
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Current maturities of long
term debt $ 532 $ 2,142
Accounts payable 18,294 18,368
Accrued expenses and other
liabilities 18,558 14,205
Total Current Liabilities 37,384 34,715
Long-term Debt, less current
maturities 134,753 131,024
Deferred Income Taxes 2,206 2,470
Minority Interest and Other
Non-Current Liabilities 3,179 3,470
Total Liabilities 177,522 171,679
Stockholders' Deficit
Common stock $ 1 $ 1
Additional paid-in capital 10,411 10,411
Accumulated deficit (16,257) (17,188)
Total Stockholders' Deficit (5,845) ( 6,776)
Total Liabilities and Stockholders'
Deficit $171,677 $164,903
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
MVE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
First Quarter
Three Months Ended May 31
1996 1995
(Unaudited)
Net sales $ 47,027 $42,897
Cost of sales 33,427 29,351
Gross profit 13,600 13,546
Operating Costs and Expenses:
Selling, general and administrative 5,834 5,577
Research and development 743 1,045
Amortization expense 1,340 1,362
Income from operations 5,683 5,562
Interest expense 4,132 3,823
Income before income taxes 1,551 1,739
Income tax expense 620 696
Net Income $ 931 $ 1,043
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
MVE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
First Quarter
Three Months Ended May 31
1996 1995
(Unaudited)
Net sales $ 47,027 $42,897
Cost of sales 33,427 29,351
Gross profit 13,600 13,546
Operating Costs and Expenses:
Selling, general and administrative 5,834 5,577
Research and development 743 1,045
Amortization expense 1,340 1,362
Income from operations 5,683 5,562
Interest expense 4,132 3,823
Income before income taxes 1,551 1,739
Income tax expense 620 696
Net Income $ 931 $ 1,043
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
MVE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Dollars in thousands)
Three Months Ended
May 31
1996 1995
(Unaudited)
OPERATING ACTIVITIES
Net income $ 931 $ 1,043
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 2,199 2,164
Change in operating assets and
liabilities:
Accounts receivable (1,071) (3,062)
Inventories (3,869) (7,184)
Prepaid expenses 11 (1,398)
Accounts payable (74) 3,462
Accrued expenses and other
liabilities 4,205 954
Net cash provided by (used in)
operating activities 2,216 (4,021)
INVESTING ACTIVITIES:
Additions to Other assets (905) (355)
Additions to property, plant and
equipment (3,459) (1,304)
Net cash provided by (used in)
investing activities $(4,364) $(1,659)
FINANCING ACTIVITIES:
Borrowings under working capital agreement $52,668 $39,352
Repayments under working capital agreement (51,118) (38,662)
Proceeds from issuance of long-term debt 1,000 5,613
Repayment of long-term debt (431) (793)
Changes in other non-current liabilities (291) (315)
Net cash provided by financing
activities 1,828 5,825
Net increase (decrease) in cash and
cash equivalents (320) 145
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 1,306 1,224
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 986 $ 1,369
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the period for
interest $ 483 $ 275
Cash paid during the period for
taxes $ 314 $ 1,110
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
MVE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Dollars in thousands)
Three Months Ended
May 31
1996 1995
(Unaudited)
OPERATING ACTIVITIES
Net income $ 931 $ 1,043
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 2,199 2,164
Change in operating assets and
liabilities:
Accounts receivable (1,071) (3,062)
Inventories (3,869) (7,184)
Prepaid expenses 11 (1,398)
Accounts payable (74) 3,462
Accrued expenses and other
liabilities 4,205 954
Net cash provided by (used in)
operating activities 2,216 (4,021)
INVESTING ACTIVITIES:
Additions to Other assets (905) (355)
Additions to property, plant and
equipment (3,459) (1,304)
Net cash provided by (used in)
investing activities $(4,364) $(1,659)
FINANCING ACTIVITIES:
Borrowings under working capital agreement $52,668 $39,352
Repayments under working capital agreement (51,118) (38,662)
Proceeds from issuance of long-term debt 1,000 5,613
Repayment of long-term debt (431) (793)
Changes in other non-current liabilities (291) (315)
Net cash provided by financing
activities 1,828 5,825
Net increase (decrease) in cash and
cash equivalents (320) 145
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 1,306 1,224
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 986 $ 1,369
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the period for
interest $ 483 $ 275
Cash paid during the period for
taxes $ 314 $ 1,110
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
MVE HOLDINGS, INC. AND MVE, INC. AND SUBSIDIARIES
NOTES TO INTERIM UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1996
1. Description of Business and General Information
In the opinion of MVE Holdings, Inc. (Holdings) and MVE, Inc.
(the Company), the accompanying Condensed Consolidated
Financial Statements include all adjustments necessary, all
of which were of a normal recurring nature, to present fairly
the financial position of Holdings and the Company as of May
31, 1996 and the results of their operations and cash flows
for the three month periods ended May 31, 1996 and 1995. The
results are not necessarily indicative of the results to be
expected for the full year.
The consolidated financial statements included herein have
been prepared by Holdings and the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). The consolidated financial
statements include the accounts of Holdings, the Company and
their subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
In accordance with the rules and regulations of the SEC, the
accompanying interim financial statements have been prepared
under the presumption that users of the interim financial
information have either read or have access to the audited
financial statements for the latest fiscal year ended
February 29, 1996. Accordingly, footnote disclosures which
would substantially duplicate the disclosures contained in
the February 29, 1996 audited financial statements have been
omitted from these interim financial statements. While
management of Holdings and the Company believe the procedures
followed in preparing these financial statements are
reasonable under the circumstances and that all adjustments
necessary for a fair statement of the results of operations
have been made. It is suggested that these interim financial
statements be read in conjunction with the financial
statements and the notes thereto included in Holdings'
and the Company's latest annual report on Form 10-K.
2. Inventories
Inventories include material, labor, and overhead and are
stated at the lower of cost on market, utilizing the
first-in, first-out method for all of the inventories at May
31, 1996 and February 29, 1996. Inventories consist of the
following:
(in 000's)
May 31, 1996 February 29, 1996
Raw Materials $16,594 $13,451
Work-in-Process 5,884 4,404
Finished Goods 5,819 6,573
$28,297 $24,428
3. Letter of Intent
MVE Holdings, Inc. ("Holdings") has entered into a binding
letter of intent concerning the issuance and sale by Holdings
of preferred stock to an investment group led by A.C. Israel
Capital Co., Inc. and American Securities Capital Partners,
L.P. Holdings will receive approximately $45 million cash in
consideration for the preferred stock. The proceeds from the
sale of the preferred stock will be used by Holdings to
repurchase all or a portion of the common stock holdings of
certain stockholders of Holdings. The consummation of these
transactions is subject to various conditions, including the
negotiation and execution of a definitive agreement with
respect to the sale of the preferred stock and Holdings'
repurchase of its common stock from certain of its current
stockholders.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company has three business segments: Industrial
Products, Medical Products and Distributed Products. Industrial
Products develops, manufactures and markets cryogenic storage
tanks and transportation equipment and provides related services
to producers, distributors and end users of industrial gases.
Medical Products develops, manufactures, assembles and markets a
broad range of medical respiratory products, including liquid
oxygen systems, ambulatory oxygen systems, oxygen concentrators
and nebulizers. Distributed Products consists of three product
lines: restaurant products, biological storage systems and new
applications. Restaurant products consists primarily of vacuum
insulated, bulk liquid CO2 containers used for beverage
carbonization in restaurants, convenience stores and cinemas.
Biological storage systems' products consist of vacuum insulated
vessels used to transport and store beef and dairy cow semen and
embryos and human organs, skin tissue samples and other
temperature-sensitive biological matter. New applications
develops new markets and new applications for the Company's
existing and developing technology, including AURATM flat vacuum
panels for insulation for durable consumer appliances and vacuum
insulated containers for liquid natural gas. Holdings conducts
business through the Company and its direct and indirect
subsidiaries and has no operations of its own.
RESULTS OF OPERATIONS
Net Sales
Net sales for the quarter ended May 31, 1996 increased 9.6%
to $47.0 million from $42.9 million in the comparable period in
1995.
Industrial Products: Net sales for the quarter ended May 31,
1996 increased 32.2% to $29.7 million from $22.5 million in the
comparable period in 1995. The increase is primarily
attributable to the strong demand for cryogenic tanks in North
America and increased sales to industrial gas producers in the
Asia-Pacific markets.
Distributed Products: Net sales for the quarter ended May
31, 1996 remained constant at $10.2 million compared to $10.2
million in the comparable period in 1995. This results from an
increase in sales to Restaurant and Biological Products markets
offset by decreases in LNG and AURA sales.
Medical Products: Net sales for the quarter ended May 31,
1996 decreased 29.6% to $7.2 million from $10.2 million in the
comparable period in 1995. This lower level of sales results
from the continued uncertainty in oxygen reimbursement caused by
the review of Medicare/Medicaid expenditures and the fact that
the comparable period reflected strong adoption of a newly
introduced product.
Gross Margin
Gross margin decreased to 28.9% for the first quarter of
fiscal 1997 from 31.6% for the three months ended fiscal 1996.
Industrial Products: Gross margin decreased to 24.3% for the
quarter ended May 31, 1996 from 27.0% for the quarter ended May
31, 1995. The decrease is primarily attributable to a higher
proportion of sales to industrial gas producers versus
distributors and end users, foreign sales that bear higher
freight costs, and the lower productivity associated with the
Company's expansion efforts.
Distributed Products: Gross margin increased to 39.5% for
the quarter ended May 31, 1996 from 34.2% for the quarter ended
May 31, 1995. The increase is primarily attributable to
manufacturing efficiencies as a result of increased volumes for
Restaurant products, improved unit manufacturing costs for
Biological products, and decreased sales of AURATM flat vacuum
panels.
Medical Products: Gross margin decreased to 33.1% for the
quarter ended May 31, 1996 from 33.9% for the quarter ended May
31, 1995. The decrease is primarily attributable to lower
productivity associated with the Company's consolidation and
product introduction efforts.
Operating Income
Operating income increased 3.6% to $5.7 million or 12.1% of
net sales for the three months ended May 31, 1996 from $5.5
million or 12.8% of net sales for the three months ended May 31,
1995. The increase is primarily due to the increases in net
sales offset by decreased gross margins as a result of business
mix and the factors noted above and relatively stable period
spending.
Interest Expense
Interest expense was $4.1 million for the quarter ended May
31, 1996 and $3.8 million the quarter ended May 31, 1995. The
increase reflects the increased indebtedness incurred through
use of the Company's working capital line to fund the new CAIRE
facility until industrial revenue bond financing closed.
Income Taxes
The provision for income taxes remained fairly constant at
$.6 million for the quarter ended May 31, 1996 as compared to a
$.7 million for the quarter ended May 31, 1995.
Net Income
As a result of the above, net income decreased to $.9 million
in first quarter 1997 from $1.0 million in the comparable period
of 1996.
Adjusted EBDAIT
Adjusted EBDAIT (earnings before depreciation, amortization,
interest, income taxes and other non-cash or non-recurring
expenses) increased 2.2% to $7.9 million or 16.8% of sales for
the quarter ended May 31, 1996 from $7.7 million or 17.9% of
sales in the comparable period of 1995. The increase in Adjusted
EBDAIT is attributable to the factors noted in "Operating Income"
above.
LIQUIDITY AND CAPITAL RESERVES
Cash flow provided by/used in operating activities was
approximately $2.2 million and $(4.4) million for the first
quarter of fiscal 1997 and 1996 respectively. The higher cash
flow is the result of better management of net operating assets.
Working capital was $29.7 million and $24.5 million,
respectively at May 31, 1996 and 1995.
The Company spent approximately $4.4 million in the first
quarter of fiscal 1997 on capital expenditures as compared to
$1.3 million in first quarter of fiscal 1996, primarily for the
expansion projects for the industrial and medical division.
Cash flow in financing activities was approximately $1.8
million and $5.9 million in first quarter 1997 and 1996,
respectively. This decrease in borrowings results from better
management of the net operating assets.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K. An 8-K was issued on April 22, 1996
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934. The contents related to Item 5. Other Events:
MVE Holdings, Inc. ("Holdings") has entered into a binding
letter of intent concerning the issuance and sale by
Holdings of preferred stock to an investment group led by
A.C. Israel Capital Co., Inc. and American Securities
Capital Partners, L.P. Holdings will receive
approximately $45 million cash in consideration for the
preferred stock. The proceeds from the sale of the
preferred stock will be used by Holdings to repurchase all
or a portion of the common stock holdings of certain
stockholders of Holdings. The consummation of these
transactions is subject to various conditions, including
the negotiation and execution of a definitive agreement
with respect to the sale of the preferred stock and
Holdings' repurchase of its common stock from certain of
its current stockholders.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrants have duly caused this report to be signed
on their behalf of the undersigned thereunto duly authorized.
MVE HOLDINGS, INC. AND SUBSIDIARIES
DATE: July 8, 1996 /s/ J. David O'Halloran
J. David O'Halloran
Vice President, Finance
and Treasurer
MVE INC. AND SUBSIDIARIES
DATE: July 8, 1996 /s/ J. David O'Halloran
J. David O'Halloran
Vice President, Finance
and Treasurer
