-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OfztNHOEeQ/rkfd2adPUao2AT4Nk55/bvLBuNo5mQk81q5qwP+fcDAJR/vHwOoPp MIwMW/ilaX6UgogsddIT9w== 0000950152-97-007660.txt : 19971107 0000950152-97-007660.hdr.sgml : 19971107 ACCESSION NUMBER: 0000950152-97-007660 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971106 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: METATEC CORP CENTRAL INDEX KEY: 0000203200 STANDARD INDUSTRIAL CLASSIFICATION: PHONOGRAPH RECORDS & PRERECORDED AUDIO TAPES & DISKS [3652] IRS NUMBER: 591698890 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-09220 FILM NUMBER: 97709103 BUSINESS ADDRESS: STREET 1: 7001 METATEC BLVD CITY: DUBLIN STATE: OH ZIP: 43017 BUSINESS PHONE: 6147612000 MAIL ADDRESS: STREET 1: 7001 METATEC BLVD CITY: DUBLIN STATE: OH ZIP: 43017 FORMER COMPANY: FORMER CONFORMED NAME: SILCO INVESTORS CORP DATE OF NAME CHANGE: 19900801 10-Q 1 METATEC CORPORATION QUARTERLY REPORT FORM 10-Q 1 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 September 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 No. 0-9220 METATEC CORPORATION (Exact name of Registrant as specified in its charter) FLORIDA 59-1698890 (State of Incorporation) (IRS Employer Identification No.) 7001 Metatec Boulevard Dublin, Ohio 43017 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (614) 761-2000 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Number of Common Shares outstanding as of November 6, 1997: 6,418,923 1 of 11 2 METATEC CORPORATION -------------------
INDEX PAGE ----- ---- Part I : Financial Information Item 1 - Financial Statements Condensed Consolidated Balance Sheets as of September 30, 1997 (unaudited) and December 31, 1996 3 Condensed Consolidated Statements of Earnings for the three months ended September 30, 1997 and 1996 (unaudited) 4 Condensed Consolidated Statements of Earnings for the nine months ended September 30, 1997 and 1996 (unaudited) 5 Condensed Consolidated Statement of Shareholders' Equity for the nine months ended September 30, 1997 (unaudited) 6 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1997 and 1996 (unaudited) 7 Notes to Condensed Consolidated Financial Statements (unaudited) 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9-10 Item 3 - Quantitative and Qualitative Disclosures about Market Risk 10 Part II: Other Information Items 1-6 11 Signatures 11
2 of 11 3 PART I - FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS
METATEC CORPORATION (Unaudited) CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 1997 1996 - --------------------------------------------------------------------------------------- ------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 185,027 $ 2,214,755 Accounts receivable, net of allowance for doubtful accounts of $297,000 and $321,000 6,013,358 6,710,596 Inventory 928,272 948,738 Prepaid expenses 345,949 435,451 Prepaid income taxes -- 25,279 Current portion of long-term note receivable 363,202 13,202 Deferred income taxes 500,000 484,000 ----------- ----------- Total current assets 8,335,808 10,832,021 Long-term note receivable, less current portion 191,942 200,648 Property, plant and equipment - net 39,792,279 37,776,085 Goodwill - net 3,365,193 3,708,723 ----------- ----------- TOTAL ASSETS $51,685,222 $52,517,477 =========== =========== LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,698,137 $ 2,942,565 Accrued royalties 885,638 1,080,400 Accrued personal property taxes 611,828 659,879 Other accrued expenses 705,646 567,675 Accrued payroll 653,682 398,160 Accrued income taxes 203,994 Unearned income 115,030 205,143 Current maturities of long-term debt and capital lease obligations 103,181 62,759 ----------- ----------- Total current liabilities 5,977,136 5,916,581 Long-term debt and capital lease obligations, less current maturities 1,857,287 55,105 Deferred income taxes 1,300,000 1,280,000 ----------- ----------- Total liabilities 9,134,423 7,251,686 ----------- ----------- Shareholders' equity: Common stock, $.10 par value; authorized 10,083,500 shares; issued 1997 - 7,103,678 shares; 1996 - 7,073,353 710,369 707,336 Additional paid-in capital 34,083,300 33,935,853 Retained earnings 11,106,494 10,891,243 Treasury stock, at cost; 1997 - 605,755 shares; 1996 - 38,655 shares (3,349,364) (268,641) ----------- ----------- Total shareholders' equity 42,550,799 45,265,791 ----------- ----------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $51,685,222 $52,517,477 =========== ============
See notes to condensed consolidated financial statements. Page 3 of 11 4 METATEC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended September 30, -------------------------------- 1997 1996 - --------------------------------------------------- ----------- ----------- NET SALES $11,890,865 $10,804,766 Cost of sales 8,488,793 7,313,126 ----------- ----------- Gross profit 3,402,072 3,491,640 Selling, general and administrative expenses 3,291,893 3,353,586 ----------- ----------- OPERATING EARNINGS 110,179 138,054 Other income and (expense): Investment income 12,925 89,504 Other - net 67,344 3,642 Interest expense (18,213) (10,720) ----------- ----------- EARNINGS BEFORE INCOME TAXES 172,235 220,480 Income taxes 120,500 89,000 ----------- ----------- NET EARNINGS $ 51,735 $ 131,480 =========== =========== NET EARNINGS PER COMMON SHARE $ 0.01 $ 0.02 =========== =========== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 6,773,821 7,152,148 =========== ===========
See notes to condensed consolidated financial statements. Page 4 of 11 5 METATEC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Nine Months Ended September 30, ------------------------------- 1997 1996 - ---------------------------------------------- ----------- ----------- NET SALES $35,577,371 $33,984,238 Cost of sales 24,557,702 21,307,560 ----------- ----------- Gross profit 11,019,669 12,676,678 Selling, general and administrative expenses 10,371,528 9,997,948 Restructuring expenses 206,000 0 ----------- ----------- OPERATING EARNINGS 442,141 2,678,730 Other income and (expense): Investment income 36,237 255,687 Other - net 23,725 (14,546) Interest expense (29,852) (16,193) ----------- ----------- EARNINGS BEFORE INCOME TAXES 472,251 2,903,678 Income taxes 257,000 1,179,000 ----------- ----------- NET EARNINGS $ 215,251 $ 1,724,678 =========== =========== NET EARNINGS PER COMMON SHARE $ 0.03 $ 0.24 =========== =========== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 7,128,270 7,166,207 =========== ===========
See notes to condensed consolidated financial statements. Page 5 of 11 6 METATEC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
Additional Common Paid-in Retained Treasury Stock Capital Earnings Stock Total - ------------------------------ -------- ----------- ----------- ------------ ------------ BALANCE AT DECEMBER 31, 1996 $707,336 $33,935,853 $10,891,243 $ (268,641) $45,265,791 Net earnings 215,251 215,251 Stock options exercised 2,471 121,033 123,504 Stock awards for employees 562 26,414 26,976 Treasury shares acquired (3,080,723) (3,080,723) -------- ----------- ----------- ----------- ----------- BALANCE AT SEPTEMBER 30, 1997 $710,369 $34,083,300 $11,106,494 $(3,349,364) $42,550,799 ======== =========== =========== =========== ===========
See notes to condensed consolidated financial statements. Page 6 of 11 7 METATEC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the nine months ended September 30, 1997 1996 - ------------------------------------------------------------- ---------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 215,251 $ 1,724,678 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 5,869,454 5,143,929 Deferred income taxes 4,000 877,000 Net loss on sales of property, plant and equipment 49,191 27,154 Changes in assets and liabilities: Accounts receivable 697,238 1,030,241 Inventory 20,465 (106,689) Prepaid expenses and other assets 114,781 79,370 Accounts payable and accrued expenses 450,423 (1,195,598) Unearned income (90,114) (285,168) ----------- ----------- Net cash provided by operating activities 7,330,689 7,294,917 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Decrease (increase) in long-term note receivable (341,294) 9,205 Purchase of property, plant and equipment (8,012,214) (8,755,772) Proceeds from the sales of property, plant and equipment 80,734 3,939 ----------- ----------- Net cash used in investing activities (8,272,774) (8,742,628) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in long-term debt 1,928,576 0 Payment of long-term debt and capital lease obligations (85,974) (61,004) Stock options exercised, including tax benefit 123,504 103,305 Treasury stock acquired (3,080,724) 0 Stock awards for employees 26,975 11,766 ----------- ----------- Net cash (used in) provided by financing activities (1,087,643) 54,067 ----------- ----------- Decrease in cash and cash equivalents (2,029,728) (1,393,644) Cash and cash equivalents at beginning of period 2,214,755 5,898,928 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 185,027 $ 4,505,284 =========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $ 24,736 $ 16,193 =========== =========== Income taxes paid $ 121,100 $ 1,148,357 =========== =========== Assets purchased for the assumption of a liability $ 147,480 $ 0 =========== ===========
See notes to condensed consolidated financial statements. Page 7 of 11 8 METATEC CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of presentation - The consolidated balance sheet as of September 30, 1997, the consolidated statements of earnings for the three and nine months ended September 30, 1997 and September 30, 1996, the consolidated statement of shareholders' equity for the nine months ended September 30, 1997, and the consolidated statements of cash flows for the nine month periods then ended have been prepared by the Company, without audit. In the opinion of management, all adjustments, which consist solely of normal recurring adjustments, necessary to present fairly, in accordance with generally accepted accounting principles, the financial position, results of operations and changes in cash flows for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's December 31, 1996 annual report on Form 10-K. The results of operations for the period ended September 30, 1997 are not necessarily indicative of the results for the full year. 2. Property, Plant and Equipment Commitments - The Company has commitments under contracts for the purchase of property, plant, and equipment. Portions of such contracts not completed as of September 30, 1997 are not reflected in the consolidated financial statements. The unrecorded commitments amounted to approximately $2,468,000 at September 30, 1997. This amount represents manufacturing equipment on order. 3. Recently Issued Accounting Standard - In February 1997, The Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings Per Share," which is effective for periods ending after December 15, 1997. SFAS No. 128 establishes new standards for computing and presenting earnings per share. Under SFAS No. 128 basic and dilutive earnings per share, as defined therein, for the three and nine month periods ended September 30, 1997 and 1996 are as follows:
Three Months Ended September 30, Nine months ended September 30, 1997 1996 1997 1996 ----- ----- ----- ----- Basic $0.01 $0.02 $0.03 $0.24 ===== ===== ===== ===== Diluted $0.01 $0.02 $0.03 $0.24 ===== ===== ===== =====
In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"). "Reporting Comprehensive Income," which will require adoption no later than the Company's fiscal quarter ended March 31, 1998. This new statement defines comprehensive income as "all changes in equity during a period, with the exception of stock issuances and dividends". The new pronouncement establishes standards for the reporting and display of comprehensive income and its components in the financial statements. In June 1997, the FASB also issued Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related Information", which will require adoption no later than 1998. SFAS 131 requires companies to report financial and descriptive information about its reportable operating segments. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. Based on current operations, the Company does not believe the Statement will be applicable. 8 of 11 9 METATEC CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net sales for the three months ended September 30, 1997 were $11,891,000, an increase of $1,086,000, or 10% over the same period of the prior year. This increase resulted primarily from the Manufacturing Services Group, which includes CD-ROM and Radio Syndication manufacturing, increasing $1,576,000 to $11,521,000 for the three months ended September 30, 1997, or 16% over the same period of the prior year. Net sales for the Access Services Group, previously reported as the New Media Solutions Group, decreased $490,000 to $370,000, or a 57% decrease from the three months ended September 30, 1996. This combined net sales increase was primarily as a result of a continued growing CD-ROM manufacturing market which resulted in an increase in volume. The Company continued its focus on the business and information services CD-ROM market. Net sales for the nine months ended September 30, 1997 were $35,577,000, an increase of $1,593,000, or 5% over the same period of the prior year. This increase resulted primarily from the Manufacturing Services Group, which includes CD-ROM and Radio Syndication manufacturing, increasing $3,876,000 to $34,359,000 for the nine months ended September 30, 1997, or 13% over the same period of the prior year. Net sales for the Access Services Group, previously reported as the New Media Solutions Group, decreased $2,283,000 to $1,218,000, or a 65% decrease from the nine months ended September 30, 1996. This combined net sales increase was primarily as a result of a continued growing CD-ROM manufacturing market which resulted in an increase in volume. Gross profit was 29% of net sales for the three months ended September 30, 1997 as compared to 32% of net sales for the same period of the prior year. This decrease is primarily attributed to price erosion and mix change which contributed to a lower gross profit percentage in 1997 as compared to 1996. Gross profit was 31% of net sales for the nine months ended September 30, 1997 as compared to 37% of net sales for the same period of the prior year. Selling, general and administrative ("SG&A") expenses increased to $3,292,000, or 28% of net sales, for the three months ended September 30, 1997 as compared to $3,354,000, or 31% of net sales, for same period of the prior year. SG&A expenses increased to $10,372,000, or 29% of net sales, for the nine months ended September 30, 1997 as compared to $9,998,000, or 29% of net sales, for same period of the prior year. The nine months ended September 30, 1997 included a restructuring charge of $206,000 related to continuing operations. This charge related to a reorganization and downsizing of the Access Services Group. Investment income was $13,000 and $90,000 for the three month periods ended September 30, 1997 and 1996, respectively. Investment income was $36,000 and $256,000 for the nine month periods ended September 30, 1997 and 1996, respectively. This decrease is the result of lower cash and cash equivalent balances and lower investment earnings rates on those balances in 1997. Interest expense for the three months ended September 30, 1997 was $18,000 as compared to $11,000 for the same period of the prior year. Interest expense for the nine months ended September 30, 1997 was $30,000 as compared to $16,000 for the same period of the prior year. The increase in interest expense was due to borrowing under a revolving line of credit. Page 9 of 11 10 METATEC CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED) The income tax expense was $121,000 for the three months ended September 30, 1997, or an effective tax rate of 70%, as compared to a tax expense of $89,000 for the same period of the prior year, or an effective tax rate of 40%. The income tax expense was $257,000 for the nine months ended September 30, 1997, as compared to a tax expense of $1,179,000 for the same period of the prior year. The 1997 provision reflects the impact of non-deductible goodwill for tax purposes. Net earnings for the three months ended September 30, 1997 were $52,000, or net earnings per common share of $.01, as compared to net earnings in the same period of the prior year of $131,000, or net earnings per common share of $.02. Net earnings for the nine months ended September 30, 1997 were $215,000, or net earnings per common share of $.03, as compared to net earnings in the same period of the prior year of $1,725,000, or net earnings per common share of $.24. The net earnings decrease was primarily a result of the change in product focus, and resulting decreased revenues, within the Access Services Group. FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES The Company financed its business during the nine months ended September 30, 1997 through cash generated from operations and available cash balances and through the use of debt. Cash flow from operating activities was $7,331,000 for the nine months ended September 30, 1997, as compared to $7,295,000 for the nine months ended September 30, 1996. The Company, in the nine month period ended September 30, 1997, continued to increase its manufacturing capacity over the 1996 level. The capacity increase along with recurring capital needs resulted in cash paid for the purchase of $8,012,000 in property, plant and equipment during the nine months ended September 30, 1997. The Company has commitments under contracts for the purchase of manufacturing equipment on order. The unrecorded commitments amounted to approximately $2,468,000 at September 30, 1997. During the three months ended September 30, 1997, the Company entered an agreement to provide working capital financing to a key supplier. The Company has cash and cash equivalents of $185,000 as of September 30, 1997. Additionally the Company has available $15,000,000 under its revolving line of credit agreement, of which $1,750,000 was outstanding as of September 30, 1997. Management believes that current cash balances, plus the funds available from the revolving line of credit agreement, plus cash to be generated from future operations should provide sufficient capital to meet the current business needs of the Company for the foreseeable future. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Except for the historical information in this report, this report includes forward-looking statements that involve risks and uncertainties, including, but not limited to, economic and competitive factors affecting the Company's operations, markets, products, prices, technological changes, manufacturing efficiencies, and other factors discussed from time to time in the Company's Security and Exchange Commission filings, including the Company's Form 8-K filed April 18, 1996, and it's Form 10-K for the year ended December 31, 1996. Actual results may differ materially from management expectations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. Disclosure not currently required. Page 10 of 11 11 PART II - OTHER INFORMATION --------------------------- Items 1-5. Inapplicable. ------------- Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits The exhibits on to this report begin on page ______. (b) No reports on Form 8-K have been filed during the quarter ended September 30, 1997. 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. Metatec Corporation /s/ Julia A. Pollner BY: Julia A. Pollner Date: November 6, 1997 Vice President, Finance and Treasurer (authorized signatory- principal financial and accounting officer) 11 of 11 12 Form 10-Q Exhibit Index
Exhibit Number Exhibit Description Page Number - -------------- ------------------- ----------- 27 Financial Data Schedule --
EX-27 2 EXHIBIT 27
5 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 185,027 0 6,310,358 297,000 928,272 8,335,808 59,959,027 (20,166,748) 51,685,222 5,977,136 3,157,287 0 0 710,369 41,840,430 51,685,222 35,577,371 35,577,371 24,557,702 35,135,230 0 (8,000) 29,852 472,251 257,000 215,251 0 0 0 215,251 0.03 0.03
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