<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
[ ] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For Quarterly Period Ended June 30, 1997
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. MVE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN (EXACT NAME OF REGISTRANT AS
ITS CHARTER) SPECIFIED IN ITS CHARTER)
DELAWARE 41-1641718 DELAWARE 41-1396485
(State or (IRS Employer (State or (IRS Employer
other Identification other Identification
jurisdiction of Number) jurisdiction of Number)
incorporation or incorporation or
organization) organization)
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 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 JUNE 30, 1997
MVE Holdings, Inc. ----------------- --------------
MVE, Inc. Common Stock 149,068 Shares
MVE Holdings, Inc. Common Stock 1,000 Shares
MVE Holdings, Inc. Preferred A Stock 4,700 Shares
Preferred B Stock 797 Shares
<PAGE>
NOTE: The duty of each of MVE Holdings, Inc., a Delaware corporation
("Holdings") and MVE, Inc. also a Delaware corporation ("MVE"), to file reports
under Section 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), has been suspended. Holdings and MVE are voluntarily filing
this quarterly report under cover of Form 10-Q. Please be advised that this
report does not include all the information required to be included in a
quarterly report on Form 10-Q filed pursuant to Section 13 or 15(d) of the
Exchange Act.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
2
<PAGE>
MVE HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,848 $ 10,505
Accounts receivable, net of allowance
for doubtful accounts 32,352 26,958
Inventories 28,615 28,091
Prepaid expenses 1,617 1,227
Income tax refund receivable 3,032 3,102
Deferred income taxes 6,740 6,740
--------- ---------
Total current assets 77,204 76,623
PROPERTY, PLANT AND EQUIPMENT 47,011 42,388
Less-Accumulated depreciation and
amortization (17,030) (15,376)
--------- ---------
Net property, plant and 29,981 27,012
equipment
GOODWILL, net 25,029 26,001
OTHER ASSETS, net 11,966 12,540
--------- ---------
Total assets $ 144,180 $ 142,176
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,311 $ 3,633
Accounts payable 19,165 18,090
Accrued expenses and other liabilities 21,294 24,988
--------- ---------
Total current liabilities 43,770 46,711
LONG-TERM DEBT, net of current
maturities 151,359 143,009
DEFERRED INCOME TAXES 1,887 1,887
OTHER NONCURRENT LIABILITIES 7,749 4,159
--------- ---------
Total liabilities 204,765 195,766
MINORITY INTEREST 324 320
SERIES A CONVERTIBLE REDEEMABLE
PREFERRED STOCK 47,000 47,000
SERIES B CONVERTIBLE PREFERRED STOCK 7,971 8,331
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Notes receivable from shareholders (2,000) (2,000)
Common stock 2 2
Additional paid-in deficit (449) (449)
Common stock warrants 165 168
Accumulated deficit (113,598) (106,962)
--------- ---------
Total stockholders' deficit (115,880) (109,241)
--------- ---------
Total liabilities and
stockholders' deficit $ 144,180 $ 142,176
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
3
<PAGE>
MVE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,824 $ 3,054
Accounts receivable, net allowance
for doubtful accounts 32,212 26,958
Inventories 28,615 28,091
Prepaid expenses 1,617 1,227
Income tax refund receivable 3,032 3,102
Deferred income taxes 6,740 6,740
-------- --------
Total current assets 74,040 69,172
Property, Plant and Equipment 47,011 42,388
Less-Accumulated depreciation and
amortization (17,030) (15,376)
-------- --------
Net property, plant and equipment 29,981 27,012
DUE FROM MVE HOLDINGS, INC. 31,040 31,015
GOODWILL, net 25,029 26,001
OTHER ASSETS, net 11,966 12,540
-------- --------
Total assets $172,056 $165,740
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,311 $ 3,633
Accounts payable 19,165 18,071
Accrued expenses and other liabilities 21,294 24,982
-------- --------
Total current liabilities 43,770 46,686
LONG-TERM DEBT, net of current 151,359 143,009
maturities
DEFERRED INCOME TAXES 1,887 1,887
OTHER NONCURRENT LIABILITIES 2,010 1,041
-------- --------
Total liabilities 199,026 192,623
MINORITY INTEREST 324 320
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Common stock 1 1
Additional paid-in deficit 10,411 10,411
Accumulated deficit (37,706) (37,615)
-------- --------
Total stockholders' deficit (27,294) (27,203)
-------- --------
Total liabilities and
stockholders' deficit $172,056 $165,740
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
4
<PAGE>
MVE HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements Of Operations
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
-------------------------- ------------------------
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
1997 1996 1997 1996
--------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $50,501 $48,097 $98,945 $97,144
COST OF SALES 35,954 34,143 69,516 68,664
------- ------- ------- -------
Gross profit 14,547 13,954 29,429 28,480
OPERATING EXPENSES:
Selling and marketing 3,522 2,572 6,582 5,230
General and
administrative 4,951 3,544 8,847 5,064
Research and development 1,514 735 3,130 1,493
Amortization 1,032 1,340 2,045 2,711
------- ------- ------- -------
Total operating expenses 11,019 8,191 20,604 14,498
------- ------- ------- -------
Operating income 3,528 5,763 8,825 13,982
INTEREST INCOME (109) (269)
INTEREST EXPENSE 4,459 4,131 8,824 8,294
------- ------- ------- -------
Income (loss) before
income tax provision
(benefit) and minority
interest (822) 1,632 270 5,688
INCOME TAX PROVISION (BENEFIT) (370) 1,000 102 2,642
------- ------- ------- -------
Income (loss) before
minority interest (452) 632 168 3,046
MINORITY INTEREST IN NET
INCOME (LOSS) 19 4 (109)
------- ------- ------- -------
Net income (loss) (452) 613 164 3,155
PREFERRED STOCK DIVIDENDS 1,750 3,488
------- ------- ------- -------
NET INCOME (LOSS) AVAILABLE
TO COMMON STOCKHOLDERS $(2,202) $ 613 $(3,324) $ 3,155
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
MVE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements Of Operations
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
-------------------------- --------------------------
Three Months Ended June 30 Six Months Ended June 30
-------------------------- --------------------------
1997 1996 1997 1996
--------- --------- --------- --------
<S> <C> <C> <C> <C>
NET SALES $50,501 $48,097 $98,945 $97,144
COST OF SALES 35,954 34,143 69,516 68,664
-------- -------- -------- --------
Gross profit 14,547 13,954 29,429 28,480
OPERATING EXPENSES:
Selling and marketing 3,522 2,572 6,582 5,230
General and administrative 4,951 3,544 8,847 5,064
Research and development 1,514 735 3,130 1,493
Amortization 1,032 1,340 2,045 2,711
-------- -------- -------- --------
Total operating expenses 11,019 8,191 20,604 14,498
-------- -------- -------- --------
Operating income 3,528 5,763 8,825 13,982
INTEREST EXPENSE 4,459 4,131 8,824 8,294
-------- -------- -------- --------
Income (loss) before
income tax provision
(benefit) and minority
interest (931) 1,632 1 5,688
INCOME TAX PROVISION (BENEFIT) (370) 1,000 102 2,642
-------- -------- -------- --------
Income (loss) before
minority interest (561) 632 (101) 3,046
MINORITY INTEREST IN NET INCOME
(LOSS) 19 4 (109)
-------- -------- -------- --------
Net income (loss) $ (561) $ 613 $ (105) $ 3,155
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
<PAGE>
MVE HOLDINGS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements Of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended
June 30,
--------------------
1997 1996
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income before preferred stock
dividends $ 164 $ 3,155
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 3,635 4,462
Minority interest 4 (109)
Interest on exchangeable debt 165 163
Deferred income tax benefit (478)
Loss (gain) on disposition of assets 66 (208)
Change in operating assets and
liabilities:
Accounts receivable (5,500) (1,498)
Inventories (332) (2,175)
Prepaid expenses (388) 11
Accounts payable 915 4,531
Accrued expenses and other
liabilities (3,707) (477)
Changes in other non-current
liabilities 551 98
-------- ---------
Net cash provided by (used in)
operating activities (4,427) 7,475
INVESTING ACTIVITIES:
Proceeds from sale of assets 219 1
Purchase of property, plant, and
equipment (4,458) (5,001)
Purchase of other assets (380) (2,752)
-------- ---------
Net cash used in investing
activities (4,619) (7,752)
FINANCING ACTIVITIES:
Borrowings under working capital
agreement 103,976 105,346
Repayments under working capital
agreement (95,347) (106,951)
Proceeds from issuance of long-term
debt 3,023
Repayment of long-term debt (1,525) (1,324)
Purchase of common stock warrants (13)
Purchase of treasury stock (3,183)
Purchase of preferred stock (493)
Changes in other non-current assets
and liabilities (26) (117)
-------- ---------
Net cash provided by (used in)
financing activities 3,389 (23)
-------- ---------
Net decrease in cash and cash
equivalents (5,657) (300)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 10,505 1,053
-------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,848 $ 753
======== =========
Supplemental Disclosure of Cash Flow
Information:
Cash paid for interest $ 8,057 $ 7,831
Cash paid for taxes $ 166 $ 813
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
<PAGE>
MVE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements Of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended
June 30,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (105) $ 3,155
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 3,635 4,462
Minority interest 4 (109)
Interest on exchangeable debt 165 163
Deferred income tax benefit (478)
Loss (gain) on disposition of
assets 66 (208)
Change in operating assets and
liabilities:
Accounts receivable (5,385) (1,498)
Inventories (332) (2,175)
Prepaid expenses (388) 11
Accounts payable 934 4,531
Accrued expenses and other
liabilities (3,701) (477)
Changes in other non-current
liabilities 470 98
--------- ---------
Net cash provided by (used in)
operating activities (4,637) 7,475
Investing activities:
Proceeds from sale of assets 219 1
Purchases of property, plant, and
equipment (4,458) (5,001)
Purchase of other assets (380) (2,752)
--------- ---------
Net cash used in investing
activities (4,619) (7,752)
Financing activities:
Borrowings under working capital
agreement 103,976 105,346
Repayments under working capital
agreement (95,347) (106,951)
Proceeds from issuance of long-term
debt 3,023
Repayment of long-term debt (1,525) (1,324)
Changes in other non-current assets
and liabilities 922 (117)
--------- ---------
Net cash provided by (used in)
financing activities 8,026 (23)
--------- ---------
Net decrease in cash and cash
equivalents (1,230) (300)
Cash and cash equivalents, beginning of
period 3,054 1,053
--------- ---------
Cash and cash equivalents, end of period $ 1,824 $ 753
========= =========
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 8,138 $ 7,831
Cash paid for taxes $ 166 $ 813
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
8
<PAGE>
MVE HOLDINGS, INC. AND MVE, INC. AND SUBSIDIARIES
NOTES TO INTERIM UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
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 June 30, 1997 and the results of its operations and its cash
flows for the six month periods ended June 30, 1997 and 1996. These 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 and 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
December 31, 1996. Accordingly, footnote disclosures which would
substantially duplicate the disclosures contained in the December 31, 1996
audited financial statements have been omitted from these interim financial
statements. While management of Holdings and the Company believes 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 under cover of Form 10-K.
2. Pursuant to an agreement entered into in June, 1997, between Holdings and
certain shareholders, Holdings redeemed 25,373 shares of Common Stock for
$125.456 per share and issued 13.31 shares of the 10% Class B Preferred
stock in exchange for 1,061 shares of Common Stock.
In addition, Holdings redeemed 49.33 shares of the 10% Class B Preferred
Stock, each share having a liquidation preference of $10,000.
3. In March, 1997, Holdings purchased 430 of its outstanding Warrants for
$30.10944 per Warrant.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SUMMARY
- -------
The Company develops, manufactures, markets and sells products which are grouped
according to three business segments: Industrial, Distributed and Medical.
Industrial products include cryogenic storage tanks and transportation equipment
sold to producers, distributors and end users of industrial gases. Distributed
products include bulk CO\\2\\ containers used for beverage carbonization,
biological storage systems used to store and transport temperature-sensitive
biological matter and insulated storage of liquid natural gas. Medical products
include a range of respiratory products such as liquid oxygen systems,
ambulatory oxygen systems, oxygen concentrators and nebulizers.
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended June 30, 1997 and 1996
Net Sales
- ---------
Net sales for the quarter ended June 30, 1997 increased 5.0% to $50.5 million
from $48.1 million in the comparable period in 1996.
Industrial Products: Net sales for the quarter ended June 30, 1997 increased
6.6% to $32.4 million from $30.4 million in the comparable period in 1996. The
increase is primarily attributable to the Company's acquisition, in November
1996, of a subsidiary located near Sydney, Australia. This subsidiary had sales
of approximately $3.3 million during the quarter ended June 30, 1997. These
sales primarily consisted of very large cryogenic tanks and tanker trailers sold
to customers in Australia and southeast Asia. Sales of small pressure vessels
increased $2.2 million and the new Orca product line was introduced in 1997.
This increase was offset by a decrease in bulk tank sales.
Distributed Products: Net sales for the quarter ended June 30, 1997 decreased
1.8% to $10.7 million from $10.9 million in the comparable period in 1996. The
decrease is primarily attributable to decreases in the sales of AURA panels.
There were no sales of AURA panels for the quarter ended June 30, 1997 compared
to $400,000 for the quarter ended June 30, 1996. The sales of AURA panels have
been discontinued.
Medical Products: Net sales for the quarter ended June 30, 1997 increased 8.8%
to $7.4 million from $6.8 million in the comparable period in 1996. Sales of
concentrators increased $1.4 million between the two periods due to the
introduction of a new concentrator product in late 1996. This increase was
offset by decreasing sales of liquid oxygen resulting from continued uncertainty
in oxygen reimbursement caused by governmental review of Medicare/Medicaid
expenditures.
Gross Margin
- ------------
Gross margin (expressed as a percent of net sales) decreased to 28.8% for the
quarter ended June 30, 1997 from 29.0% in the comparable period in 1996.
Industrial Products: Gross margin increased to 25.5% for the quarter ended June
30, 1997 from 23.9% in the comparable period in 1996. The increase is primarily
attributable to improved product mix and reduced manufacturing costs.
Distributed Products: Gross margin increased to 43.0% for the quarter ended
June 30, 1997 from 40.8% in the comparable period in 1996. This increase is
primarily due to lower margin sales of AURA panels in the second quarter of
1996. Sales of AURA panels were discontinued in the first quarter of 1997.
Medical Products: Gross margin decreased to 22.6% for the quarter ended June
30, 1997 from 33.0% in the comparable period in 1996. The decrease is primarily
attributable to lower prices resulting from increased competition and
governmental regulation, as well as a change in the mix of medical products
sales, with lower margin concentrator sales replacing higher margin liquid
sales.
10
<PAGE>
Operating Expenses
- ------------------
Operating expenses for the quarter ended June 30, 1997 were $11.0 million or
21.8% of net sales compared to $8.2 million or 17.0% of net sales for the same
period one year ago. The increase in operating expense is primarily
attributable to additional expenses of $1.0 million associated with the
expansion of the Company's business into the Pacific Rim and other net spending
increases of approximately $1.8 million.
Operating Income
- ----------------
Operating income decreased 38.8% to $3.5 million or 7.0% of net sales for the
quarter ended June 30, 1997 from $5.8 million or 12.0% of net sales in the
comparable period in 1996. The decrease is primarily due to the factors noted
in the Operating Expenses discussion above.
Interest Expense
- ----------------
Interest expense was $4.5 million for the quarter ended June 30, 1997 and $4.1
million in the comparable period in 1996.
Income Taxes
- ------------
The effective income tax rate was 45.0% for the quarter ended June 30, 1997
compared to 61.3% in the comparable period in 1996.
Net Income
- ----------
As a result of the above, net loss (before preferred stock dividends) for the
quarter ended June 30, 1997 was $452,000 compared to a net income of $613,000 in
the comparable period in 1996.
EBITDA
- ------
EBITDA (earnings before interest, income taxes, depreciation, amortization)
decreased 32.5% to $5.4 million or 10.7% of sales for the quarter ended June 30,
1997 from $8.0 million or 16.6% of sales in the comparable period of 1996. The
decrease in EBITDA is attributable to the factors noted in "Operating Income"
above.
Six Months Ended June 30, 1997 and 1996
Net Sales
- ---------
Net sales for the six months ended June 30, 1997 increased 1.9% to 98.9 million
from 97.1 million in the comparable period in 1996.
Industrial Products: Net sales for the six months ended June 30, 1997 increased
7.7% to $64.0 million from $59.4 million in the comparable period in 1996. The
increase is primarily attributable to the Company's acquisition, in November
1996, of a subsidiary located near Sydney, Australia. This subsidiary had sales
of approximately $5.9 million during the six months ended June 30, 1997. These
sales primarily consisted of very large cryogenic tanks and tanker trailers sold
to customers in Australia and southeast Asia. Sales of small pressure vessels
increased $3.8 million and the new Orca product line was introduced in 1997.
This increase was offset by a decrease in bulk tank sales.
Distributed Products: Net sales for the six months ended June 30, 1997
decreased 9.4% to $21.3 million from $23.3 million in the comparable period in
1996. The decrease is primarily attributable to decreases in the sales of AURA
panels. Sales of AURA panels were $135,000 for the six months ended June 30,
1997 compared to $1.9 million for the six months ended June 30, 1996. The sales
of AURA panels have been discontinued.
Medical Products: Net sales for the six months ended June 30, 1997 decreased
5.6% to $13.6 million from $14.4 million in the comparable period in 1996.
Sales of concentrators increased $1.7 million between the two periods due to the
introduction of a new concentrator product in late 1996. This increase was
offset by a $2.5 million decrease in liquid oxygen sales resulting from
continued uncertainty in oxygen reimbursement caused by governmental review of
Medicare/Medicaid expenditures.
11
<PAGE>
Gross Margin
- ------------
Gross margin (expressed as a percent of net sales) increased to 29.7% for the
six months ended June 30, 1997 from 29.3% in the comparable period in 1996.
Industrial Products: Gross margin increased to 26.5% for the six months ended
June 30, 1997 from 23.7% in the comparable period in 1996. The increase is
attributable to changes in the mix of products and decreased manufacturing
costs.
Distributed Products: Gross margin decreased to 43.0% for the six months ended
June 30, 1997 from 44.5% in the comparable period in 1996. The decrease is
primarily attributable to favorable adjustments made in February 1996 which were
partially offset by improved manufacturing efficiencies.
Medical Products: Gross margin decreased to 25.6% for the six months ended June
30, 1997 from 29.2% in the comparable period in 1996. The decrease is primarily
attributable to lower pricing as a result of increased competition and
governmental regulation and due to a change in the mix of medical products
sales, with lower margin concentrator sales replacing higher margin liquid
sales.
Operating Expenses
- ------------------
Operating expenses for the six months ended June 30, 1997 were $20.6 million or
20.8% of net sales compared to $14.5 million or 14.9% of net sales for the same
period one year ago. The increase in operating expense is primarily
attributable to favorable, non-recurring adjustments of $1.8 million made in
January and February 1996, additional expenses of $1.6 million associated with
the expansion of the Company's business into the Pacific Rim and other net
spending increases of approximately $2.7 million.
Operating Income
- ----------------
Operating income decreased 36.9% to $8.8 million or 8.9% of net sales for the
six months ended June 30, 1997 from $14.0 million or 14.4% of net sales in the
comparable period in 1996. The decrease is primarily due to the factors noted
in the Operating Expense discussion above.
Interest Expense
- ----------------
Interest expense was $8.8 million for the six months ended June 30, 1997 and
$8.3 million in the comparable period in 1996.
Income Taxes
-------------
The effective income tax rate was 37.8% for the six months ended June 30, 1997
compared to 46.4% in the comparable period in 1996.
Net Income
- ----------
As a result of the above, net income (before preferred stock dividends) for the
six months ended June 30, 1997 was $164,000 compared to a net income of $3.2
million in the comparable period in 1996.
EBITDA
- ------
EBITDA (earnings before interest, income taxes, depreciation, amortization)
decreased 31.7% to $12.5 million or 12.6% of sales for the six months ended June
30, 1997 from $18.4 million or 18.9% of sales in the comparable period of 1996.
The decrease in EBITDA is attributable to the factors noted in "Operating
Income" above.
LIQUIDITY AND CAPITAL RESERVES
- ------------------------------
Cash flow used by operating activities was $4.4 million for the six months ended
June 30, 1997 compared to cash provided of $7.5 million in the same period one
year ago. This resulted primarily from the Company's decrease in net income,
increase in accounts receivable and decrease in liabilities.
Working capital was $33.4 million and $29.9 million at June 30, 1997 and
December 31, 1996, respectively.
The Company invested $4.6 million in the six months ended June 30, 1997 compared
to $7.8 million in the same period one year ago. Lower investment in 1997
resulted primarily from loans advanced in 1996 to a major supplier.
12
<PAGE>
Cash provided by financing activities was $3.4 million for the six months ended
June 30, 1997 compared to $23,000 used in the same period one year ago. This
resulted from higher borrowings under the working capital agreement less the
cash used to redeem common and preferred stock by MVE Holdings, Inc. The
Company is not in default under any lending agreement nor in violation of any
related covenants for which there have not been waivers obtained. The Company's
agreement governing its revolving line of credit expires in February 1998. The
Company is currently in negotiation with and has obtained a commitment from a
commercial lender to replace its current $40 million revolving facility.
13
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
None.
(b) Reports on Form 8-K.
None.
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 by the
undersigned thereunto duly authorized.
MVE HOLDINGS, INC.
DATE: August 14, 1997 /s/ William Priesmeyer
----------------------------------------
William Priesmeyer
Chief Financial Officer
MVE, INC.
DATE: August 14, 1997 /s/ William Priesmeyer
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William Priesmeyer
Chief Financial Officer
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