-----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, K6LhxVd78g1HDsRS3xDDf5FSM8nevFKce55z8BC+593XVX52PnDHKUzElOgDVysR Z5eH5L9fk+qLWfCzZqaVUw== 0000950124-99-001913.txt : 19990322 0000950124-99-001913.hdr.sgml : 19990322 ACCESSION NUMBER: 0000950124-99-001913 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990319 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/A SEC ACT: SEC FILE NUMBER: 000-07770 FILM NUMBER: 99568877 BUSINESS ADDRESS: STREET 1: 6200 ELMRIDGE RD CITY: STERLING HEIGHTS STATE: MI ZIP: 48310 BUSINESS PHONE: 8102643611 10-Q/A 1 FORM 10-Q/A 1 FORM 10-Q/A 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, 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 (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 5, 1999. Common Stock, No Par Value 4,668,911 - -------------------------- ---------------- 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, 1998 1998 (unaudited) ------------ ------------- ASSETS ------ CURRENT ASSETS Cash and Cash Equivalents $ 724,482 $ 1,924,006 Accounts Receivable (Net) 18,899,386 24,235,761 Inventories 42,290,752 38,873,477 Net Investment in Sales Type Leases - Current Portion 3,250,000 3,100,000 Prepaid Expenses 565,483 543,095 ----------- ----------- Total Current Assets 65,730,103 68,676,339 ----------- ----------- Property and Equipment 42,464,708 42,100,575 Accumulated Depreciation (19,559,704) (18,834,030) Net Property and Equipment 22,905,004 23,266,545 ----------- ----------- Net Investment in Sales Type Leases - Less Current Portion 6,256,909 6,013,959 ----------- ----------- Other Assets 2,239,163 2,290,124 ----------- ----------- Total Assets $97,131,179 $100,246,967 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES Current Portion of Long-Term Debt 3,300,000 3,300,000 Accounts Payable 15,847,909 18,405,224 Accrued Liabilities 4,780,838 4,537,434 Federal and State Income Taxes 0 513,994 ----------- ----------- Total Current Liabilities 23,928,747 26,756,652 ----------- ----------- Deferred Income Taxes 2,215,000 2,215,000 ----------- ----------- Long Term Debt - Less Current Portion 40,959,327 42,530,105 ----------- ----------- Product Liability 2,631,313 1,909,904 ----------- ----------- Stockholders' Equity 27,396,792 26,835,306 ----------- ----------- Total Liabilities and Stockholders' equity $97,131,179 $100,246,967 =========== ============
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, 1998 1997 -------------------------- Net Sales $27,156,906 $23,625,324 Cost of Sales 22,314,809 19,252,930 ----------- ----------- Gross Profit 4,842,097 4,372,394 Selling General and Administrative Expenses 3,446,543 3,278,925 ----------- ----------- Operating Income 1,395,554 1,093,469 ----------- ----------- Other Income (Expense) Interest Expense (863,076) (831,574) Interest Income 363,639 308,819 Other Income (Expense) ( 45,631) ( 59,177) ----------- ----------- Net Other Expense (545,068) (581,932) ----------- ----------- Income Before Income Taxes 850,486 511,537 Income Taxes 289,000 174,000 ----------- ----------- Net Income $ 561,486 $ 337,537 =========== =========== Net income per common share (basic and diluted) $ .12 $ .07 =========== =========== Weighted average number of common shares (basic and diluted) 4,682,160 4,762,953 =========== ===========
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, -------------------- 1998 1997 -------- -------- Net income $ 561,486 $ 337,537 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 800,753 857,339 Changes in assets and liabilities which provided (used) cash Current assets excluding cash & equivalents 1,746,712 798,664 Other assets (306,331) 46,287 Accounts payable (2,557,315) (567,347) Accrued expenses 243,404 (166,665) Federal and state income taxes (513,994) 452,771 Product liabilty 721,409 251,340 ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 696,124 2,009,926 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (324,870) (327,031) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal reductions of long term debt (1,570,778) (2,165,982) Sale of common stock 0 61,369 Redemption of common stock 0 (40,000) ---------- ---------- NET CASH USED IN FINANCING ACTIVITIES (1,570,778 (2,144,613) ---------- ---------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,199,524) (461,718) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,924,006 2,402,421 ---------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 724,482 $1,940,703 ========== ==========
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, 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 considered necessary for a fair presentation have been included. Operating results for the three month period ended December 31, 1998, are not necessarily indicative of the results that may be expected for the year ending September 30, 1999. 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, 1998. 2. Inventories Inventories at December 31, 1998 and September 30, 1998 are summarized as follows:
(Unaudited) December 31, 1998 September 30, 1998 ----------------- ------------------ Material and Supplies $22,590,752 $22,100,252 Work in Process 6,200,000 5,707,374 Finished Goods 13,500,000 11,065,851 ----------- ----------- $42,290,752 $38,873,477 =========== ===========
3. Earnings per Common Share and Common Equivalent Share: Earnings per share is computed using the weighted average number of common shares outstanding during the year. The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share", effective September 30, 1998. This statement requires a dual presentation and reconciliation of "basic" and "diluted" per share amounts. Diluted reflects the potential dilution of all common stock equivalents. At December 31, 1998, and 1997 options to purchase 264,464 and 132,311 shares, respectively, were excluded from the computation of earnings per share because the options' exercise prices were greater than the average market price of the common shares. 5 of 11 6 MCCLAIN INDUSTRIES, INC. ------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ THREE MONTHS ENDED DECEMBER 31, 1998 ------------------------------------ 4. Depreciation For the three months ended December 31, 1998 and 1997, depreciation charges were $686,411 and $774,228, respectively. 5. Contingencies Product Liability As a manufacturer of industrial products, the Company is occasionally 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. The Company is currently defending certain legal proceedings involving allegations of product liability relating to products manufactured and sold by the Company. Historically, such claims have not resulted in material losses to the Company in any one year, and the Company maintains product liability insurance in amounts believed by management to be adequate. Galion Holding Company (GHC), pursuant to an indemnification it provided to the seller in connection with GHC's July 1992 acquisition of the Galion operations, is currently defending a number of legal proceedings involving product liability claims arising out of products manufactured and sold prior to the acquisition. These claims are covered by insurance and many of these cases have been settled. In addition, the acquisition agreement called for the seller to share in the payment of certain costs related to the defense of these cases. On December 29, 1998 the Company reached a settlement agreement with the seller, the terms of which called for the Company to release the seller from its obligations related to product liability claims under the Galion acquisition agreement in exchange for a cash payment of $1,050,000. A reserve to provide for these product claims was established at the acquisition date. Since many of the cases have been settled and insurance coverage exists, management believes that the ongoing costs to defend these claims will not exceed the amount accrued on the accompanying consolidated balance sheet at December 31, 1998. 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 6 of 11 7 MCCLAIN INDUSTRIES, INC. ------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ------------------------------------------------------ THREE MONTHS ENDED DECEMBER 31, 1998 ------------------------------------ 5. Contingencies - (continued) 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 certainty. The Company has incurred and will continue to incur costs, on an ongoing basis, associated with environmental regulatory compliance in its business. Labor Union Matters Certain of the Company's hourly employees are represented by various labor unions pursuant to collective bargaining agreement which expire between September 1999 and June 2000. On February 23, 1995, the National Labor Relations Board (NLRB) conducted an election in response to a petition filed by a local union (Union) to represent the hourly employees at the Company's Macon, Georgia plant. The ballots of certain employees were challenged as ineligible. The Union filed charges asserting that the Company committed various unfair labor practices which affected the election results and that the challenged ballots should be counted. On October 17, 1996 the NLRB upheld the unfair labor practice charges and on November 5, 1996 the NLRB determined that the results of the election were in favor of the Union. Management, based upon the opinion of counsel, does not believe a final decision upholding the Union certification or the unfair labor practice charges would have a material adverse effect on the Company. Other Legal Matters The Company is also involved in routine litigation incidental to its business. Management believes that the resolution of these matters will not materially affect the consolidated financial statements. 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, ------------------------ 1998 1997 ---- ---- Net Sales $27,156,906 $23,625,324 Net Income 561,486 337,537 Net Earnings Per Common Share (basic and diluted) $ .12 $ .07 (Unaudited) As of As of December 31, September 30, 1998 1998 ------------ -------------- Working Capital $41,801,356 $41,919,687 Total Assets 97,131,179 100,246,967 Long-Term Debt 40,959,327 42,530,105 Stockholder's Investment 27,396,792 26,835,306 Weighted Average Number of Common and Common Equivalent Shares Outstanding 4,682,160 4,762,953 Current Ratio 2.75:1 2.57:1 Long-Term Debt to Equity 1.50:1 1.59:1
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, -------------------------- 1998 1997 ---- ---- Net Sales 100.00% 100.00% Cost of Sales 82.17 81.49 ------- ------- Gross Profit 17.83 18.51 Selling, General & Administrative Expenses 12.69 13.88 ------- ------- Operating Income 5.14 4.63 Other Expenses ( 2.01) (2.46) ------- ------- Income Before Income Taxes 3.13 2.17 Provision for Income Taxes 1.06 .74 ------- ------- Net Income 2.07% 1.43% ======= =======
9 of 11 10 MCCLAIN INDUSTRIES, INC. ------------------------ DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ---------------------------------------------- Net sales increased 14.95% to $27.2 million for the quarter ended December 31, 1998 (Quarter 1998) from $23.6 million for the quarter ended December 31, 1997 (Quarter 1997). The increase in sales is attributable primarily to strong sales in the McClain E-Z Pack product line and the company's truck program. Cost of sales as a percentage of net sales increased to 82.17% for the Quarter 1998 from 81.49% for the Quarter 1997. Selling, General and Administrative expenses decreased to 12.69% of net sales for the Quarter 1998 as a result of the increased sales volume and the restructing of certain administrative processes. The Company had working capital of $41.8 million at December 31, 1998 compared to $41.9 million at September 30, 1998. The ratio of current assets to current liabilities was 2.75 to 1 at December 31, 1998 compared to 2.57 to 1 at September 30, 1998. The Company's cash and cash equivalents totaled $.72 million at December 31, 1998. Cash flows from operations were $.7 million for the quarter ended December 31, 1998, primarily as a result of increased receivable collections. The Company uses computer hardware and financial and manufacturing software that it purchased from third party suppliers. Such suppliers have confirmed to the Company that such products are Year 2000 compliant. Consequently, the Company does not expect to incur any significant costs to become Year 2000 compliant. The Company has no information concerning the Year 2000 compliance status of its suppliers or customers. If any of the Company's significant suppliers or customers does not successfully and timely become Year 2000 compliant, the Company's business or operations could be adversely affected. The Company has not yet generated any disaster contingency plans related to the Year 2000 compliance issue. 10 of 10 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 8, 1999 By: /s/ Kenneth D. McClain ----------------------- ------------------------ Kenneth D. McClain, President Date: FEBRUARY 8, 1999 By: /s/ Mark S. Mikelait ------------------------ -------------------------- Mark S. Mikelait, Treasurer 11 of 11 12 Exhibit Index ------------- Exhibit No. Description - ----------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 0000063686 MCCLAIN INDUSTRIES YEAR SEP-30-1998 OCT-01-1998 DEC-31-1998 724,482 0 18,899,386 0 42,290,752 65,730,103 42,464,708 19,559,704 97,131,179 23,928,747 0 0 0 4,997,809 22,398,983 97,131,179 27,156,906 27,156,906 22,314,809 22,314,809 0 0 863,076 850,486 289,000 561,486 0 0 0 561,486 .12 .12
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