-----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, Sdd9vOanNQE8/xC43QUAVoe5jJgtuY7v+9AsObmr6+RVq68cJr5j9QaIE+jmiydq zsTbfHBFRS77syuDPd1Eiw== 0000950152-98-006449.txt : 19980810 0000950152-98-006449.hdr.sgml : 19980810 ACCESSION NUMBER: 0000950152-98-006449 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980807 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: 98679433 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 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended 30 June 1998 ------------ or ( ) TRANSITION REPORT PURSUANT OT SECTION 13 OR 15 (d) OF THE SECRUITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File No. 1 - 1997 -------- THE MONARCH MACHINE TOOL COMPANY (Exact name of registrant as specified in its charter) Ohio 34-43407810 - ---------------------------- ----------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2600 Kettering Tower, Dayton, Ohio 45423 ---------------------------------------- (Address of principal executive offices, zip code) (937) 910-9300 -------------- (Registrant's telephone number including area code) - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 --- --- The number of common shares outstanding as of July 29, 1998 was 3,769,427. 2 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES INDEX TO FORM 10-Q
PAGE NUMBER ------ PART 1. FINANCIAL INFORMATION: ITEM 1. - Condensed Financial Statements: Balance Sheets - 30 June 1998 and 31 December 1997 2 Statements of Operations and Comprehensive Income - Two Quarters and Quarter ended 30 June 1998 and 1997 3 Statements of Cash Flow - Two Quarters ended 30 June 1998 and 1997 4 Notes to Condensed Financial Statements 5-6 ITEM 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8 PART II. OTHER INFORMATION: ITEMS 1- 5 Inapplicable 8 ITEM 6 Exhibits and Reports on Form 8-K 8
1 3 PART 1 - FINANCIAL INFORMATION THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES CONDENSED BALANCE SHEETS (In thousands)
30 June 31 December 1998 1997 ---- ---- (Unaudited) ASSETS CURRENT ASSETS: Cash $ 886 $ 5,022 Accounts receivable 24,800 26,762 Costs and estimated earnings in excess of billings on uncompleted contracts 522 337 Inventories 10,768 11,142 Prepaid expenses 162 540 Deferred income taxes 2,504 3,102 -------- -------- Current assets 39,642 46,905 PROPERTY, PLANT & EQUIPMENT - NET 8,976 8,649 PREPAID PENSION COSTS 17,434 15,723 DEFERRED INCOME TAXES 1,153 1,153 OTHER ASSETS 3,375 3,439 -------- -------- $ 70,580 $ 75,869 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 6,753 $ 10,138 Accrued liabilities 12,911 16,016 Billings in excess of costs and estimated earnings on uncompleted contracts 3,436 5,096 Current maturities of long-term debt 41 577 -------- -------- Current liabilities 23,141 31,827 LONG-TERM DEBT 4,093 1,598 OTHER ACCRUED LIABILITIES 1,203 1,175 SHAREHOLDERS' EQUITY: Preferred stock 14 14 Common stock 5,815 5,741 Unearned compensation, restricted stock (101) (77) Retained earnings 36,509 35,739 Translation adjustment (94) (148) -------- -------- 42,143 41,269 -------- -------- $ 70,580 $ 75,869 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 2 4 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (In thousands, except per share amounts) (Unaudited)
Two Quarters Ended 30 June Quarter Ended 30 June -------------------------- --------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Net sales $ 42,259 $ 55,544 $ 19,194 $ 29,556 Operating costs and expenses: Cost of sales 33,853 47,053 14,918 25,041 Selling, general and administrative 6,497 7,774 3,303 3,835 -------- -------- -------- -------- Operating income 1,909 717 973 680 Other income (expense): Interest expense, net (180) (704) (91) (340) Interest income 113 116 56 75 Other income (expense) (115) 402 (46) 288 -------- -------- -------- -------- Income before income taxes 1,727 531 892 703 Income tax provision 565 70 310 194 -------- -------- -------- -------- Net income 1,162 461 582 509 Other comprehensive income, net of tax - foreign currency translation adjustments 52 (215) 36 (14) -------- -------- -------- -------- Comprehensive income $ 1,214 $ 246 $ 618 $ 495 ======== ======== ======== ======== Average common shares outstanding 3,769 3,762 3,769 3,762 ======== ======== ======== ======== Net income per common share, $ .31 $ .12 $ .15 $ .13 basic and diluted ======= ====== ====== ======= Dividends per share: Preferred $ .90 $ .90 $ .45 $ .45 Common $ .10 $ .10 $ .05 $ .05
The accompanying notes are an integral part of the consolidated financial statements. 3 5 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Two Quarters Ended 30 June -------------------------- 1998 1997 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 1,162 $ 461 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 478 815 Pension income (1,646) 879 Deferred tax provision 599 Changes in assets and liabilities: Accounts receivable 1,841 10,840 Inventories 374 (2,893) Other assets 443 (492) Accounts payable (3,385) (4,582) Accrued liabilities (3,078) 1,295 Advance payments on contracts (1,660) 4,884 Accrued income taxes (176) ---------- ---------- Net cash provided by (used in) operating activities (4,872) 11,031 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (806) Proceeds from sale of fixed assets 197 ---------- ---------- Net cash provided by (used in) investing activities (806) 197 CASH FLOWS FROM FINANCING ACTIVITIES: Dividends (390) (389) Repayments of short-term borrowings, net (9,761) Proceeds from long-term borrowings 4,960 Repayments of long-term borrowings (3,000) Issuance of restricted stock 8 ---------- ---------- Net cash provided by (used in) financing activities 1,570 (10,142) EFFECT OF EXCHANGE RATES ON CASH (28) (326) ---------- ---------- INCREASE (DECREASE) IN CASH (4,136) 760 CASH - BEGINNING OF PERIOD 5,022 4,848 ---------- ---------- CASH - END OF PERIOD $ 886 $ 5,608 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements 4 6 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES NOTES TO CONDENSED FINANCIAL STATEMENTS TWO QUARTERS ENDED 30 JUNE 1998 AND 1997 1. FINANCIAL STATEMENTS -------------------- The balance sheet at 31 December 1997 presents condensed financial information taken from the audited financial statements. The interim financial statements are unaudited. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary to present fairly the financial position and results of operations for the interim periods presented, have been made. The results shown for the periods presented in 1998 are not necessarily indicative of the results that may be expected for the entire year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 31 December 1997 annual report to shareholders. 2. EARNINGS PER SHARE ------------------ Basic earnings per common share is computed by dividing net income (loss), after adjustment for the preferred stock dividend requirement, by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by adding the dilutive effect of common stock equivalents, such as the convertible preferred shares and any stock options outstanding, to the weighted average number of common shares outstanding. 3. COMPREHENSIVE INCOME -------------------- The statements of operations and comprehensive income reflect the disclosures required by Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income". The only non-owner source of changes in equity during those periods is the change in the Company's translation adjustment related to its investment in foreign subsidiaries. 4. INVENTORIES ----------- The Company's inventories consist of the following balances (in thousands):
30 June 31 December 1998 1997 -------- -------- Finished goods $ 3,106 $ 2,729 Work-in process and parts 9,495 12,381 Raw materials 2,455 320 Less LIFO reserve (4,288) (4,288) -------- -------- Net inventories $ 10,768 $ 11,142 ======== ========
5 7 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES NOTES TO CONDENSED FINANCIAL STATEMENTS TWO QUARTERS ENDED 30 JUNE 1998 AND 1997 5. INDEBTEDNESS ------------ In May 1998, the Company executed a $15,000,000 revolving credit facility. The amount available under the credit facility is based on eligible accounts receivable and inventory. The Company had $15 million available under the revolving credit facility of which $3 million was borrowed at 30 June 1998. This facility can be converted to a term loan on May 29, 2001 and is payable in eight quarterly installments beginning June 30, 2001. 6 8 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TWO QUARTERS ENDED 30 JUNE 1998 AND 1997 RESULTS OF OPERATIONS --------------------- During the last half of 1997 the Company sold or decided to close its Sidney and German operations. To facilitate comparison to the periods presented for this year, all references in the following discussion to the periods in 1997 are adjusted to eliminate the impact of these operations. Net earnings for the two quarters and quarter ended 30 June 1998 were $1,162,000, or $.31 per share, and $582,000, or $.15 per share, respectively compared to net earnings of $650,000, or $.17 per share, and $620,000, or $.16 per share, respectively, from ongoing operations for the same periods of 1997. The increase in earnings was principally the result of a strong first two quarters at the coil processing operation due to plant capacity utilization and improved profit margins on contracts in process. A reduction in interest expense associated with lower borrowing levels during the first two quarters of 1998 also contributed to increased earnings. The coating and laminating operation has operated at a loss in 1998 due to limited sales during its start up phase. The machine tool division continues to be profitable although lower sales volume in the second quarter of 1998 has resulted in lower income in 1998 compared to 1997. Backlog at 30 June 1998 was $36.9 million compared to $53.2 million at 30 June 1997. Net sales for the two quarters and quarter ended 30 June 1998 were $42.3 and $19.2 million, respectively, compared to $44.9 and $24.7 million for the same periods in 1997. The decrease was primarily due to the Company entering 1998 with a lower backlog than it had in the beginning of 1997. Cost of sales as a percentage of sales was 80.3% and 78.2% for the two quarters and quarter ended 30 June 1998 compared to 84.3% and 84.2% for the same periods in 1997. The improvement occurred mainly in the coil processing operations, as a result of better margins on equipment presently being produced. Selling, general and administrative expenses were $6.5 million and $3.3 million for the two quarters and quarter ended 30 June 1998, respectively, compared to $5.5 million and $2.7 million during the same periods in 1997. The Company has incurred higher expenses in 1998 due to increased sales and marketing activities and to position itself for future growth. 7 9 THE MONARCH MACHINE TOOL COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TWO QUARTERS ENDED 30 JUNE 1998 AND 1997 LIQUIDITY AND CAPITAL RESOURCES ------------------------------- During the first two quarters of 1998, the Company's operating activities required $4.9 million of cash, which was used to reduce accounts payable ($3.4 million) and accrued liabilities ($3.1 million). In addition, advance payments from customers on contracts in process decreased by $1.7 million as certain contracts were completed during 1998. A reduction in accounts receivable and inventories provided $2.2 million of cash in 1998. The remaining cash requirement was funded from the Company's cash balances and from additional net borrowings of $2.0 million under the Company's revolving credit facility. The requirement for cash during the first two quarters of 1998 was primarily due to the Company's ability to collect advance payments from customers of its coil processing operation in 1997, while cash was used to pay manufacturing costs during 1998. The Company forecasts that its operating activities will provide cash during the remainder of 1998. In May 1998, the Company executed a $15,000,000 revolving credit facility, with the amount available under the credit facility based on eligible accounts receivable and inventory. The Company had $15 million available under the revolving credit facility, of which $3 million was borrowed at 30 June 1998. This facility can be converted to a term loan on May 29, 2001 and is payable in eight quarterly installments beginning June 30, 2001. FORWARD LOOKING STATEMENTS -------------------------- In addition to historical information, this document contains various forward-looking statements, involving risks and uncertainties, which could cause actual results to differ materially from these statements. These risks include, but are not limited to, changes in economic conditions, interest rates, price and product offering competition from domestic and foreign entities, customer purchasing patterns, labor costs, product liability issues and other legal claims and governmental regulatory issues. PART II - OTHER INFORMATION Items 1-5 - Inapplicable Item 6 - Exhibits and Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended 30 June 1998. 8 10 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 (Registrant) DATE: 7 August 1998 By /s/Karl A. Frydryk ---------------------- ------------------------------------ Karl A. Frydryk Vice President & Chief Financial Officer 9 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 IT ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 886 0 26,345 1,546 10,768 39,642 33,094 24,445 70,580 23,141 0 0 14 5,815 36,314 70,580 42,259 42,259 33,853 40,350 115 249 180 1,727 565 1,162 0 0 0 1,162 .31 0
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