-----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, LhzvXIaLxNZf2bHhYs7UyDqNjgFg4MYMn0gkSGp5pqkoUZqreUnOg1fKh+esdDld PLe9I9N9drIoRGns7Xdf1A== 0000950124-98-002965.txt : 19980518 0000950124-98-002965.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950124-98-002965 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCCLAIN INDUSTRIES INC CENTRAL INDEX KEY: 0000063686 STANDARD INDUSTRIAL CLASSIFICATION: TRUCK & BUS BODIES [3713] IRS NUMBER: 381867649 STATE OF INCORPORATION: MI FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07770 FILM NUMBER: 98623106 BUSINESS ADDRESS: STREET 1: 6200 ELMRIDGE RD CITY: STERLING HEIGHTS STATE: MI ZIP: 48310 BUSINESS PHONE: 8102643611 10-Q 1 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 March 31, 1998 [ ] 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 (313) 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 May 8, 1998. Common Stock, No Par Value 4,719,870 - -------------------------- ---------------- Class Number of Shares 1 of 11 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements MCCLAIN INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, SEPTEMBER 30, 1998 1997 (unaudited) ----------- ------------- CURRENT ASSETS - -------------- Cash and Cash Equivalents $ 1,999,265 $ 2,402,421 Accounts Receivable (Net) 17,619,454 16,589,263 Inventories 35,827,976 31,011,766 Net Investment in Sales Type Leases - Current Portion 2,700,000 2,900,000 Prepaid expenses 408,296 362,029 Refundable Federal & State Taxes 201,352 837,638 ------------ ------------ Total Current Assets 58,756,343 54,103,117 ------------ ------------ Property and equipment 42,537,534 41,470,473 Accumulated depreciation (17,671,324) (16,229,849) ------------ ------------ Net Property and Equipment 24,866,210 25,240,624 ------------ ------------ Net Investment in Sales Type Leases - Less Current Portion 5,183,758 5,348,773 ------------ ------------ Other Assets 2,100,986 2,493,053 ------------ ------------ Total Assets $ 90,907,297 $ 87,185,567 ============ ============ LIABILITIES AND STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES - ------------------- Current Portion of Long-Term Debt $ 2,800,000 $ 2,800,000 Accounts Payable 15,812,090 14,132,646 Accrued Liabilities 4,141,532 3,650,468 ------------ ------------ Total Current Liabilities 22,753,622 20,583,114 ------------ ------------ Deferred Income Taxes 2,100,000 2,100,000 ------------ ------------ Long Term Debt - Less Current Portion 39,465,247 38,513,490 ------------ ------------ Other Liabilities 2,253,284 2,151,872 ------------ ------------ Stockholders' Investment 24,335,144 23,837,091 ------------ ------------ Total Liabilities and Stockholders' Investment $ 90,907,297 $ 87,185,567 ============ ============
See notes to consolidated financial statements. 2 of 11 3 \ MCCLAIN INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED
Three Months Ended Six Months Ended March 31, March 31, 1998 1997 1998 1997 ----------------------- ------------------------ Net Sales $23,614,926 $22,341,585 $47,240,250 $42,653,815 Cost of Sales 19,236,285 17,377,450 38,489,215 33,819,436 ----------- ----------- ----------- ----------- Gross Profit 4,378,641 4,964,135 8,751,035 8,834,379 Selling, General and Administrative Expenses 3,258,728 3,472,740 6,537,653 6,643,009 ----------- ----------- ----------- ----------- Operating Income 1,119,913 1,491,395 2,213,382 2,191,370 ----------- ----------- ----------- ----------- Other Income (Expense) Interest Expense (744,950) (945,233) (1,576,524) (1,669,394) Interest Income 310,913 329,272 619,732 580,435 Other Expense (187,976) (305,092) (247,153) (476,001) ---------- ----------- ----------- ----------- (622,013) (921,053) (1,203,945) (1,564,960) ---------- ----------- ----------- ----------- Income Before Income Taxes 497,900 570,342 1,009,437 626,410 Provision for Income Taxes 166,000 194,000 340,000 213,000 ---------- ----------- ----------- ----------- Net Income $ 331,900 $ 376,342 $ 669,437 $ 413,410 ========== =========== =========== ----------- Net Income per Common and Common Equivalent Shares (Basic and Fully Diluted) $ .07 $ .08 $ .14 $ .09 ========== =========== =========== =========== Weighted Average Number of Common and Common Equivalent Shares Outstanding 4,719,870 4,709,533 4,719,870 4,738,297 ========== =========== =========== ===========
See notes to consolidated financial statements 3 of 11 4 MCCLAIN INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
SIX MONTHS ENDED MARCH 31, ---------------------------------------- 1998 1997 ---------- ------------ CASH FLOW FROM OPERATING ACTIVITIES: Net income $ 669,437 $ 413,410 ----------- ----------- Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 1,724,250 1,755,230 Common stock issued in lieu of cash 8,248 5,244 Changes in operating assets and liabilites which provided (used) cash: Current assets excluding cash & cash equivalents (5,692,668) (3,283,515) Other assets 330,860 (1,106,373) Accounts payable 1,679,443 1,184,620 Accrued liabilities 491,065 112,083 Federal income tax 636,286 209,025 Other liabilities 101,412 337,447 ----------- ----------- TOTAL ADJUSTMENTS (724,102) (786,035) ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (51,665) (372,625) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (1,123,615) (2,948,952) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (1,123,615) (2,948,952) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Additions to long term debt 951,757 4,213,070 Sale of common stock 61,369 -- Redemption of common stock ( 241,000) ( 96,968) ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 772,126 4,116,102 ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ( 403,156) 795,525 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,402,421 1,065,039 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,999,265 $ 1,859,564 =========== ===========
See notes to consolidated financial statements. 4 of 11 5 MCCLAIN INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SIX MONTHS ENDED MARCH 31, 1998 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 consisting of normal recurring items considered necessary for a fair presentation have been included. Operating results for the three month and six month periods ended March 31, 1998, are not necessarily indicative of the results that may be expected for the year ending September 30, 1998. 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, 1997. Certain amounts reported in 1997 have been reclassified to conform to the 1998 presentation. 2. Inventories Inventories at March 31, 1998 and September 30, 1997 are summarized as follows:
(Unaudited) March 31, 1998 September 30, 1997 -------------- ------------------ Material and Supplies $17,062,976 $17,221,766 Work in Process 7,525,000 6,664,000 Finished Goods 11,240,000 7,126,000 ----------- ----------- $35,827,976 $31,011,766 =========== ===========
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 period. 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 repurchased with the proceeds from the exercise of the stock options; those repurchases were assumed to have been made at the average price of the common stock during the period. 4. Depreciation For the six months ended March 31, 1998 and 1997, depreciation charges were $1,498,028 and $1,451,218, respectively. 5 of 11 6 MCCLAIN INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SIX MONTHS ENDED MARCH 31, 1998 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) SIX MONTHS ENDED MARCH 31, 1998 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) (unaudited) Three Months ended Six Months ended March 31, March 31, 1998 1997 1998 1996 ---- ---- ---- ---- Net Sales $23,614,926 $22,341,585 $47,240,250 $42,653,815 Net Income $ 331,900 $ 376,342 $ 669,437 $ 413,410 Net Earnings Per Common and Common Equivalent Share $ .07 $ .08 $ .14 $ .09
(unaudited) As of As of March 31, September 30, 1998 1997 ------------ --------- Working Capital $36,002,721 $33,520,003 Total Assets 90,907,297 87,185,567 Long-Term Debt 39,465,247 38,513,490 Stockholders' Investment 24,335,144 23,837,091 Weighted Average Number of Common and Common Equivalent Shares Outstanding 4,719,870 4,729,281 Current Ratio 2.58:1 2.63:1 Long-Term Debt to Stockholders' Investment 1.62:1 1.62:1
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) (Unaudited) Three Months Ended Six Months Ended March 31, March 31, ---------------------- ----------------- 1998 1997 1998 1997 ---- ---- ---- ---- Net Sales 100.00% 100.00% 100.00% 100.00% Cost of Sales 81.46 77.78 81.47 79.29 ------ ------ ------ ------ Gross Profit 18.54 22.22 18.53 20.71 Selling, General & Administrative Expenses 13.80 15.54 13.84 15.57 ------ ------ ------ ------ Operating Income 4.74 6.68 4.69 5.14 Other Expenses (2.63) (4.12) (2.55) (3.67) ------ ------ ------ ------ Income Before Income Taxes 2.11 2.56 2.14 1.47 Provision for Income Taxes ( .70) ( .87) ( .72) (. 50) ------ ------ ------ ------ Net Income 1.41% 1.69% 1.42% .97% ====== ====== ====== ======
9 of 11 10 MCCLAIN INDUSTRIES, INC. DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, Net sales increased 5.7% to $23.6 million for the quarter ended March 31, 1998 (Quarter 1998) from $22.3 million for the quarter ended March 31, 1997 (Quarter 1997). The increase was primarily a result of strong sales by the Company's McClain E-Z Pack and Commodity facilities. Although the sales for the Quarter 1998 increased, the Company's McClain E-Z Pack and Galion Dump Bodies facilities had approximately $5.0 million of finished product they were unable to ship due to a severe shortage of the Truck Chassis on which the Company mounts these products. Cost of sales as a percentage of net sales increased to 81.46% for the Quarter 1998 from 77.78% for the Quarter 1997. Selling, General and Administrative expenses decreased to 13.8% for the Quarter 1998 from 15.54% for the Quarter 1997 as a result of the increased sales volume and the continued restructuring of certain administrative processes. Net sales for the six months ended March 31, 1998 increased 10.75% to $47.2 million from $42.6 million for the six months ended March 31, 1997. Cost of sales for the six months ended March 31, 1998 increased to 81.47% from 79.29% for the six months ended March 31, 1997. Selling, General and Administrative expenses decreased to 13.48% of net sales for the six months ended March 31, 1998 from 15.57% for the six months ended March 31, 1997. The Company had working capital of $36.2 million at March 31, 1998 compared to $33.5 million at September 30, 1997. The ratio of current assets to current liabilities was 2.58 to 1 at March 31, 1998 from 2.63 to 1 at September 30, 1997. The Company's cash and cash equivalents totaled $2.0 million at March 31, 1998. Cash flows used by operations were $0.05 million for the six months ended March 31, 1998, primarily due to increased inventory resulting from the current shortage of chassis previously discussed. On April 16, 1998 the Company signed a new agreement with its principal lender. As a result the Company has additional availability on the Company's working capital line of credit. Additionally, the agreement changed the basis of its interest rate structure from a Prime Rate base to a LIBOR base. This change effectively reduced the Company's primary borrowing rate by approximately 75 basis points. 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: MAY 15, 1998 By: /s/ Kenneth D. McClain ------------------------ ----------------------- Kenneth D. McClain, President Date: MAY 15, 1998 By: /s/ Mark S. Mikelait ------------------------ --------------------- Mark S. Mikelait, Treasurer 11 of 11 12 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION - ----------- ----------- 27 FINANCIAL DATA SCHEDULE EX-27 2 FDS
5 YEAR SEP-30-1998 JAN-01-1998 MAR-31-1998 1,999,265 0 17,619,454 0 35,827,976 58,756,343 42,537,534 17,671,324 90,907,297 22,753,622 0 0 0 5,155,571 19,179,573 90,907,297 47,240,250 47,240,250 38,489,215 38,489,215 0 0 1,576,524 1,009,437 340,000 669,437 0 0 0 669,437 .14 .14
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