-----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, MWIUE1J9BHxHKNl9bVHet+U37NZsnZ28cg5J6CoL6rUbYh4zwyqKkx3LXv16Y8zO B8KbN9n/2uOvUDjb2O6xeg== 0000950148-96-000147.txt : 19960205 0000950148-96-000147.hdr.sgml : 19960205 ACCESSION NUMBER: 0000950148-96-000147 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960202 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALNETICS CORP CENTRAL INDEX KEY: 0000277376 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 952303687 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08767 FILM NUMBER: 96510502 BUSINESS ADDRESS: STREET 1: 20401 PRAIRIE ST CITY: CHATSWORTH STATE: CA ZIP: 91311 BUSINESS PHONE: 8188869819 MAIL ADDRESS: STREET 1: 20401 PRAIRIE STREET CITY: CHATSWORTH STATE: CA ZIP: 91311 10-Q 1 QUARTERLY REPORT FOR PERIOD ENDING 12/31/95 1 UNITED STATES 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 Ended December 31, 1995 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: 0-8767 CALNETICS CORPORATION (Exact name or registrant as specified in its charter) CALIFORNIA 95-2303687 (State or jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 20401 PRAIRIE STREET, CHATSWORTH, CALIFORNIA 91311 (Address of principle executive offices) (zip code) (818) 886-9819 Registrant's telephone number, including area code NA (Former name, former address and former fiscal 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 shares outstanding of each of the issuer's classes of common stock, as of the December 31, 1995 date was 2,914,799. 2 CALNETICS CORPORATION INDEX
Part I. Financial Information Page Number - ------------------------------ ----------- Item 1. Financial Statements Condensed Consolidated Statements of Income (Unaudited) Three Months and Six Months Ended December 31, 1995 and 1994 . . . . . . . . . 3 Condensed Consolidated Balance Sheets (Unaudited) December 31, 1995 and June 30, 1995 . . . . . . . . . . . . . . . . . . . . . 4 Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . 6 Notes to Condensed Consolidated Financial Statements (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . 11 Part II. Other Information - --------------------------- Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 14 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Page 2 of 15 3 PART I - FINANCIAL INFORMATION CALNETICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended December 31, December 31, ----------------------------- ------------------------------ 1995 1994 1995 1994 ---------- ---------- ----------- ----------- Net Sales $7,627,663 $6,275,591 $16,398,938 $12,922,762 Cost of Sales 5,829,512 4,696,488 12,637,091 9,753,858 ---------- ---------- ----------- ----------- Gross Profit 1,798,151 1,579,103 3,761,847 3,168,904 ---------- ---------- ----------- ----------- Selling, general and administrative expenses 1,219,614 1,135,308 2,551,887 2,302,195 Other expense, including interest 115,308 139,060 239,827 266,281 ---------- ---------- ----------- ----------- Total costs and expenses 1,334,922 1,274,368 2,791,714 2,568,476 Income from operations before income taxes 463,229 304,735 970,133 600,428 Provision for income taxes 192,300 125,223 403,000 251,223 ---------- ---------- ----------- ----------- Net income $ 270,929 $ 179,512 $ 567,133 $ 349,205 ========== ========== =========== =========== Earnings per common share and common share equivalent $ 0.09 $ 0.06 $ 0.19 $ 0.12 Weighted average common shares and common share equivalents outstanding 3,059,416 3,045,093 3,063,260 3,035,546 ========== ========== =========== ==========
No dividends were paid during the period set forth above. See accompanying notes to condensed consolidated financial statements. Page 3 of 15 4 CALNETICS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS
December 31, 1995 June 30, 1995 ----------------- ------------- CURRENT ASSETS: Cash and cash equivalents $ 956,171 $ 1,580,974 Accounts receivable, net 4,159,165 4,448,526 Inventories 5,311,491 4,962,037 Prepaid expenses 308,445 312,996 Deferred income taxes 272,000 272,000 ----------- ----------- Total current assets 11,007,272 11,576,533 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT (at cost): Land 466,288 466,288 Buildings and improvements 2,204,992 2,204,992 Machinery and equipment 4,123,720 3,752,505 Furniture and fixtures 244,196 224,251 ----------- ----------- 7,039,196 6,648,036 Less--Accumulated depreciation and amortization 3,089,370 2,776,164 ----------- ----------- Property, plant and equipment, net 3,949,826 3,871,872 ----------- ----------- Deposits and other assets 250,418 201,205 Goodwill 1,437,268 1,472,968 ----------- ----------- Total assets $16,644,784 $17,122,578 =========== ===========
See accompanying notes to condensed consolidated financial statements. Page 4 of 15 5 CALNETICS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, 1995 June 30, 1995 ----------------- ------------- CURRENT LIABILITIES: Current portion of long-term debt $ 259,003 $ 338,000 Accounts payable 2,502,815 2,650,651 Customer deposits 46,070 150,004 Accrued liabilities 966,537 1,145,300 Income taxes payable (134,979) 58,193 ----------- ----------- Total current liabilities 3,639,446 4,342,148 ----------- ----------- LONG-TERM DEBT, net of current portion 5,209,059 5,551,284 ----------- ----------- DEFERRED INCOME TAXES 93,000 93,000 ----------- ----------- SHAREHOLDERS' EQUITY: Preferred stock: authorized- 2,000,000 shares, none issued --- --- Common stock, no par value: Authorized - 20,000,000 shares; Issued and outstanding -- 2,914,799 at December 31, 1995 and 2,914,799 at June 30, 1995 2,397,635 2,397,635 Retained earnings 5,305,644 4,738,511 ----------- ----------- Total shareholders' equity 7,703,279 7,136,146 ----------- ----------- Total liabilities and shareholders' equity $16,644,784 $17,122,578 =========== ===========
See accompanying notes to condensed consolidated financial statements. Page 5 of 15 6 CALNETICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended December 31, ------------------------ 1995 1994 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 567,133 $ 349,205 --------- --------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for doubtful accounts 11,000 21,000 Depreciation and amortization 303,703 351,856 Changes in operating assets and liabilities, net of effects from acquisitions: Accounts receivable 278,361 530,103 Inventories (349,454) (787,583) Prepaid expenses 4,551 (131,302) Deposits and other assets (49,213) (20,538) Accounts payable (147,836) 40,319 Customer deposits (103,934) (11,073) Accrued liabilities (178,763) (592,042) Income taxes payable (193,172) (130,145) --------- --------- Total adjustments (424,757) (729,405) --------- --------- Net cash provided by (used in) operating activities 142,376 (380,200) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (345,957) (166,719) --------- --------- Net cash used in investing activities (345,957) (166,719) --------- ---------
Page 6 of 15 7 CALNETICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
Six Months Ended December 31, ------------------------------ 1995 1994 ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long-term debt $ (421,222) $ (468,095) Net proceeds from issuance of common stock --- 8,628 ---------- ----------- Net cash used in financing activities (421,222) (459,467) ---------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (624,803) (1,006,386) CASH AND CASH EQUIVALENTS, beginning of period 1,580,974 1,853,091 ---------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 956,171 $ 846,705 ========== =========== Supplemental disclosures of cash flow information: Interest paid $ 243,790 $ 234,910 ========== =========== Income taxes paid $ 597,000 $ 381,000 ========== ===========
See accompanying notes to condensed consolidated financial statements. Page 7 of 15 8 CALNETICS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) December 31, 1995 1. General In the opinion of the management of the Company, the accompanying condensed unaudited financial statements contain all adjustments, consisting of only normal recurring accruals, necessary to present fairly the financial position at December 31, 1995, the results of its operations for the three and six months ended December 31, 1995 and 1994 and the cash flows for the six months ended December 31, 1995 and 1994. Certain information and footnote disclosures normally included in financial statements that would have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures in these financial statements are adequate to make the information presented therein not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's June 30, 1995 Form 10-K. The results of operations for the three and six months ended December 31, 1995 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending June 30, 1996. 2. Receivables. The following tabulation shows the elements of receivables:
December 31, 1995 June 30, 1995 ----------------- ------------- Trade accounts receivable $4,433,180 $4,711,541 Less allowance for doubtful accounts 274,015 263,015 ---------- ---------- Total $4,159,165 $4,448,526 ========== ==========
Page 8 of 15 9 3. Income Taxes. Income taxes for the six-month period ended December 31, 1995 were computed using the effective tax rate estimated to be applicable for the full fiscal year. This rate is subject to ongoing evaluation and review by management. 4. Long-term debt. At December 31, 1995 and June 30, 1995, long-term debt consisted of the following:
December 31, 1995 June 30, 1995 ----------------- ------------- Term loans payable to banks, secured by inventory and receivables, interest at the banks' reference rate (8.5 percent at December 31, 1995) plus .75 percent, due in various monthly install- ments of principal and interest through July 1, 1999, with balloon payments totaling $1,458,462 due on August 1, 1999 $3,249,967 $3,683,316 Industrial revenue bond payable, principal due in annual sinking fund installments ranging from $15,000 to $130,000 through December 2021, plus interest due monthly based on the Issuer's Weekly Adjustable Interest Rates for Revenue Bonds (5.3 percent at December 31, 1995), secured by a standby 1,455,000 1,455,000 letter of credit issued by a bank with an annual fee of 1.25%
Page 9 of 15 10 Long-term debt. (cont'd)
December 31, 1995 June 30, 1995 ----------------- ------------- Loans payable to former API shareholders, unsecured, interest payable semi-annually at 7.50 percent, principal payable in four equal annual installments beginning June 1996 402,042 402,042 Mortgage payable to bank, secured by the related building and land, payable in monthly installments of $1,665 plus interest at the bank's prime rate, (8.5% at December 31, 1995) plus .75%, with a balloon payment of $201,415 due March 5, 2000 284,675 294,663 Equipment term notes payable to banks, secured by the related equipment, due in equal monthly installments of principal and interest ranging from $214 to $780, interest at rates ranging from a bank's prime rate (8.5% at December 31, 1995) plus 1% to 11.87 percent through October 1998 76,378 54,263 ---------- ---------- $5,468,062 $5,889,284 Current portion of long-term debt 259,003 338,000 ---------- ---------- Long-term portion $5,209,059 $5,551,284 ========== ==========
The term loans and notes payable include certain restrictive financial and non-financial covenants, including certain cash restrictions and limitations on payment of cash dividends and redemption of stock. At December 31, 1995, the Company was in compliance with all bank covenants. Page 10 of 15 11 5. Earnings per common share and common share equivalent. Earnings per common share and common share equivalent are based on the weighted average number of shares of common stock and common stock equivalents (dilutive stock options) outstanding during the related periods. The weighted average number of common stock equivalent shares includes shares issuable upon the assumed exercise of stock options less the number of shares assumed purchased with the proceeds available from such exercise. Fully diluted net income per share does not differ materially from net income per common share and common share equivalent. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. MANCHESTER ACQUISITION In September 1989, the Company acquired Manchester. The acquisition expanded the Company's operations to include the manufacturing of acrylic, polycarbonate and polystyrene plastic sheet that serves the building materials and industrial plastics industries. Prior to the acquisition, the Company was primarily engaged in the manufacturing of molded plastic components by injection, transfer and compression processes. PSI ACQUISITION On June 3, 1992, the Company acquired for cash substantially all of the assets of PSI, a manufacturer of plastic injection molding components located in Corona, California. The acquisition was accomplished through a subsidiary of the Company, Ny-Glass, which continued the business of PSI, under the Ny-Glass name in Corona, California. The cash purchase price paid for the assets acquired amounted to $320,100, $250,000 of which was obtained from a short-term bank loan, utilizing the Company's then existing credit line of $1,000,000. Current assets acquired as part of the acquisition amounted to $354,182 and current liabilities assumed totaled $306,081. API ACQUISITION In fiscal 1994, the Company completed the acquisition of all of the outstanding Page 11 of 15 12 stock of API of Ontario, California from the API shareholders effective as of April 30, 1994. The purchase price was $4,402,144, consisting of cash of $4,000,102 and unsecured promissory notes payable to the selling shareholders of $402,042. API, which was a closely held private company, is a manufacturer of plastic water handling products, including tubing, filters and drip system accessories with manufacturing plants in Ontario, California and Winter Haven, Florida. Net assets acquired totaled $3,528,341, resulting in recording of goodwill of $873,803 which is being amortized on a straight-line basis over 20 years. Financial condition. There were no significant changes in current assets or current liabilities of the Company between December 31, 1995, the end of the second quarter, and June 30, 1995 except for the voluntary payment of $150,000, representing three monthly installments, of the Company's long term bank loan, the payment of which was in addition to the regular scheduled monthly payments. Liquidity and Capital Resources. At December 31, 1995, the Company's working capital was $7,367,826, compared to $6,901,774 at the same time a year ago. The Company has a working capital agreement with a bank under which the Company may borrow up to $2,500,000 on an unsecured basis and as of December 31, 1995, the entire amount of $2,500,000 was available under this credit arrangement, which expires on December 31, 1996. The Company has no immediate plans for any significant capital expenditures and the Company believes that its available funds and internally generated cash from operations will be sufficient to meet its working capital needs in fiscal 1995. Certain loan agreements limit capital expenditures to $750,000 in 1996 and $500,000 in 1997 and thereafter. Results of Operations. Three months ended December 31, 1995 compared to three months ended December 31, 1994 Net sales for the three-month period ended December 31, 1994 increased 22% from $6,275,591 in 1994, to $7,627,663 in 1995; the increase is attributed to the addition of new customers, increases in selling prices and improved business Page 12 of 15 13 conditions. Cost of sales as a percentage of sales increased to 76.4%, during the period October 1, 1995 to December 31, 1995, as compared to 74.8% for the same period in the prior year. The increase is attributed to higher resin price costs in the current period. Selling, general and administrative expenses increased to $1,219,614 as compared with $1,135,308 for the same period in the prior year, an increase of 7%; the increase due mainly to increased sales volume. Net income for the current three-month period was $270,929 as compared with $179,512, after provisions for income taxes of $192,300 and $125,223 for the three months ended December 31, 1995 and 1994, respectively. Earnings per share increased to $0.09 from $0.06 per share for the three months ended December 31, 1995 and 1994, respectively. The increase in net income is attributed to increased sales volume during the three months ended December 31, 1995. Six Months ended December 31, 1995 compared to six months ended December 31, 1994 Net sales for the six-month period ended December 31, 1995 increased 27% from $12,922,762 in 1994, to $16,398,938 in 1995; the increase is attributed to the addition of new customers, increases in selling prices and improved business conditions. Cost of sales as a percentage of sales increased to 77.1%, during the period July 1, 1995 to December 31, 1995, as compared to 75.5% for the same period in the prior year. The increase is attributed to the higher resin costs in the current period. Selling, general and administrative expenses increased to $2,551,887 as compared with $2,302,195 for the same period in the prior year. The increase was mainly attributed to increased sales volume. Net income for the current six-month period was $567,133 as compared with $349,205, after provisions for income taxes of $403,000 and $251,223 for the six months ended December 31, 1995 and 1994, respectively. The improvement in net income is attributed to increased sales volume in the current period. Page 13 of 15 14 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K None. Page 14 of 15 15 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. CALNETICS CORPORATION (Registrant) Dated: January 30, 1996 /s/ Clinton G. Gerlach ------------------------------ Clinton G. Gerlach President Dated: January 30, 1996 /s/ Teresa S. Louie ------------------------------ Teresa S. Louie Treasurer Page 15 of 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 US DOLLARS 6-MOS JUN-30-1996 JUL-01-1996 DEC-31-1996 1 956,171 0 4,433,180 274,015 5,311,491 11,007,272 7,039,196 3,089,370 16,644,784 3,639,446 5,302,059 2,397,635 0 0 5,305,644 16,644,784 7,627,663 7,627,663 5,829,512 1,208,614 0 11,000 115,308 463,229 192,300 0 0 0 0 270,929 .09 .09
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