<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 March 31, 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 (EXACT NAME OF REGISTRANT AS SPECIFIED
IN ITS CHARTER) IN ITS CHARTER)
DELAWARE 41-1641718 DELAWARE 41-1396485
(State or other (IRS Employer (State or other (IRS Employer
jurisdiction of Identification jurisdiction of Identification
incorporation or Number) incorporation or Number)
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.
<TABLE>
<CAPTION>
OUTSTANDING AT
CLASS MARCH 31, 1997
----------------- --------------
<S> <C> <C>
MVE Holdings, Inc. Common Stock 175,502 Shares
MVE, Inc. Common Stock 1,000 Shares
MVE Holdings, Inc. Preferred A Stock 4,700 Shares
MVE Holdings, Inc. Preferred B Stock 833 Shares
</TABLE>
<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
--------------------
<PAGE>
MVE HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------- -----------------
<S> <C> <C>
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,881 $ 10,505
Accounts receivable, net of allowance
for doubtful accounts 30,050 26,958
Inventories 28,547 28,091
Prepaid expenses 1,199 1,227
Income tax refund receivable 3,103 3,102
Deferred income taxes 6,740 6,740
-------------- -----------------
Total current assets 78,520 76,623
PROPERTY, PLANT AND EQUIPMENT 44,442 42,388
Less-Accumulated depreciation and amortization (16,111) (15,376)
-------------- -----------------
Net property, plant and equipment 28,331 27,012
GOODWILL, net 25,490 26,001
OTHER ASSETS, net 12,229 12,540
-------------- -----------------
Total assets $ 144,570 $ 142,176
============== =================
LIABILITIES AND
STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,747 $ 3,633
Accounts payable 19,192 18,090
Accrued expenses and other liabilities 20,007 24,988
-------------- -----------------
Total current liabilities 42,946 46,711
LONG-TERM DEBT, net of current
maturities 148,433 143,009
DEFERRED INCOME TAXES 1,887 1,887
OTHER NONCURRENT LIABILITIES 5,958 4,159
-------------- -----------------
Total liabilities 199,223 195,766
MINORITY INTEREST 324 320
SERIES A CONVERTIBLE REDEEMABLE 47,000 47,000
PREFERRED STOCK
SERIES B CONVERTIBLE PREFERRED STOCK 8,331 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 168 168
Accumulated deficit (108,029) (106,962)
-------------- -----------------
Total stockholders' deficit (110,308) (109,241)
-------------- -----------------
Total liabilities and stockholders' deficit $ 144,570 $ 142,176
============== =================
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
MVE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
<S> <C> <C>
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,260 $ 3,054
Accounts receivable, net allowance
for doubtful accounts 29,953 26,958
Inventories 28,547 28,091
Prepaid expenses 1,199 1,227
Income tax refund receivable 3,103 3,102
Deferred income taxes 6,740 6,740
---------- ------------
Total current assets 71,802 69,172
PROPERTY, PLANT AND EQUIPMENT 44,442 42,388
Less-Accumulated depreciation and
amortization (16,111) (15,376)
---------- ------------
Net property, plant and
equipment 28,331 27,012
DUE FROM MVE HOLDINGS, INC. 31,015 31,015
GOODWILL, net 25,490 26,001
OTHER ASSETS, net 12,229 12,540
---------- ------------
Total assets $168,867 $165,740
========== ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,747 $ 3,633
Accounts payable 19,192 18,071
Accrued expenses and other liabilities 20,007 24,982
---------- ------------
Total current liabilities 42,946 46,686
LONG-TERM DEBT, net of current 148,433 143,009
maturities
DEFERRED INCOME TAXES 1,887 1,887
OTHER NONCURRENT LIABILITIES 1,969 1,041
---------- ------------
Total liabilities 195,235 192,623
MINORITY INTEREST 324 320
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Common stock 1 1
Additional paid-in deficit 10,411 10,411
Accumulated deficit (37,104) (37,615)
---------- ------------
Total stockholders' deficit (26,692) (27,203)
---------- ------------
Total liabilities and stockholders' deficit $168,867 $165,740
========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
MVE HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements Of Operations
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited)
----------------------------
Three Months Ended March 31
----------------------------
1997 1996
-------------- -----------
<S> <C> <C>
NET SALES $48,444 $49,047
COST OF SALES 33,562 34,521
-------------- -----------
Gross profit 14,882 14,526
OPERATING EXPENSES:
Selling and marketing 3,060 2,658
General and administrative 3,779 1,380
Research and development 1,733 898
Amortization 1,013 1,371
-------------- -----------
Total operating expenses 9,585 6,307
-------------- -----------
Operating income 5,297 8,219
INTEREST INCOME (160)
INTEREST EXPENSE 4,365 4,163
-------------- -----------
Income before income tax provision
and minority interest 1,092 4,056
INCOME TAX PROVISION 472 1,642
-------------- -----------
Income before minority interest 620 2,414
MINORITY INTEREST IN NET INCOME (LOSS) 4 (128)
-------------- -----------
Net income 616 $ 2,542
-------------- -----------
PREFERRED STOCK DIVIDENDS (1,738)
-------------- -----------
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS $(1,122) $ 2,542
============== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
MVE, INC. AND SUBSIDIARIES
Consolidated Statements Of Operations
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited)
----------------------------
Three Months Ended March 31
----------------------------
1997 1996
--------------- -----------
(Unaudited)
<S> <C> <C>
NET SALES $48,444 $49,047
COST OF SALES 33,562 34,521
--------------- -----------
Gross profit 14,882 14,526
OPERATING EXPENSES:
Selling and marketing 3,060 2,658
General and administrative 3,779 1,380
Research and development 1,733 898
Amortization 1,013 1,371
--------------- -----------
Total operating expenses 9,585 6,307
--------------- -----------
Operating income 5,297 8,219
INTEREST EXPENSE 4,365 4,163
--------------- -----------
Income before income tax
provision and minority
interest 932 4,056
INCOME TAX PROVISION 472 1,642
--------------- -----------
Income before minority
interest 460 2,414
MINORITY INTEREST IN NET INCOME 4 (128)
--------------- -----------
Net income $ 456 $ 2,542
=============== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
MVE HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements Of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income before preferred stock dividends $ 616 $ 2,542
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,766 2,254
Minority interest 4 (127)
Interest on exchangeable debt 82 81
Deferred income tax benefit 0 (478)
Gain on disposition of assets (212)
Change in operating assets and liabilities:
Accounts receivable (3,093) (3,264)
Inventories (456) 311
Prepaid expenses 28 278
Accounts payable 1,102 3,841
Accrued expenses and other liabilities (4,981) (2,850)
Changes in other non-current liabilities 226 67
---------- ----------
Net cash provided by (used in) operating
activities (4,706) 2,443
INVESTING ACTIVITIES:
Proceeds from sale of assets 3
Purchase of property, plant, and equipment (2,072) (1,602)
Purchase of other assets (191) (1,254)
---------- ----------
Net cash used in investing activities (2,263) (2,853)
FINANCING ACTIVITIES:
Borrowings under working capital agreement 52,931 51,721
Repayments under working capital agreement (47,459) (51,762)
Proceeds from issuance of long-term debt 873
Repayment of long-term debt (242) (894)
Changes in other non-current assets and liabilities 115 53
---------- ----------
Net cash provided by (used in) financing
activities 5,345 (9)
---------- ----------
Net decrease in cash and cash equivalents (1,624) (419)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 10,505 1,053
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,881 $ 634
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 7,612 $ 7,259
Cash paid for taxes $ 149 $ 674
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
MVE, INC. AND SUBSIDIARIES
Consolidated Statements Of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 456 $ 2,542
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,766 2,254
Minority interest 4 (127)
Interest on exchangeable debt 82 81
Deferred income tax benefit (478)
Gain on disposition of assets (212)
Change in operating assets and liabilities:
Accounts receivable (2,996) (3,264)
Inventories (456) 311
Prepaid expenses 28 278
Accounts payable 1,121 3,841
Accrued expenses and other liabilities (4,975) (2,850)
Changes in other non-current liabilities 226 67
---------- ----------
Net cash provided by (used in) operating
activities (4,744) (2,443)
INVESTING ACTIVITIES:
Proceeds from sale of assets 3
Purchases of property, plant, and equipment (2,072) (1,602)
Purchase of other assets (191) (1,254)
---------- ----------
Net cash used in investing activities (2,263) (2,853)
FINANCING ACTIVITIES:
Borrowings under working capital agreement 52,931 51,721
Repayments under working capital agreement (47,459) (51,762)
Proceeds from issuance of long-term debt 873
Repayment of long-term debt (242) (894)
Changes in other non-current assets and liabilities 983 53
---------- ----------
Net cash provided by (used in) financing
activities 6,213 (9)
---------- ----------
Net increase (decrease) in cash and cash
equivalents (794) (419)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,054 1,053
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,260 $ 634
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 7,612 $ 7,259
Cash paid for taxes $ 149 $ 674
</TABLE>
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
MARCH 31, 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 March 31, 1997 and the results of its operations and its cash
flows for the three month periods ended March 31, 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 on Form 10-K.
<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 March 31, 1997 and 1996
Net Sales
- ---------
Net sales for the quarter ended March 31, 1997 decreased 1.2% to $48.4 million
from $49.0 million in the comparable period in 1996.
Industrial Products: Net sales for the quarter ended March 31, 1997 increased
9.0% to $31.6 million from $29.0 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 $2.4 million during the quarter ended March 31, 1997. These
sales primarily consisted of very large cryogenic tanks and tanker trailers sold
to customers in Australia and southeast Asia.
Distributed Products: Net sales for the quarter ended March 31, 1997 decreased
15.2% to $10.6 million from $12.5 million in the comparable period in 1996. The
decrease is primarily attributable to decreases in the sales of AURA panels.
Sales of biological storage systems and insulated liquid nitrogen gas storage
containers decreased slightly quarter to quarter and were offset by increases in
the sales of restaurant CO\\2\\products. Sales of AURA panels were $121,000 for
the quarter ended March 31, 1997 compared to $1.4 million for the quarter ended
March 31, 1996. The sales of Aura panels have been discontinued.
Medical Products: Net sales for the quarter ended March 31, 1997 decreased
17.1% to $6.3 million from $7.6 million in the comparable period in 1996. This
lower level of sales results from the continued uncertainty in oxygen
reimbursement caused by the review of Medicare/Medicaid expenditures and the
delay of the introduction of a new concentrator product which occurred in late
1996.
Gross Margin
- ------------
Gross margin (expressed as a percent of net sales) increased to 30.7% for the
quarter ended March 31, 1997 from 29.6% in the comparable period in 1996.
Industrial Products: Gross margin increased to 26.9% for the quarter ended
March 31, 1997 from 22.1% in the comparable period in 1996. The increase is
attributable to reduced material costs, lower overhead spending and improved
manufacturing efficiencies.
Distributed Products: Gross margin decreased to 43.1% for the quarter ended
March 31, 1997 from 49.5% in the comparable period in 1996. The decrease is
primarily attributable to favorable year-end adjustments made in February 1996
(fiscal year 1997) offset by improved manufacturing efficiencies.
Medical Products: Gross margin increased to 29.2% for the quarter ended March
31, 1997 from 25.8% in the comparable period in 1996. The increase is primarily
attributable to higher manufacturing efficiencies and lower overhead costs.
<PAGE>
Operating Expenses
- ------------------
Operating expenses for the quarter ended March 31, 1997 were $9.6 million or
19.8% of net sales compared to $6.3 million or 12.9% of net sales for the same
period one year ago. The increase in operating expense is primarily attributable
to favorable, year-end, non-recurring adjustments of $1.8 million made in
January and February 1996, additional expenses of $560,000 associated with the
expansion of the Company's business into the Pacific Rim and other net spending
increases of approximately $928,000.
Operating Income
- ----------------
Operating income decreased 35.6% to $5.3 million or 10.9% of net sales for the
three months ended March 31, 1997 from $8.2 million or 16.8% of net sales in the
comparable period in 1996. The decrease is primarily due to the decline in
Medical Products sales and other factors noted in the Operating Expense
discussion above.
Interest Expense
- ----------------
Interest expense was $4.4 million for the quarter ended March 31, 1997 and $4.2
million in the comparable period in 1996.
Income Taxes
- ------------
The effective income tax rate was 43.2% for the three months ended March 31,
1997 compared to 40.5% for the same period one year ago.
Net Income
- ----------
As a result of the above, net income (before preferred stock dividends) for the
three months ended March 31, 1997 was $66,000 compared to a net income of $2.5
million in the comparable period in 1996.
EBITDA
- ------
EBITDA (earnings before interest, income taxes, depreciation, amortization)
decreased 33.0% to $7.1 million or 14.6% of sales for the quarter ended March
31, 1997 from $10.6 million or 21.6% 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 $4.7 million for the three months
ended March 31, 1997 compared to cash used of $2.4 million in the same period
one year ago.
Working capital was $35.6 million and $29.9 million at March 31, 1997 and
December 31, 1996, respectively.
The Company invested $2.3 million in the three months ended March 31, 1997
compared to $2.9 million in the same period one year ago.
Cash provided by financing activities was $5.3 million for the three months
ended March 31, 1997. No cash was used or provided in the same period one year
ago. 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.
<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: /s/ J. David O'Halloran
----------------------------------------
J. David O'Halloran
President and Chief Executive Officer
/s/ William Priesmeyer
----------------------------------------
William Priesmeyer
Chief Financial Officer
MVE, INC.
DATE: /s/ J. David O'Halloran
---------------------------------------
J. David O'Halloran
President and Chief Executive Officer
/s/ William Priesmeyer
---------------------------------------
William Priesmeyer
Chief Financial Officer
