-----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, GIo7sCnRWpuISulooWkEThtB5rO5jj9XKI6asOGT+SA1Qfr2qmMhdpVFKR9e7pPq qPoNDfaBSAdRL5Sps5/p6w== 0000950148-96-000708.txt : 19960521 0000950148-96-000708.hdr.sgml : 19960521 ACCESSION NUMBER: 0000950148-96-000708 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960506 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALNETICS CORP CENTRAL INDEX KEY: 0000277376 STANDARD INDUSTRIAL CLASSIFICATION: 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: 96556886 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 THE PERIOD ENDED 3/31/96 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 March 31, 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 Number: 0-8767 CALNETICS CORPORATION (Exact name or registrant as specified in its charter) CALIFORNIA 95-2303687 (State or other 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 N/A (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 March 31, 1996 date was 2,924,799. 2 CALNETICS CORPORATION INDEX Part I. Financial Information Page Number Item 1. Financial Statements Condensed Consolidated Statements of Income (Unaudited) Three Months and Nine Months Ended March 31, 1996 and 1995 ........ 3 Condensed Consolidated Balance Sheets (Unaudited) March 31, 1996 and June 30, 1995 .................................. 4 Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended March 31, 1996 and 1995 ......................... 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 ........................... 13 Signatures .......................................................... 14 Page 2 of 14 3 PART I - FINANCIAL INFORMATION CALNETICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended March 31, March 31, ----------------------------- -------------------------------- 1996 1995 1996 1995 ---------- ---------- ----------- ----------- Net Sales $9,089,762 $7,704,812 $25,488,700 $20,627,574 Cost of Sales 6,744,642 5,712,942 19,381,733 15,466,800 ---------- ---------- ----------- ----------- Gross Profit 2,345,120 1,991,870 6,106,967 5,160,774 ---------- ---------- ----------- ----------- Selling, general and administrative expenses 1,486,616 1,370,015 4,038,503 3,672,210 Other expense including interest 95,666 132,431 335,493 398,712 ---------- ---------- ----------- ----------- Total costs and expenses 1,582,282 1,502,446 4,373,996 4,070,922 Income from operations before income taxes 762,838 489,424 1,732,971 1,089,852 Provision for income taxes 319,000 209,721 722,000 460,944 ---------- ---------- ----------- ----------- Net Income $ 443,838 $ 279,703 $ 1,010,971 $ 628,908 ========== ========== =========== =========== Earnings per common share and common share equivalent $ 0.14 $ 0.09 $ 0.33 $ 0.21 Weighted average common shares and common share equivalents outstanding 3,075,569 3,045,093 3,063,145 3,036,402 ========== ========== =========== ===========
No dividends were paid during the period set forth above. See accompanying notes to condensed consolidated financial statements. Page 3 of 14 4 CALNETICS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS
March 31, 1996 June 30, 1995 ----------- ----------- CURRENT ASSETS: Cash and cash equivalents $ 782,088 $ 1,580,974 Accounts receivable, net 5,437,969 4,448,526 Inventories 5,305,037 4,962,037 Prepaid expenses 332,104 312,996 Deferred income taxes 272,000 272,000 ----------- ----------- Total current assets 12,129,198 11,576,533 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT (at cost): Land 466,288 466,288 Buildings and improvements 2,244,716 2,204,992 Machinery and equipment 4,334,050 3,752,505 Furniture and fixtures 246,737 224,251 ----------- ----------- 7,291,791 6,648,036 Less--Accumulated depreciation and amortization 3,242,273 2,776,164 ----------- ----------- Property, plant and equipment, net 4,049,518 3,871,872 ----------- ----------- Deposits and other assets 243,560 201,205 Goodwill 1,419,268 1,472,968 ----------- ----------- Total assets $17,841,544 $17,122,578 =========== ===========
See accompanying notes to condensed consolidated financial statements. Page 4 of 14 5 CALNETICS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 1996 June 30, 1995 -------------- ------------- CURRENT LIABILITIES: Current portion of long-term debt $ 237,399 $ 338,000 Accounts payable 2,928,583 2,650,651 Customer deposits 111,104 150,004 Accrued liabilities 1,155,037 1,145,300 Income taxes payable 117,021 58,193 ----------- ----------- Total current liabilities 4,549,144 4,342,148 ----------- ----------- LONG-TERM DEBT, net of current portion 5,037,903 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 -- 2,924,799 at March 31, 1996 and 2,914,799 at June 30, 1995 2,412,015 2,397,635 Retained earnings 5,749,482 4,738,511 ----------- ----------- Total shareholders' equity 8,161,497 7,136,146 ----------- ----------- Total liabilities and shareholders' equity $17,841,544 $17,122,578 =========== ===========
See accompanying notes to condensed consolidated financial statements. Page 5 of 14 6 CALNETICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended March 31, -------------------------- 1996 1995 ----------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,010,971 $ 628,908 ----------- --------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for doubtful accounts 21,000 61,500 Depreciation and amortization 539,723 520,548 Changes in operating assets and liabilities, net of effects from acquisitions: Accounts receivable (1,010,443) (594,973) Inventories (343,000) (677,755) Prepaid expenses (19,108) (113,528) Accounts payable 277,932 744,127 Customer deposits (38,900) 26,320 Accrued liabilities 9,737 (444,728) Income taxes payable 58,828 (84,999) ----------- --------- Total adjustments (504,231) (563,488) ----------- --------- Net cash provided by operating activities 506,740 65,420 ----------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (663,669) (393,490) Deposits and other assets (42,355) (32,769) ----------- --------- Net cash used in investing activities (706,024) (426,259) ----------- ---------
Page 6 of 14 7 CALNETICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
Nine Months Ended March 31, ---------------------------- 1996 1995 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long-term debt $ (613,982) $ (598,337) Net proceeds from issuance of common stock 14,380 30,198 ----------- ----------- Net cash used in financing activities (599,602) (568,139) ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS (798,886) (928,978) CASH AND CASH EQUIVALENTS, beginning of period 1,580,974 1,853,091 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 782,088 $ 924,113 =========== =========== Supplemental disclosures of cash flow information: Interest paid $ 341,747 $ 398,712 =========== =========== Income taxes paid $ 664,000 $ 545,575 =========== ===========
See accompanying notes to condensed consolidated financial statements. Page 7 of 14 8 CALNETICS CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) March 31, 1996 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 March 31, 1996, and June 30, 1995, the results of its operations for the three and nine months ended March 31, 1996 and 1995 and the cash flows for the nine months ended March 31, 1996 and 1995. 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 nine months ended March 31, 1996 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:
March 31, 1996 June 30, 1995 -------------- ------------- Trade accounts receivable $5,722,135 $4,711,541 Less allowance for doubtful accounts 284,166 263,015 ---------- ---------- Total $5,437,969 $4,448,526 ========== ==========
Page 8 of 14 9 3. Income Taxes. Income taxes for the nine-month period ended March 31, 1996 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 March 31, 1996 and June 30, 1995, long-term debt consisted of the following:
March 31, 1996 June 30, 1995 -------------- ------------- Term loans payable to banks, secured by inventory and receivables, interest at the banks' reference rate (8.25 percent at March 31, 1996) plus .75 percent, due in various monthly installments of principal and interest through July 1, 1999, with balloon payments totaling $1,458,462 due on August 1, 1999 $3,049,953 $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 Issuers Weekly Adjustable Interest Rates for Revenue Bonds (3.5 percent atMarch 31, 1996), secured by a standby letter of credit issued by a bank with an annual fee of 1.25 percent 1,440,000 1,455,000
Page 9 of 14 10 Long-term debt. (cont'd)
March 31, 1996 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 (8.25 percent at March 31, 1996) plus .75 percent with a balloon payment of $201,415 due March 5, 2000 279,681 294,663 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 (8.25 percent at March 31, 1996) plus 1 percent to 11.87 percent through October 1998. 103,626 54,263 ---------- ---------- $5,275,302 $5,889,284 Current portion of long-term debt 237,399 338,000 ---------- ---------- Long-term portion $5,037,903 $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 March 31, 1996, the Company was in compliance with all bank covenants. Page 10 of 14 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 PLASTICS CO., INC. ACQUISITION In September 1989, the Company acquired Manchester Plastics Co., Inc. ("MPC"). 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. PLASTIC SCIENCE, INC. ACQUISITION On June 3, 1992, the Company acquired for cash substantially all of the assets of Plastic Science, Inc. ("PSI"), a manufacturer of plastic injection molding components located in Corona, California. The acquisition was accomplished through a subsidiary of the Company, Ny-Glass Plastics, Inc. ("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 was $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 were $354,182 and current liabilities assumed totaled $306,081. AGRICULTURAL PRODUCTS, INC. ACQUISITION In fiscal 1994, the Company completed the acquisition of all of the outstanding stock of Agricultural Products, Inc. ("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 Page 11 of 14 12 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 March 31, 1996, the end of the third quarter, and June 30, 1995, except for (1) increases in receivables and inventory, partially offset by an increase in accounts payable, all attributable to sales increases and (2) the voluntary payment of $150,000, representing three monthly installments on the Company's long-term bank loans, the payment of which was in addition to the regular scheduled monthly payments. Liquidity and Capital Resources. At March 31, 1996, the Company's working capital was $7,580,054, compared to $7,234,385 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 March 31, 1996, 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 1996. Certain loan agreements limit capital expenditures to $750,000 in 1996 and $500,000 in 1997 and thereafter. Results of Operations. Three months ended March 31, 1996 compared to three months ended March 31, 1995 Net sales for the three-month period ended March 31, 1996 increased 18% from $7,704,812 in the same period in 1995, to $9,089,762 in 1996; the increase is attributed to the addition of new customers, improved business conditions, and increases in selling prices. Cost of sales as a percentage of sales increased to 74.2%, during the period January 1, 1996 to March 31, 1996, as compared to 74.1% for the same period in the prior year. Page 12 of 14 13 Selling, general and administrative expenses for the three-month period ended March 31, 1996 increased to $1,486,616 as compared with $1,370,015 for the same period in the prior year, an increase of 9%. The increase is attributed to increased sales volume. Net income for the current three-month period was $443,838 as compared with $279,703, for the same period in the prior year, after provisions for income taxes of $319,000 and $209,721 for the three months ended March 31, 1996 and 1995, respectively. Earnings per common share and common share equivalent increased to $0.14 from $0.09 per share for the three months ended March 31, 1996 and 1995, respectively. The increase in net income is attributed primarily to increased sales volume at all three subsidiaries. Nine months ended March 31, 1996 compared to nine months ended March 31, 1995 Net sales for the nine-month period ended March 31, 1996 increased 24% from $20,627,574 in 1995, to $25,488,700 in 1996; the increase is attributed to the addition of new customers, improved business conditions, and increases in selling prices. Cost of sales as a percentage of sales increased to 76%, during the period July 1, 1995 to March 31, 1996, as compared to 75% for the same period in the prior year. The increase is primarily attributed to the inclusion of certain unfavorable profit margins of MPC and Ny-Glass during the first three months of the current fiscal year. Selling, general and administrative expenses increased to $4,038,503 for the nine-month period ended March 31, 1996 as compared with $3,672,210 for the same period in the prior year. The increase is mainly attributed to the increased sales volume of all subsidiaries. Net income for the current nine-month period was $1,010,971 as compared with $628,908, for the nine-month period ended March 31, 1995 after provisions for income taxes of $722,000 and $460,944 for the nine months ended March 31, 1996 and 1995, respectively. The improvement in net income was primarily attributed to increased sales volume at all three subsidiaries. Earnings per common share and common share equivalent increased to $0.33 from $0.21 per share for the nine months ended March 31, 1996 and 1995, respectively. The increase being primarily attributed to increased sales volume. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K None. 27.1 Financial Data Schedule Page 13 of 14 14 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: April 26, 1996 /s/ Clinton G. Gerlach ----------------------- Clinton G. Gerlach President Dated: April 26, 1996 /s/ Teresa S. Louie ----------------------- Teresa S. Louie Treasurer Page 14 of 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS JUN-30-1996 JUL-01-1995 MAR-31-1996 782088 0 5722135 284166 5305037 12129198 7291791 3242273 17841544 4549144 5130903 0 0 2412015 5749482 17841544 25488700 25488700 19381733 23399236 0 21000 335493 1732971 722000 0 0 0 0 1010971 .33 .33
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