<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994.
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 0-870
TRICO PRODUCTS CORPORATION
(Exact name of Registrant as specified in its charter)
New York 16-066-5680
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
817 Washington Street, Buffalo, New York 14203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 716-852-5700
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
1,872,212 shares of common stock were outstanding at March 31, 1994.
<PAGE>
PART I. Item 1. Financial Statements
TRICO PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
March 31 December 31
1994 1993
Current assets: -------- -----------
Cash and equivalents $ 3,379 $ 419
Accounts receivable 42,395 51,263
Inventories 25,277 32,108
Other current assets 2,874 3,083
Customer tooling in progress 2,981 4,339
Deferred restructuring expenses 16,276 16,215
-------- --------
Total current assets 93,182 107,427
Property, plant and equipment, net 67,159 67,000
Other assets 3,499 3,445
-------- --------
Total assets $163,840 $177,872
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 7,575 $ 8,139
Current portion of long-term debt 2,174 2,174
Accounts payable 28,745 31,850
Payrolls and other liabilities 13,333 16,383
Liability for restructuring expenses 3,171 3,726
-------- --------
Total current liabilities 54,998 62,272
-------- --------
Long-term debt 30,538 39,714
Other liabilities 5,689 5,574
Non-current restructuring liabilities 860 860
-------- --------
Total non-current liabilities 37,087 46,148
-------- --------
Shareholders' equity:
Common stock, without par value -
2,700,000 shares authorized and issued
at stated value of $7.75 per share 20,925 20,925
Additional paid-in capital 751 696
Retained earnings 66,311 64,226
Cumulative translation adjustments (4,162) (4,379)
Minimum pension liability adjustment (2,769) (2,769)
Loans to employees - stock purchases (597) (500)
Treasury stock, at cost - 827,788 and
831,788 shares, respectively (8,704) (8,747)
-------- --------
Total shareholders' equity 71,755 69,452
-------- --------
Total liabilities and shareholders' equity $163,840 $177,872
======== ========
The accompanying notes are an integral part of these financial statements
2
<PAGE>
PART I. Item 1. (continued)
TRICO PRODUCTS CORPORATION
CONSOLIDATED RESULTS OF OPERATIONS AND EARNINGS
REINVESTED IN THE BUSINESS
FOR THE THREE MONTHS ENDED MARCH 31
(Dollars in Thousands)
1994 1993
---- ----
Net sales $95,231 $80,521
Cost of goods sold 84,307 70,639
------- -------
Gross profit 10,924 9,882
Selling, general and administrative expenses 7,098 8,211
------- -------
Operating income 3,826 1,671
Dividend and other income 215 239
Interest expense (1,086) (1,122)
------- -------
Income before income taxes 2,955 788
Income tax provision 870 87
------- -------
Net income 2,085 701
Retained earnings, January 1 64,226 60,969
------- -------
Retained earnings, March 31 $66,311 $61,670
======= =======
Net income per share $1.11 $0.38
======= =======
The accompanying notes are an integral part of these financial statements
3
<PAGE>
PART I. Item 1. (continued)
TRICO PRODUCTS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31
(Dollars in Thousands)
1994 1993
Cash flows provided by (used in) ---- ----
operating activities:
Net income $ 2,085 $ 701
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization 3,687 3,928
Other (157) 49
Change in assets and liabilities:
Accounts receivable 9,158 (7,708)
Inventories 6,919 4,665
Other assets 1,214 132
Payables, payroll and other liabilities (5,880) (3,335)
Liability for restructuring expenses (693) (3,289)
------- -------
Net cash from operating activities 16,333 (4,857)
------- -------
Cash flows provided by (used in)
investing activities:
Capital expenditures - property, plant
and equipment (3,639) (4,260)
Proceeds from sale of joint venture - 500
------- -------
Net cash from investing activities (3,639) (3,760)
------- -------
Cash flows provided by (used in)
financing activities:
Net increase (decrease) in borrowings
under revolving credit agreements and
notes payable (9,385) 10,570
Proceeds from new debt facilities - 7,535
Principal payments under long-term debt (558) (5,404)
------- -------
Net cash from financing activities (9,943) 12,701
------- -------
Effect of exchange rate changes on cash 209 23
------- -------
Net increase in cash and equivalents 2,960 4,107
Cash and equivalents, January 1 419 1,195
------- -------
Cash and equivalents, March 31 $ 3,379 $ 5,302
======= =======
The accompanying notes are an integral part of these financial statements
4
<PAGE>
PART I. Item l. (continued)
TRICO PRODUCTS CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. The information forwarded in this report reflects all adjustments
which are, in the opinion of Management, necessary to a fair
statement of the results for the interim periods. This report has
not been audited by Independent Accountants and the information
herein is subject to year-end adjustments and audit. The
consolidated financial statements and notes thereto, included herein,
should be read in conjunction with the consolidated financial
statements and notes thereto for the years ended December 31, 1993,
1992 and 1991 that are included in Item 8 of Part II of the 1993
Annual Report to the Securities and Exchange Commission on Form 10-K.
2. Earnings per share - Earnings per share are based on the following
weighted average number of shares outstanding during the period:
Three Months Ended
March 31,
1994 1993
---- ----
Weighted average shares 1,869,965 1,847,296
3. Inventories - Approximately 84% and 85% of inventories were valued
using the LIFO method at March 31, 1994 and December 31, 1993,
respectively. The major classes of inventory were as follows:
March 31, December 31,
1994 1993
--------- ------------
(Dollars in thousands)
Finished goods $ 6,756 $ 8,016
Work-in-process 5,059 7,341
Raw materials and supplies 13,462 16,751
------- -------
$25,277 $32,108
======= =======
5
<PAGE>
PART I. Item l. (continued)
4. Property, plant and equipment, at cost -
March 31, December 31,
--------- ------------
(Dollars in thousands)
Land $ 2,085 $ 2,083
Buildings 38,372 38,410
Machinery and equipment 111,071 110,533
Improvements in progress 7,769 4,443
-------- --------
159,297 155,469
Less accumulated depreciation 92,138 88,469
-------- --------
$ 67,159 $ 67,000
======== ========
Depreciation expense for the three months ended March 31, 1994 and
1993 was $3,687,000 and $3,928,000, respectively.
5. Statement of cash flows related disclosures - The Company entered
into financing transactions in 1994 and 1993 resulting in capital
lease obligations of $57,000 and $594,000, respectively. Cash paid
during the three months for interest and income taxes were as
follows:
March 31, March 31,
--------- ---------
Interest $1,306,000 $889,000
Income taxes 1,525,000 -
6. Income taxes - The income tax provision represents alternative
minimum tax on North American income.
6
<PAGE>
PART I. Item l. (continued)
7. Commitments, contingencies and legal matters - In the normal course
of business, the Company is subject to certain product recalls and
various liabilities, some contingent in nature, relating to
environmental cleanup costs and lawsuits. The Company estimates the
range of loss exposure for such items at March 31, 1994, to be from
$1.6 million to $16.0 million. $1.6 million of loss contingencies is
included in Payrolls and Other Liabilities at March 31, 1994. The
outcome of these matters, individually or in the aggregate, is not
expected to have a material effect on the financial position, results
of operations or cash flows of the Company.
The Company has been identified as a potentially responsible party
("PRP") at eight sites that are under the jurisdiction of the United
States Environmental Protection Agency or the New York State
Department of Environmental Conservation ("DEC"). The Company's
exposure for material loss contingencies for the remediation of
five of these sites is considered remote at this time. The Company's
exposure for loss contingencies for the remediation of two of the
sites is not estimable at this time, as no estimated range of the
cost to remediate the sites is available, nor has the Company's share
percentage of these remediation costs been determined. Their effect
on the Company's financial position, results of operations or cash
flows is not determinable at this time. The Company is one of twenty
PRP's for purposes of site investigation and possible remediation at
the Pfohl Brothers Landfill. The DEC estimates the costs for this
remedial effort to be approximately $53 to $60 million. The Company
has entered into a preliminary participation agreement with ten other
companies to jointly negotiate with New York State to remediate the
site and to pursue non-participating entities. The Company's
exposure for loss contingencies for the remediation of the Pfohl
Brothers Landfill has been preliminarily estimated at 1.03% of the
$53-$60 million estimated cost to remediate the site, or in the range
7
<PAGE>
PART I. Item l. (continued)
7. Commitments, contingencies and legal matters (continued)
of $0.5 to $0.6 million. This preliminary share percentage is
subject to future review and negotiation. The Company reviews and
evaluates its exposure for environmental loss contingencies on a
quarterly basis. Approximately $1.1 million of loss contingencies
for environmental cleanup costs has been accrued at March 31, 1994
and is included in the above mentioned $1.6 million included in
Payrolls and other Liabilities.
The Company is being investigated by U.S. Customs Service for alleged
customs violations. The Company is fully cooperating with the review
and does not anticipate a material adverse outcome.
8
<PAGE>
Part I. Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
Results of Operations -
Manufacturing operations resulted in a profit of $3,826,000 compared to
$1,671,000 in the first quarter of 1993, an increase of 129%. North
American operations improved as operating income increased to $4,466,000
from $899,000 in 1993. The improvement in North American earnings was
primarily due to increased pricing and sales volume. United Kingdom
operations worsened as an 11% decrease in sales volume resulted in an
operating loss of $619,000 compared to operating income of $456,000 in
1993. Australian operations incurred an operating loss of $21,000
compared to operating income of $316,000 in 1993 as sales volumes to
North American operations were reduced.
Sales increased $14,710,000 or 18.3%. The sales increase occurred in the
North American operations, partially offset by a sales decrease in the
United Kingdom (U.K.) operations. North American sales increased 23%
primarily due to an increase in original equipment market shipments.
Cost of goods sold (COGS) increased $13,668,000, or 19.3%. COGS was
88.5% of sales as compared to 87.7% in the first quarter of 1993. The
increase as a percentage of net sales of 0.8% was due to decreased
margins in U.K. and Australian operations partially offset by higher
margins in North American operations.
Selling, general and administrative expenses decreased $1,113,000 from
the first quarter of 1993 primarily due to decreased research and
development expenses and distribution expenses.
Interest expense decreased $36,000 as lower debt levels were offset by
higher interest rates.
9
<PAGE>
PART l. Item 2. (continued)
Liquidity and Capital Resources -
Operating activities provided $16,300,000 of cash flows primarily
from accounts receivable and inventory reductions, investments in capital
expenditures totaled $3,600,000 while financing activities consumed
$9,900,000 of cash as debt levels were decreased.
The Company has total credit facilities of $65,100,000 with credit
available under these lines of $17,600,000 at March 31, 1994. In North
America, the Company has credit facilities of $51,000,000. The North
American revolving credit facility provides for borrowings of up to
$42,000,000 to the extent of available collateral and is secured by
accounts receivable and inventory. Availability under this facility at
March 31, 1994 was $14,800,000. The Company's U.K. subsidiary currently
has 8,000,000 pounds sterling or approximately $11,800,000 in financings,
both unsecured and secured. Availability under these debt agreements at
March 31, 1994 was approximately 400,000 pounds sterling or approximately
$600,000. The Company's Australian subsidiary has financing facilities
of $3,300,000 Australian dollars or approximately $2,300,000.
Availability under these credit facilities at March 31, 1994 was
$3,200,000 Australian dollars or approximately $2,200,000.
Expenditures for the current portion of restructuring liabilities
will total $3,200,000. The Company expects capital expenditures over the
next twelve months to be in the range of $12 million to $15 million. The
Company is seeking to finance $5,000,000 to $9,000,000 of these
expenditures by obtaining long-term financing secured by new machinery
and equipment. The balance is expected to be funded from operations, the
existing credit facilities, and proceeds realized from the sale of the
U.K. land. See note 7 to the Consolidated Financial Statements for a
discussion of contingent items.
The Company entered into a contract in September 1993 for the sale of
its nine acres of land in London for 11,000,000 pounds sterling or
$16,300,000. The contract is contingent upon obtaining governmental
10
<PAGE>
PART l. Item 2. (continued)
Liquidity and Capital Resources -
approval to rezone the property from industrial to non-food retail park
use. The local planning board has declined to approve the initial
planning and the Company is appealing this decision. The Company expects
its appeal to prevail. Upon satisfaction of the contingency to the
contract of sale, the Company expects the gain on the sale of the land to
offset the deferred restructuring expenses of 10,960,000 pounds sterling
or $16,276,000 included in current assets.
In the first quarter of 1994, the Company renegotiated pricing on
certain unprofitable or low margin original equipment and replacement
market products. Cash flow generated from repricing, operations and cash
obtained from credit facilities are the Company's primary sources of
cash. Additionally, the Company anticipates generating cash from the
sale of its land in the United Kingdom. Management expects cash from
operations and existing credit facilities will be sufficient to meet
capital requirements and other planned commitments over the next twelve
months. Management expects to be able to borrow the excess of long-term
cash requirements over cash from operations and existing credit
facilities.
11
<PAGE>
PART II. Other Information
Item 1. Legal Proceedings
On or about April 11, 1994, Registrant was served in an
action commenced in New York Supreme Court, County of Erie, entitled
Robert W. Pfohl et al v. Amax, Inc. et al and filed on November 12,
1993. Plaintiffs who brought the action are property owners adjacent to
the Pfohl Brothers Landfill site (a New York State Department of
Environmental Conservation superfund site) where Registrant and the other
defendants are PRP's at the site. Plaintiffs seek personal and property
damages of approximately $11.9 million.
Item 2. Changes in Securities
None
Item 3. Default upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
12
<PAGE>
PART II. Other Information
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.
TRICO PRODUCTS CORPORATION
Date: 4/28/94 /s/ Christopher T. Dunstan
Christopher T. Dunstan,
Vice Chairman, Senior Vice
President Finance and
Administration, CFO
Date: 4/28/94 /s/ Eric B. Brooks
Eric B. Brooks,
Controller
(Chief Accounting Officer)
13
