-----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, iqad3rEPI7E4Pt2f8aTSNdg/7lKwY98/G3U+AwC2QvJerlqy3f/u4xOvDEtH6MwE AhdyzOBc9C3tPVr+sJ65ww== 0000950124-95-002236.txt : 19950728 0000950124-95-002236.hdr.sgml : 19950728 ACCESSION NUMBER: 0000950124-95-002236 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950727 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: 95556537 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 June 30, 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 July 21, 1995. Common Stock, No Par Value 4,451,293 - -------------------------- ------------------ Class Number of Shares 1 of 11 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements MCCLAIN INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, September 30, 1995 1994 (unaudited) audited ----------- ------------- CURRENT ASSETS - -------------- Cash and Cash Equivalents $ 525,650 $ 1,697,713 Accounts Receivable (Net) 17,011,481 12,048,352 Inventories 34,742,853 23,340,907 Prepaid Expenses 319,489 296,944 ----------- ----------- Total Current Assets 52,599,473 37,383,916 ----------- ----------- Property and Equipment 31,421,618 28,833,901 Accumulated Depreciation (11,386,347) (10,070,253) ----------- ----------- Net Property and Equipment 20,035,271 18,763,648 ----------- ----------- Other Assets 2,710,776 2,146,210 ----------- ----------- Total Assets $75,345,520 $58,293,774 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES - ------------------- Current Portion of Long-Term Debt $ 1,875,213 $ 1,791,213 Accounts Payable 12,882,839 10,324,028 Accrued Liabilities 1,712,061 1,465,369 Federal Income Taxes 2,176,722 649,072 ----------- ----------- Total Current Liabilities 18,646,835 14,229,682 ----------- ----------- Deferred Income Taxes 1,062,916 1,065,000 ----------- ----------- Long Term Debt - Less Current Portion 28,119,107 18,039,869 ----------- ----------- Other Liabilities and Contingencies 5,701,688 5,599,514 ----------- ----------- Stockholders' Equity 21,814,974 19,359,709 ----------- ----------- Total Liabilities and Stockholders' Equity $75,345,520 $58,293,774 ----------- ===========
See notes to condensed consolidated financial statements. 2 of 11 3 MCCLAIN INDUSTRIES, INC. CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS UNAUDITED
Three Months Ended Nine Months Ended June 30, June 30, 1995 1994 1995 1994 ------------------ ------------------- Net Sales $21,171,595 $24,244,234 $63,155,669 $57,623,491 Cost of Sales 15,631,620 18,969,438 48,189,465 44,681,125 ----------- ---------- ----------- ----------- Gross Profit 5,539,975 5,274,796 14,966,204 12,942,366 Selling, General and Administrative Expenses 3,267,021 2,988,051 9,161,814 8,188,686 ----------- ----------- ----------- ----------- Operating Income 2,272,954 2,286,745 5,804,390 4,753,680 ----------- ----------- ----------- ----------- Other Income (Expense) Interest Expense (631,578) (384,037) (1,543,099) (878,127) Other Expense (152,275) (191,128) (563,133) (611,293) Gain (loss) on Sale of Asset - ( 26,935) - (23,423) ----------- ----------- ----------- ----------- (783,853) (602,100) (2,106,232) (1,512,843) ----------- ----------- ----------- ----------- Income before Income taxes 1,489,101 1,684,645 3,698,158 3,240,837 Provision for Income taxes 505,910 572,780 1,256,910 1,101,885 ----------- ----------- ----------- ----------- Net Income $ 983,191 $ 1,111,865 $ 2,441,248 $ 2,138,952 =========== =========== =========== =========== Net Income Per Common Equivalent Shares $ .21 $ .23 $ .53 $ .46 =========== =========== =========== =========== Weighted Average Number of Common and Common Equivalent Shares Outstanding 4,625,284 4,637,224 4,625,284 4,637,224 =========== =========== =========== ===========
See notes to condensed consolidated financial statements 3 of 11 4 MCCLAIN INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
Nine Months Ended JUNE 30, ------------------- 1 9 9 5 1 9 9 4 -------- -------- Net income $2,441,248 $2,138,952 ---------- --------- Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortizations 1,444,378 1,335,462 Deferred taxes ( 2,084) ( 2,084) Common stock issued in lieu of cash 7,517 10,375 Loss on sale of property and equipment 0 23,422 Changes in operating assets which provided (used) cash: Current assets excluding cash & equivalents (16,387,620) (8,529,659) Other assets ( 655,624) 2,139,927 Accounts payable 2,558,811 2,996,545 Accrued expenses 246,692 16,174 Federal income taxes 1,527,650 897,868 Other liabilities 102,174 ( 236,523) ---------- --------- TOTAL ADJUSTMENTS (11,158,106) (1,348,493) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (8,716,858) 790,459 ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (2,587,717) (4,504,521) ---------- --------- NET CASH USED BY INVESTING ACTIVITIES (2,587,717) (4,504,521) ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net additions to notes payable 0 2,327,930 Principal additions (repayments) of long term debt 10,163,239 1,133,903 Sale of common stock 6,500 151,550 ---------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 10,169,739 3,613,383 ---------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,134,836) ( 100,679) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,660,486 466,204 ---------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 525,650 $ 365,525 ========== =========
See notes to condensed consolidated financial statements. 4 of 11 5 MCCLAIN INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 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 and nine month period ended June 30, 1995, are not necessarily indicative of the results that may be expected for the year ending September 30, 1995. 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, 1994. 2. Inventories Inventories at June 30, 1995 and September 30, 1994 are summarized as follows:
(Unaudited) June 30, 1995 September 30, 1994 ------------- ------------------ Material and Supplies $11,117,053 $ 8,362,693 Work in Progress 5,150,200 7,115,786 Finished Goods 18,475,600 7,862,428 ----------- ----------- $34,742,853 $23,340,907 =========== ===========
3. Earnings per Common Share and Common Equivalent Share: On March 30, 1995, a four-for-three split of the Company's Common Stock was effected through distribution of one additional share for every three shares already issued. All applicable share and per share data have been restated to give retroactive effect to the stock split. 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 was increased by the number of shares issuable on the exercise of the stock options when the market price of the common shares exceeded 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 year. 4. Depreciation For the nine months ended June 30, 1995 and 1994, depreciation charges were $1,383,718 and $1,274,802, respectively. 5 of 11 6 MCCLAIN INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1995 5. Contingencies A subsidiary of the Company acquired in July 1992, assumed certain costs relative to product liability. Currently, the subsidiary is involved in various product liability cases which have arisen as a result of alleged product failure. Management, in consultation with legal counsel has, among other things, analyzed existing claims and lawsuits, reviewed historical loss results, and reviewed the incidence and severity of injuries in order to estimate costs relative to product liability. While an exact amount cannot be identified due to many variables and assumptions and the outcome of claims is uncertain and difficult to predict, management after consulting with legal counsel, has estimated, that as of the date the subsidiary was acquired the costs to the subsidiary on product liability assumed will most likely range from $7.5 million to $12 million. The reserve for product liability was $4.5 million as of June 30, 1995. Cumulative payments resulting from product liability activity existing at the acquisition date were approximately $3.0 million through the quarter ended June 30, 1995. The subsidiary intends to vigorously defend any lawsuits which may arise as a result of alleged product failure. Environmental Matters The Company's operations are subject to extensive federal, state and local regulation under environmental laws and regulations, and such regulations are increasing. Inherent in manufacturing operations and owning real estate is the risk of environmental liabilities as a result of both current and past operations, which cannot be predicted with certainty. The Company has incurred and will continue to incur costs, on an ongoing basis, associated with environmental regulatory compliance. Inasmuch as the Company does not currently maintain environmental impairment insurance, the Company may face claims of significant remediation costs (for which the Company would be uninsured and in connection with which the Company may be unable to obtain reimbursement from other responsible parties) in connection with contamination which may be detected on its properties or as a result of its operations in the future. The Company has determined that several of its operating sites are not in full compliance with certain hazardous waste management reporting and other related requirements. The Company has begun to implement procedures and take requisite actions to remedy as soon as practicable all identified deficiencies so that its facilities will comply with all applicable environmental laws and regulations in all material respects. Management estimates that the total costs of bringing its facilities into compliance will not have a material effect on the Company's consolidated financial statements. 6 of 11 7 MCCLAIN INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1995 6. Subsequent Event On July 17, 1995 McClain Industries, Inc. purchased the stock of EPCO Manufacturing Corporation, Inc,. EPCO is a manufacturer of vertical downstroke and closed door horizontal bailing equipment used for processing of cardboard, paper, plastic and non-ferous metals in the recycling industry. EPCO will be operated as a wholly owned subsidiary of McClain. EPCO sales during the last fiscal year ended March 1995 were approximately $2.6 million. 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) As of As of June 30, September 30, 1995 1994 ------------ ------------- Working Capital $33,952,638 $23,154,234 Total Assets 75,345,520 58,293,774 Long-Term Debt 28,119,107 18,039,869 Stockholders' Investment 21,814,974 19,359,709 Weighted Average Number of Common and Common Equivalent Shares Outstanding 4,625,284 4,608,137 Current Ratio 2.82:1 2.63:1 Long-Term Debt to Stockholders' Equity 1.29:1 .93:1
(unaudited) (unaudited) Three Months ended Nine Months ended June 30 June 30, 1995 1994 1995 1994 ---- ---- ---- ---- Net Sales $21,171,595 $24,244,234 $63,155,669 $57,623,491 Net Income $ 983,191 $ 1,111,865 $ 2,441,248 $ 2,138,952 Net Earnings Per Common and Common Equivalent Share $ .21 $ .23 $ .53 $ .46
7 of 11 8 MCCLAIN INDUSTRIES, INC. DISCUSSION OF RESULTS OF OPERATIONS 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 Nine Months Ended June 30, June 30, 1995 1994 1995 1994 ------------------ --------------- Sales 100.00% 100.00% 100.00 100.00% Cost of Sales 73.83 78.24 76.30 77.54 ------ ------ ------ ------ Gross Profit 26.17 21.76 23.70 22.46 Selling, General & Admin. Expense 15.43 12.32 14.51 14.21 ------ ------ ------ ------ Operating Income 10.74 9.44 9.19 8.25 Other Expenses (3.70) (2.48) (3.33) (2.63) ------ ------ ------ ------ Income Before Income Tax 7.04 6.96 5.86 5.62 Provision for Income Taxes 2.39 2.36 1.99 1.91 ------ ------ ------ ------ Net Income 4.65% 4.60% 3.87% 3.71% ====== ====== ====== ======
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 June 30, ------------------------------------- 1995 1994 ----------------- ----------------- amount % amount % ----------------- ----------------- Dump Truck Bodies $ 4,938 23.33 $ 5,709 23.54 Containers 5,977 28.23 6,753 27.85 Compactors and Unitized Compaction Systems 2,407 11.37 2,157 8.90 Garbage and Recycling Truck Bodies 5,004 23.63 4,951 20.42 Transfer Trailers 788 3.72 3,030 12.50 Replacement Parts 1,113 5.26 794 3.28 Other Product Sales 945 4.46 850 3.51 ------------------ ---------------- Total Net Sales $21,172 100.00% $24,244 100.00% ================== ================
(Unaudited) For the Nine Months Ended June 30, ------------------------------------- 1995 1994 ----------------- ----------------- amount % amount % ----------------- ----------------- Dump Truck Bodies $13,884 21.98 $13,572 23.55 Containers 16,175 25.61 13,131 22.79 Compactors and Unitized Compaction Systems 6,699 10.61 6,948 12.06 Garbage and Recycling Truck Bodies 16,436 26.02 12,448 21.60 Transfer Trailers 4,772 7.56 7,273 12.62 Replacement Parts 2,425 3.84 2,109 3.66 Other Product Sales 2,765 4.38 2,142 3.72 ------------------ ----------------- Total Net Sales $63,156 100.00% $57,623 100.00% ================== =================
8 of 11 9 MCCLAIN INDUSTRIES, INC. Quarter Ended June 30, 1995 compared to quarter Ended June 30, 1994 Net sales declined 12.67% to $21.2 million for the quarter ended June 30, 1995 (Quarter 1995) from $24.2 million for the quarter ended June 30, 1994 (Quarter 1994) primarily due to a decrease in unit sales of trailers and intermodal containers. This is attributable to larger than normal shipments of trailers and intermodal containers in June 1994 and a revamping of certain areas of the sales force during the latter part of the second quarter 1995 and into the third quarter 1995, which are expected to show positive results during the current and succeeding quarters. Cost of sales as a percentage of net sales was 73.83% for the Quarter 1995 compared to 78.24% for the Quarter 1994. This decrease in cost of sales is due primarily to Galion Solid Waste achieving higher gross profit margins during Quarter 1995. Selling, general, and administrative expenses as a percentage of net sales increased to 15.43% for Quarter 1995 compared to 12.32% for Quarter 1994 primarily due to increases in selling and marketing expenses. Interest expense increased to 2.98% of net sales for Quarter 1995 compared to 1.60% for Quarter 1994 due to increased levels of borrowing and higher prevailing interest rates. Net income was $983,191 or 4.64% of net sales for Quarter 1995 compared to $1,111,865 or 4.59% of net sales for Quarter 1994. Nine Months Ended June 30,1995 Compared to Nine Months Ended June 30, 1994 Net sales increased 9.60% to $63 million for the nine months ended June 30, 1995 from $57 million for the nine months ended June 30, 1994 primarily due to increased unit sales, increases in selling prices of the product lines and the Company's increased selling efforts. Roll off containers, intermodal containers, and sludge containers accounted for 55.5% of the net sales increase for such period, garbage and recycling truck bodies sales accounted for 72.1% and sales of the Company's other products excluding transfer trailers amounted to 17.6% of the net sales. Transfer trailer sales declined 45.2% for the subject period. As stated in the quarterly information, the Company is and has been involved in revamping certain areas of the sales force, which is expected to show positive results during the current and succeeding quarters. Cost of sales as a percentage of net sales decreased to 76.3% for the nine months ended June 30, 1995 compared to 77.5% for the nine months ended June 30, 1994, primarily due to higher gross profit margins for Galion Solid Waste. Selling, general, and administrative expenses as a percentage of net sales increased to 14.5% for the nine months ended June 30, 1995 compared to 14.2% for the nine months ended June 30, 1994 due to increased selling and marketing expenses. Interest expense increased to 2.4% of net sales for the nine months ended June 30, 1995 compared to 1.5% for the nine months ended June 30, 1994, primarily due to increased borrowings and higher interest rates. Net income was $2.4 million or 3.87% of net sales for the nine months ended June 30, 1995 of compared to $2.1 million or 3.71% of net sales for the nine months ended June 30, 1994. 9 of 11 10 MCCLAIN INDUSTRIES, INC. DISCUSSION OF FINANCIAL CONDITION The Company had working capital of approximately $34 million at June 30, 1995 compared to $23 million at June 30, 1994. The ratio of current assets to current liabilities was 2.82 to 1 at June 30, 1995 compared to 2.63 to 1 at June 30, 1994. The Company's cash and cash equivalents totaled $525,650. Cash flows utilized by operations was $8.8 million for the nine months ended June 30, 1995, primarily as a result of increased purchases of raw materials inventory and higher levels of finished goods inventory. Cash flows from investing activities utilized $2.6 million, primarily as a result of machinery and equipment purchases. The expenditures for inventories and machinery and equipment purchases were financed by increased borrowings. Uncommitted revolving lines of credit of $5.8 million were available at June 30, 1995. Management believes that the Company has had and continues to have sufficient working capital and capital resources to meet its short-term obligations and anticipated long-term requirements. 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: July 21, 1995 By: /s/ Edward J. Zabinski ------------------------------- Edward J. Zabinski, Treasurer Date: July 21, 1995 By: /s/ Kenneth D. McClain ------------------------------- Kenneth D. McClain, President 11 of 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS SEP-30-1995 OCT-01-1994 JUN-30-1995 525,650 0 17,011,481 0 34,742,853 52,599,473 31,421,618 11,386,347 75,345,520 18,646,835 0 4,064,053 0 0 17,750,921 75,345,520 63,155,669 63,155,669 48,189,465 48,189,465 0 0 1,543,099 3,698,158 1,256,910 2,441,248 0 0 0 2,441,248 .53 0
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