-----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, It73RcS/aYqYI6y6R1a+3l+WShKXS7pg1+4/ou8Ap+0VHHxi7MagnDWd8rTQiKo0 m1ySU0OhclFuR8h74mOKUg== 0000950124-96-000760.txt : 19960216 0000950124-96-000760.hdr.sgml : 19960216 ACCESSION NUMBER: 0000950124-96-000760 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960214 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCCLAIN INDUSTRIES INC CENTRAL INDEX KEY: 0000063686 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED PLATE WORK (BOILER SHOPS) [3443] IRS NUMBER: 381867649 STATE OF INCORPORATION: MI FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07770 FILM NUMBER: 96518997 BUSINESS ADDRESS: STREET 1: 6200 ELMRIDGE RD CITY: STERLING HEIGHTS STATE: MI ZIP: 48310 BUSINESS PHONE: 8102643611 10-Q 1 FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 (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 [ ] TRANSITION REPORT PURSUANT OR SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------ ------------ Commission File No. 0-7770 MCCLAIN INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Michigan 38-1867649 State of Incorporation I.R.S. Employer I.D. No. 6200 Elmridge Road Sterling Heights, Michigan 48310 (810) 264-3611 (Address of principal executive offices and telephone number) 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 issuer's classes of common stock as of February 10, 1995. Common Stock, No Par Value 4,681,725 - -------------------------- ---------------- Class Number of Shares 1 of 11 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements MCCLAIN INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30, 1995 1995 (unaudited) ----------- ------------ ASSETS ------ CURRENT ASSETS - -------------- Cash and Cash Equivalents $ 1,100,007 $ 1,173,370 Accounts Receivable (Net) 14,298,607 15,590,278 Inventories 32,464,064 31,229,399 Prepaid Expenses 340,416 176,075 ----------- ----------- Total Current Assets 48,203,094 48,169,122 ----------- ----------- Property and Equipment 33,456,984 33,078,135 Accumulated Depreciation (12,438,306) (11,894,922) ----------- ----------- Net Property and Equipment 21,018,678 21,183,213 ----------- ----------- Other Assets 5,375,993 4,546,862 ----------- ----------- Total Assets $74,597,765 $73,899,197 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES - ------------------- Current Portion of Long-Term Debt $ 2,179,449 $ 2,179,449 Accounts Payable 7,919,886 9,190,309 Accrued Liabilities 2,057,520 2,331,809 Federal Income Taxes 286,402 598,999 ----------- ----------- Total Current Liabilities 12,443,257 14,300,566 ----------- ----------- Deferred Income Taxes 1,440,000 1,440,000 ----------- ----------- Long Term Debt - Less Current Portion 33,382,995 31,170,287 ----------- ----------- Other Liabilities 4,493,323 4,147,070 ----------- ----------- Stockholders' Equity 22,838,190 22,841,274 ----------- ----------- Total Liabilities and Stockholders' equity $74,597,765 $73,899,197 =========== ===========
See notes to condensed consolidated financial statements. 2 of 11 3 MCCLAIN INDUSTRIES, INC. CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS UNAUDITED
Three Months Ended December 31, 1995 1994 -------------------------- Net Sales $16,394,682 $20,602,031 Cost of Sales 12,957,066 16,015,242 ----------- ----------- Gross Profit 3,437,616 4,586,789 Selling General and Administrative Expenses 3,258,575 2,860,830 ----------- ----------- Operating Income 179,041 1,725,959 ----------- ----------- Other Income (Expense) Interest Expense (663,850) (416,905) Other Income (Expense) 80,780 (261,161) ----------- ----------- Total Other Income (Expense) (583,070) (678,066) ----------- ----------- Income (Loss) Before Income Taxes (404,029) 1,047,893 (Provision) Credit for Income Taxes 137,000 (356,000) ----------- ----------- Net Income (Loss) $ (267,029) $ 691,893 =========== =========== Net income (Loss) per common and common equivalent shares $ (.06) $ .15 =========== =========== Weighted average number of common and common equivalent shares outstanding 4,584,369 4,610,733 =========== ===========
See notes to condensed consolidated financial statements 3 of 11 4 MCCLAIN INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
THREE MONTHS ENDED DECEMBER 31, ------------------- 1 9 9 5 1 9 9 4 -------- -------- Net income (loss) $(267,029) $ 691,893 Adjustments to reconcile net income (loss) to net cash (used in) operating activities Depreciation and amortization 584,195 419,363 Changes in assets and liabilities which provided (used) cash Current assets excluding cash & equivalents (107,335) (4,393,623) Other assets (851,827) 355,679 Accounts payable (1,270,423) 931,078 Accrued expenses (274,289) (84,226) Federal income taxes (312,597) 569,263 Other liabilities 346,253 238,987 ---------- --------- TOTAL ADJUSTMENTS (1,886,023) (1,963,479) ---------- --------- NET CASH USED IN OPERATING ACTIVITIES (2,153,052) (1,271,586) ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (396,964) (948,734) ---------- --------- NET CASH USED IN INVESTING ACTIVITIES (396,964) (948,734) ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal additions of long term debt 2,662,958 1,804,089 Principal reductions of long term debt (450,250) (358,619) Sale of common stock 263,945 0 ---------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 2,476,653 1,445,470 ---------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS (73,363) (774,850) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,173,370 1,697,713 ---------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $1,100,007 $ 922,863 ========== =========
See notes to condensed consolidated financial statements. 4 of 11 5 MCCLAIN INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) THREE MONTHS ENDED DECEMBER 31, 1995 1. Basis of Presentation The accompanying unaudited Consolidated Financial Statements of McClain Industries, Inc. and subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, such Statements 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 considered necessary for a fair presentation have been included. Operating results for the three month period ending December 31, 1995, are not necessarily indicative of the results that may be expected for any other period of for the year ending September 30, 1996. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended September 30, 1995. 2. Inventories Inventories at December 31, 1995 and September 30, 1995 are summarized as follows:
(Unaudited) December 31, 1995 September 30, 1995 ----------------- ------------------ Material and Supplies $19,153,780 $17,400,070 Work in Process 4,869,684 6,255,749 Finished Goods 8,440,600 7,573,580 ----------- ----------- $32,464,064 $31,229,399 =========== ===========
3. Earnings per Common Share and Common Equivalent Share: Earnings per common share and common equivalent share were calculated using the weighted average number of common shares and common stock equivalents outstanding during the year. The weighted average number of common shares actually outstanding was increased by the number of shares issuable on the exercise of the dilutive stock options when the market price of the common shares exceeds the option price granted. This increase in the number of common shares was reduced by the number of common shares that are assumed to have been purchased with the proceeds from the exercise of the stock options; those purchases were assumed to have been made at the average price of the common stock during the period. 4. Depreciation For the three months ended December 31, 1995 and 1994, depreciation charges were $561,499 and $399,143, respectively. 5 of 11 6 MCCLAIN INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) THREE MONTHS ENDED DECEMBER 31, 1995 5. Contingencies Legal Proceedings The Company is from time to time subject to various claims from existing or former employees alleging gender, age or racial discrimination and anti-union activity, none of which are expected to have a material adverse affect on the Company. In addition, as a manufacturer of industrial products, the Company is, from time to time, subjected to various product liability claims. Such claims typically involve personal injury or wrongful death associated with the use or misuse of the Company's products. While such claims have not been material to the Company in any year and the Company believes that it maintains adequate product liability insurance, there can be no assurance that such insurance will continue to be available on terms acceptable to the Company. Any product liability claim not fully covered by insurance, as well as any adverse publicity from a product liability claim, could have a material adverse effect on the Company. The Company is currently defending a few legal proceedings involving product liability claims relating to McClain, Galion Dump and E-Z Pack brand products. Galion Holding, pursuant to an indemnification it provided Peabody Galion Division of Peabody International Corporation ("Peabody") in connection with the Galion Acquisition, is currently defending a number of legal proceedings involving product liability claims arising out of products manufactured by Peabody prior to the date of the Galion Acquisition. These claims are also covered by insurance. Although the Company has already settled many of these cases and the Company believes that it can continue to successfully resolve these product liability claims, there can be no assurance that the Company can continue to do so. The Company is not presently a party to any material legal proceedings except as described above. Environmental Matters The Company's operations are subject to extensive federal, state and local regulation under environmental laws and regulations concerning, among other things, emissions into the air, discharges into the waters and the generation, handling, storage, transportation, treatment and disposal of waste and other materials. Inherent in manufacturing operations and in owning real estate is the risk of environmental liabilities as a result of both current and past operations, which cannot be predicted with (continued) 6 of 11 7 MCCLAIN INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) THREE MONTHS ENDED DECEMBER 31, 1995 5. Contingencies - (continued) certainty. The Company has incurred and will continue to incur costs, on an ongoing basis, associated with environmental regulatory compliance in its business. State and local agencies have become increasingly active in the environmental area. The increased regulation by multiple agencies can be expected to increase the Comapany's future environmental costs. In particular, properties under federal and state scrutiny frequently result in significant clean-up costs and litigation expenses related to a party's clean-up obligation. However, the Company believes that the ever-increasing waste stream and the continuing initiatives of government authorities relating to environmental and waste disposal problems, including restrictions on landfill locations and operations and extensive regulation relating to the disposal of waste, create significant opportunities for companies in the solid waste handling equipment industry. In addition, the trend towards classifying more materials as "semi-hazardous" or "hazardous" waste may be expected to continue to make handling such materials more complex, thereby further facilitating the market for solid waste handling products. 7 of 11 8 MCCLAIN INDUSTRIES, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview The following discussion should be read in conjunction with the condensed consolidated financial statements, including the notes thereto, appearing elsewhere in this report. Selected financial data for the Company for the periods indicated:
(Unaudited) Three Months Ended DECEMBER 31, ------------------------ 1995 1994 ---- ---- Net Sales $16,394,682 $20,602,031 Net Income (Loss) (267,029) 691,893 Net Earnings (Loss) Per Common and Common Equivalent Share $ (.06) $ .20 (unaudited) As of As of December 31, September 30, 1995 1995 ------------ ------------ Working Capital $35,759,837 $33,868,556 Total Assets 74,597,765 73,899,197 Long-Term Debt 33,382,995 31,170,287 Stockholder's Investment 22,838,190 22,841,274 Weighted Average Number of Common and Common Equivalent Shares Outstanding 4,584,369 4,657,476 Current Ratio 3.87:1 3.37:1 Long-Term Debt to Equity 1.46:1 1.36:1
8 of 11 9 MCCLAIN INDUSTRIES, INC. The following table presents, as a percentage of net sales, certain selected financial data for the Company for the periods indicated:
(Unaudited) Three Months Ended December 31, ---------------------- 1995 1994 ---- ---- Net Sales 100.00% 100.00% Cost of Sales 79.03 77.74 ------ ------ Gross Profit 20.97 22.26 Selling, General & Administrative Expenses 19.88 13.89 ------ ------ Operating Income 1.09 8.37 Other Expenses (3.56) (3.29) ------ ------- Income Before Income Taxes (2.47) 5.08 Provision for Income Taxes ( .83) 1.73 ------ ------- Net Income (1.64)% 3.35% ====== ======
The following table presents the net sales of the Company by major product line for the periods indicated (in thousands)
(Unaudited) For the Three Months Ended December 31, 1995 1994 ----------------- ----------------- amount % amount % ----------------- ----------------- Dump Truck Bodies $ 3,011 18.37 $ 3,694 17.93 Containers 2,697 16.45 5,501 26.70 Compactors and Unitized Compaction Systems 3,631 22.15 1,880 9.12 Garbage and Recycling Truck Bodies 4,481 27.33 4,888 23.72 Transfer Trailers 1,446 8.82 3,009 14.61 Replacement Parts 729 4.45 818 3.92 Other Product Sales 399 2.43 812 4.00 ---------------- ---------------- Total Net Sale $16,394 100.00 $20,602 100.00 ================ ================
9 of 11 10 McCLAIN INDUSTRIES, INC. DISCUSSION OF RESULTS OF OPERATIONS Net sales decreased 20.42% to $16.4 million for the quarter ended December 31, 1995 (Quarter 1995) from $20.6 million for the quarter ended December 31, 1994 (Quarter 1994). The decline in sales is attributable to intense competition by solid waste manufactures and a temporary decline in purchases of equipment by the Solid Waste Industry. A decline in trailer sales of $ 1.6 million and a decline in intermodal containers sales of $3.0 million were the primary consequences of these factors. Management has been restructuring the sales force adding additional sales people and introducing new products to increase sales and expects to see positive results of these actions in the latter part of the second quarter of Fiscal 1996. Cost of sales as a percentage of net sales was 79.03% for the Quarter 1995 compared to 77.74% for the Quarter 1994 and was primarily due to lower revenues and increased costs incurred for raw materials, which were not fully recoverable due to intense pricing competition within the Solid Waste Industry. Selling, General and administrative expenses as a percentage of net sales increased to 19.88% for the Quarter 1995, primarily due to the lower sales volume. Interest expense increased to 4.05% of net sales for the Quarter 1995 compared to 2.02% of net sales for the Quarter 1994, primarily due to increased borrowings and a lower sales volume. A net loss of $267,029 was incurred for Quarter 1995 compared to net income of $691,893 for the Quarter 1994 primarily due to lower sales. DISCUSSION OF FINANCIAL CONDITION The Company had working capital of approximately $35.6 million at December 31, 1995 compared to $33.9 million at September 30, 1995. The ratio of current assets to current liabilities was 3.87 to 1 at December 31, 1995 compared to 3.37 to 1 at September 30, 1995. The Company's cash and cash equivalents totaled $1.1 million at December 31, 1995. Cash flows utilized by operations was $2.2 million for the quarter ended December 31, 1995, primarily as a result of increased purchases of inventory and a reduction of accounts payable. During this period investing activities utilized $396,964 primarily as a result of machinery and equipment purchases. The expenditures for inventory and payable reductions were financed by increased borrowings. 10 of 11 11 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorizd. McCLAIN INDUSTRIES, INC. Date: FEBRUARY 13, 1996 By: /s/ Edward J. Zabinski ------------------------ ------------------------ Edward J. Zabinski, Treasurer Date: FEBRUARY 13, 1996 By: /s/ Kenneth D. McClain ------------------------- -------------------------- Kenneth D. McClain, President 11 of 11 12 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - -------- ----------- 27 Financial Data Schedule EX-27 2 EXHIBIT 27
5 3-MOS SEP-30-1996 OCT-01-1995 DEC-31-1995 1,100,007 0 14,298,607 0 32,464,064 48,203,094 33,456,984 12,438,306 74,597,765 12,443,257 0 0 0 5,332,791 17,505,399 74,597,765 16,394,682 16,394,682 12,957,066 12,957,066 0 0 663,850 (404,029) (137,000) (267,029) 0 0 0 (267,029) (.06) 0
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