-----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, AurUepwy+2JZGxQnb4PIQCBkmAajpRh/c5MZiXB/C2Lw3H4xiOP+66y6LfVQoX1a R7cVPWTEHQgVIhu6AVxnwg== 0000950152-98-003838.txt : 19980504 0000950152-98-003838.hdr.sgml : 19980504 ACCESSION NUMBER: 0000950152-98-003838 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980430 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: SEC FILE NUMBER: 000-09220 FILM NUMBER: 98606647 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 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 March 31, 1998 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 April 30, 1998: 6,033,224 1 of 10 2 METATEC CORPORATION ------------------- INDEX PAGE ----- ---- Part I : Financial Information Item 1 - Financial Statements Condensed Consolidated Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997 3 Condensed Consolidated Statements of Earnings for the three months ended March 31, 1998 and 1997 (unaudited) 4 Condensed Consolidated Statement of Shareholders' Equity for the three months ended March 31, 1998 (unaudited) 5 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and 1997 (unaudited) 6 Notes to Condensed Consolidated Financial Statements (unaudited) 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 Item 3 - Quantitative and Qualitative Disclosures about Market Risk 9 Part II: Other Information Items 1-6 10 Signatures 10 2 of 10 3 PART I - FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS
METATEC CORPORATION (Unaudited) CONDENSED CONSOLIDATED BALANCE SHEETS March 31, December 31, 1998 1997 - ---------------------------------------------------------------------------------------- -------------- -------------- ASSETS Current assets: Cash and cash equivalents $ 369,310 $ 1,381,057 Accounts receivable, net of allowance for doubtful accounts of $311,000 and $301,000 8,704,163 7,215,178 Inventory 1,326,518 1,155,519 Prepaid expenses 403,989 362,801 Current portion of long-term note receivable 364,087 364,087 Deferred income taxes 327,000 327,000 ------------ ------------ Total current assets 11,495,067 10,805,642 Long-term note receivable, less current portion 183,125 186,562 Property, plant and equipment - net 38,595,105 38,629,006 Goodwill - net 3,136,173 3,250,683 ------------ ------------ TOTAL ASSETS $ 53,409,470 $ 52,871,893 ============ ============ LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,535,056 $ 2,058,587 Accrued royalties 907,480 1,109,257 Accrued personal property taxes 1,016,574 809,399 Other accrued expenses 1,002,855 814,569 Accrued payroll 1,085,776 567,315 Accrued income taxes 355,758 249,747 Unearned income 104,744 73,778 Current maturities of long-term debt and capital lease obligations 101,778 101,778 ------------ ------------ Total current liabilities 7,110,021 5,784,430 Long-term debt and capital lease obligations, less current maturities 4,054,105 4,578,410 Deferred income taxes 1,315,000 1,315,000 ------------ ------------ Total liabilities 12,479,126 11,677,840 ------------ ------------ Shareholders' equity: Common stock, $.10 par value; authorized 10,083,500 shares; issued 1998 - 7,108,479 shares; 1997 - 7,108,479 710,848 710,848 Additional paid-in capital 34,102,325 34,102,325 Retained earnings 11,909,706 11,382,777 Treasury stock, at cost; 1998 - 1,075,255 shares; 1997 - 912,755 shares (5,792,535) (5,001,897) ------------ ------------ Total shareholders' equity 40,930,344 41,194,053 ------------ ------------ TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 53,409,470 $ 52,871,893 ============ ============
See notes to condensed consolidated financial statements Page 3 of 10 4 METATEC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended March 31, ---------------------------------- 1998 1997 - -------------------------------------------------- -------------- ------------- NET SALES $ 14,717,057 $ 11,678,574 Cost of sales 9,923,356 8,052,587 ------------ ----------- Gross profit 4,793,701 3,625,987 Selling, general and administrative expenses 3,876,568 3,713,535 Restructuring expenses 0 206,000 ------------ ----------- OPERATING EARNINGS 917,133 (293,548) Other income and (expense): Investment income 14,626 10,762 Other - net 100,462 (39,041) Interest expense (66,292) (2,184) ------------ ----------- EARNINGS BEFORE INCOME TAXES 965,929 (324,011) Income taxes 439,000 (120,000) ------------ ----------- NET EARNINGS $ 526,929 $ (204,011) ============ ============ NET EARNINGS PER COMMON SHARE Basic $ 0.09 $ (0.03) ============ ============ Diluted $ 0.09 $ (0.03) ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING Basic 6,069,980 7,022,354 ============ ============ Diluted 6,113,884 7,054,567 ============ ============
See notes to condensed consolidated financial statements. Page 4 of 10 5 METATEC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
Additional Common Paid-in Retained Treasury Stock Capital Earnings Stock Total - ---------------------------- --------- ---------- ----------- ------------- ---------- BALANCE AT DECEMBER 31, 1997 $710,848 $34,102,325 $11,382,777 $(5,001,897) $41,194,053 Net earnings 526,929 526,929 Treasury shares acquired (790,638) (790,638) ----------- ----------- ----------- ------------ ----------- BALANCE AT MARCH 31, 1998 $710,848 $34,102,325 $11,909,706 $(5,792,535) $40,930,344 ========== =========== ============ =========== ===========
See notes to condensed consolidated financial statements. Page 5 of 10 6 METATEC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the three months ended March 31, 1998 1997 - ------------------------------------------------------------- ------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 526,929 $ (204,011) Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 2,098,695 1,926,227 Net loss on sales of property, plant and equipment 8,914 39,041 Changes in assets and liabilities: Accounts receivable (1,488,979) 1,668,088 Inventory (170,998) (13,712) Prepaid expenses and other assets (41,183) (287,487) Accounts payable and accrued expenses 1,514,275 (968,169) Unearned income 30,966 (107,170) ----------- ----------- Net cash provided by operating activities 2,478,619 2,052,807 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Decrease in long-term note receivable 3,436 2,141 Purchase of property, plant and equipment (2,179,158) (3,477,055) Proceeds from the sales of property, plant and equipment 300 61,000 ----------- ----------- Net cash used in investing activities (2,175,422) (3,413,914) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in long-term debt 0 178,576 Payment of long-term debt and capital lease obligations (524,306) (25,416) Treasury stock acquired (790,638) (540,375) Stock awards for employees 0 13,965 ----------- ----------- Net cash used in financing activities (1,314,944) (373,250) ----------- ----------- Decrease in cash and cash equivalents (1,011,747) (1,734,357) Cash and cash equivalents at beginning of period 1,381,057 2,214,755 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 369,310 $ 480,398 =========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $ 56,355 $ 2,184 =========== =========== Income taxes paid $ 365,989 $ 80,100 =========== =========== Assets purchased for the assumption of a liability $ 185,467 $ 227,785 =========== ===========
See notes to condensed consolidated financial statements. Page 6 of 10 7 METATEC CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION - The consolidated balance sheet as of March 31, 1998, the consolidated statements of earnings for the three months ended March 31, 1998 and 1997, the consolidated statement of shareholders' equity for the three months ended March 31, 1998, and the consolidated statements of cash flows for the three 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, 1997 annual report on Form 10-K. The results of operations for the period ended March 31, 1998 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 March 31, 1998 are not reflected in the consolidated financial statements. The unrecorded commitments amounted to approximately $1,689,000 at March 31, 1998. This amount represents manufacturing equipment on order. 3. RECENTLY ISSUED ACCOUNTING STANDARD - In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130 ("SFAS 130") "Reporting Comprehensive Income," which is effective for periods beginning after December 15, 1997. This new statement defines comprehensive income as "all changes in equity during a period, with the exception of stock issuances and dividends". Under SFAS 130 comprehensive income for March 31, 1998 is $526,929 and a comprehensive loss for March 31, 1997 is $204,011. 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 December 31, 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. RESULTS OF OPERATIONS Net sales for the three months ended March 31, 1998 were $14,717,000, an increase of $3,038,000, or 26% over the same period of the prior year. This increase resulted from the Manufacturing Services Group, which includes CD-ROM, DVD, and Radio Syndication manufacturing, increasing $3,436,000 for the three months ended March 31, 1998, or 30% over the same period of the prior year. Net sales for the Company's Access Services Group were $409,000 for the three months ended March 31, 1997. Because the Company exited this business segment during 1997, there were no sales for this segment for the three months ended March 31, 1998. The 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 and DVD market. Gross profit was 33% of net sales for the three months ended March 31, 1998 as compared to 31% of net sales for the same period of the prior year. This increase is primarily attributed to improved manufacturing capacity utilization during the three month period ended March 31, 1998. 7 of 10 8 METATEC CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED) Selling, general and administrative ("SG&A") expenses were $3,877,000, or 26% of net sales, for the three months ended March 31, 1998 as compared to $3,714,000, or 32% of net sales, for same period of the prior year. This improvement was primarily due to the absorption of overhead expenses related to the business segment which was exited during 1997. The three months ended March 31, 1997 included a restructuring charge of $206,000 relating to a reorganization and downsizing of the Access Services Group. The Company exited the Access Services Group business segment during 1997. Investment income was $15,000 and $11,000 for the three month periods ended March 31, 1998 and 1997, respectively. Interest expense for the three months ended March 31, 1998 was $66,000 as compared to $2,000 for the same period of the prior year. The increase in interest expense was due to borrowing under a revolving line of credit. The income tax expense was $439,000 for the three months ended March 31, 1998, or an effective tax rate of 45%, as compared to a tax benefit of $120,000 for the same period of the prior year, or an effective tax benefit of 37%. Net earnings for the three months ended March 31, 1998 were $527,000, or net earnings per diluted common share of $.09, as compared to a net loss in the same period of the prior year of $204,000, or net loss per diluted common share of $.03. The net earnings increase was primarily a result of improved profit margins because of exiting the Access Services Group business segment during 1997, as well as strong revenue growth in the core Manufacturing Services Group during the three months ended March 31, 1998. FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES The Company financed its business during the three months ended March 31, 1998 through cash generated from operations and available cash balances. Cash flow from operating activities was $2,479,000 for the three months ended March 31, 1998, as compared to $2,053,000 for the three months ended March 31, 1997. The Company has commitments under contracts for the purchase of manufacturing equipment on order. The unrecorded commitments amounted to approximately $1,689,000 at March 31, 1998. The Company has cash and cash equivalents of $369,000 as of March 31, 1998. Additionally the Company has available $15,000,000 under its revolving line of credit agreement, of which $4,000,000 was outstanding as of March 31, 1998. 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. Page 8 of 10 9 METATEC CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS YEAR 2000 The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the year. Any of the Company's computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than 2000. This could result in a system failure or miscalculations causing disruptions of uncertain duration in operations including, among other things, a temporary inability to process transactions, or engage in similar normal business activities. The company created a task force during 1997 to address the Year 2000 issues. As of December 31, 1997, all of the Company's in-house developed systems and applications are Year 2000 compliant. The Company currently believes that all systems will be Year 2000 compliant by December 31, 1998. 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, 1997. Actual results may differ materially from management expectations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. Disclosure not currently required. Page 9 of 10 10 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 March 31, 1998. 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: April 30, 1998 Vice President, Finance and Treasurer (authorized signatory- principal financial and accounting officer) 10 of 10 11 Form 10-Q Exhibit Index Exhibit Number Exhibit Description Page Number - -------------- ----------------------- ------------ 27 Financial Data Schedule -- EX-27 2 EXHIBIT 27
5 0000203200 METATEC CORP 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 369,310 0 9,015,163 311,000 1,326,518 11,495,067 60,915,820 (22,320,715) 53,409,470 7,110,021 5,369,105 0 0 710,848 40,219,496 53,409,470 14,717,057 14,717,057 9,923,356 13,799,924 0 80,000 66,292 965,929 439,000 526,929 0 0 0 0 0 0
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