-----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, DfOyCDhBy5ym2ht4r7VulbIwKXfgrSkMQI8Fq91tBHIvssUdS8+EZKYmjJDiZhqi mDRPSmAmrT9vVk1ygn6a0Q== 0000061004-96-000056.txt : 19960827 0000061004-96-000056.hdr.sgml : 19960827 ACCESSION NUMBER: 0000061004-96-000056 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960826 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: LYNCH CORP CENTRAL INDEX KEY: 0000061004 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 381799862 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-00106 FILM NUMBER: 96620414 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/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A (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 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, 1996 Common Stock, no par value 1,390,579 INDEX LYNCH CORPORATION AND SUBSIDIARIES PART I. FINANCIAL INFORMATION Item 1. Financial Statements Financial Statements as amended August 19, 1996, to revised Note C (Acquisition of Central Products - Proforma Information) SIGNATURES 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 -------------- 1996 1995 ---------- ---------- SALES AND REVENUES > Multimedia $ 6,715 $ 5,685 Services 30,506 26,803 Manufacturing 73,709 37,300 ---------- ---------- 110,930 69,788 ---------- ---------- Costs and expenses: Multimedia 4,610 4,225 Services 28,561 24,233 Manufacturing 61,234 30,236 Selling and administrative 10,615 7,060 ---------- ---------- OPERATING PROFIT 5,910 4,034 Other income (expense): Investment Income 433 884 Interest expense (3,954) (2,204) Share of operations of affiliated companies 19 (70) Gain on Sale of Stock by Subsidiary 44 0 ---------- ---------- (3,458) (1,390) ---------- ---------- INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 2,452 2,644 Provision for income taxes (963) (1,096) Minority interests (288) (423) ---------- ---------- NET INCOME $1,201 $1,125 ---------- ---------- Weighted average shares outstanding 1,397,000 1,401,000 ========== ========== NET INCOME PER SHARE $0.86 $0.80 ========== ==========
LYNCH CORPORATION AND SUBSIDIARIES ----------------------------------- CONDENSED CONSOLIDATED BALANCE SHEET ------------------------------------ (In thousands)
March 31 December 31 1996 1995 (Unaudited) (A) ----------- ----------- ASSETS CURRENT ASSETS: Cash and Cash Equivalents $ 23,204 $ 15,921 Marketable Securities and Short-Term Investments 6,409 11,432 Receivables, less Allowances of $ 1286 and $1732 52,959 52,306 Inventories 33,911 33,235 Deferred Income Tax Benefits 3,944 3,944 Other Current Assets 7,016 6,810 -------- -------- Total Current Assets 127,443 123,648 PROPERTY, PLANT AND EQUIPMENT: Land 2,068 2,068 Buildings and Improvements 17,725 16,675 Machinery and Equipment 132,602 128,397 -------- -------- 152,395 147,140 Less Accumulated Depreciation 40,053 36,093 -------- -------- Net Property, Plant and Equipment 112,342 111,047 INVESTMENT IN AND ADVANCES TO AFFILIATED COMPANIES 9,356 8,982 ACQUISITION INTANGIBLES 51,843 53,060 OTHER ASSETS 7,449 5,702 -------- -------- Total Assets $308,433 $302,439 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes Payable to Banks $ 8,789 $ 9,622 Trade Accounts Payable 24,528 20,147 Accrued Liabilities 28,338 28,545 Current Maturities of Long-Term Debt 38,419 39,708 -------- -------- Total Current Liabilities 100,074 98,022 LONG-TERM DEBT 139,485 138,029 DEFERRED INCOME TAXES 17,912 17,912 MINORITY INTERESTS 13,532 12,964 SHAREHOLDERS' EQUITY COMMON STOCK, NO PAR VALUE-10,000,000 SHARES AUTHORIZED; 1,471,191 shares issued (at stated value) 5,139 5,139 ADDITIONAL PAID - IN CAPITAL 8,425 7,873 RETAINED EARNINGS 24,977 23,776 TREASURY STOCK OF 80,612 AND 92,528 SHARES, AT COST (1,111) (1,276) -------- -------- Total Shareholders' Equity 37,430 35,512 -------- -------- Total Liabilities and Shareholders' Equity $308,433 $302,439 ======== ========
(A) The Balance Sheet at December 31,1995 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. LYNCH CORPORATION AND SUBSIDIARIES ---------------------------------- CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS --------------------------------------------- (UNAUDITED) (In thousands)
Three Months Ended March 31 ---------- ---------- 1996 1995 ---------- ---------- OPERATING ACTIVITIES Net Income $ 1,201 $ 1,125 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,931 2,550 Net effect of sales of trading securities 5,023 2,726 Share of operations of affiliated companies (19) 70 Minority interests 288 423 Changes in operating assets and liabilities: Receivables (653) 5,876 Inventories (676) (12,193) Accounts payable and accrued liabilities 4,174 4,402 Other (2,008) (90) -------- -------- NET CASH FROM OPERATING ACTIVITIES 11,261 4,889 -------- -------- INVESTING ACTIVITIES Capital Expenditures (3,906) (3,101) Other (327) 0 -------- -------- NET CASH USED IN INVESTING ACTIVITIES (4,233) (3,101) -------- -------- FINANCING ACTIVITIES Repayments of debt, net (741) (482) Treasury stock transactions 723 0 Minority interest transactions 273 (117) -------- -------- NET CASH FROM (USED IN)FINANCING ACTIVITIES 255 (599) -------- -------- Net increase in cash and cash equivalents 7,283 1,189 Cash and cash equivalents at beginning of period 15,921 18,010 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 23,204 $ 19,199 ======== ========
See Notes to Condensed Consolidated Financial Statements. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A. Subsidiaries of the Registrant The present operating subsidiaries of the Registrant are as follows: Lynch Multimedia Corporation CLR Video LLC (60% owned) 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 49% - 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) (78% owned) Central Products Acquisition Corp. 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, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. 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, 1995. C. Acquisitions On October 4, 1995, Central Products Acquisition Corp., a wholly-owned subsidiary of Spinnaker Industries, Inc. (an 78% owned subsidiary of Lynch) acquired from Alco Standard Corporation ("Alco"), the assets and stock of Central Products Company. Central Products manufactures a wide variety of carton sealing tapes and related equipment. The cost of the acquisition was $80.0 million. As a result of this transaction, the Company recorded $27.2 million in goodwill which is being amortized over 25 years. This transaction was accounted for as a purchase, and accordingly, the assets acquired and liabilities assumed were recorded at their estimated fair market value. 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 purchase of Central Products had been made at the beginning of 1995.
First Quarter Ended March 31 1996 1995 (In thousands, except per share data) Sales and Revenues $110,930 $100,798 Operating Profit 5,910 6,464 Net Income 1,201 1,370 Net Income per Share 0.86 0.97
D. Inventories Inventories are stated at the lower of cost or market value. At March 31, 1996, inventories were valued by three methods: last-in, first-out (LIFO) - 56%, specific identification - 40%, and first-in, first-out (FIFO) - 4%. At December 31, 1995, the respective percentages were 58%, 38%, and 4%.
In Thousands 3-31-96 12-31-95 Raw materials and supplies $11,572 $10,676 Work in process 10,322 10,286 Finished goods 12,017 12,273 TOTAL INVENTORIES $33,911 $33,235
E. Indebtedness On a consolidated basis, at March 31, 1996, the Registrant maintains short-term and long term lines of credit facilities totaling $81.6 million, of which $30.2 million is available. Lynch Corporation, the Parent Company, maintains a $12.0 million short term line of credit facility, of which $6.8 million was available at March 31,1996. This facility has recently been extended to April 15, 1997. Spinnaker Industries, Inc. maintains lines of credit at its subsidiaries which total $45.5 million, of which $11.7 million was available at March 31, 1996 and The Morgan Group maintains lines of credit totaling $18.0 million, $10.5 million of which was available at March 31, 1996. These facilities as well as facilities at other subsidiaries of the Registrant, generally limit the credit available under the lines of credit to certain variables, such as inventories and receivables, are secured by the operating assets of the subsidiary, and include various financial covenants. At March 31, 1996, $3.4 million of these total facilities expire within one year. Long-term debt consists of (all interest rates are weighted averages, where applicable at March 31, 1996):
In Thousands 3-31-96 12-31-95 Rural Electrification Administration and Rural Telephone Bank notes payable in equal quarterly installments through 2023 at fixed rates (3.5%) 28,251 27,543 Bank credit facilities utilized by certain telephone and telephone holding companies at both 9.5% fixed and 8.9% variable rates 28,140 28,255 Unsecured notes issued in connection with telephone company acquisitions at 10% fixed rate 16,120 16,149 Debt associated with Central Products: Revolving line of credit 9.25% variable rate 13,223 14,126 Term loan 9.5% variable rate 35,250 35,625 Notes to seller 9.2% variable rate 30,000 30,000 Bank debt associated with Brown-Bridge at variable rates 9.5%: Revolving line of credit 12,611 12,646 Term loan 6,112 6,691 Other 8,197 6,702 177,904 177,737 Current Maturities (38,419) (39,708) $139,485 $138,029
In general, the long-term debt 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. As part of Spinnaker's acquisition of Central Products Company from Alco Standard on October 4, 1995 (see note C), Alco provided two loans totaling $25 million and received the right to sell these notes to Spinnaker and demand payment (the "Put Agreement"). Lynch agreed to guarantee the notes and provide funds for the Put Agreements. As of January 2, 1996, Alco exercised the rights under the Put Agreement to sell the notes back to Spinnaker and in connection therewith, as described below, Spinnaker entered into a new financing agreement with the seller and a third party to make a partial principal payment on the note and replace the balance with a new financing arrangement. On April 5, 1996, Spinnaker entered into an agreement with a third party for an $8.5 million bridge loan. The bridge loan is due on December 30, 1996, and if not paid will convert into a 5 year term loan. The third party will be entitled to receive a warrant to purchase 2.5% of the common equity of Spinnaker for each quarter the term loan is outstanding up to 20% on a fully diluted basis, of the common equity of Spinnaker. The bridge loan bears interest at the greater of the LIBOR reference rate or the Treasury rate plus 5% for the first 90 days, then incrementally increasing by .25% for every subsequent 90 day period. On April 5, 1996, the rate in effect was 10.4%. Spinnaker may also fix the rate at 18% if the floating rate increases to or above that rate. The bridge loan and term loan include a payment in kind ("PIK") feature that allows Spinnaker to pay an interest in excess of 16% (the maximum cash interest) by issuing additional bridge notes. Also on April 5, 1996, an entity affiliated with Richard J. Boyle and Ned N. Fleming III ("BF"), the Company's Chairman and Chief executive Officer and President, respectively, exercised warrants to purchase 187,476 share of Spinnaker's common stock resulting in proceeds of $500,000 which will be used by the Company to make scheduled interest payment on the bridge loans. The Company has pledged its shares of Spinnaker stock to secure such loans. The agreement requires BF to continue to exercise its warrants to provide funds to satisfy the outstanding interest that will be due on the bridge loan and term loans. Spinnaker is actively pursuing various alternatives to refinance the indebtedness of Spinnaker and its subsidiaries, including refinancing the bridge loan before it matures. There can be no assurance that Spinnaker can successfully complete any such refinancing. Concurrently with the closing of the bridge loan, Spinnaker paid Alco $7.5 million of which $5.5 million was a principal payment on the $25 million note, approximately $1.0 million related to accrued interest and $1.0 million was applied toward a $1.75 million purchase price for a warehouse facility in Denver, Colorado. The unpaid balance of the $25 million note, together with the balance due on the warehouse facility was restructured into a series of new convertible subordinated notes consisting of the following: (a) A 7%, $6 million convertible subordinated note that automatically converts including accrued interest, into Spinnaker common stock 30 days after the execution of the note at a conversion price per share of approximately $35. After conversion, Alco is entitled to sell the shares. If the proceeds of this sale are less than $6 million, Spinnaker is required to pay the difference between $6 million and the sales proceeds to Alco either in cash or an equivalent number of common shares; (b) A 7%, $7 million convertible subordinated note due April 1997. The note contains a PIK feature that allows Spinnaker, at its option, to satisfy the interest by increasing the principal amount of the note. However, if Spinnaker selects the PIK option, the interest rate on the note is 9%. All or any part of this note can be converted at Alco's option into shares of Spinnaker's common stock after April 1, 1997 at the then market price; and (c) A 7%, $7.25 million convertible subordinated note due April 1998. The note contains a PIK feature that allows Spinnaker, at its option, to satisfy interest by increasing the principal amount of the note. However, if Spinnaker selects the PIK option, the interest rate on the note is 9%. All or any part of this note can be converted at Alco's option into shares of Spinnaker stock after April 1, 1998 at the then current market price. Based on the terms of the bridge loan and the restructured subordinated notes with Alco, the Company has classified the $25 million subordinated notes to Alco as long-term. 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, 1996 and 1995 represent effective tax rates of 40.0% and 41.5%, respectively. The rates differ from the federal statutory rate principally due to the effect of state income taxes, amortization of goodwill, and, in 1995 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 300,000 shares of Common Stock of the Registrant. These shares will be retained as treasury stock for future use as required. Through March 31, 1996, 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 the exercise of all stock options having an exercise price less than the greater of the average or closing market price at the end of the period of the Common Stock of the Registrant using the treasury stock method. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10(w)(i) - Amendment No. 1 to the Loan Agreement, dated as of November, 1996, between Lynch PCS Corporation A and Aer Force Communications, L.P. (amendments in similar form are being entered into with respect to the other Loan Agreements). 27-Financial Data Schedule (b) Reports on Form 8-K On January 4, February 2, March 1, March 14, and April 19,1996, Registrant filed Amendments (2)-(6), respectively, to its Form 8-K, dated October 4, 1995, with respect to the Central Products acquisition and financing. On March 20, 1996, Registrant filed a Form 8-K, dated March 13, 1996, with respect to a change of independent accountants at Registrant's subsidiary, The Morgan Group, Inc. and with respect to the pending acquisition of Dunkirk & Fredonia Telephone Company, which was amended on April 4, 1996. 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 August 19, 1996 -----END PRIVACY-ENHANCED MESSAGE-----