-----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, LXOB1jruefxWHGGSKla5XxnRO7EmJWpSVjgJdxUeS0aTZAa5yO4UVaUYeXM8Qj5G HqtozwtiipJ7AvM8aXuEqg== 0000024104-97-000007.txt : 19970808 0000024104-97-000007.hdr.sgml : 19970808 ACCESSION NUMBER: 0000024104-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970628 FILED AS OF DATE: 19970807 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONTINENTAL MATERIALS CORP CENTRAL INDEX KEY: 0000024104 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 362274391 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03834 FILM NUMBER: 97653184 BUSINESS ADDRESS: STREET 1: 225 WEST WACKER STREET 2: SUITE 1800 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126617200 MAIL ADDRESS: STREET 1: 225 WEST WACKER STREET 2: SUITE 1800 CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: CONTINENTAL URANIUM INC DATE OF NAME CHANGE: 19660830 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ending June 28, 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 number 1-3834 CONTINENTAL MATERIALS CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-2274391 (State or other jurisdiction (I.R.S. Employer of Identification No.) incorporation or organization 225 West Wacker Drive, Chicago, Illinois 60606 (Address of principal executive office) (Zip Code) (312) 541-7200 (Registrant's telephone number, including area code) (Former name, former address and former year, if changed since last report) 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 (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of common shares outstanding at July 30, 1997 1,104,211 PART I - FINANCIAL INFORMATION Item 1. Financial Statements CONTINENTAL MATERIALS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 28, 1997 and DECEMBER 28, 1996 (Unaudited) (000's omitted except share data)
JUNE 28, DECEMBER 28, ASSETS 1997 1996 Current assets: Cash and cash equivalents $ 686 $ 379 Receivables, net 20,862 14,584 Inventories: Finished goods 9,374 8,696 Work in process 1,905 1,800 Raw materials and supplies 5,833 4,688 Prepaid expenses 2,603 2,687 Total current assets 41,263 32,834 Property, plant and equipment, net 18,456 18,818 Other assets: Investment in mining partnership 600 600 Other 1,534 1,641 $ 61,853 $ 53,893 LIABILITIES Current liabilities: Bank loan payable $ 6,500 $ 400 Current portion of long-term debt 1,900 1,500 Accounts payable and accrued expenses 13,343 13,863 Income taxes 602 450 Total current liabilities 22,345 16,213 Long-term debt 7,350 6,500 Deferred income taxes 1,830 1,830 SHAREHOLDERS' EQUITY Common shares, $0.50 par value; authorized 3,000,000; issued 1,326,588 663 663 Capital in excess of par value 3,484 3,484 Retained earnings 29,151 28,173 Treasury shares, 223,377, at cost (2,970) (2,970) 30,328 29,350 $ 61,853 $ 53,893
See accompanying notes 2 CONTINENTAL MATERIALS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE THREE MONTHS ENDED JUNE 28, 1997 AND JUNE 29, 1996 (Unaudited) (000's omitted except per share amounts)
JUNE 28, JUNE 29, 1997 1996 Net sales $ 27,991 $ 27,124 Costs and expenses: Cost of sales (exclusive of depreciation, depletion and amortization) 21,623 20,426 Depreciation, depletion and amortization 876 668 Selling and administrative 3,667 3,614 26,166 24,708 Operating income 1,825 2,416 Interest (309) (181) Equity loss from mining partnership (29) (138) Other income, net 85 108 Income before income taxes 1,572 2,205 Provision for income taxes 552 837 Net income 1,020 1,368 Retained earnings, beginning of period 28,131 25,241 Retained earnings, end of period $ 29,151 $ 26,609 Net income per share $ .92 $ 1.24 Average shares outstanding 1,104 1,104
See accompanying notes 3 CONTINENTAL MATERIALS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE SIX MONTHS ENDED JUNE 28, 1997 AND JUNE 29, 1996 (Unaudited) (000's omitted except per share amounts)
JUNE 28, JUNE 29, 1997 1996 Net sales $ 48,896 $ 44,976 Costs and expenses: Cost of sales (exclusive of depreciation, depletion and amortization) 38,073 34,329 Depreciation, depletion and amortization 1,755 1,329 Selling and administrative 7,288 6,782 47,116 42,440 Operating income 1,780 2,536 Interest (504) (329) Equity loss from mining partnership (57) (1,145) Other income, net 285 213 Income before income taxes 1,504 1,275 Provision for income taxes 526 484 Net income 978 791 Retained earnings, beginning of period 28,173 25,818 Retained earnings, end of period $ 29,151 $ 26,609 Net income per share $ .89 $ .71 Average shares outstanding 1,104 1,107
See accompanying notes 4 CONTINENTAL MATERIALS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 28, 1997 AND JUNE 29, 1996 (Unaudited) (000's omitted)
JUNE 28, JUNE 29, 1997 1996 Net cash used by operating activities $(5,648) $ (713) Investing activities: Capital expenditures (1,347) (1,228) Proceeds from sale of property and equipment 9 56 Investment in mining partnership (57) (395) Net cash used in investing activities (1,395) (1,567) Financing activities: Borrowings under revolving credit facility 6,100 2,900 Long-term borrowings 2,000 -- Repayment of long-term debt (750) (510) Payment to acquire treasury stock -- (286) Net cash provided by financing activities 7,350 2,104 Net increase (decrease) in cash and cash equivalents 307 (176) Cash and cash equivalents: Beginning of year 379 1,074 End of period $ 686 $ 898 Supplemental disclosures of cash flow items: Cash paid during the six months for: Interest $ 555 $ 348 Income taxes 380 1
See accompanying notes 5 CONTINENTAL MATERIALS CORPORATION SECURITIES AND EXCHANGE COMMISSION FORM 10-Q NOTES TO THE QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS QUARTER ENDED JUNE 28, 1997 (Unaudited) 1.The unaudited interim consolidated financial statements included herein are prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures normally accompanying the annual financial statements have been omitted. The interim financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report on Form 10-K. In the opinion of management, the consolidated financial statements include all adjustments (none of which were other than normal recurring adjustments) necessary for a fair statement of the results for the interim periods. 2.During the quarter, as allowed by the current credit agreement, the Company elected to convert $2,000,000 qualifying capital expenditures purchased with funds from the revolving credit facility to the term loan with a corresponding decrease in the revolving credit facility and a proportional increase in the term-loan amortization. 3.The provision for income taxes is based upon the estimated effective tax rate for the year. 4.Operating results for the first six months of 1997 are not necessarily indicative of performance for the entire year. Historically, sales of construction materials are higher in the second and third quarters. Overall, sales of heating and air-conditioning products have not shown strong seasonal fluctuations in recent years although product mix has historically yielded higher gross profit margins in the fourth quarter. (See Note 12 of Notes to Consolidated Financial Statements in the Company's 1996 Annual Report.) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation Financial Condition (See pages 2 and 5) Operations for the first six months of 1997 used $5,648,000 in cash compared to $713,000 in 1996. The increased use of cash is attributed to higher inventory balances and reduced accrued expense and payables balances. The increase in inventories is the result of a decision by Williams Furnace to carry additional wall furnaces at this time as well an increase in Williams' fan coil business. The Company expects to reduce inventories throughout the second half of the year in line with current sales demand. The decrease in accrued expenses reflects the expected payment of certain 1996 year end accruals while the decrease in accounts payable is the result of timing of payments. The Company estimates that its short-term line of credit (of which $6,500,000 was outstanding at June 28, 1997) will be adequate to meet its cash requirements for the foreseeable future. See also the discussion of the credit facility in Note 2 of the accompanying Notes to the Quarterly Consolidated Financial Statements. Historically, the Company's borrowings against the short-term line peak during the second quarter and decline over the remainder of the year. Operations - Comparison of Quarter Ended June 28, 1997 to Quarter Ended June 29, 1996 (See page 3) Consolidated net sales increased $867,000 (3.2%). The construction materials segment reported sales up $1,705,000 (14.3%) due to the acquisition of Transit Mix of Pueblo during the last quarter of 1996 which offset the expected modest decline in the construction market in the Colorado Springs, Colorado area. Unfavorable weather conditions during the height of Phoenix Manufacturing's selling season were mainly responsible for the decline of $837,000 (5.5%) in the heating and air-conditioning segment. Williams Furnace showed improved sales volume attributable to the fan coil product line, however, this growth was not significant enough to offset the decline in this segment's other product offerings. Consolidated cost of sales (exclusive of depreciation, depletion and amortization) as a percentage of sales increased from 75.3% to 77.2% as a result of increased volume in the traditionally lower margin construction materials segment and a change in product mix in the heating and air-conditioning segment. Depreciation, depletion and amortization increased $208,000 (31.1%) mainly due to the acquisition of Transit Mix of Pueblo in the last quarter of 1996. 7 Operations - Comparison of Six Months Ended June 28, 1997 to Six Months June 29, 1996(See page 4) Net sales rose $3,920,000 (8.7%). The increase in the construction materials segment, $4,255,000 (21.7%) and the decrease in the heating and air-conditioning segment $334,000 (1.3%), were due to the reasons noted above. Consolidated cost of sales (exclusive of depreciation, depletion and amortization) as a percentage of sales increased from 76.3% to 77.9% due to reasons noted above. Depreciation, depletion and amortization increased $426,000 (32.1%) due to the reason noted above. The prior year equity loss from mining partnership includes a first quarter write-down in the carrying value of the investment of $628,000. Historically, the Company has experienced operating losses during the first quarter. The second quarter has historically improved over the first quarter's operating results. This trend is expected to continue as sales of construction materials are generally higher in the second and third quarters while sales of heating and air-conditioning products, although not showing strong seasonality, experience product mix changes that yield higher gross profits in the fourth quarter. 8 PART II Other Information - Item 4. Submission of Matters to a Vote of Security Holders (a) The annual meeting of the stockholders of the Company was held on May 28, 1997. (b) At that meeting, three individuals, two of whom are current directors, were nominated and elected to serve until the 2000 Annual Meeting by the following votes: Director Shares Shares Shares For Against Withheld Thomas H. Carmody 992,452 -- 6,377 Ronald J. Gidwitz 984,222 -- 14,607 Darrell M. Trent 992,452 -- 6,377 There were no broker non votes. The following directors' terms of office continued after the meeting until the Annual Meetings of the years as noted: Directors Expiration of Term Betsy R. Gidwitz 1998 James G. Gidwitz 1998 Joseph J. Sum 1998 Ralph W. Gidwitz 1999 William G. Shoemaker 1999 Theodore R. Tetzlaff 1999 (c) In addition to the above election, the independent auditing firm of Coopers & Lybrand L.L.P. was appointed by the following vote: For Against Abstain 992,030 2,742 4,057 There were no broker non votes. (d) No other matters were submitted for vote. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 11: Computation of per share earnings Exhibit 27: Financial data schedule (b) Registrant filed no reports on Form 8-K during the quarter ended June 28, 1997. 9 SIGNATURE Pursuant to the requirement 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. CONTINENTAL MATERIALS CORPORATION Date: July 31, 1997 By: /S/ Joseph J. Sum Joseph J. Sum, Vice President and Chief Financial Officer 10 EX-11 2 Exhibit 11 Computation of Per Share Earnings For the three and six months ended June 28, 1997 and June 29, 1996 (Unaudited) (000's omitted except per share amounts)
Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, 1997 1996 1997 1996 Primary Earnings Per Share: Net Income $ 1,020 $ 1,368 $ 978 $ 791 Weighted Average Shares Outstanding: Common Shares 1,104 1,104 1,104 1,107 Common Stock Equivalents 30 10 29 6 1,134 1,114 1,133 1,113 Primary Earnings Per Share $ .90 $ 1.23 $ .86 $ .71 Fully Diluted Income Per Share: Net Income $ 1,020 $ 1,368 $ 978 $ 791 Weighted Average Shares Outstanding: Common Shares 1,104 1,104 1,104 1,107 Common Stock Equivalents 32 10 32 9 Total 1,136 1,114 1,136 1,116 Fully Diluted Earnings Per Share $ .90 $ 1.23 $ .86 $ .71
Notes: Primary and fully diluted amounts are not reflected on the face of the Consolidated Statements of Operations and Retained Earnings because they differ from basic earnings per share by less than 3%. Therefore, basic earnings per share are presented on the face of the statements. EX-27 3
5 1,000 6-MOS JAN-03-1998 JUN-28-1997 $ 686 0 20,862 0 17,112 41,263 18,456 0 61,853 23,945 0 0 0 663 29,665 61,853 48,896 48,896 38,073 47,116 228 0 504 1,504 526 978 0 0 0 $ 978 $ .89 $ .89 Net of allowance for doubtful accounts Net of accumulated depreciation, depletion and amortization Exclusive of depreciation, depletion and amortization
-----END PRIVACY-ENHANCED MESSAGE-----