-----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, UiwX5UQjaYop66RafZSj1I/ApPLUdFC026n5tmV6V6tkdr3Xe1T23M6lxabNmzO8 rXC1KkhnSMo3Cdy/HIzm5Q== 0000950152-97-007874.txt : 19971114 0000950152-97-007874.hdr.sgml : 19971114 ACCESSION NUMBER: 0000950152-97-007874 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONARCH MACHINE TOOL CO CENTRAL INDEX KEY: 0000067532 STANDARD INDUSTRIAL CLASSIFICATION: METALWORKING MACHINERY & EQUIPMENT [3540] IRS NUMBER: 344307810 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01997 FILM NUMBER: 97714073 BUSINESS ADDRESS: STREET 1: 615 N OAK ST STREET 2: PO BOX 668 CITY: SIDNEY STATE: OH ZIP: 45365 BUSINESS PHONE: 5134924111 MAIL ADDRESS: STREET 1: 615 N OAK ST STREET 2: PO BOX 668 CITY: SIDNEY STATE: OH ZIP: 45365 10-Q 1 THE MONARCH MACHINE TOOL COMPANY 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended Commission File No. 1-1997 September 30, 1997 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES An Ohio Corporation Employer Identification No. 34-4307810 615 North Oak Street, Sidney, Ohio 45365 Telephone 937/492-4111 Securities registered pursuant to Section 12(b) of the act: Name of each exchange Title of each class on which registered - ---------------------- ----------------------------- Common Shares, without New York Stock Exchange, Inc. Par value ---------- 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 twelve months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X]. No [ ]. The number of common shares outstanding as of November 12, 1997 was 3,761,967. 2 PART 1 -- FINANCIAL INFORMATION THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 AND DECEMBER 31, 1996 (All money amounts stated in thousands of dollars)
ASSETS 9-30-97 12-31-96 --------- -------- Unaudited Cash $ 6,803 $ 4,848 Accounts receivable Customers 21,996 31,338 Earned and unbilled on partially completed contracts 8,955 13,949 Inventories 11,045 15,528 Other current assets 5,985 6,096 --------- -------- Current assets 54,784 71,759 Property, plant & equipment -- net 13,129 15,939 Prepaid pension costs 14,492 13,277 Other assets 2,609 1,938 --------- -------- $ 85,014 $102,913 ========= ======== LIABILITIES Short term borrowings 85 4,810 Accounts payable 6,271 11,935 Accrued liabilities 11,824 11,558 Advance payments on contracts 9,140 4,669 Accrued taxes 1,482 2,419 --------- -------- Current liabilities 28,802 35,391 Long-term borrowings 7,134 18,175 Deferred U.S. income taxes 2,263 1,847 Other accrued liabilities 920 920 --------- -------- 39,119 56,333 --------- -------- SHAREHOLDERS' EQUITY Preferred stock 14 14 Common stock 5,698 5,618 Retained earnings 40,419 40,719 Unearned compensation restricted stock (61) Translation adjustment (175) 229 --------- -------- 45,895 46,580 --------- -------- $ 85,014 $102,913 ========= ========
The accompanying notes are an integral part of the consolidated financial statements. 3 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the nine months ended September 30, 1997 and 1996 (In thousands of dollars, except per share amounts)
1997 1996 --------- --------- Unaudited Unaudited Net sales $ 81,066 $ 76,897 Operating costs and expenses: Cost of sales 68,370 70,906 Selling and administrative 11,275 10,319 Interest expense 891 1,052 Other expense (income) (648) (713) -------- -------- 79,888 81,564 1,178 (4,667) Gain (loss) on discontinuance of operations of foreign subsidiaries (200) 365 Gain (loss) on sale of certain assets of domestic division (766) Gain on sale of foreign property 3,528 Income (loss) before income taxes 212 (774) Provision (credit) for income taxes (73) 48 -------- -------- Net income (loss) $ 285 $ (822) ======== ======== Common shares outstanding 3,762 3,745 ======== ======== Earnings (loss) per common share: $ .08 $ (.22) ======== ======== Dividends per share: Preferred $ 1.35 $ 1.35 Common $ .15 $ .15
The accompanying notes are an integral part of the consolidated financial statements. 4 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the three months ended September 30, 1997 and 1996 (In thousands of dollars, except per share amounts)
1997 1996 --------- --------- Unaudited Unaudited Net sales $ 25,523 $ 24,419 Operating costs and expenses: Cost of sales 21,317 21,828 Selling and administrative 3,502 3,700 Interest expense 187 314 Other expense (income) (130) (355) -------- -------- 24,876 25,487 647 (1,068) Gain (loss) on discontinuance of operations of foreign subsidiaries (200) 365 Gain (loss) on sale of certain assets of domestic division (766) Income (loss) before income taxes (319) (703) Provision (credit) for income taxes (143) (291) -------- -------- Net income (loss) $ (176) $ (412) ======== ======== Common shares outstanding 3,762 3,745 Earnings (loss) per common share: $ (.04) $ (.11) ======== ======== Dividends per share: Preferred $ .45 $ .45 Common $ .05 $ .05
The accompanying notes are an integral part of the consolidated financial statements. 5 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY September 30, 1997 and December 31, 1996 and 1995 (In thousands of dollars, except per share amounts)
Common & Preferred Retained Unearned Translation Total Stock Earnings Compensation Adjustments -------- --------- -------- ------------ ----------- Balances at 12/31/94 $ 52,676 $ 5,632 $ 46,982 $ 62 Net income 786 786 Cash dividends Common ($.20/share) (748) (748) Preferred ($1.80/share) (27) (27) Translation Adjustments (37) (37) - --------------------------------------------------------------------------------------------------------- Balances at 12/31/95 $ 52,650 $ 5,632 $ 46,993 $ 25 Net loss (5,498) (5,498) Cash dividends: Common ($.20/share) (748) (748) Preferred ($1.80/share) (27) (27) Translation Adjustments 202 202 - --------------------------------------------------------------------------------------------------------- Balances at 12/31/96 $ 46,579 $ 5,632 $ 40,720 $ 227 Net income 285 285 Cash dividends: Common ($.15/share) (566) (566) Preferred($1.35/share) (20) (20) Stock issuances: Restricted stock -- net 19 80 (61) Translation Adjustments (402) (402) - --------------------------------------------------------------------------------------------------------- Balances at 9/30/97 $ 45,895 $ 5,712 $ 40,419 $ (61) $(175)
The accompanying notes are an integral part of the consolidated financial statements. 6 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, 1997 and 1996 (All money amounts stated in thousands of dollars)
1997 1996 --------- --------- Unaudited Unaudited Cash flows from operating activities: Net income (loss) $ 285 $ (822) Adjustments to reconcile net income (loss) to net cash provided by operations: Depreciation 1,170 1,406 Pension income (1,318) (1,417) Cash provided by (used for) current assets and liabilities Accounts receivable 14,336 12,223 Inventories 4,483 1,499 Other assets (457) (1,525) Accounts payable (5,664) (5,555) Accrued liabilities (80) (435) Advance payments on contracts 4,471 (1,958) Accrued income taxes (176) 332 -------- -------- Total adjustments 16,765 4,570 -------- -------- Net cash provided by (used in) operating activities 17,050 3,748 Cash flows from investing activities: Proceeds from sale of Fixed Assets 1,996 Capital expenditures (356) (685) -------- -------- Cash flows from financing activities: Dividends paid (584) (582) Proceeds from (repayments of) short-term borrowings (15,766) 612 Restricted stock issuance 19 -- -------- -------- (16,331) 30 Effect of exchange rates on cash (404) (13) -------- -------- Net increase in cash 1,955 3,080 Cash and cash equivalents at beginning of period 4,848 2,616 -------- -------- Cash and cash equivalents at end of period $ 6,803 $ 5,696 ======== ========
The accompanying notes are an integral part of the consolidated financial statements 7 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the nine months ended September 30, 1997 and 1996 The foregoing consolidated results of operations are unaudited, but in the opinion of the company all adjustments (consisting of normal recurring accruals as well as the accounting changes) necessary to present fairly the results for these periods have been included. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report and any current year's previously filed Forms 10-Q. NET INCOME PER COMMON SHARE: Net income per common share, is based upon the weighted average number of common shares outstanding and common share equivalents, after giving effect to the preferred share dividend requirement. The impact of adopting FASB 128 is not expected to be material to the earnings per share calculation. INVENTORY: At September 30, 1997 and December 31, 1996, inventories are summarized as follows (000's omitted):
September 30, 1997 December 31, 1996 ------------------ ----------------- Finished goods $ 3,120 $ 4,978 Work-in-process and Parts inventory 11,798 23,940 Raw materials 290 599 ------- ------- Total first-in, first-out (FIFO) inventory 15,208 29,517 Less allowance to adjust the carrying value of inventories to LIFO basis 4,163 13,989 ------- ------- $11,045 $15,528 ======= =======
8 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the nine months ended September 30, 1997 and 1996 RESULTS OF OPERATIONS New orders booked during the third quarter of 1997 decreased relative to the level of orders booked during the same period last year by $ 3.7 million or 18.2% . The decrease in bookings in the quarter was primarily due to the sale of our U.S. lathe manufacturing operation in July. New order bookings for the entire corporation throughout the first nine months of 1997 were down approximately 9% relative to the level experienced during the same period last year. New order bookings, year-to-date, were weak compared to the same period the previous year at our turning operation in Sidney Ohio and at two of our European operations. However, the new order bookings at our U.S. and U.K. strip processing operations increased moderately relative to the first nine months of last year. The resulting level of backlogs at 9/30/97 was $54 million as compared to $60.8 million at 12/31/96 and $64.2 million at 9/30/96. After adjustment for the sale of the lathe business the comparable backlogs for 12/31/96 and 9/30/96 were $50.8 million and $50.2 million respectively. Net sales for the first nine months of 1997 were $81 million as compared to $76.9 million for the same period in 1996, and for the third quarter of this year were $25.5 million in contrast to the $24.4 million experienced during the same period in 1996. Shipments were up this year relative to the same period last year at most of our U.S. operations, but were down at most of our European operations due to lower backlogs at these subsidiaries at the beginning of the respective periods and poor order rates at these subsidiaries this year. The Company incurred a net loss of $176 thousand or 4 cents per share in the third quarter of 1997 as compared to a net loss of $412 thousand or 11 cents per share during the same period last year. The net loss in the third quarter of this year resulted from a pre-tax charge of $966 thousand related to the sale of our Sidney lathe manufacturing business and the consolidation of our Busch GmbH paper converting machinery operation into our Busch U.S. operation. The resulting pre-tax operating earnings of $647 thousand in the third quarter of 1997 reflect a significant improvement over the pre-tax operating loss of $1.1 million experienced in the same period last year. Operating earnings last year were hampered by a large loss in the Sidney lathe operation which was eliminated by the sale of this operation in July of this year. In addition, operations at our Stamco U.S. and Stamco U.K. operations have improved significantly relative to last year. The Sidney lathe business was sold because this operation had been plagued by a chronically poor operating capacity ratio and was therefore an unprofitable operation on average. The company has signed a joint representation agreement with the "Spinner" Company in Germany to allow the Company to sell their lathe products in the North America. Spinner will also sell Monarch's Vertical Machining Centers in the European market, thereby replacing the previous Monarch dealership network in Europe. 9 RESULTS OF OPERATIONS (CONTINUED) As described more fully in the Company's "8K" filing on August 14, 1997, the Sidney lathe business was sold to an unrelated business, namely, Monarch Lathes L.P. on July 31,1997. The Company sold the business and certain operating assets for approximately the book value of the assets sold, subject to potential adjustment based upon certain Inventory Valuation/Verification Procedures. The Busch GmbH operation is being consolidated into our U.S. operation due to recent losses at this subsidiary. This subsidiary will be wound-down as a separate entity, which will allow the Paper Converting Machinery segment of our business to gain certain operating efficiencies. Operations during the first nine months of 1997 produced net income of $285 thousand or $.08 per share as compared to a net loss of $822 thousand or $.22 per share posted during the same period in 1996. The increase in net sales during the first nine months of 1997 relative to the same period in 1996 helped to create operating earnings of $1.2 million this year as compared to the operating loss of $4.7 million experienced last year. The net operating loss in the first nine months of 1996 was severely impacted by poor margins at our domestic strip processing operation due to the shipment of several new products that had not been produced in the past. Furthermore, our turning operation in Sidney was moderately profitable in the first half of this year as a result of the shipment of an advantageous product mix as well as the lower cost base made possible by the product line curtailments and associated inventory write-downs taken in the fourth quarter of 1996. Earnings continue to be hampered by the generally increasing cost of purchased items that we have only had limited success in passing along to the customer due to severe price competition from both domestic and foreign builders of similar products. The Company, however, continues to implement a company-wide effort to control costs particularly with respect to the largest and fastest growing areas of costs such as health care, travel and product liability insurance. 10 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the nine months ended September 30, 1997 and 1996 RESULTS OF OPERATIONS (CONTINUED) Selling and general & administrative expenses expressed as a percentage of sales were 13.9% during the first nine months of this year as compared to 13.4% during the same period last year. Sales costs were increased this year by the start-up of the Busch U.S. operation. Although this ratio is highly dependent upon sales volume because of the fixed nature of many of these costs, the Company will intensify its efforts on controlling these costs where possible. Cost of sales expressed as a percentage of sales went down to 84.3% during the first nine months of 1997 as compared to 92.2% during the same period last year. The lower margins experienced during the first nine months of 1996 were due to the factors noted above, particularly with respect the margin erosion resulting from cost over-runs on several customer orders at our domestic strip processing operation. Earnings continue to be strongest at our strip processing operations due to reasonable plant capacity utilization. Margins remain poorest, although improving, at our machine tool operations because of the considerable excess capacity that existed in this segment of our business prior to the sale of the Sidney business. The Company is continuing a program of analyzing all of its operations to ascertain the optimum organization of its operations in order to make the best use of the resources available to it in an effort to maximize shareholder value. The Company continues to retain the services of the investment banking firm of Lehman Brothers Inc. for the purpose of assisting the Company in maximizing shareholder value. Management and Lehman Brothers have been working together towards achieving this end. 11 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the nine months ended September 30, 1997 and 1996 LIQUIDITY AND CAPITAL RESOURCES The Company maintained a strong financial position throughout the past year and has current assets of $1.90 for each dollar of current liabilities at 9/30/97 as compared to $2.03 at 12/31/96 and $2.54 at 9/30/96. The Company presently has long-term debt of $7.1 million as compared to $15 million one year ago. The Company has unsecured lines of credit aggregating $37 million, including a $20 million committed three year revolving loan with a three year term-out option. Short-term borrowings against these facilities at 9/30/97 were $.1 million compared to $4.3 million one year ago. The decrease in the Company's net borrowing position to $.4 million at 9/30/97 from $18.1 million at 12/31/96 resulted primarily from receivables collections and the sale of certain assets of the Sidney Division. Except for historical information, statements in this document are forward-looking and involve risks and uncertainties including, but not limited to, continuation of intense price competition in the industries in which the Company participates, changes in economic conditions, customer preference and spending patterns, inflation, labor benefit costs, product liability and other legal claims and government regulatory initiatives. 12 PART II -- OTHER INFORMATION Item 6 -- Exhibits and Reports on Form 8-K One report on Form 8-K was filed during the nine month period ending September 30, 1997, Which was dated July 31, 1997, describing the disposition of the business and certain operating assets of the lathe division located in Sidney, Ohio. 13 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned thereunto duly authorized. THE MONARCH MACHINE TOOL COMPANY Date November 12, 1997 By /s/ Robert Riethman ------------------------------------- Robert Riethman, Treasurer Date November 12, 1997 By /s/ Earl Hull ------------------------------------- Earl Hull, Corporate Secretary EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEET, CONSOLIDATED INCOME STATEMENT, CONSOLIDATED STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B). 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 6,803 0 21,996 0 11,045 54,784 38,167 25,038 85,014 28,802 0 0 14 5,637 40,244 85,014 81,066 81,066 68,370 79,888 0 547 891 212 (73) 285 0 0 0 285 .08 .08
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