-----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, DG0EPIU+YcY83m8ES3nioDYJqKbo416qLYKc03WmjWvc/k07YFJge5RwoNbX+wvv /Fe6UfX5xvJxzCMFRYb+Ow== 0000950152-96-006029.txt : 19961115 0000950152-96-006029.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950152-96-006029 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 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: 1934 Act SEC FILE NUMBER: 000-09220 FILM NUMBER: 96662115 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 September 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 November 11, 1996: 7,066,501 1 of 12 2 METATEC CORPORATION
INDEX PAGE ----- ---- Part I : Financial Information Item 1 - Financial Statements Consolidated Balance Sheets as of September 30, 1996 (unaudited) and December 31, 1995 3 Consolidated Statements of Earnings for the three months ended September 30, 1996 and 1995 (unaudited) 4 Consolidated Statements of Earnings for the nine months ended September 30, 1996 and 1995 (unaudited) 5 Consolidated Statement of Shareholders' Equity for the nine months ended September 30, 1996 (unaudited) 6 Consolidated Statements of Cash Flows for the nine months ended September 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) SEPTEMBER 30, DECEMBER 31, 1996 1995 - -------------------------------------------------- ------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 4,505,284 $ 5,898,928 Accounts receivable, net of allowance for doubtful accounts of $312,000 and $338,000 5,251,219 6,281,460 Inventory 991,796 885,107 Prepaid expenses 526,901 606,271 Deferred income taxes 211,000 674,000 Current portion of long-term note receivable 12,374 12,374 ----------- ----------- Total current assets 11,498,574 14,358,140 Long-term note receivable, less current portion 204,646 213,851 Property, plant and equipment - net 35,261,602 31,337,322 Goodwill - net 3,823,233 4,166,763 ----------- ----------- TOTAL ASSETS $50,788,055 $50,076,076 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,209,107 $ 2,328,255 Accrued royalties 800,552 1,173,252 Accrued personal property taxes 501,738 541,228 Other accrued expenses 223,716 530,728 Accrued payroll 552,131 465,371 Accrued income taxes 0 444,008 Unearned income 85,253 370,421 Current maturities of long-term debt and capital lease obligations 59,460 75,859 ----------- ----------- Total current liabilities 4,431,957 5,929,122 Long-term debt and capital lease obligations, less current maturities 73,270 117,875 Deferred income taxes 1,142,000 728,000 ----------- ----------- Total liabilities 5,647,227 6,774,997 ----------- ----------- Shareholders' equity: Common stock, $.10 par value; authorized 10,083,500 shares; issued 1996 - 7,069,256 shares; 1995 - 7,054,734 shares 706,927 705,474 Additional paid-in capital 33,895,249 33,781,631 Retained earnings 10,575,193 8,850,515 Treasury stock, at cost - 2,755 shares (36,541) (36,541) ----------- ----------- Total shareholders' equity 45,140,828 43,301,079 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $50,788,055 $50,076,076 =========== ===========
See notes to consolidated financial statements. Page 3 of 12 4 METATEC CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
For The Three Months Ended September 30, 1996 1995 - ---------------------------------------- ---- ---- NET SALES $10,804,766 $9,434,662 Cost of sales 7,313,126 5,690,866 ----------- ---------- Gross profit 3,491,640 3,743,796 Selling, general and administrative expenses 3,353,586 2,866,952 ----------- ---------- OPERATING EARNINGS 138,054 876,844 Other income and (expense): Investment income 89,504 114,096 Other - net 3,642 38,334 Interest expense (10,720) (4,294) ----------- ---------- EARNINGS BEFORE INCOME TAXES 220,480 1,024,980 Income taxes 89,000 398,500 ----------- ---------- NET EARNINGS $ 131,480 $ 626,480 =========== ========== NET EARNINGS PER COMMON SHARE $ 0.02 $ 0.09 =========== ========== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 7,152,148 7,192,542 =========== ==========
See notes to consolidated financial statements. Page 4 of 12 5 METATEC CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
For the Nine Months Ended September 30, 1996 1995 - --------------------------------------------- ------------ ------------ NET SALES $ 33,984,238 $ 27,367,300 Cost of sales 21,307,560 15,917,388 ------------ ------------ Gross profit 12,676,678 11,449,912 Selling, general and administrative expenses 9,997,948 8,863,039 ------------ ------------ OPERATING EARNINGS 2,678,730 2,586,873 Other income and (expense): Investment income 255,687 189,098 Other - net (14,546) 41,468 Interest expense (16,193) (318,746) ------------ ------------ EARNINGS BEFORE INCOME TAXES 2,903,678 2,498,693 Income taxes 1,179,000 961,700 ------------ ------------ NET EARNINGS $ 1,724,678 $ 1,536,993 ============ ============ NET EARNINGS PER COMMON SHARE $ 0.24 $ 0.25 ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 7,166,207 6,261,198 ============ ============
See notes to consolidated financial statements. Page 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 1,724,678 1,724,678 Stock awards for employees 128 11,638 11,766 Stock options exercised 1,325 101,980 103,305 ------------ ------------ ------------ ------------ ------------ BALANCE AT SEPTEMBER 30, 1996 $ 706,927 $ 33,895,249 $ 10,575,193 $ (36,541) $ 45,140,828 ============ ============ ============ ============ ============
See notes to consolidated financial statements. Page 6 of 12 7 METATEC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the nine months ended September 30, 1996 1995 - --------------------------------------- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 1,724,678 $ 1,536,993 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 5,143,929 3,229,865 Deferred income taxes 877,000 77,000 Net loss (gain) on sales of property, plant and equipment 27,154 (19,819) Changes in assets and liabilities: Accounts receivable 1,030,241 (579,528) Inventory (106,689) (307,653) Prepaid expenses and other assets 79,370 (223,998) Accounts payable and accrued expenses (1,195,598) (172,219) Unearned income (285,168) (475,810) ----------- ----------- Net cash provided by operating activities 7,294,917 3,064,831 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in long-term note receivable and other assets 9,205 112,227 Purchase of property, plant and equipment (8,755,772) (8,486,591) Proceeds from the sale of property, plant and equipment 3,939 348,300 ----------- ----------- Net cash used in investing activities (8,742,628) (8,026,064) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of long-term debt and capital lease obligations (61,004) (8,404,676) Proceeds from issuance of stock 0 17,914,782 Stock awards for employees 11,766 0 Stock options exercised 103,305 78,467 ----------- ----------- Net cash provided by financing activities 54,067 9,588,573 ----------- ----------- Increase in cash and cash equivalents (1,393,644) 4,627,340 Cash and cash equivalents at beginning of year 5,898,928 2,167,518 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,505,284 $ 6,794,858 =========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $ 16,193 $ 318,746 =========== =========== Income taxes paid $ 1,148,357 $ 575,440 =========== ===========
See notes to consolidated financial statements. Page 7 of 12 8 METATEC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Basis of presentation - The consolidated balance sheet as of September 30, 1996, the consolidated statements of earnings for the three and nine months ended September 30, 1996 and September 30, 1995, the consolidated statement of shareholders' equity for the nine months ended September 30, 1996, 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, 1995 annual report on Form 10-K. The results of operations for the period ended September 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, plant, and equipment. Portions of such contracts not completed as of September 30, 1996 are not reflected in the consolidated financial statements. The unrecorded commitments amounted to approximately $7,199,000 at September 30, 1996. This amount represents approximately $5,000,000 for the construction currently underway for an approximate 80,000 square foot addition to our present facility and approximately $2,199,000 for manufacturing equipment on order. 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 September 30, 1996 were $10,805,000, an increase of $1,370,000, or 15% 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 $2,210,000 to $9,945,000 for the three months ended September 30, 1996, or 29% over the same period of the prior year. The CD-ROM sales within MSG accounted for 87% of MSG sales for the three months ended September 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 $840,000 to $860,000 for the three months ended September 30, 1996, or a 49% 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 nine months ended September 30, 1996 were $33,984,000, an increase of $6,617,000, or 24% 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 $7,803,000 to $30,483,000 for the nine months ended September 30, 1996, or 34% over the same period of the prior year. The CD-ROM sales within MSG accounted for 87% of MSG sales for the nine months ended September 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 $1,186,000 to $3,501,000 for the nine months ended September 30, 1996, or a 25% 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. 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 September 30, 1996 is under 2,500 and the Company has determined it will no longer separately report the NautilusCD activity. Gross profit was 37% of net sales for the nine months ended September 30, 1996 as compared to 42% of net sales for the same period of the prior year and as compared to 32% 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 September 30, 1996. This decrease is primarily attributed to an under utilization of manufacturing capacity during the three month period ended September 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 September 30, 1995 than in the three months ended September 30, 1996. This resulted in higher fixed costs in relation to net sales during the three months ended September 30, 1996. The company also experienced price erosion and mix change which contributed to a lower gross profit percentage in 1996 as compared to 1995. Selling, general and administrative ("SG&A") expenses increased to $3,354,000, or 31% of net sales, for the three months ended September 30, 1996 as compared to $2,867,000, or 30% of net sales, for same period of the prior year. This increase of $487,000 is primarily attributed to increased personnel costs. SG&A expenses increased to $9,998,000, or 29% of net sales, for the nine months ended September 30, 1996 as compared to $8,863,000, or 32% of net sales, for same period of the prior year. This increase of $1,135,000 is primarily attributed to increased personnel costs. Investment income was $90,000 and $114,000 for the three month periods ended September 30, 1996 and 1995, respectively. This decrease is the result of lower cash and cash equivalent balances and lower investment earnings rates on those balances in 1996. Investment income was $256,000 and $189,000 for the nine month periods ended September 30, 1996 and 1995, respectively. The increases were a result of additional investment income from higher cash and cash equivalents balances. Other expense of $15,000 in the nine months ended September 30, 1996 is as a result of losses on the sales of property, plant and equipment. Interest expense for the three months ended September 30, 1996 was $11,000 as compared to $4,000 for the same period of the prior year. Interest expense for the nine months ended September 30, 1996 was $16,000 as compared to $319,000 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 $133,000 as of September 30, 1996. The income tax expense was $89,000 for the three months ended September 30, 1996, or an effective tax rate of 40%, as compared to $399,000 for the same period of the prior year, or an effective tax rate of 39%. The income tax expense was $1,179,000 for the nine months ended September 30, 1996, or an effective tax rate of 41%, as compared to $962,000 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 September 30, 1996 were $131,000, or net earnings per common share of $.02, as compared to the same period of the prior year of $626,000, or net earnings per common share of $.09. The primary reason for the decrease in net earnings was due to the drop in the gross profit percentage. Net earnings for the nine months ended September 30, 1996 were $1,725,000, or net earnings per common share of $.24, as compared to the same period of the prior year of $1,537,000, or net earnings per common share of $.25. FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES The Company financed its business during the nine months ended September 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 $7,295,000 for the nine months ended September 30, 1996, as compared to $3,065,000 for the nine months ended September 30, 1995. The Company, in the nine month period ended September 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 $8,756,000 in property, plant and equipment during the nine months ended September 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 to the Company's existing facility. This addition is under construction and planned to be completed during the first quarter of 1997. The projected cost of this addition is $5,500,000. 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 $4,505,000 as of September 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 1-5. 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) No reports on Form 8-K have been filed during the quarter ended September 30, 1996. 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: November 12, 1996 Executive Vice President, and Chief Financial Officer (authorized signatory- principal financial and accounting officer) 12 of 12 EX-27 2 EXHIBIT 27
5 YEAR DEC-31-1995 JAN-01-1996 SEP-30-1996 4,505,284 0 5,563,219 312,000 991,796 11,498,574 49,833,174 (14,571,572) 50,788,055 4,431,957 1,215,270 0 0 706,927 44,433,901 50,788,055 33,984,238 33,984,238 21,307,560 31,305,508 0 114,000 16,193 2,903,678 1,179,000 1,724,678 0 0 0 1,724,678 .24 .24
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