-----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, WYWh4FFJ/UEPJ/ksr34LiszIoTC+jhUJnl9uUjgSoQ5v5bDyQGiD0PJbu9jXntyt Zc7EQR5XmzElyZ17nGV99g== 0000950152-96-003709.txt : 19960805 0000950152-96-003709.hdr.sgml : 19960805 ACCESSION NUMBER: 0000950152-96-003709 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960802 SROS: NASD 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: 1934 Act SEC FILE NUMBER: 000-09220 FILM NUMBER: 96603228 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 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 June 30, 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 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 July 31, 1996: 7,065,229 1 of 12 2 METATEC CORPORATION -------------------
INDEX PAGE ----- ---- Part I : Financial Information Item 1 - Financial Statements Consolidated Balance Sheets as of June 30, 1996 (unaudited) and December 31, 1995 3 Consolidated Statements of Earnings for the three months ended June 30, 1996 and 1995 (unaudited) 4 Consolidated Statements of Earnings for the six months ended June 30, 1996 and 1995 (unaudited) 5 Consolidated Statement of Shareholders' Equity for the six months ended June 30, 1996 (unaudited) 6 Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995 (unaudited) 7 Notes to Consolidated Financial Statements (unaudited) 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9 -11 Part II: Other Information Items 1-6 12 Signatures 12
2 of 12 3 METATEC CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) June 30, December 31, 1996 1995 - ----------------------------------------------------------------------------------- ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 5,930,492 $ 5,898,928 Accounts receivable, net of allowance for doubtful accounts of $335,000 and $338,000 5,595,030 6,281,460 Inventory 802,773 885,107 Prepaid expenses 568,345 606,271 Deferred income taxes 200,000 674,000 Current portion of long-term note receivable 12,374 12,374 ------------- ------------- Total current assets 13,109,014 14,358,140 Long-term note receivable, less current portion 208,792 213,851 Property, plant and equipment - net 32,604,243 31,337,322 Goodwill - net 3,937,743 4,166,763 ------------- ------------- TOTAL ASSETS $ 49,859,792 $ 50,076,076 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,278,918 $ 2,328,255 Accrued royalties 1,062,967 1,173,252 Accrued personal property taxes 595,570 541,228 Other accrued expenses 334,124 530,728 Accrued payroll 375,511 465,371 Accrued income taxes 0 444,008 Unearned income 57,792 370,421 Current maturities of long-term debt and capital lease obligations 62,193 75,859 ------------- ------------- Total current liabilities 3,767,075 5,929,122 Long-term debt and capital lease obligations, less current maturities 88,135 117,875 Deferred income taxes 1,007,000 728,000 ------------- ------------- Total liabilities 4,862,210 6,774,997 ------------- ------------- Shareholders' equity: Common stock, $.10 par value; authorized 10,083,500 shares; issued 1996 - 7,067,984 shares; 1995 - 7,054,734 shares 706,799 705,474 Additional paid-in capital 33,883,611 33,781,631 Retained earnings 10,443,713 8,850,515 Treasury stock, at cost - 2,755 shares (36,541) (36,541) ------------- ------------- Total shareholders' equity 44,997,582 43,301,079 ------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 49,859,792 $ 50,076,076 ============= =============
See notes to consolidated financial statements. 3 of 12 4 METATEC CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
For The Three Months Ended June 30, 1996 1995 - --------------------------------------------------------- ------------ ------------ NET SALES $ 10,975,017 $ 8,754,016 Cost of sales 6,967,938 5,092,568 ------------ ------------ Gross profit 4,007,079 3,661,448 Selling, general and administrative expenses 3,172,357 3,004,232 ------------ ------------ OPERATING EARNINGS 834,722 657,216 Other income and (expense): Investment income 97,836 53,353 Other - net 3,593 7,507 Interest expense (2,684) (123,581) ------------ ------------ EARNINGS BEFORE INCOME TAXES 933,467 594,495 Income taxes 384,000 226,600 ------------ ------------ NET EARNINGS $ 549,467 $ 367,895 ============ ============ NET EARNINGS PER COMMON SHARE $ 0.08 $ 0.06 ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 7,197,148 6,130,347 ============ ============
See notes to consolidated financial statements. 4 of 12 5 METATEC CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
For The Six Months Ended June 30, 1996 1995 - ------------------------------------------------------ ------------- ------------ NET SALES 23,179,472 $ 17,932,638 Cost of sales 13,994,434 10,226,522 ------------- ------------ Gross profit 9,185,038 7,706,116 Selling, general and administrative expenses 6,644,362 5,996,087 ------------- ------------ OPERATING EARNINGS 2,540,676 1,710,029 Other income and (expense): Investment income 166,183 75,002 Other - net (18,188) 3,134 Interest expense (5,473) (314,452) ------------- ------------ EARNINGS BEFORE INCOME TAXES 2,683,198 1,473,713 Income taxes 1,090,000 563,200 ------------- ------------ NET EARNINGS $ 1,593,198 $ 910,513 ============= ============ NET EARNINGS PER COMMON SHARE $ 0.22 $ 0.16 ============= ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 7,173,237 5,776,707 ============= ============
See notes to consolidated financial statements. 5 of 12 6 METATEC CORPORATION CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
Additional Common Paid-in Retained Treasury Stock Capital Earnings Stock Total - --------------------------------- --------- ------------ ------------ ---------- ------------ BALANCE AT DECEMBER 31, 1995 $ 705,474 $ 33,781,631 $ 8,850,515 $ (36,541) $ 43,301,079 Net earnings 1,593,198 1,593,198 Stock options exercised 1,325 101,980 103,305 --------- ------------ ------------ ---------- ------------ BALANCE AT JUNE 30, 1996 $ 706,799 $ 33,883,611 $ 10,443,713 $ (36,541) $ 44,997,582 ========= ============ ============ ========== ============
See notes to consolidated financial statements. 6 of 12 7 METATEC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the six months ended June 30, 1996 1995 - --------------------------------------------------------------------------------------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 1,593,198 $ 910,513 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 3,365,960 2,047,428 Deferred income taxes 753,000 12,000 Net loss on sales of property, plant and equipment 26,673 11,816 Changes in assets and liabilities: Accounts receivable 686,430 138,624 Inventory 82,334 (250,705) Prepaid expenses and other assets 37,926 (368,506) Accounts payable and accrued expenses (1,835,752) (593,152) Unearned income (312,629) (243,267) ------------ ------------ Net cash provided by operating activities 4,397,140 1,664,751 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in long-term note receivable 5,059 5,705 Purchase of property, plant and equipment (4,434,473) (4,683,529) Proceeds from the sale of property, plant and equipment 3,939 298,300 ------------ ------------ Net cash used in investing activities (4,425,475) (4,379,524) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payment of long-term debt and capital lease obligations (43,406) (8,383,117) Proceeds from issuance of stock 0 17,914,782 Stock options exercised 103,305 46,300 ------------ ------------ Net cash provided by financing activities 59,899 9,577,965 ------------ ------------ Increase in cash and cash equivalents 31,564 6,863,192 Cash and cash equivalents at beginning of year 5,898,928 2,167,518 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,930,492 $ 9,030,710 ============ ============ SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $ 5,473 $ 314,452 ============ ============ Income taxes paid $ 1,043,083 $ 529,619 ============ ============
See notes to consolidated financial statements. 7 of 12 8 METATEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION - The consolidated balance sheet as of June 30, 1996, the consolidated statements of earnings for the three and six months ended June 30, 1996 and June 30, 1995, the consolidated statement of shareholders' equity for the six months ended June 30, 1996, and the consolidated statements of cash flows for the six 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, 1995 annual report on Form 10-K. The results of operations for the period ended June 30, 1996 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 and equipment. Portions of such contracts not completed as of June 30, 1996 are not reflected in the consolidated financial statements. The unrecorded commitments amounted to approximately $344,000 at June 30, 1996. 3. RECENTLY ISSUED ACCOUNTING STANDARD - In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," which was effective for the Company beginning January 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based compensation arrangements with employees and encourages, but does not require, compensation costs to be measured based on the fair value of the equity instrument awarded. Companies are permitted, however, to continue to apply Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," which recognizes compensation costs based on the intrinsic value of the equity instrument awarded. The Company will continue to apply APB Opinion No. 25 to its stock based compensation awards to employees and will disclose annually the required pro forma effect on net earnings and earnings per share in a note to the financial statements. 8 of 12 9 METATEC CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net sales for the three months ended June 30, 1996 were $10,975,000, an increase of $2,221,000, or 25% over the same period of the prior year. This increase resulted primarily from the Manufacturing Services Group ("MSG"), which includes CD-ROM and Radio Syndication manufacturing, increasing $2,674,000 to $9,930,000 for the three months ended June 30, 1996, or 37% over the same period of the prior year. The CD-ROM sales within MSG accounted for 86% of MSG sales for the three months ended June 30, 1996 as compared to 81% of MSG sales in the same period of the prior year. The New Media Solutions Group, previously reported as Software Services and Publishing Services separately, decreased $453,000 to $1,045,000 for the three months ended June 30, 1996, or a 30% decrease as compared to the same period of the prior year. 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 six months ended June 30, 1996 were $23,179,000, an increase of $5,247,000, or 29% 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 $5,593,000 to $20,538,000 for the six months ended June 30, 1996, or 37% over the same period of the prior year. The CD-ROM sales within MSG accounted for 87% of MSG sales for the six months ended June 30, 1996 as compared to 82% of MSG sales in the same period of the prior year. The New Media Solutions Group, previously reported as Software Services and Publishing Services separately, decreased $346,000 to $2,641,000 for the six months ended June 30, 1996, or a 12% decrease as compared to the same period of the prior year. 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. Within the New Media Solutions Group the Company reports sales of NautilusCD, a monthly CD-ROM multimedia magazine. As previously reported in the Form 10Q filed for the quarterly period ended March 31, 1996, all of the current NautilusCD subscribers were and continue to be of the Macintosh version. The number of subscribers as of June 30, 1996 is under 3,000 and the Company has determined it will no longer separately report the NautilusCD activity, as quarterly net sales are less than $25,000. Gross profit was 37% of net sales for the three months ended June 30, 1996 as compared to 42% of net sales for the same period of the prior year and as compared to 42% of net Page 9 of 12 10 METATEC CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED) sales for the three months ended March 31, 1996. This decrease is primarily attributed to an under utilization of manufacturing capacity during the three month period ended June 30, 1996. This under utilization of capacity is a direct result of a more than doubling in the capacity during the prior twelve months. The Company increased capacity in the prior twelve months in anticipation of increased volume in 1996, which is evidenced by the current growth in sales. The Company operated at closer to capacity in the three months ended June 30, 1995 than in the three months ended June 30, 1996. This resulted in higher fixed costs in relation to net sales during the three months ended June 30, 1996. Gross profit for the six months ended June 30, 1996 was at 40%. Selling, general and administrative ("SG&A") expenses increased to $3,172,000, or 29% of net sales, for the three months ended June 30, 1996 as compared to $3,004,000, or 34% of net sales, for same period of the prior year. This increase of $168,000 is primarily attributed to increased personnel costs. SG&A expenses increased to $6,644,000, or 29% of net sales, for the six months ended June 30, 1996 as compared to $5,996,000, or 33% of net sales, for same period of the prior year. This increase of $648,000 is primarily attributed to increased personnel costs. Investment income was $98,000 and $53,000 for the three month periods ended June 30, 1996 and 1995, respectively. Investment income was $166,000 and $75,000 for the six month periods ended June 30, 1996 and 1995, respectively. The increases were a result of additional investment income from higher cash and cash equivalents balances. Other expense of $18,000 in the six months ended June 30, 1996 is as a result of losses on the sales of property, plant and equipment. Interest expense for the three months ended June 30, 1996 was $3,000 as compared to $124,000 for the same period of the prior year. Interest expense for the six months ended June 30, 1996 was $5,000 as compared to $314,000 for the same period of the prior year. During 1995 the Company paid off all of its long-term bank debt utilizing $8,100,000 of the proceeds from the 1995 sale of common shares. As a result, the only items bearing interest in 1996 are capital lease obligations which have a balance of $150,000 as of June 30, 1996. The income tax expense was $384,000 for the three months ended June 30, 1996, or an effective tax rate of 41%, as compared to $227,000 for the same period of the prior year, or an effective tax rate of 38%. The income tax expense was $1,090,000 for the six months ended June 30, 1996, or an effective tax rate of 41%, as compared to $563,000 for Page 10 of 12 11 METATEC CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED) the same period of the prior year, or an effective tax rate of 38%. The 1996 provision reflects the impact of non-deductible goodwill for tax purposes, which resulted from the increase in goodwill related to the restricted shares earned by an officer effective December 31, 1995. Net earnings for the three months ended June 30, 1996 were $549,000, or net earnings per common share of $.08, as compared to the same period of the prior year of $368,000, or net earnings per common share of $.06. Net earnings for the six months ended June 30, 1996 were $1,593,000, or net earnings per common share of $.22, as compared to the same period of the prior year of $911,000, or net earnings per common share of $.16. This improvement was primarily a result of higher net sales and a reduction in the rate of growth in selling, general and administrative expenses relative to net sales growth, partially offset by a slightly higher effective tax rate. FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES The Company financed its business during the six months ended June 30, 1996 through cash generated from operations and available cash balances. Historically, the Company also financed business needs through the issuance of common stock and through the use of debt. Cash flow from operating activities was $4,397,000 for the six months ended June 30, 1996, as compared to $1,665,000 for the six months ended June 30, 1995. The Company, in the six month period ended June 30, 1996, continued to increase its manufacturing capacity over the 1995 level. The capacity increase along with recurring capital needs resulted in the purchase of $4,434,000 in property, plant and equipment during the six months ended June 30, 1996. The Company will continue to expand its operations during 1996 through the addition of manufacturing and distribution equipment and, as announced in April, 1996, will add an 80,000 square foot addition the Company's existing facility. It is anticipated that this addition will be funded out of existing cash balances and through funds generated from operations. The Company has cash and cash equivalents of $5,930,000 as of June 30, 1996 and additionally has available $5,000,000 under its revolving line of credit agreement. 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 and funds which may be obtained from future financing activities should provide sufficient capital to meet the current business needs of the Company. Page 11 of 12 12 PART II - OTHER INFORMATION --------------------------- Items 1-3. Inapplicable. ------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- a,b & c) The results of the April 24, 1996 annual meeting of shareholders were reported in the Form 10-Q filed for the quarterly period ended March 31, 1996. (d) Inapplicable. ------------- Item 5. Inapplicable. ------------- Item 6. Exhibits and Reports on Form 8-K --------------------------------- (a) No exhibits are filed as a part of this report on Form 10-Q. (b) On April 18,1996, a current report on Form 8-K, dated April 18, 1996, was filed with the Securities and Exchange Commission reporting under items 5 and 7. 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/ William H. Largent BY: William H. Largent Date: July 31, 1996 Executive Vice President, and Chief Financial Officer (authorized signatory- principal financial and accounting officer) 12 of 12 EX-27 2 EXHIBIT 27
5 6-MOS DEC-31-1995 JAN-01-1996 JUN-30-1996 5,930,492 0 5,930,030 335,000 802,773 13,109,014 45,553,794 (12,949,551) 49,859,792 3,767,075 1,095,135 706,799 0 0 44,290,783 49,859,792 23,179,472 23,179,472 13,994,434 20,638,796 0 134,000 5,473 2,683,198 1,090,000 1,593,198 0 0 0 1,593,198 .22 .22
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