-----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, CrIGe+ScqDNClRK4fKHK2dqicf3wr7tbT8nyZZZw+Ynl4nH2MFj3akUAEex1O+IW BWgh3zFaJi1zimT4NbsnzQ== 0000914760-96-000263.txt : 19961118 0000914760-96-000263.hdr.sgml : 19961118 ACCESSION NUMBER: 0000914760-96-000263 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MID WEST SPRING MANUFACTURING CO CENTRAL INDEX KEY: 0000731895 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 112661683 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16677 FILM NUMBER: 96666554 BUSINESS ADDRESS: STREET 1: 1404 JOLIET RD STREET 2: SUITE C CITY: ROMEOVILLE STATE: IL ZIP: 60441 BUSINESS PHONE: 7087393800 MAIL ADDRESS: STREET 1: 1404 JOLIET RD STREET 2: SUITE C CITY: ROMEOVILLE STATE: IL ZIP: 60441 FORMER COMPANY: FORMER CONFORMED NAME: PATHE TECHNOLOGIES INC DATE OF NAME CHANGE: 19940217 FORMER COMPANY: FORMER CONFORMED NAME: PATHE COMPUTER CONTROL SYSTEMS CORP DATE OF NAME CHANGE: 19920703 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ______________________ FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934. Sept. 30, 1996 0-16677 (For Quarter Ended) (Commission file number) MID-WEST SPRING MANUFACTURING COMPANY (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 11-2661683 (I.R.S. Employer Identification No.) 1404 JOLIET RD. - UNIT C, ROMEOVILLE, IL 60446 (Address of principal executive offices) 630-739-3800 (Registrants 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_________ 31,000,000 shares, $.0001 par value, 9,290,594 outstanding as of November 14, 1996 (Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date) PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The following condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they 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 (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1996 are not necessarily indicative of results that may be expected for the year ended December 31, 1996. Information with respect to all periods ending September 30, 1996 and 1995 is unaudited and the balance sheet data at December 31, 1995 has been derived from audited financial statements. MID-WEST SPRING MANUFACTURING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
SEPT. 30, DECEMBER 31, 1996 1995 ASSETS CURRENT ASSETS: Cash $ 128,000 $ 564,000 Trade Accounts Receivable, net 4,364,000 4,380,000 Inventories Finished Goods 5,154,000 4,913,000 Work-in-Process 1,557,000 1,609,000 Raw Materials and Parts 2,054,000 2,414,000 8,765,000 8,936,000 Prepaid Expenses and Other 568,000 600,000 TOTAL CURRENT ASSETS 13,825,000 14,480,000 Property, Plant & Equipment, net 18,890,000 19,934,000 Purchase Cost in Excess of Assets Acquired 8,116,000 8,328,000 Other 1,429,000 1,584,000 $42,260,000 $ 44,326,000 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Cash Overdraft -- 622,000 Notes Payable to Bank 4,588,000 4,121,000 Accounts Payable 3,162,000 2,872,000 Accrued Payroll & Other Expenses 2,139,000 1,698,000 Income Taxes Payable -- 32,000 Accrued Interest 826,000 -- TOTAL CURRENT LIABILITIES 10,715,000 9,345,000 Long-Term Debt 26,493,000 26,468,000 Deferred Income Taxes and Other 3,621,000 3,664,000 Preferred Stock of Mid-West Spring & Stamping Corp. 2,227,000 2,227,000 COMMON STOCKHOLDERS' EQUITY: Common Stock, par value $.0001; 31,000,000 shares authorized; 10,570,289 shares issued, respectively -- -- Paid-in-Capital 6,559,000 6,559,000 Retained Earnings (Deficit) (6,456,000) (3,038,000) Treasury Stock, at cost(1,279,695 shares) (899,000) (899,000) __________ __________ TOTAL COMMON STOCKHOLDERS' EQUITY (796,000) 2,622,000 $42,260,000 $44,326,000
See Notes MID-WEST SPRING MANUFACTURING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended Nine months ended Sept. 30, Sept. 30, 1996 1995 1996 1995
NET SALES $ 8,215,000 $ 9,143,000 $26,397,000 $28,898,000 Cost and expenses: Cost of sales 6,802,000 7,305,000 21,949,000 22,556,000 Selling and administrative 1,146,000 1,412,000 3,186,000 3,943,000 Amortization of intangibles 71,000 71,000 209,000 212,000 Special charges (347,000) -- 1,653,000 -- 7,672,000 8,788,000 26,997,000 26,711,000 OPERATING INCOME(LOSS) 543,000 355,000 (600,000) 2,187,000 Interest expense 951,000 894,000 2,818,000 2,557,000 _________ _________ __________ __________ Income (loss) before Income taxes (408,000) (539,000) (3,418,000) (370,000) Income taxes -- (180,000) -- (150,000) _________ __________ __________ __________ NET INCOME(LOSS) $ (408,000) $(359,000) $(3,418,000) $ (220,000) Preferred Stock of Mid-West Spring & Stamping Corp. Dividend Requirement 77,000 46,000 200,000 130,000 _________ _________ ___________ ___________ Income (loss) attributable to Common Shares $ (485,000) $(405,000) $(3,618,000) $ (350,000) INCOME PER COMMON SHARE $ (.05) $ (.04) $ (.39) $ (.04) Weighted average number of shares outstanding 9,290,594 10,069,877 9,290,594 10,069,877
See Notes MID-WEST SPRING MANUFACTURING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY
COMMON STOCK Additional Retained Treasury Shares Paid-in-Capital (deficit) Stock Total Balance, December 31, 1995 10,570,289 $ 6,559,000 ($3,038,000) ($ 899,000) $ 2,622,000 NET INCOME (392,000) ( 392,000) __________ ___________ __________ _________ __________ Balance, March 31, 1996 10,570,289 $ 6,559,000 $(3,430,000) ($ 899,000) $ 2,230,000 NET INCOME (2,618,000) (2,618,000) __________ ___________ __________ _________ __________ Balance, June 30, 1996 10,570,289 $ 6,559,000 ($6,048,000) ($ 899,000) $ (388,000) NET INCOME (408,000) (408,000) __________ ___________ __________ _________ __________ Balance, Sept.30, 1996 10,570,289 $ 6,559,000 ($6,456,000) ($ 899,000) $ (796,000)
See Notes MID-WEST SPRING MANUFACTURING COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED SUMMARY OF CASH FLOWS Nine months ended Sept. 30 1996 1995
CASH FLOWS FROM (USED) IN OPERATING ACTIVITIES: Net Income (Loss) $(3,418,000) $ (220,000) Adjustments to reconcile net income/loss to net cash from operating activities: Depreciation and amortization 1,567,000 1,537,000 Deferred income taxes -- -- Changes in net operating assets and liabilities, net of effects from 1993 acquisitions 2,093,000 (1,798,000) 242,000 (481,000) CASH FLOWS FROM (USED) IN INVESTING ACTIVITIES: Purchase of equipment (297,000) (2,409,000) (297,000) (2,409,000) CASH FLOWS FROM (USED) IN FINANCING ACTIVITIES: Proceeds from revolving line of credit, net 467,000 3,518,000 Principal payments on long-term debt, net -- -- Cash overdraft (622,000) -- Other (226,000) (1,000,000) (381,000) 2,518,000 NET INCREASE IN CASH ($ 436,000) ($ 372,000) Cash, Beginning $ 564,000 $ 408,000 Cash, End $ 128,000 $ 36,000 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $1,859,000 $1,848,000 Income taxes 65,000 67,000 Noncash investing activities: Reverse purchase of Pathe -- -- Noncash financing activities: Common Stock issued -- -- Redeemable Preferred Stock of Mid-West Spring and Stamping Corp. dividend requirement -- --
See Notes NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. PREFERRED STOCK At September 30, 1996, there were $892,000 of accumulated and undeclared dividends in respect to Preferred Stock of Mid-West Spring and Stamping Corporation. 2. TAXES A reconciliation between the Company's effective tax rate and the US statutory rate (34%) at September 30, is as follows: 1996 1995 Statutory tax expense ($1,162,000) $(126,000) Nondeductible amortization of cost in excess of net assets acquired 207,000 75,000 Other, various items 955,000 ( 99,000) $ 0 $(150,000) At September 30, 1996, the Company has net operating loss carryforwards of $6.4 million for income tax purposes that expire in the years 2000 through 2010. The timing of utilization of these carryforwards may be subject to annual limitations. $2.0 million of these carryforwards resulted from the Company's 1993 reverse purchase of Pathe. For financial reporting purposes, a valuation allowance of $424,000 has been recognized to offset the deferred tax assets related to those carryforwards. Significant components of the Company's deferred tax liabilities and assets as of January 1, 1996 are as follows: Deferred tax liabilities: Tax over book depreciation and bases differences on property, plant, equip. $4,997,000 Inventories 414,000 Other 9,000 Total deferred tax liabilities 5,420,000 Deferred tax assets: Net operating loss carryforwards 2,437,000 Provision for 1993 special charges -- Other - net 393,000 Total deferred tax assets 2,830,000 Valuation allowance for deferred tax assets ( 424,000) Net deferred tax asset 2,406,000 Net deferred tax liabilities $3,014,000 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS OVERVIEW The Company's net sales for the nine months and third quarter ended September 30, 1996, decreased 8.7% and 10.1% to $26,397,0000 and $8,215,000, respectively, attributable to lower than expected sales from Spring and Stamping. Operating income for the same periods decreased $2,787,000 (127.4%) and increased $188,000 (53.0%) to ($600,000) and $543,000, respectively. The decrease in operating income for the year was attributable to operating losses from the Advanced Pressure Casting division and to a special charge in the second quarter relating to the closing of that division. The increase in operating income for the third quarter was a result of closing the die cast division as well as increased sales from Pathe Advanced Composites. The spring plants have continued to make productivity improvements that have lowered direct labor as a percent of sales by 2.8% for the year. NET SALES The Company's net sales for the three and nine months ended September 30, 1996, were $8,215,000 and $26,397,000 respectively, down 10.1% and 8.7% from the $9,143,000 and $28,898,000 recorded in the 1995 comparable period. Spring operations decreased $1,281,000 and $3,082,000 in net sales for the three and nine month periods ended September 30, 1996, due to the closing of the die cast division as well as lower sales from the spring plants over the 1995 comparable period. The spring plants experienced lower than expected sales (down $1.6 million for the year and down $.5 million for the quarter) due to competitive pressures and customer service problems dating back to 1995 operations. Spring's die casting operation closed its doors as of August 31, 1996 which contributed to the year-to-date decrease in sales. Pathe Advanced Composites contributed a $353,000 sales increase for the 1995 comparable period. Booked orders from Spring and Stamping (including blanket orders) at September 1996 were $6.5 million, this compares to a backlog of $9.1 million at September 1995. OPERATING INCOME Operating income for the three and nine months ended September 30, 1996, increased $188,000 and decreased $2,787,000 to $543,000 and ($600,000) compared to $355,000 and $2,187,000 for the comparable period. The decrease in operating income was attributable to operating losses at APC ($1,425,000 loss for the year, in addition there was a $1,653,000 special charge for the plant closing). The spring plants showed an increase in operating income of $31,000 and $156,000 for the three and nine month periods ended September 30, 1996, over the 1995 comparable period. This was attributable to lower direct labor costs and higher operating efficiencies through out the company, and is especially impressive when you consider the $.5 million and $1.6 million dollar decrease in sales for the three and nine month periods ended September 30, 1996. Cost of Sales, as a percentage of sales, for the three and nine months ended September 30, 1996, increased 2.9% and 5.0% to 82.8% and 83.1% due to the operating inefficiencies at Advance Pressure Castings during the year. The spring plants showed significant improvement in direct labor (down 2.8% from last year) which was offset by the decreases in sales volume and related effects on fixed costs. Selling and Administrative expenses decreased $266,000 and $757,000 to $1,146,000 (14.0% of sales) and $3,186,000 (19.2% of sales) for the three and nine months ended September 30, 1996 compared to $1,412,000 and $3,943,000 for the prior year periods. Selling expenses decreased in travel and entertainment ($30k) and commissions ($45k). These decreases are attributed to cost cutting measures and lower sales volume during 1996. Administrative expenses decreased across the board due to cost cutting measures. Administrative salaries decreased as the company reassigned personnel to catalog sales in an effort to develop that market. Interest expense for the nine months and three months September 30, 1996 increased $261,000 to $2,818,000 and $57,000 to $951,000 for the respective periods. The increases were due to higher debt balances and effective rate on borrowings. SPECIAL CHARGES The Company had booked a $2,000,000 reserve towards the closing cost of Advance Pressure Casting. In that amount was a write down of inventory ($347,000) which should have been charged to cost of sales. The adjustment is reflected in the third quarter report. The special charge assumes a 50% liquidation value on equipment. There are also lease obligations that run through December of 1999 included in this accrual. The plant ceased all operations on August 31, 1996. INCOME TAX The provision for income taxes for the periods presented was based on the estimated effective tax rate for the year. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1996, the Company's current assets ($13.8 million) exceed current liabilities ($10.7 million) by $3.1 million which compares to the $5.2 million excess of current assets over current liabilities at December 31, 1995. Included in current liabilities at September 30, 1996 and December 31, 1995 is $4.6 million and $4.1 million, respectively, borrowed under its revolving credit agreement which expires in December, 1996. The Company has successfully, in each of the past five years, been able to "roll-over" its revolving credit agreement. Before the changes in net operating assets and liabilities of $2.1 million and ($1.8) million for the nine months ended September 30, 1996 and 1995, cash flow from operating activities were ($1.9) million and $1.3 million, respectively. Included in cash flows from operations is $2,818,000 and $2,557,000 in interest expense for 1996 and 1995, respectively. Short term debt at September 30, 1996 includes $4.6 million borrowed under the Company's $5 million revolving credit line which was renewed in June 1996 and will expire in December of 1996. The Company expects, as it has successfully done in the past, to renew or refinance its revolving credit line prior to expiration. The Company was in violation of certain restrictive covenants as of September 30,1996. The Company fully expects to receive waivers for the third quarter. In December 1994, the Company completed an important objective toward improving its total capitalization and long-term liquidity and reducing its exposure to fluctuating interest rates with a $27.0 million 11.25% fixed rate, long-term debt financing including $.5 million of detachable warrants, and $.5 million private equity offering. The net proceeds (after expenses) were used to repay; 1) all variable interest rate short-term and medium-term borrowings; 2) all the 14% subordinated and junior subordinated notes; 3) $4.6 million in redeemable preferred and preferred stock of Mid-West Spring and; 4) repurchase 1,256,150 shares of the Company's Common Stock. The new long-term debt facility permits the Company to maintain up to $5 million revolving line of credit. The new debt facilities, as amended in December 1995, require the Company, among other things, to maintain a current ratio of 1:1 or greater; tangible net worth, as defined, greater than $1.5 million; fixed charges coverage ratio of 1:1 or greater. In addition, the debt facility provides that the prepayment of principal may, under certain circumstances, result in additional interest charges of up to approximately 8.75%. Due to the Company breaking several covenants, in December of 1995, under the long-term financing agreement, the lender increased the interest rate by 1/2% to amend the covenants. Cash flows from operations, revolving line of credit and long-term debt refinancing at increased amounts, have been the Company's main source of capital to fund its operating and investing activities. Increased cash flow from operations and/or additional equity capital will most likely be required if the Company is to increase or accelerate its capital spending or acquisition programs. In the fourth quarter of 1996 and for the full year of 1997, the Company plans capital expenditures of approximately $300,000 and $1,000,000 in order to continue to expand its existing products and markets. Future capital expenditures are expected to be funded by cash from operations. The Company believes it has a sufficient operating cash flow and working capital base to meet all of its obligations for the foreseeable future. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS (a) Exhibits: 27 - Financial Data Schedule (b) Reports on 8-k: None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MID-WEST SPRING MANUFACTURING COMPANY By /s/ Michael B. Curran Michael B. Curran Chief Financial Officer November 14, 1996 EX-27 2
5 9-MOS DEC-31-1996 SEP-30-1996 128,000 0 4,517,000 153,000 8,765,000 13,825,000 27,841,000 8,951,000 42,260,000 10,715,000 0 0 0 2,227,000 (796,000) 42,260,000 26,397,000 26,397,000 21,949,000 21,949,000 5,048,000 0 2,818,000 (3,418,000) 0 (3,418,000) 0 0 0 (3,418,000) (.39) (.39)
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