-----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, QamIo/sMKu2QBiHBhzE8A+tLbD9/Gg84Jns58eNcSiQ9cFz5WSWKE24vJbWwGuqm 3zxt4EkGb51oXZLYByVcLw== /in/edgar/work/0000950152-00-007855/0000950152-00-007855.txt : 20001114 0000950152-00-007855.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950152-00-007855 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METATEC INTERNATIONAL INC CENTRAL INDEX KEY: 0000203200 STANDARD INDUSTRIAL CLASSIFICATION: [3652 ] IRS NUMBER: 311647405 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-09220 FILM NUMBER: 761887 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: METATEC CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SILCO INVESTORS CORP DATE OF NAME CHANGE: 19900801 10-Q 1 l84669ae10-q.txt METATEC INTERNATIONAL, INC. 10-Q 1 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 September 30, 2000 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 INTERNATIONAL, INC. (Exact name of Registrant as specified in its charter) OHIO 31-1647405 (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 8, 2000: 6,096,113 Page 1 of 12 2 METATEC INTERNATIONAL, INC. ---------------------------
INDEX PAGE ----- ---- Part I : Financial Information Item 1 - Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2000 (unaudited) and December 31, 1999 3 Condensed Consolidated Statements of Operations for the three months ended September 30, 2000 and 1999 (unaudited) 4 Condensed Consolidated Statements of Operations for the nine months ended September 30, 2000 and 1999 (unaudited) 5 Condensed Consolidated Statement of Shareholders' Equity for the nine months ended September 30, 2000 (unaudited) 6 Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 (unaudited) 7 Notes to Condensed Consolidated Financial Statements (unaudited) 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 Item 3 - Quantitative and Qualitative Disclosures about Market Risk 11 Part II: Other Information Items 1-6 12 Signatures 12
Page 2 of 12 3
METATEC INTERNATIONAL, INC. (Unaudited) CONDENSED CONSOLIDATED BALANCE SHEETS September 30, At December 31, 2000 1999 - --------------------------------------------------------------------------------------- ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 315,401 $ 1,695,884 Accounts receivable, net of allowance for doubtful accounts of $397,000 and $490,000 16,715,818 20,628,847 Inventory 2,985,202 3,671,639 Prepaid expenses 1,788,672 1,285,200 Deferred income taxes 230,000 1,784,000 ------------- ------------- Total current assets 22,035,093 29,065,570 Property, plant and equipment - net 57,118,358 63,748,238 Goodwill - net 16,612,636 18,380,164 Other Assets 312,798 213,781 ------------- ------------- TOTAL ASSETS $ 96,078,885 $ 111,407,753 ============= ============= LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,910,000 $ 12,663,558 Accrued royalties 3,028,499 1,749,508 Accrued personal property taxes 974,543 1,241,638 Other accrued expenses 1,189,562 1,927,464 Accrued payroll 636,181 1,384,775 Unearned income 192,849 195,975 Current maturities of long-term debt and capital lease obligations 6,997,028 6,999,850 ------------- ------------- Total current liabilities 20,928,661 26,162,768 Long-term debt and capital lease obligations, less current maturities 38,153,268 45,501,868 Other long-term liabilities 525,950 450,925 Deferred income taxes 174,000 1,430,000 ------------- ------------- Total liabilities 59,781,879 73,545,561 ------------- ------------- Shareholders' equity: Common stock - no par value; authorized 10,000,000 shares; issued 2000 - 7,177,855, 1999 - 7,157,355 shares 34,981,138 34,949,138 Retained earnings 8,974,591 9,959,256 Accumulated other comprehensive loss (1,836,186) (1,223,665) Treasury stock, at cost - 1,081,742 shares (5,822,537) (5,822,537) ------------- ------------- Total shareholders' equity 36,297,006 37,862,192 ------------- ------------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 96,078,885 $ 111,407,753 ============= =============
Page 3 of 12 4 METATEC INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended September 30, ---------------------------- 2000 1999 - --------------------------------------------- ------------ ------------ NET SALES $ 26,351,076 $ 28,152,547 Cost of sales 19,442,686 21,302,999 ------------ ------------ Gross profit 6,908,390 6,849,548 Selling, general and administrative expenses 6,989,379 8,622,512 ------------ ------------ OPERATING LOSS (80,989) (1,772,964) Other income (expense): Investment income 2,881 1,684 Interest expense (1,042,518) (843,497) ------------ ------------ LOSS BEFORE INCOME TAXES (1,120,626) (2,614,777) Income tax benefit (234,000) (986,000) ------------ ------------ NET LOSS $ (886,626) $ (1,628,777) ============ ============ NET LOSS PER COMMON SHARE Basic $ (0.15) $ (0.27) ============ ============ Diluted $ (0.15) $ (0.27) ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING Basic 6,087,771 6,075,613 ============ ============ Diluted 6,087,771 6,092,748 ============ ============
See notes to condensed consolidated financial statements. Page 4 of 12 5 METATEC INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Nine Months Ended September 30, ----------------------------- 2000 1999 - ------------------------------------------- ------------ ------------ NET SALES $ 80,166,339 $ 88,709,301 Cost of sales 57,780,275 64,235,856 ------------ ------------ Gross profit 22,386,064 24,473,445 Selling, general and administrative expenses 20,024,690 24,236,797 Restructuring expenses 430,561 0 ------------ ------------ OPERATING EARNINGS 1,930,813 236,648 Other income (expense): Investment income 24,530 23,357 Interest expense (3,251,008) (2,271,612) ------------ ------------ LOSS BEFORE INCOME TAXES (1,295,665) (2,011,607) Income tax benefit (311,000) (684,000) ------------ ------------ NET LOSS $ (984,665) $ (1,327,607) ============ ============ NET LOSS PER COMMON SHARE Basic $ (0.16) $ (0.22) ============ ============ Diluted $ (0.16) $ (0.22) ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING Basic 6,081,863 6,074,634 ============ ============ Diluted 6,081,863 6,124,156 ============ ============ See notes to condensed consolidated financial statements. Page 5 of 12 6 METATEC INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
Common Retained Acuumulated Other Treasury Stock Earnings Comprehensive Loss Stock Total - ------------------------------------------------- ------------ ------------ ------------ ------------ ------------ BALANCE AT DECEMBER 31, 1999 $ 34,949,138 $ 9,959,256 $ (1,223,665) $ (5,822,537) $ 37,862,192 Comprehensive Loss: Net loss (984,665) (984,665) Foreign currency translation adjustments (612,521) (612,521) ------------ Comprehensive loss (1,597,186) Stock options exercised 32,000 32,000 ------------ ------------ ------------ ------------ ------------ BALANCE AT SEPTEMBER 30, 2000 $ 34,981,138 $ 8,974,591 $ (1,836,186) $ (5,822,537) $ 36,297,006 ============ ============ ============ ============ ============
See notes to consolidated financial statements. Pages 6 of 12 7 METATEC INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the nine months ended September 30, 2000 1999 - ------------------------------------------------------------- ----------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) $ (984,665) $ (1,327,607) Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 10,932,639 10,589,488 Net loss on sales of property, plant and equipment (148,917) (1,873) Changes in assets and liabilities: Accounts receivable 3,847,499 1,292,785 Inventory 650,511 (811,203) Prepaid expenses and other assets 860,029 (1,100,307) Accounts payable and accrued expenses (5,010,662) (341,175) Unearned income 13,830 255,775 ------------ ------------ Net cash provided by operating activities 10,160,264 8,555,883 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (4,456,030) (17,405,780) Proceeds from the sales of property, plant and equipment 126,250 200,750 Net cash used for acquisition (374,124) ------------ ------------ Net cash used in investing activities (4,329,780) (17,579,154) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Increase in long-term debt 4,139,597 9,508,383 Payment of long-term debt and capital lease obligations (11,491,024) (813,581) Stock options exercised 32,000 11,213 ------------ ------------ Net cash provided by (used in) financing activities (7,319,427) 8,706,015 ------------ ------------ Effect of exchange rate on cash 108,460 (3,435) Decrease in cash and cash equivalents (1,380,483) (320,691) Cash and cash equivalents at beginning of period 1,695,884 2,557,221 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 315,401 $ 2,236,530 ============ ============ SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $ 3,235,289 $ 2,718,740 ============ ============ Income taxes paid $ 147,835 $ 99,849 ============ ============ Assets purchased by the assumption of a liability $ 403,222 $ 1,433,097 ============ ============
See notes to condensed consolidated financial statements. Page 7 of 12 8 METATEC INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION - The consolidated balance sheet as of September 30, 2000, the consolidated statements of operations for the three and nine months ended September 30, 2000 and 1999, the consolidated statement of shareholders' equity for the nine months ended September 30, 2000, and the consolidated statements of cash flows for the nine month ended September 30, 2000 and 1999 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 accounting principles generally accepted in the United States of America, 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, 1999 annual report on Form 10-K. The results of operations for the period ended September 30, 2000 are not necessarily indicative of the results for the full year. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 AND THE NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1999 RESULTS OF OPERATIONS Net sales for the three months ended September 30, 2000 were $26,351,000, a decrease of $1,801,000, or 6% over the same period of the prior year. This decrease resulted primarily from CD-ROM manufacturing sales decreasing $2,182,000 to $24,443,000 for the three months ended, or 9%. This decrease was primarily the result of the Company's emphasis on higher margin product, and reduction in lower margin sales. DVD sales accounted for $472,000 during the three months ended September 30, 2000, as compared to $114,000 for the same period in the prior year. Net sales for the nine months ended September 30, 2000 were $80,166,000, a decrease of $8,543,000, or 10% over the same period of the prior year. This decrease resulted primarily from CD-ROM manufacturing sales decreasing $7,810,000 to $75,303,000 for the nine months ended, or 9%. This decrease was primarily the result of the Company's emphasis on higher margin product, and reduction in lower margin sales, and, during early 2000, delayed software releases caused by Y2K concerns and the anticipated release of Windows 2000. Radio syndication sales decreased $359,000, to $2,553,000 for the nine months ended September 30, 2000, a decrease of 12% from the same period in the prior year, primarily as a result of some customers choosing to use CD-Recordable as a distribution method for smaller size orders. The Company expects this trend to continue in the foreseeable future. DVD sales accounted for $1,417,000 during the nine months ended September 30, 2000, as compared to $306,000 for the same period in the prior year. Page 8 of 12 9 Gross profit was 26% of net sales for the three months ended September 30, 2000 as compared to 24% of net sales for the same period of the prior year. This increase was primarily attributed to the reduction in lower margin sales. Gross profit was 28% of net sales for the nine months ended September 30, 2000 as compared to 28% of net sales for the same period of the prior year. Selling, general and administrative ("SG&A") expenses were $6,989,000, or 27% of net sales, for the three months ended September 30, 2000 as compared to $8,623,000, or 31% of net sales, for same period of the prior year. This expense reduction was primarily attributed to restructuring and work force reductions which occurred in the quarter ended March 31, 2000. SG&A expenses were $20,025,000, or 25% of net sales, for the nine months ended September 30, 2000 as compared to $24,237,000, or 27% of net sales, for same period of the prior year. This expense reduction was primarily attributed to restructuring and work force reductions which occurred in the quarter ended March 31, 2000. Interest expense for the three months ended September 30, 2000 was $1,043,000 as compared to $843,000 for the same period of the prior year. Interest expense for the nine months ended September 30, 2000 was $3,251,000 as compared to $2,272,000 for the same period of the prior year. The increase in interest expense was due to increased borrowings under revolving loan and term loan facilities, as well as increases in interest rates. The income tax benefit was $234,000 for the three months ended September 30, 2000, or an effective tax benefit of 21%, as compared to a tax benefit of $986,000 for the same period of the prior year, or an effective tax benefit of 38%. This decrease in the income tax rate is mainly due to non-deductible goodwill. The income tax benefit was $311,000 for the nine months ended September 30, 2000, as compared to a tax benefit of $684,000 for the same period of the prior year. As a result of the foregoing, net losses for the three months ended September 30, 2000 were $887,000, or net losses per common share of $.15, as compared to net losses in the same period of the prior year of $1,629,000, or net losses per common share of $.27. Net losses for the nine months ended September 30, 2000 were $985,000, or net losses per common share of $.16, as compared to net losses in the same period of the prior year of $1,328,000, or net losses per common share of $.22. FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES The Company financed its business during the nine months ended September 30, 2000 through cash generated from operations, the use of debt, and the use of available cash balances. Cash flow from operating activities was $10,160,000 for the nine months ended September 30, 2000, as compared to $8,556,000 for the nine months ended September 30, 1999. The Company had cash and cash equivalents of $315,000 as of September 30, 2000. Page 9 of 12 10 The Company has a term loan facility and a revolving loan facility (the "Credit Facilities") with Huntington National Bank and Bank One, N.A. In March 2000, the Credit Facilities were modified, with the revolving loan facility being reduced from $20,000,000 to $13,000,000 and the term loan facility being increased to $21,250,000. As of September 30, 2000, $9,000,000 was outstanding under the revolving loan facility. The revolving loan facility is payable September 11, 2003, and the term loan facility matures on September 30, 2003. The following is a summary of the other terms of the Credit Facilities. The term loan facility is payable in monthly principal payments which escalate over the term of the loan. The term loan facility and a portion of the revolving loan facility were used to finance the purchase of the assets of the CD-ROM services business acquired from Imation Corporation. Borrowings under the Credit Facilities bear interest, at the Company's option, at either the federal funds rate plus 50 basis points or prime rate plus the alternative base rate margin (whichever of the two is higher), or the London Interbank Offered Rate (LIBOR) plus a margin based upon the Company's debt coverage ratio (which ranges from not less than 100 basis points to not more than 325 basis points). The Credit Facilities are secured by a first lien on all non-real estate business assets of the Company and a pledge of the stock of the Company's subsidiaries. The Company is required to comply with certain financial and other covenants. The Company was not in compliance with several of its financial covenants as of September 30, 2000, and the bank has waived compliance with these covenants through September 30, 2000. The banks have agreed to modify the financial covenants. The Company anticipates being in compliance with the amended covenants through the remainder of 2000. The Company has a $19,000,000 loan facility with Huntington Capital Corp which is payable in monthly principal and interest payments based upon a thirty year amortization schedule and bears interest at a fixed rate of 8.2%. This term loan facility was used to permanently finance the Company's Dublin, Ohio distribution center and to pay down other bank debt. This loan facility is payable in monthly installments over 10 years, with a 30 year amortization period, and is secured by a first lien on all real property of the Company and letters of credit in favor of the lender, in an aggregate amount of $1,650,000. Management believes that current cash balances, plus the funds available under its current credit facilities, 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 historical information, all other statements made in this report are "forward-looking" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause the Company's actual results to differ Page 10 of 12 11 materially from those projected. Such risks and uncertainties that might cause such a difference include, but are not limited to, changes in general business and economic conditions, changes in demand for CD-ROM products, excess capacity levels in the CD-ROM industry, the introduction of new products by competitors, increased competition (including pricing pressures), changes in manufacturing efficiencies, changes in technology, and other risks indicated in the company's filings with the Securities and Exchange Commission, including Form 10-K for Metatec's year ended December 31, 1999. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. There is no change in the quantitative and qualitative disclosures about the Company' market risk from the disclosures contained in the Company's Form 10-K for its fiscal year ended December 31, 1999. Page 11 of 12 12 PART II - OTHER INFORMATION Items 1-3. Inapplicable. ------------- Items 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- Inapplicable. Item 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, 2000. 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 International, Inc. /s/ Julia A. Pollner BY: Julia A. Pollner Date: November 13, 2000 Senior Vice President, Finance (authorized signatory- principal financial and accounting officer) Page 12 of 12 13 Form 10-Q Exhibit Index Exhibit Number Exhibit Description Page Number - -------------- ------------------- ----------- 27 Financial Data Schedule -- EX-27 2 l84669aex27.txt EXHIBIT 27
5 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 315,401 0 17,112,818 397,000 2,985,202 22,035,093 104,399,259 (47,280,901) 96,078,885 20,928,662 38,853,218 0 0 34,981,137 1,315,868 96,078,885 80,166,339 80,166,339 57,780,275 78,235,526 0 258,301 3,251,008 (1,295,665) (311,000) (984,665) 0 0 0 (984,665) (0.16) (0.16)
-----END PRIVACY-ENHANCED MESSAGE-----