-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, KrjBTmB55A5MHQmUT4bFLgWegXUuUMOqUYM8/LEGdX8rhBPdUSpCRB6SbZoqcncd BPXn77u9yCyPNhbZoc27fA== 0000061004-95-000007.txt : 19950614 0000061004-95-000007.hdr.sgml : 19950614 ACCESSION NUMBER: 0000061004-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950516 DATE AS OF CHANGE: 19950613 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: LYNCH CORP CENTRAL INDEX KEY: 0000061004 STANDARD INDUSTRIAL CLASSIFICATION: 4213 IRS NUMBER: 381799862 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00106 FILM NUMBER: 95546107 BUSINESS ADDRESS: STREET 1: 8 SOUND SHORE DR STE 290 CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2036293333 MAIL ADDRESS: STREET 1: 8 SOUND SHORE DRIVE STREET 2: SUITE 290 CITY: GREENWICH STATE: CT ZIP: 06830 10-Q 1 1ST QTR 10Q 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, 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 No. 1-106 LYNCH CORPORATION (Exact name of Registrant as specified in its charter) Indiana 38-1799862 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8 Sound Shore Drive, Suite 290, Greenwich, Connecticut 06830 (Address of principal executive offices) (Zip code) (203) 629-3333 Registrant's telephone number, including area code 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 Indicate the number of shares outstanding of each of the Registrant's classes of Common Stock, as of the latest practical date. Class Outstanding at May 1, 1995 Common Stock, no par value 1,378,658 INDEX LYNCH CORPORATION AND SUBSIDIARIES PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Statement of Operations: - Three months ended March 31, 1995 and 1994 Condensed Consolidated Balance Sheet: - March 31, 1995 - December 31, 1994 (Audited) Condensed Consolidated Statement of Cash Flows: - Three months ended March 31, 1995 and 1994 Notes to Condensed Consolidated Financial Statements Item 2. Managements's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K SIGNATURES LYNCH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands) March 31 December 31 1995 1994 (Unaudited) (A) ASSETS: ------- ------- CURRENT ASSETS: Cash and Cash Equivalents $19,199 $18,010 Marketable Securities and Short-Term Investments 10,785 13,511 Accounts Receivable, Less Allowances of $749 and $737 30,578 36,454 Inventories 31,148 18,955 Deferred Income Tax Benefits 2,872 2,872 Other Current Assets 4,081 4,083 ------- ------- Total Current Assets 98,663 93,885 PROPERTY, PLANT AND EQUIPMENT: Land 1,893 1,893 Buildings and Improvements 12,683 11,713 Machinery and Equipment 81,628 79,290 ------- ------- 96,204 92,896 Less Accumulated Depreciation 33,863 31,451 ------- ------- Net Property, Plant and Equipment 62,341 61,445 INVESTMENT IN AND ADVANCES TO AFFILIATED COMPANIES 3,461 3,503 ACQUISITION INTANGIBLES 23,245 23,518 OTHER ASSETS 3,623 3,559 ------- ------- Total Assets $191,333 $185,910 LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: Notes Payable to Banks $5,378 $5,904 Trade Accounts Payable 16,635 11,999 Accrued Liabilities 23,490 23,724 Current Maturities of Long-Term Debt 16,489 29,545 Total Current Liabilities 61,992 71,172 LONG-TERM DEBT 75,917 62,745 DEFERRED INCOME TAXES 10,397 10,397 MINORITY INTERESTS 11,371 11,065 SHAREHOLDERS' EQUITY COMMON STOCK, NO PAR VALUE-10,000,000 SHARES AUTHORIZED; 1,418,310 shares issued (at stated value) 5,139 5,139 ADDITIONAL PAID - IN CAPITAL 8,037 8,037 RETAINED EARNINGS 19,756 18,631 TREASURY STOCK OF 92,533 SHARES, AT COST (1,276) (1,276) ------- ------- Total Shareholders' Equity 31,656 30,531 ------- ------- Total Liabilities and Shareholders' Equity $191,333 $185,910 (A) The Balance Sheet at December 31,1994 has been derived from the Audited financial Statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See Notes to Condensed Consolidated Financial Statements. LYNCH CORPORATION AND SUBSIDIARIES ------------------------------------------- CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS ------------------------------------------- (UNAUDITED) (In thousands) Three Months Ended March 31 1995 1994 OPERATING ACTIVITIES Net Income 1,125 641 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,550 1,748 Deferred taxes 0 (53) Share of operations of affiliated companies 70 (6) Minority interests 423 80 Provisions for unrealized losses on marketable securities (190) (52) Realized gains on sale of marketable securities 38 (17) Changes in operating assets and liabilities: Receivables 5,876 (2,610) Inventories (12,193) (173) Accounts payable and accrued liabilities 4,402 945 Other (90) 420 ------ ------ NET CASH FROM OPERATING ACTIVITIES 2,011 923 ------ ------ INVESTING ACTIVITIES Capital Expenditures (3,101) (807) Sales (purchases) of marketable securities - net 2,878 (1,442) Investment in Capital Communications, Inc 0 (13,670) ------ ------ NET CASH USED IN INVESTING ACTIVITIES (223) (15,919) ------ ------ FINANCING ACTIVITIES Repayments of debt, net (482) (977) Sale of treasury stock 0 2,288 Other (117) 0 ------ ------ NET CASH FROM (USED IN)FINANCING ACTIVITIES (599) 1,311 ------ ------ Net increase (decrease) in cash and cash equivalents 1,189 (13,685) Cash and cash equivalents at beginning of period 18,010 24,548 ------ ------ CASH AND CASH EQUIVALENTS AT END OF PERIOD 19,199 10,863 ====== ====== See Notes to Condensed Consolidated Financial Statements. Part 1- FINANCIAL INFORMATION - - ------------------------------------------------ Item 1- Financial Statements - - ------------------------------------------------ LYNCH CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) (In thousands, except share amounts) Three Months Ended March 31 1995 1994 ------ ------ SALES AND REVENUES Multimedia $5,685 $4,881 Services 26,803 22,956 Manufacturing 37,300 8,231 ------ ------ 69,788 36,068 ------ ------ Costs and expenses: Multimedia 4,225 3,298 Services 24,233 20,978 Manufacturing 30,236 5,841 Selling and administrative 7,060 4,211 ------ ------ OPERATING PROFIT 4,034 1,740 Other income (expense): Investment Income 884 577 Interest expense (2,204) (1,366) Share of operations of affiliated companies (70) 6 Gain on Sale of Subsidiary Stock 0 150 ------ ------ (1,390) (633) INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 2,644 1,107 Provision for income taxes (1,096) (386) Minority interests (423) (80) ------ ------- NET INCOME $1,125 $641 ------ ------ Weighted average shares outstanding 1,401,000 1,301,000 INCOME PER COMMON SHARE: NET INCOME PER SHARE $0.80 $0.49 INCOME PER COMMON SHARE ASSUMING FULL DILUTION $0.80 $0.47
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A. Subsidiaries of the Registrant The present operating subsidiaries of the Registrant are as follows: Lynch Multimedia Corporation Lynch Telecommunications Corporation Lynch Telephone Corporation (80.1% owned) Western New Mexico Telephone Company, Inc. WNM Communications Corporation Lynch Telephone Corporation II (83.0% owned) Inter-Community Telephone Company Lynch Telephone Corporation III (81% owned) Cuba City Telephone Exchange Company Belmont Telephone Company Lafayette County Satellite TV, Inc. Brighton Communications Corporation Lynch Telephone Corporation IV Bretton Woods Telephone Company Lynch Telephone Corporation VI (98% owned) J.B.N. Telephone Company, Inc. J.B.N. Finance Corporation Lynch Telephone Corporation VII USTC Kansas Inc. Haviland Telephone Company Haviland Finance Corporation Global Television Inc. Lynch Entertainment Corporation Coronet Communications Company (20% owned) Lynch Entertainment Corporation II Capital Communications Corporation (49% owned) The Morgan Group, Inc. (equity ownership 47% - voting ownership 64%) Morgan Drive Away, Inc. Transport Services Unlimited, Inc. Interstate Indemnity Inc. Morgan Finance, Inc. Lynch Capital Corporation Lynch Manufacturing Corporation Lynch Machinery, Inc. (90% owned) Tri-Can International, Ltd. M-tron Industries, Inc. (94% owned) M-tron Industries, Ltd. Spinnaker Industries, Inc. (previously named Safety Railway Service Corporation) (83% owned) Brown-Bridge Industries, Inc. (80.1% owned) Entoleter, Inc. Lynch International Exports, Inc. B. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1995 are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. C. Acquisitions On September 26, 1994, Lynch Telephone Corporation VII, a wholly owned subsidiary of Lynch, acquired all of the outstanding shares of Haviland Telephone Company, Inc. from InterDigital Communications Corporation. The total cost of this transaction was $13.4 million. The transaction was accounted for as a purchase, and, accordingly, the assets acquired and liabilities assumed were recorded at their estimated fair market value. As a result of this transaction, the Company recorded $8.2 million in goodwill which is being amortized over 25 years. On September 19, 1994, Brown-Bridge Industries, Inc. an 80.1% owned subsidiary of Spinnaker Industries, Inc., (an 83% owned subsidiary of Lynch) acquired from Kimberly-Clark Corporation the net assets associated with its Brown-Bridge operation, a manufacturer of adhesive coated stock for labels and related applications. The cost of the transaction was $29.1 million, plus $6.9 million in current liabilities were assumed. The transaction was accounted for as a purchase, and, accordingly, the assets and liabilities were recorded at their estimated fair market value. On March 1, 1994, Capital Communications Corporation, 49% owned by the Registrant, acquired certain assets associated with the operations of Station WOI-TV from Iowa State University. Station WOI is an ABC affiliate serving the Des Moines, Iowa market. The total cost of the transaction was $13.0 million. The transaction was accounted for as a purchase, and, accordingly, the assets acquired and liabilities assumed were recorded at their estimated fair market value. Lynch is recording the results of Capital operations on an equity basis. The operating results of the acquired companies are included in the consolidated statements of operations from their respective acquisition dates. The following combined proforma information shows the results of the Registrant's operations presented as through the purchases of Haviland, Brown-Bridge and Station WOI-TV had been made at the beginning of 1994. First Quarter Ended March 31 1995 1994 (In thousands, except per share data) Sales and Revenues $69,788 $59,781 Earnings Before, Interest Depreciation, Taxes and Amortization 6,493 5,072 Net Income 1,125 612 Net Income per Share 0.80 0.47 D. Inventories Inventories are stated at the lower of cost or market value. At March 31, 1995, inventories were valued by three methods: specific identification - 46%, last-in, first-out (LIFO) - 49%, and first-in, first-out (FIFO) - 5%. At December 31, 1994, the respective percentages were 68%, 23%, and 9%. In Thousands 3-31-95 12-31-94 Raw materials and supplies $ 6,142 $ 5,560 Work in process 9,006 7,745 Finished goods 16,000 5,650 TOTAL INVENTORIES $31,148 $18,955 E. Indebtedness Long-term debt consists of (all interest rates are weighted averages, where applicable at March 31, 1995): In Thousands 3-31-95 12-31-94 Rural Electrification Administration and Rural Telephone Bank notes payable in equal quarterly installments through 2023 at fixed interest rates (3.3%) 24,131 24,283 Bank credit facilities utilized by certain telephone and telephone holding companies at both 10.4 fixed and 8.9% variable interest rates 24,053 24,158 Unsecured notes issued in connection with telephone company acquisitions 16,236 16,266 Bank debt associated with Brown-Bridge at variable rates 10.25%: Revolving line of credit 11,129 13,180 Term loan 9,000 9,000 Other 7,857 5,402 92,406 92,290 Current Maturities (16,489) (29,545) $75,917 $62,745 These credit facilities are secured by property, plant and equipment, inventory, receivables and common stock of certain subsidiaries and contain certain covenants restricting distributions to the Registrant. On April 14, 1995, the Registrant renegotiated and extended an $11.5 million bank credit facility which was utilized in 1989 to acquire a telephone company. The original facility expired on April 15, 1995. As a result of the extension, the facility is due in due in annual amounts of $800,000 beginning in 1996 with the remainder due on December 31, 2000. The Registrant has fixed the interest rate at 9.91%, the original facility was at a fixed rate of 11.67%. Accordingly, at March 31, 1995, this debt has been classified as long-term in the accompanying Consolidated Balance Sheet. The Company also maintains short-term lines of credit with banks which aggregate $32.6 million, of which $21.4 was available at March 31, 1995. These lines are secured by operating assets of the related subsidiaries. The line of credit agreements expire in 1995 and 1996, are renewable annually, and are at interest rates of prime to prime plus 1%. The weighted average interest rate at March 31,1995 of outstanding borrowings under the lines was 9.1%. The Company had outstanding under these lines of credit standby letters of credit totaling approximately $6.0 million, securing various insurance obligations and customer advances. Several of the credit agreements contain covenants restricting distributions. In July 1986, the Registrant issued $23 million principal amount of 8% Convertible Subordinated Debentures. The Debentures were redeemable at the option of the Registrant, subject to certain restrictions, in whole or in part, at 108.0% of principal amount initially, declining annually to 100% on or after July 15, 1996. Through September 21, 1994, the Registrant had either purchased on the open market or redeemed $11,165,000 of the original issuance. At that date, in accordance with the terms of the debenture indenture, the Registrant called for redemption all of the remaining debentures outstanding, at 101.6% of their face amount plus accrued interest. The redemption was completed on October 24, 1994, and $10,195,000 of the debentures were redeemed and $1,640,000 were converted into 52,881 shares of the Registrant's Common Stock at $31 per share. F. Income Taxes The income tax provision includes federal, as well as state and local taxes. The tax provisions for the three months ending March 31, 1995 and 1994 represent effective tax rates of 41.5% and 34.9%, respectively. The rates differ from the federal statutory rate principally due to the effect of state income taxes, amortization of goodwill, no provision required on the Registrant's gain in 1994 from the sale of certain securities and a valuation reserve provided on the benefit associated with the Registrant's equity in losses of Capital Communications Corporation. G. Capital Stock In 1987 and 1992, the Board of Directors authorized the purchase of up to a total of 300 thousand shares of Common Stock of the Registrant. These shares will be retained as treasury stock for future use as required. Through March 31, 1995, the Registrant had purchased 230,861 shares of Common Stock to date at an average price of $13.15. H. Earnings Per Share Earnings per common and common equivalent share amounts are based on the average number of common shares outstanding during each period, assuming the exercise of all stock options having an exercise price less than the average market price of the common stock using the treasury stock method. Fully diluted earnings per share reflect the effect, where dilutive, of converting the outstanding convertible debentures and the exercise of all stock options having an exercise price less than the closing market price at the end of the period of the Common Stock of the Registrant using the treasury stock method. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Sales and Revenues Revenues for the first quarter of 1995 increased by $33.7 million, or 94%, from the first quarter in the prior year predominantly due to: $23.9 million in revenues from the Brown-Bridge operation, which was acquired on September 19, 1994; $4.3 million in incremental revenues from Lynch Machinery due to production activity associated with the manufacture of several extra-large glass press machines (Note: In December 1994, Lynch Machinery adopted the percentage of completion for its long term contracts which it had previously accounted for on a completed contract basis 1994's first quarter has been restated to reflect this change); and $3.8 million in incremental revenues from Morgan due to increased industry shipments of manufactured housing and recreational vehicle and increased markets share by Morgan. On a prospective basis, the inclusion of the Brown-Bridge operation and the backlog at Lynch Machinery (see below) is expected to result in increased reported revenues by the Registrant in the second and third quarters of 1995 versus the respective prior year periods. Operating Profit Operating profit for the first quarter of 1995 increased by $2.3 million, 132% from the first quarter in the prior year predominantly due to: $1.2 million contribution from Brown-Bridge; and $1.4 million in incremental operating profit from Lynch Machinery. On a prospective basis, the inclusion of Brown-Bridge and the backlog at Lynch Machinery (see below) is expected to result in increased reported operating profit by the Registrant in the second and third quarters of 1995 versus the respective prior year periods. Other Income (Expense), Net Investment income in the first quarter of 1995 was $307,000 higher than the first quarter of the previous year due to increased net market securities gains which more than offset lower investments in securities generating current investment income. Interest expense in the first quarter of 1995 was $838,000 higher than the first quarter of the previous year due to $850,000 of interest expense associated with the acquisitions of Brown-Bridge and Haviland Telephone Company. Offsetting this increase was a $275,000 decrease in interest expense associated with the redemption and conversion on October 24, 1994 of $11.8 million of the Company's 8% Convertible Subordinated Debentures. The remaining change was due to higher borrowing levels at slightly higher rates. Tax Provision The income tax provision includes federal, as well as state and local taxes. The tax provisions for the three months ending March 31, 1995 and 1994, represent effective tax rates of 41.5% and 34.9%, respectively. The rates differ from the federal statutory rate principally due to the affect of state income taxes, amortization of goodwill, no provision required on the Registrant's gain in 1994 from the sale of certain securities, and a valuation reserve provided on the benefit associated on the Registrant's equity in losses in Capital Communications Corporation. Net Income (Loss) Net income for the three months ended March 31, 1995 was $1.1 million, or $0.80 per share, in comparison to net income for the three months ended March 31, 1994 of $641,000, or $0.49 per share. The predominant factors that affected the comparability were: the acquisition of Brown-Bridge; increased production activity at Lynch Machinery; and higher investment income in 1995. A $150,000 after-tax gain was recorded in 1994 on the sale of affiliated stock. Backlog/New Orders Total backlog of manufactured products at March 31, 1995 was $38.2 million (25.1% relates to Lynch Machinery), which represents a slight decrease from the backlog of $38.8 million at December 31, 1994. During the quarter, M-tron Industries backlog increased by $3.0 million due to increased market demand and new product introductions which offset the production activity that reduced Lynch Machinery's backlog. Liquidity/Capital Resources At March 31, 1995, the Registrant had $30.0 million in cash and short-term investments, which was $1.5 million lower than the $31.5 million reported at December 31, 1994. Working capital at March 31, 1995 was $36.7 million as compared to $22.7 million at December 31, 1994. The predominant reason for the increase in working capital was the reclassification from short-term to long-term of an $11.5 million bank credit facility, previously due on April 15, 1995, which was extended on April 14, 1995. The Registrant and consolidated subsidiaries had $21.4 million of unused short-term and long-term credit facilities at March 31, 1995, $8.5 million of which relates to the Registrant. Total debt of the Registrant decreased from $98.2 million at December 31, 1994 to $97.8 million at March 31, 1995. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 27-Financial Data Schedule (b) Reports on Form 8-K On January 21, 1995, a second amendment to Form 8-K with respect to the acquisition of Haviland Telephone Company, Inc. (originally filed on September 29, 1994 and amended on December 10, 1994) was filed which contained amended financial statements. SIGNATURE 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. LYNCH CORPORATION (Registrant) BY: s/Robert E. Dolan Robert E. Dolan Chief Financial Officer May 12, 1995 EX-27 2
5 This schedule contains summary financial information extracted from the Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets and is qualified in its entirety by reference to such Form 10-Q. 3-MOS DEC-31-1995 MAR-31-1995 19199 10785 30578 749 31148 98663 96204 33863 191333 61992 75917 5139 0 0 26517 191333 69788 69788 58694 65754 0 12 2204 2644 1096 1125 0 0 0 1125 .80 .80
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