-----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, C3Mfyf9fS4mE3NnPz67danyG8ufwLITJKh/BSPoOy+B+4YUC3wXZCLjnzQHXLwDJ 2G13SBaoK6QLvPTaz5bFIg== 0000950152-97-006027.txt : 19970815 0000950152-97-006027.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950152-97-006027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 1934 Act SEC FILE NUMBER: 001-01997 FILM NUMBER: 97661792 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 CO. & SUBSIDIARIES/ 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 June 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 August 12, 1997 was 3,761,967. 2 PART 1 - FINANCIAL INFORMATION THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 1997 AND DECEMBER 31, 1996 (All money amounts stated in thousands of dollars)
ASSETS 6-30-97 12-31-96 - ------ ------- -------- Unaudited Cash $ 5,608 $ 4,848 Accounts receivable Customers 25,202 31,338 Earned and unbilled on partially completed contracts 9,245 13,949 Inventories 18,421 15,528 Other current assets 5,965 6,096 ---------- ---------- Current assets 64,441 71,759 Property, plant & equipment - net 14,927 15,939 Prepaid pension costs 14,233 13,277 Other assets 726 1,938 ---------- ---------- $ 94,327 $102,913 ========== ======== LIABILITIES Short-term borrowings 90 4,810 Accounts payable 7,353 11,935 Accrued liabilities 12,572 11,558 Advance payments on contracts 9,553 4,669 Accrued taxes 1,970 2,419 ---------- ---------- Current liabilities 31,538 35,391 Long-term borrowings 13,135 18,175 Deferred U.S. income taxes 2,401 1,847 Other accrued liabilities 920 920 ---------- ---------- 47,994 56,333 ---------- ---------- SHAREHOLDERS' EQUITY Preferred stock 14 14 Common stock 5,698 5,618 Retained earnings 40,791 40,719 Unearned compensation restricted stock (73) Translation adjustment (97) 229 ---------- ---------- 46,333 46,580 ---------- ---------- $ 94,327 $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 six months ended June 30, 1997 and 1996 (In thousands of dollars, except per share amounts)
1997 1996 -------- -------- Unaudited Unaudited Net sales $ 55,544 $ 52,478 -------- -------- Operating costs and expenses: Cost of sales 47,053 49,078 Selling and administrative 7,774 6,619 Interest expense 704 738 Other expense (income) (518) (358) -------- -------- 55,013 56,077 -------- -------- 531 (3,599) Gain on sale of foreign property -- 3,528 -------- -------- Income before income taxes 531 (71) Provision for income taxes 70 339 -------- -------- Net income (loss) $ 461 $ (410) ======== ======== Common share outstanding 3,762 3,745 ======== ======== Earnings (loss) per common share: $ .12 $ (.11) ======== ======== Dividends per share: Preferred $ .90 $ .90 Common $ .10 $ .10
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 June 30, 1997 and 1996 (In thousands of dollars, except per share amounts)
1997 1996 -------- -------- Unaudited Unaudited Net sales $ 29,556 $ 28,123 -------- -------- Operating costs and expenses: Cost of sales 25,041 26,517 Selling and administrative 3,835 3,360 Interest expense 340 386 Other expense (income) (363) (172) -------- -------- 28,853 30,091 -------- -------- 703 (1,968) Gain on sale of foreign property -- 3,528 -------- -------- Income before income taxes 703 1,560 Provision for income taxes 194 999 -------- -------- Net income $ 509 $ 561 ======== ======== Common shares outstanding 3,762 3,745 ======== ======== Earnings per common share: $ .13 $ .15 ======== ======== 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 June 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 ($.05/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 461 461 Cash dividends: Common ($.10)/share) (376) (376) Preferred ($.90)/share) (13) (13) Stock issuances: Restricted stock - net 7 80 (73) Translation Adjustments (325) (325) - ----------------------------------------------------------------------------------------------------------------- Balances at 6/30/97 $ 46,333 $ 5,712 $ 40,792 $ (73) $ (98)
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 six months ended June 30, 1997 and 1996 (All money amounts stated in thousands of dollars)
1997 1996 --------- --------- Unaudited Unaudited Cash flows from operating activities: Net income (loss) $ 461 $ (410) Adjustments to reconcile net income (loss) to net cash provided by operations: Depreciation 815 939 Pension income 879 945 Cash provided by (used for) current assets and liabilities Accounts receivable 10,840 11,743 Inventories (2,893) 319 Other assets (492) (1,992) Accounts payable (4,582) (6,689) Accrued liabilities 1,295 758 Advance payments on contracts 4,884 (2,370) Accrued income taxes (176) -- -------- -------- Total adjustments 10,570 3,653 -------- -------- Net cash provided by (used in) operating activities 11,031 3,243 Cash flows from investing activities: Capital expenditures 197 (1,135) -------- -------- Cash flows from financing activities: Dividends paid (389) (388) Proceeds from (repayments of) short-term borrowings (9,761) 1,615 Restricted stock issuance 8 -- -------- -------- (10,142) 1,227 Effect of exchange rates on cash (326) 18 -------- -------- Net increase in cash 760 3,353 Cash at beginning of period 4,848 2,616 -------- -------- Cash at end of period $ 5,608 $ 5,969 ======== ========
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 six months ended June 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 (LOSS) PER COMMON SHARE: Net income (loss) 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 June 30, 1997 and December 31, 1996, inventories are summarized as follows (000's):
June 30, 1997 December 31, 1996 ------------- ----------------- Finished goods $ 5,531 $ 4,978 Work-in-process and Parts inventory 26,256 23,940 Raw materials 623 599 ---------- ---------- Total first-in, first-out (FIFO) loss 32,410 29,517 Less allowance to adjust the carrying value of inventories to LIFO basis 13,989 13,989 ---------- ---------- $ 18,421 $ 15,528 ========== ==========
8 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the six months ended June 30, 1997 and 1996 SUBSEQUENT EVENT: The Monarch Machine Tool Company (the "Company") completed on July 31, 1997 the sale of the business and certain operating assets of its Lathe Division, located in Sidney, Ohio. The assets sold included machinery and equipment and inventory of the Lathe Division and all intellectual property rights related to the manufacture of products of the Lathe Division (the "Assets"). The Lathe Division was primarily engaged in the design, manufacture and sale of computer numerically controlled and manual turning machines or lathes and replacement parts for such lathes (the "Business"). The Business and Assets were purchased by Monarch Lathes, L.P., an Ohio limited partnership ("MLLP"), with Lucas Precision, Inc., an Ohio corporation, as its sole general partner. The Business and Assets were purchased pursuant to an Asset Purchase Agreement dated July 16, 1997, between the Company and MLLP. The real property located in Sidney, Ohio, used by the Lathe Division of the Company, was leased to MLLP for a five-year term pursuant to a Lease dated July 31, 1997, between the Company and MLLP. Rentals and other payments under the Lease cover the Company's depreciation and other operating costs associated with the Sidney property. There is no material relationship between MLLP or Lucas Precision, Inc. and the Company or any affiliate, director or officer of the Company or any associate of any director or officer of the Company. For the Lathes Division business, the Company was paid an aggregate of $7,416,529 in cash, and MLLP assumed specified liabilities of the business. Also, the Company will be paid an additional $1,800,000 over a five year period. The purchase price reflects approximately the book value of the Assets sold and is subject to adjustment based on agreed Inventory Valuation/Verification Procedures, as more fully set forth in Section 2.4 of the Asset Purchase Agreement. The Company retained the accounts receivables of the Lathe Division, which totaled approximately $5,000,000. 9 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the six months ended June 30, 1997 and 1996 RESULTS OF OPERATIONS New orders booked during the second quarter of 1997 exceeded those booked during the same period last year by $ 1.8 million or 7% , largely due to better booking at our strip processing and paper converting machinery operations. However, new order bookings for the entire corporation throughout the first six months of 1997 were down approximately 6% relative to the level experienced during the same period last year. New order bookings 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. strip processing operation increased moderately relative to the first half of last year. The resulting level of backlogs at the end of the first half of 1997 was $63 million as compared to $60.8 million at 12/31/96 and $68.5 million at 6/30/96. Net sales for the first six months of 1997 were $55.5 million as compared to $52.5 million for the same period in 1996, and for the second quarter of this year were $29.6 million in contrast to the $28.1 million experienced during 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 all of our European operations due to lower backlogs at these subsidiaries at the beginning of the respective periods. Operations during the first half of 1997 produced net income of $461,000 or $.12 per share as compared to a net loss of $410,000 or $.11 per share posted during the same period in 1996. Earnings in the second quarter of 1997 were $509,000 or $.13 per share as compared to earnings of $561,000 or $.15 per share in the second quarter of 1996. The increase in net sales during the first half of 1997 relative to the same period in 1996 helped to create operating earnings of $531,000 this year as compared to the operating loss of $3.6 million experienced last year. However the net loss in the first six months of 1996 were exacerbated 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 at this division were also enhanced by approximately $150,000 as the result of cancellation fees with respect to a customer order. Earnings are 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 six months ended June 30, 1997 and 1996 RESULTS OF OPERATIONS (CONTINUED) Selling and general and administrative expenses expressed as a percentage of sales were 14% during the first six months of this year as compared to 12.6% 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 84.7% during the first half of 1997 as compared to 93.5% during the same period last year. The lower margins experienced during the first quarter 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, and remain poorest, although improving, at our machine tool operations because of considerable excess capacity. The Company is accelerating 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 over the past months towards achieving this end. On July 31, 1997, the Company completed the sale of the business and certain operating assets of our lathe division located in Sidney, Ohio. This transaction is more fully described in the notes to the Consolidated Financial Statements in this document. 11 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the six months ended June 30, 1997 and 1996 LIQUIDITY AND CAPITAL RESOURCES The Company maintained a strong financial position throughout the past year and has current assets of $2.04 for each dollar of current liabilities at 6/30/97 as compared to $2.03 at 12/31/96 and $3.07 at 6/30/96. The Company presently has long-term debt of $13.1 million as compared to $17 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 6/30/97 were $.1 million compared to $3.4 million one year ago. The decrease in the Company's net borrowing position, net of cash, to $7.6 million at 6/30/97 from $18.1 at 12/31/96 resulted primarily from receivables collections. 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 4 - Submission of matters to a vote of security holders. During the annul meeting of shareholders held on May 6, 1997, the following matters were voted upon by the Company's security holders. The following is a tabulation of the voting results: 1) Election of directors to the class whose term expires in 2000.
Votes Votes "For" "Withheld" ----- ---------- William A. Enouen 3,008,443 17,397 David E. Lundeen 3,008,243 17,597 John M. Richardson 3,007,203 18,637
Directors not voted upon whose term of office continued after the meeting: Richard E. Clemens John A. Bertrand Waldemar M. Goulet Kenneth H. Hopkins Joseph M. Rigot John F. Torley Item 6 - Exhibits and Reports on Form 8-K No reports on Form 8-K were filed during the six month period ending June 30, 1997. 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 August 13, 1997 By /s/ Robert Riethman --------------- ------------------------ Robert Riethman, Treasurer Date August 13, 1997 By /s/ Earl Hull --------------- ------------------------ Earl Hull, Corporate Secretary EX-27 2 EXHIBIT 27
5 THIS FINANCIAL 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. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 5,608 0 25,202 0 18,421 64,441 50,825 35,898 94,327 31,538 0 5,625 0 14 40,694 94,327 55,544 55,544 47,053 55,013 0 448 704 531 70 461 0 0 0 461 .12 .12
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