<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission file number 1-7399
TCC INDUSTRIES, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 74-1366626
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
816 Congress Avenue, Suite 1250, Austin, TX 78701
-----------------------------------------------------
(Address of principal executive offices) (Zip code)
(512) 320-0976
-----------------------------------------------------
(Registrant's telephone number, including area code)
-----------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING 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: 2,759,115 shares as
of May 1, 1996.
<PAGE> 2
Part I. Contents of Consolidated Financial Information:
<TABLE>
<CAPTION>
Page Number(s)
--------------
<S> <C>
Consolidated Balance Sheet 1 - 2
Consolidated Statement of Operations 3
Condensed Consolidated Statement of Cash Flows 4
Consolidated Statement of Shareholders' Equity 5
Notes to Consolidated Financial Statements 6 - 7
Management's Discussion and Analysis 8 - 9
Part II. Other Information 10 - 11
Signatures 12
</TABLE>
<PAGE> 3
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
Current assets: --------------- ---------------
<S> <C> <C>
Cash and cash equivalents $ 2,400 $ 2,224
Receivables:
Trade receivables, net
of allowance of
$84 and $118, respectively 4,074 3,136
Other, including
interest 59 66
--------------- ---------------
4,133 3,202
--------------- ---------------
Inventories:
Raw materials 1,073 892
Work in progress 253 347
Finished goods 5,864 6,252
--------------- ---------------
7,190 7,491
--------------- ---------------
Other 619 270
--------------- ---------------
Total current assets 14,342 13,187
--------------- ---------------
Property, plant and
equipment 9,780 9,735
Accumulated depreciation (5,411) (5,283)
--------------- ---------------
4,369 4,452
--------------- ---------------
Intangible assets:
Goodwill 1,160 1,158
Patents and trademarks 74 74
--------------- ---------------
1,234 1,232
Accumulated amortization (414) (400)
--------------- ---------------
820 832
--------------- ---------------
Other assets 725 835
--------------- ---------------
Total assets $20,256 $19,306
=============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-1-
<PAGE> 4
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - continued
(Unaudited)
(In Thousands, except share amounts)
<TABLE>
<CAPTION>
LIABILITIES AND March 31, December 31,
SHAREHOLDERS' EQUITY 1996 1995
--------------- ---------------
<S> <C> <C>
Current liabilities:
Notes payable $ 2,579 $ 882
Current maturities of
long-term debt 693 664
Accounts payable 654 839
Accrued expenses 743 828
Customer deposits 304 430
--------------- ---------------
Total current
liabilities 4,973 3,643
--------------- ---------------
Long-term debt, less
current maturities 2,279 2,459
Deferred liabilities 245 254
--------------- ---------------
Total liabilities 7,497 6,356
--------------- ---------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, authorized
2,000,000 shares, no par
value, no shares issued -- --
Common stock, authorized
10,000,000 shares, par
value $1 per share,
2,840,601 shares issued 2,841 2,841
Additional paid-in capital 8,748 8,748
Cumulative foreign currency
translation adjustment (51) (53)
Retained earnings 1,487 1,680
--------------- ---------------
13,025 13,216
Treasury stock,
81,486 shares at cost (266) (266)
--------------- ---------------
Total shareholders'
equity 12,759 12,950
--------------- ---------------
Total liabilities
and shareholders'
equity $20,256 $19,306
=============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-2-
<PAGE> 5
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In Thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1996 1995
--------------- ---------------
<S> <C> <C>
Revenue $ 5,312 $ 5,249
Cost of goods sold 3,679 3,460
--------------- ---------------
Gross profit 1,633 1,789
Selling, general and administrative
expenses 1,771 1,737
--------------- ---------------
Operating income (loss) (138) 52
--------------- ---------------
Other income (expense):
Interest income 29 28
Interest expense (131) (134)
Other, net 45 87
--------------- ---------------
(57) (19)
--------------- ---------------
Income (loss) before provision (benefit)
for income taxes (195) 33
Provision (benefit) for income taxes:
Federal 0 11
State (2) 3
--------------- ---------------
(2) 14
--------------- ---------------
Net income (loss) ($193) $ 19
=============== ===============
Weighted average number of common and
common equivalent shares outstanding 2,759 2,791
=============== ===============
Earnings (loss) per common and common
equivalent share: ($0.07) $ 0.01
=============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE> 6
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In Thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1996 1995
--------------- ---------------
<S> <C> <C>
Net cash used by operating activities $(1,435) $(1,017)
-------------- --------------
Cash flows of investing activities:
Additions to property, plant and equipment (47) (73)
Proceeds from sale of assets 110 134
Other, net 2 (6)
-------------- --------------
Net cash provided by investing activities 65 55
-------------- --------------
Cash flows of financing activities:
Net borrowings of short-term debt 1,697 1,067
Long-term debt paid (140) (108)
Purchase of common stock for treasury 0 (25)
Other, net (11) 3
-------------- --------------
Net cash provided by financing activities 1,546 937
Effect of foreign exchange rate changes on cash -- 3
Net increase (decrease) in cash and
cash equivalents 176 (22)
Cash and cash equivalents at beginning
of period 2,224 2,124
-------------- --------------
Cash and cash equivalents at end
of period $2,400 $2,102
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE> 7
TCC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Cumulative
Foreign
Par Value Addt'l Currency
Number of of Common Paid-in Translation Retained Treasury
Shares Shares Capital Adjustment Earnings Stock Total
--------- ---------- ------- ----------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
January 1, 1996 2,841 $ 2,841 $ 8,748 $ (53) $ 1,680 $ (266) $ 12,950
Net loss (193) (193)
Foreign currency
translation
adjustment 2 2
------- ------- ------- --------- -------- ---------- --------
Balances,
March 31, 1996 2,841 $ 2,841 $ 8,748 $ (51) $ 1,487 $ (266) $ 12,759
======= ======= ======= ========= ======== ========== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 8
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 Summary of Significant Accounting Policies
The consolidated financial statements include the accounts of
TCC Industries, Inc. and Subsidiaries ("the Company"), and have been presented
in accordance with the reporting requirements for interim financial statements.
Such requirements do not include all of the disclosures normally required by
generally accepted accounting principles or those normally made in an Annual
Report on Form 10-K. Certain amounts have been reclassified for consistency in
presentation. In connection therewith readers are referred to the Company's
most recent Annual Report on Form 10-K filed for the year ended December 31,
1995. The information furnished herein reflects all adjustments which, in the
opinion of management, are of a normal recurring nature and necessary for a
fair statement of the results of interim periods. Such results for interim
periods are not necessarily indicative of the results to be expected for a full
year, principally due to seasonal fluctuations in wholesale distribution
revenue.
Income Taxes
The Company and its wholly owned domestic subsidiaries join in
filing a consolidated federal income tax return. The provision (benefit) for
income taxes for interim financial reporting is determined utilizing the
estimated annual effective tax rate method of allocation. Separate state and
foreign income tax returns are filed by subsidiaries where required.
Statement of Cash Flows
For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
Foreign Currency Translation
The consolidated financial statements of Meyer Europe, Ltd.
are translated into U.S. dollars in accordance with SFAS 52, "Foreign Currency
Translation". SFAS 52 requires the foreign operations to be translated using
current exchange rates for balance sheet items, historical rates for capital
accounts, and average exchange rates for income statement items. The resulting
translation adjustments are recorded directly into a separate component of
shareholders' equity.
6
<PAGE> 9
TCC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
Note 2 Commitments and Contingencies
There are sundry claims pending against certain of the
Company's subsidiaries, all of which are incidental to the ordinary course of
business and, in the opinion of Company management, should not result in any
significant liability.
Note 3 Shareholders' Equity
The loss per share for the three months ended March 31, 1996 is
calculated using the weighted average number of common shares outstanding for
the three months ended March 31, 1996. Common share equivalents would have
diluted the loss per share and were therefore excluded from the computation.
For the three months ended March 31, 1995, the calculation of weighted
average shares outstanding included dilutive stock options amounting to 28,000
share equivalents.
7
<PAGE> 10
TCC INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is management's discussion and analysis of the results
of operations and financial condition of TCC Industries, Inc. and Subsidiaries
("the Company") during the periods included in the accompanying consolidated
financial statements. The discussion below relates to material changes in the
results of operations for the three months ended March 31, 1996 as
compared to the same period ended March 31, 1995 and to material changes
in the financial condition of the Company occurring since the prior fiscal year
end of December 31, 1995. The reader is invited to review Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 for further details regarding the significant factors
affecting the results of operations and financial condition of the Company.
COMPARISONS OF THE RESULTS OF OPERATIONS FOR THE THREE
MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
Revenue
Consolidated revenue increased $63,000 (1.2%) to $5,312,000 for the
first quarter of 1996 as compared to revenue of $5,249,000 in the first quarter
of 1995. The increase in revenue primarily resulted from an increase in revenue
at the manufacturing segment, offset by a decline in revenue at the wholesale
distribution segment. Manufacturing revenue increased $262,000 (11.5%) to
$2,548,000 in the first quarter of 1996 when compared to revenue of $2,286,000
for the same period in 1995. The increased manufacturing revenue is the result
of a $485,000 increase at Meyer Vi-Tech, the manufacturing segment's European
operation, offset by a $223,000 decline in revenue at Meyer Machine, the U.S.
based operation. The increase in revenue at Meyer Vi-Tech primarily resulted
from its higher backlog of orders for equipment at December 31, 1995, when
compared to December 31, 1994. The higher backlog resulted from an increase in
orders received in the fourth quarter of 1995 due primarily to improving market
conditions and increased market penetration. The decline in revenue during the
first quarter at Meyer Machine primarily resulted from the lower backlog of
orders for equipment at December 31, 1995 as compared to December 31, 1994. The
lower backlog resulted from continuing weakness in the markets served by Meyer
Machine. As reported earlier, Meyer Machine had begun to experience an increase
in inquiries in the third quarter of 1995, but customers had been slow in
placing orders for new equipment. This condition continued into the first
quarter of 1996, however, the MEYER Group did experience a 7% increase in new
orders entered in the first quarter of 1996 which resulted in a backlog of
approximately $1,650,000 at March 31, 1996 which is 8.5% higher than at March
31, 1995. The increase in orders booked is believed to result from a slight
improvement in the overall condition of the markets served by the MEYER Group.
Wholesale distribution revenue for the first quarter decreased by 6.1%
to $2,751,000 in 1996 from $2,928,000 in 1995. This decline is primarily
attributable to the lower backlog at December 31, 1995 when compared to
December 31, 1994. The lower backlog resulted from generally weak conditions
and intense competition in the markets served by the wholesale distribution
segment.
Gross Profit
Gross profit decreased 8.7% to $1,633,000 in the first quarter of 1996,
as compared to $1,789,000 for the same period in 1995. The decline in gross
profit resulted from, (a) lower gross profit margins at both the manufacturing
and wholesale distribution segments, (b) lower revenue at the wholesale
distribution segment, offset by (c) the increase in revenue at the manufacturing
segment. At the manufacturing segment, gross profit margins decreased to 28.5%
in the first quarter of 1996 as compared to 32.2% in the comparable period of
1995. This lower gross profit margin is primarily the result of two percentage
point increase in materials costs as a percentage of sales in the first quarter
of 1996 when compared to the same period in 1995, due to a change in the product
mix. Also negatively impacting gross profit margins was the affect of a learning
curve on the first time manufacture of two products, the impact of which is not
readily determinable. The affect the lower gross profit margin had on gross
profit at the manufacturing segment was substantially offset by the increase in
revenue at the segment, as discussed above. The decrease in wholesale
distribution gross profit margins to 32.5% in the first quarter of 1996 compared
to 34.7% in the same period in 1995, is primarily attributable to a change in
the sales mix that reflected a larger percentage of sales that qualified for
quantity discounts.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $34,000 or
2.0%, in the first quarter of 1996 when compared to the same period in 1995.
During the first quarter of 1996, a $76,000 decrease in employee related
expenses at the manufacturing segment, which resulted from the cost cutting
measures implemented at the end of 1994 and beginning of 1995, was offset by
increases in other selling, general and administrative expense of $110,000 when
comparing the first quarter of 1996 to the same period in 1995. This increase
was a general increase with no one expense category having a material impact on
the overall increase.
Other Income (Expense)
Other expense (net of other income) increased approximately $38,000 in
the first quarter of 1996 when compared to the same period in 1995. The
increase is primarily attributable to a $42,000 decrease in other income, as
the amount of interest expense and interest income for the first quarter of 1996
did not vary significantly from the amounts reported for the same period in
1995. The $42,000 decline in other income resulted from lower gains on the
sale of assets held for sale in the first quarter of 1996 when compared to the
same period in 1995.
8
<PAGE> 11
TCC INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS -- (Continued)
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had working capital of $9.4 million and a
current ratio of 2.9 to 1. This compares to working capital of $9.5 million and
a current ratio of 3.6 to 1 at December 31, 1995. The decrease in the current
ratio is a result of a greater percentage increase in current liabilities
versus current assets. Current liabilities increased primarily as a result of
an increase in the line of credit balance at the wholesale distribution segment
to support the increase in accounts receivable which was the primary cause for
the increase in current assets at the end of the first quarter of 1996 when
compared to December 31, 1995. The increase in accounts receivable and the line
of credit can be attributed to the seasonality of the wholesale distribution
segment of the Company as shipments are increased to customers in preparation
of the summer selling season. Cash for the three months ended March 31, 1996
increased a net $176,000.
At March 31, 1996, Meyer Machine maintained a $1,000,000 bank line of
credit, of which approximately $800,00 was available after a reduction of
$200,000 to support a letter of credit issued by the bank as partial collateral
for the real estate lien note payable to a bank by Meyer Vi-Tech. Meyer Machine
has a commitment from its primary bank lender to provide a line of credit for
up to $400,000, if needed, for equipment purchases. This commitment expires in
June 1996.
Allen-Lewis maintains a line of credit with a bank that provides
maximum borrowing capabilities of $3.3 million, subject to a borrowing base
calculation, for working capital purposes and letters of credit. At March 31,
1996, Allen-Lewis had approximately $865,000 available under this line of
credit.
TCC Industries has an $85,000 and a $300,000 line of credit, neither of
which had outstanding balances at March 31, 1996. These lines of credit are
used to supplement the short-term cash needs of the parent company.
Each of the subsidiaries bank lines of credit agreements contain
provisions that limit or restrict the transfer of funds to the parent company in
the form of cash dividends, loans, or advances. Management does not believe the
restrictions will have a significant effect on the parent company's ability to
meet ordinary cash obligations.
9
<PAGE> 12
TCC INDUSTRIES, INC. AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 2 to the financial statements included elsewhere
herein for a discussion of legal proceedings.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of TCC Industries, Inc. was
held on May 7, 1996, for the purpose of electing two directors
to the board of Directors, approving the appointment by the
Board of Directors of Coopers & Lybrand L.L.P. as the firm of
independent accountants to audit the accounts of the Company
for the fiscal year ended December 31, 1996, considering the
proposal to ratify and approve the amendment and restatement
of the 1985 Non-Employee Directors Stock Option Plan and
considering the proposal to approve the issuance of shares of
Company common stock pursuant to the Annual Incentive Plan
in conjunction with 1996 Incentive Awards. Proxies for the
meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934 and there was no solicitaion
in opposition to management's solicitation. Management's
nominees for director as listed in the proxy statement were
elected.
The vote on the election of the nominees for director was:
J. Patrick Kaine Lawrence W. Schumann
For 1,982,898 1,983,485
Withheld 78,329 77,742
The vote on approving the appointment of Coopers & Lybrand
L.L.P. as the firm of independent accountants to audit the
accounts of the Company for the fiscal year ended December 31,
1996 was:
For 1,955,245
Against 43,230
Abstain 62,752
The vote on the proposal to ratify and approve the amendment
and restatement of the 1985 Non-Employee Directors Stock
Option Plan was:
For 1,795,149
Against 227,690
Abstain 38,388
The vote on the proposal to approve issuance of shares of
Company common stock pursuant to the Annual Incentive Plan in
conjunction with 1996 Incentive Awards
For 1,801,254
Against 228,803
Abstain 31,170
10
<PAGE> 13
TCC INDUSTRIES, INC. AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996
PART II - OTHER INFORMATION (CONTINUED)
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
6(a) Exhibits:
11 The computation of fully diluted earnings per share
would be the same as primary earnings per share,
which is easily discernable on the face of the
statements of operations included elsewhere herein.
27 Financial Data Schedules:
(i) For the quarterly period ended March 31, 1996.
6(b) Reports on Form 8-K:
The following is the date and description of the events
reported on Forms 8-K filed during the first quarter of 1996:
Date of Earliest Event
Reported on Form 8-K Description
None.
11
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TCC INDUSTRIES,INC.
----------------------------------------
(Registrant)
/s/ LAWRENCE W. SCHUMANN
----------------------------------------
LAWRENCE W. SCHUMANN
President
(Duly Authorized Officer)
/s/ LARRY T. MAREK
----------------------------------------
LARRY T. MAREK
Executive Vice President,
Treasurer and Secretary
(Principal Financial and Accounting
Officer)
Date: May 15, 1996
12
<PAGE> 15
EXHIBIT INDEX
EXHIBIT
NO.
- -------
11 The computation of fully diluted earnings per shares would be the same
as primary earnings per share, which is easily discernable on the face
of the statements of operations included elsewhere herein.
27 Financial Data Schedules:
(i) For the quarterly period ended March 31, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,400
<SECURITIES> 0
<RECEIVABLES> 4,158
<ALLOWANCES> (84)
<INVENTORY> 7,190
<CURRENT-ASSETS> 14,342
<PP&E> 9,780
<DEPRECIATION> (5,411)
<TOTAL-ASSETS> 20,256
<CURRENT-LIABILITIES> 4,973
<BONDS> 2,279
<COMMON> 2,841
0
0
<OTHER-SE> 9,918
<TOTAL-LIABILITY-AND-EQUITY> 20,256
<SALES> 5,312
<TOTAL-REVENUES> 5,312
<CGS> 3,679
<TOTAL-COSTS> 3,679
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 131
<INCOME-PRETAX> (195)
<INCOME-TAX> (2)
<INCOME-CONTINUING> (193)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (193)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
