-----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, QBaLUgM7vC/dKu3x0ErbgAgniSQPtUPmbLGKBBstEOCNaIl801fFV0EGI5bq90jS fpd4xUA+HjwtECDJ0oUJdQ== 0000899243-00-000320.txt : 20000224 0000899243-00-000320.hdr.sgml : 20000224 ACCESSION NUMBER: 0000899243-00-000320 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 20000223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ERC INDUSTRIES INC /DE/ CENTRAL INDEX KEY: 0000775477 STANDARD INDUSTRIAL CLASSIFICATION: OIL & GAS FILED MACHINERY & EQUIPMENT [3533] IRS NUMBER: 760382879 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-14439 FILM NUMBER: 551468 BUSINESS ADDRESS: STREET 1: 1441 PARK TEN BOULEVARD CITY: HOUSTON STATE: TX ZIP: 77084 BUSINESS PHONE: 2813988901 MAIL ADDRESS: STREET 1: 1441 PARK TEN BOULEVARD CITY: HOUSTON STATE: TX ZIP: 77084 FORMER COMPANY: FORMER CONFORMED NAME: ERC CORP /DE/ DATE OF NAME CHANGE: 19851103 10-Q/A 1 AMENDMENT TO SEPTEMBER 30, 1999 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A-1 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 1999 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File No. 0-14439 ERC INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 76-0382879 - ------------------------------- -------------------------- (State or other jurisdiction of (I.R.S. Employer I.D. No.) incorporation or organization) 1441 Park Ten Boulevard, Houston, Texas 77084 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (281) 398-8901 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 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 the latest practicable date. Class Outstanding at November 15, 1999 - ----------------------------- -------------------------------- Common stock, $0.01 par value 28,848,272 shares ERC INDUSTRIES, INC. INDEX PAGE PART I Item 1: Financial Information Condensed Consolidated Balance Sheet - September 30, 1999 and December 31, 1998.......................... 2 Condensed Consolidated Statement of Operations Three and Nine Months Ended September 30, 1999 and 1998........... 3 Condensed Consolidated Statement of Shareholders' Equity Nine Months Ended September 30, 1999.............................. 4 Condensed Consolidated Statement of Comprehensive Income (Loss) Three and Nine Months Ended September 30, 1999 and 1998........... 5 Condensed Consolidated Statement of Cash Flows Nine Months Ended September 30, 1999 and 1998..................... 6 Notes to Condensed Consolidated Financial Statements................. 7 OTHER INFORMATION...................................................... 11 Signature Page....................................................... 12 Part I. FINANCIAL INFORMATION ERC INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEET (in thousands, except for share amounts) (unaudited)
September 30, December 31, 1999 1998 (restated) ----------------- ------------------- Assets Current assets: Cash and cash equivalents $ 663 $ 2,246 Trade accounts receivable, net of allowance for doubtful accounts of $700 and $825, respectively 19,464 22,634 Inventory 32,240 31,853 Prepaid expenses and other current assets 2,012 2,546 Deferred tax asset 3,886 3,814 ------- -------- Total current assets 58,265 63,093 Property, plant and equipment, net 9,824 9,990 Excess cost over net assets acquired, net 3,796 4,231 ------- -------- Total assets $71,885 $77,314 ======= ======== Liabilities and Shareholders' Equity Current liabilities: Line of credit from banks $ 9,562 $ 3,881 Line of credit from parent 15,742 19,509 Current portion of long-term debt 1,000 1,237 Accounts payable 8,908 10,645 Other accrued liabilities 5,945 6,465 ------- ------- Total current liabilities 41,157 41,737 Deferred tax liability 100 100 Long-term debt 1,201 2,710 ------- ------- Total Liabilities 42,458 44,547 ------- ------- Commitments and contingencies - - Shareholders' equity: Preferred stock, par value $1; authorized - 10,000,000 shares; 1,850,000 issued and outstanding 1,850 1,850 Common stock, par value $0.01; authorized - 40,000,000; shares; 28,848,272 issued and outstanding 289 289 Additional paid-in capital 25,666 25,946 Retained earnings 1,606 4,671 Accumulated other comprehensive income 16 11 ------- ------- Total shareholders' equity 29,427 32,767 ------- ------- Total liabilities and stockholders' equity $71,885 $77,314 ======= =======
The accompanying notes are an integral part of the condensed consolidated financial statements. 2 ERC INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share data) (unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------------------------ ------------------------------------------- 1999 1998 1999 1998 ------------------------------------------------ ------------------------------------------- (restated) (restated) ------------------------------------------------ ------------------------------------------- Revenues $ 22,083 $ 30,439 $ 63,460 $ 91,364 Cost of goods sold 17,067 22,242 49,209 66,874 ----------- ---------- ---------- ---------- Gross profit 5,016 8,197 14,251 24,490 Selling, general and administrative expenses 5,279 6,579 15,931 18,439 ----------- ---------- ---------- ---------- Operating (loss) income (263) 1,618 (1,680) 6,051 ----------- ---------- ---------- ---------- Other (income) expense: Interest expense 406 616 1,275 1,454 Other, net - (15) - (110) =========== ========== ========== ========== 406 601 1,275 1,344 ----------- ---------- ---------- ---------- (Loss) income before provision for income taxes (669) 1,017 (2,955) 4,707 Provision for income taxes 20 428 110 1,888 ----------- ---------- ---------- ---------- Net (loss) income $ (689) $ 589 $ (3,065) $ 2,819 =========== ========== ========== ========== Basic income per share Basic $ (0.02) $ 0.02 $ (0.11) $ 0.10 =========== =========== =========== =========== Diluted $ (0.02) $ 0.02 $ (0.10) $ 0.09 =========== =========== =========== =========== Weighted average number of shares outstanding Basic 28,848,272 28,848,272 28,848,272 28,848,272 =========== =========== =========== =========== Diluted 30,698,272 30,698,272 30,698,272 30,698,272 =========== =========== =========== ===========
The accompanying notes are an integral part of the condensed consolidated financial statements. 3 ERC INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (in thousands) (unaudited)
Additional Accumulated Other Preferred Common Paid-in Retained Comprehensive Stock Stock Capital Earnings Income ------------------------------------------- ------------ -------------------- Balance as of December 31, 1998 (restated) $ 1,850 $ 289 $ 25,946 $ 4,671 $ 11 Net loss - - - (3,065) - Income tax benefit of pre-quasi-reorganization net operating loss carryforwards - - (280) - - Other comprehensive income - - - - 5 -------------------------------------------------------------------------------- Balance as of September 30, 1999 $ 1,850 $ 289 $ 25,666 $ 1,606 $ 16 ========= ====== ========= ======== =======
The accompanying notes are an intergral part of the condensed consolidated financial statements. 4 ERC INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (in thousands) (unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------------------------------- 1999 1998 1999 1998 --------------------------- -------------------------- (restated) (restated) ------- ---------- ----------- ---------- Net (loss) income $(680) $589 $(3,065) $2,819 Other comprehensive (loss) income 67 (10) 5 19 ------ ---- ------- ------ Total comprehensive (loss) income $(622) $579 $(3,060) $2,838 ====== ==== ======= ======
The accompanying notes are an integral part of the condensed consolidated financial statements. 5 ERC INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) (unaudited)
Nine Months Ended September 30, -------------------------------------------- 1999 1998 ---------------- -------------------- (restated) Cash flows from operating activities: Net cash used in operating activities $ (432) $(9,779) ------- ------- Cash flows from investing activities: Acquisitions, net of cash acquired - (2,520) Purchases of property, plant and equipment (1,543) (2,138) Proceeds from sale of property, plant and equipment 224 419 ------- ------- Net cash used in investing activities (1,319) (4,239) ------- ------- Cash flows from financing activities: Line of credit (payments to)/receipts from parent company, net (3,767) 18,668 Line of credit borrowings from banks, net 5,681 279 Principal payments on long-term debt and capital lease obligations (1,746) (4,541) ------- ------- Net cash provided by financing activities 168 14,406 ------- ------- Effect of exchange rate changes on cash - - ------- ------- Net increase (decrease) in cash and cash equivalents (1,583) 388 Cash and cash equivalents, beginning of period 2,246 79 ------- ------- Cash and cash equivalents, end of period $ 663 $ 467 ======= =======
The accompanying notes are an integral part of the condensed consolidated financial statements. 6 ERC INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) The information contained herein with respect to September 30, 1999 and the three and nine months ended September 30, 1999 and 1998, has not been audited but was prepared in conformity with the accounting principles and policies described in the ERC Industries, Inc. (the "Company") annual report (Form 10-K) for the year ended December 31, 1998. Included are all adjustments (consisting of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of the financial information for the three and nine months ended September 30, 1999 and 1998. The results of interim periods are not necessarily indicative of results to be expected for the year. The Company has restated the previously issued financial statements as of December 31, 1998 and for the three and nine months ended September 30, 1998 to reflect the acquisition on May 14, 1999 of all of the outstanding capital stock of Wood Group Pressure Control Holdings Limited, ("WGPCHL") a company incorporated in Scotland under the Companies Act of the United Kingdom. Prior to the acquisition, WGPCHL was a wholly owned subsidiary of John Wood Group PLC ("Wood Group"). WGPCHL owned Wood Group Pressure Control and Engineering Services Limited and Wood Group (Middle East) Limited, the latter of which beneficially owns Wood Group Pressure Control (Arabian) LLC (collectively, the "Group Companies"). With the Company and the Group Companies all being under the common control of the Wood Group, the above transaction has been accounted for similar to a pooling of interests. The historical financial statements of the Company for periods prior to the consummation of the acquisition have been restated as though the Companies had been combined from the period when they first were under common control of the Wood Group. (2) Acquisitions: On February 2, 1998, the Company entered into a definitive purchase agreement for the acquisition of Bompet, C.A. ("Bompet"), a Venezuelan company. In connection with the transaction, the Company paid the sole Bompet stockholder, Inversiones Western C.A., a purchase price of $2.6 million. In addition, the Company will pay up to a maximum of $3.4 million in the event that Bompet's earnings exceed certain thresholds during 1998, 1999 and 2000. No amount has been accrued or paid in respect of this commitment as of September 30, 1999. The acquisition of Bompet was accounted for under the purchase method of accounting and the purchase price was allocated as follows (in thousands):
Cash $ 80 Accounts Receivable 2,556 Inventory 1,784 Property, Plant and Equipment 556 Other Assets 15 Excess Cost Over Net Assets Acquired 1,213 Accounts Payable (1,438) Accrued Expenses (1,298) Long-Term Debt-Current and Non-Current (868) ------- $ 2,600 =======
7 The pro-forma impact of the Bompet acquisition on the Company's 1998 results of operations is not material. During the fourth quarter of 1998, Bompet was advised that it had lost its contract with its major customer. As a result of the loss of this contract, the Company determined that its investment in Bompet was impaired and accordingly wrote off the goodwill arising from the acquisition of Bompet. As noted in Note (1) above, on May 14, 1999, the Company, in a privately negotiated transaction (the "Pressure Control Acquisition"), completed its acquisition from Wood Group of all of the outstanding capital stock of WGPCHL. In connection with the transaction and in exchange for all of the shares of the capital stock of WGPCHL, the Company issued to Wood Group, 1,350,000 shares of its common stock, par value $0.01 per share (the "Common Stock"), representing approximately 0.5% of the currently issued and outstanding shares of Common Stock. In addition, the Company issued 1,850,000 shares of its Series A Cumulative Convertible Preferred Stock (the "Series A Preferred Stock"). The Series A Preferred Stock has a liquidation preference of $1.00 per share and an annual dividend of $0.01 per share beginning in January 2000. Each share of Series A Preferred Stock will be convertible into one share of the Company's common stock. At the Company annual meeting in September 1999 the Company's stockholders approved such conversion. Combined and separate results of operations of the Company prior to consummation of the transaction for the restated periods are as follows:
WGPC WGPC Company (Arabian) Eng. Services Combined ------- --------- ------------- -------- Three months ended September 30, 1998 (unaudited) Revenues $27,417 $ 902 $2,120 $30,439 Profit before provision for income taxes $ 819 $ 62 $ 136 $ 1,017 Net income $ 439 $ 62 $ 88 $ 589 Nine months ended September 30, 1998 (unaudited) Revenues $83,398 $2,204 $5,762 $91,364 Profit before provision for income taxes $ 4,150 $ 209 $ 348 $ 4,707 Net income $ 2,384 $ 209 $ 226 $ 2,819 Three months ended March 31, 1999 (unaudited) Revenues $20,401 $ 533 $1,732 $22,666 Profit before provision for income taxes $ (889) $ (156) $ 117 $ (928) Net income (loss) $ (722) $ (156) $ 119 $ (759)
8 (3) Segment and Related Information The Company has adopted SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. Summarized financial information of the Company's reportable segments for the three and nine months ended September 30, 1999 and 1998 is shown in the following table:
U.S. Eastern Operations Hemisphere Other Total ----------- ---------- ------- -------- Three months ended September 30, 1999 Revenues from external customers $12,566 $ 8,331 $1,186 $22,083 EBIT (1) (264) 203 (202) (263) Total Assets $43,347 $22,548 $5,990 $71,885 Three months ended September 30, 1998 Revenues from external customers $21,091 $ 7,914 $1,434 $30,439 EBIT (1) 1,020 546 52 1,618 Nine months ended September 30, 1999 Revenues from external customers $38,259 $21,577 $3,624 $63,460 EBIT (1) (1,845) 452 (287) (1,680) Nine months ended September 30, 1998 Revenues from external customers $64,604 $20,856 $5,904 $91,364 EBIT (1) 4,058 1,475 518 6,051
(1) EBIT represents earnings before other (income) expense and taxes. The following table is a reconciliation of reportable segment EBIT to the Company's consolidated totals:
Three Months Ended Nine Months Ended September 30 September 30 1999 1998 1999 1998 ----- ------ ------- ------ (restated) (restated) Total EBIT for reportable segments $(263) $1,618 $(1,680) $6,051 Other (income) expense 406 601 1,275 1,344 ----- ------ ------- ------ Total consolidated (loss) income before taxes $(669) $1,017 $(2,955) $4,707 ===== ====== ======= ======
(4) Debt On January 20, 1999, the Company obtained a $2 million unsecured line of credit with a U.S. bank, which is guaranteed by the Company's principal stockholder, John Wood Group PLC. The line of credit is used for the purpose of general working capital requirements, and $0.35 million was available for additional borrowings on the line of credit at September 30, 1999. 9 On September 2, 1998, the Company obtained a $22 million line of credit with John Wood Group PLC. At September 30, 1999, $10.25 million was available for additional borrowings under this line of credit. Wood Group Pressure Control and Engineering Services Limited has a line of credit with a bank in Scotland provided as part of a group banking arrangement with John Wood Group PLC. The line of credit is issued for the purpose of general working capital requirements and provides overdraft and documentary credit facilities. The Company's United Kingdom subsidiaries have lines of credit with a bank in Scotland provided as part of a group banking arrangement with John Wood Group PLC. The lines of credit are issued for the purpose of general working capital requirements and provide overdraft and documentary credit facilities. Wood Group Pressure Control Limited also has a loan from John Wood Group PLC amounting to $3.2 million, which is repayable on demand. The loan is used for the purpose of general working capital requirements. The Company's Abu Dhabi subsidiary has a line of credit of up to DHS 2 million ($545,000) with a bank in Scotland provided as part of a group banking arrangement with John Wood Group PLC. The line of credit is used for the purpose of general working capital requirements and provides overdraft and documentary facilities. In addition, the subsidiary has a loan of DHS 2.5 million ($681,000) from John Wood Group PLC. 10 Part II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 27.1 Financial Data Schedule(1). (b) Reports on Form 8-K: None ---------------------------- (1) Filed herewith. 11 SIGNATURES 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. Date: February 22, 2000 ERC INDUSTRIES, INC. ------------------------------------- /s/ Alan D. Senn ------------------------------------- Alan D. Senn President and Chief Operating Officer /s/ James E. Klima ------------------------------------- James E. Klima Vice President and Chief Financial Officer 12
EX-27.1 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 663 0 20,164 700 32,240 58,265 29,683 19,859 71,885 41,157 0 0 0 289 29,120 71,885 63,460 63,460 49,209 15,931 0 0 1,275 (2,955) (110) (3,065) 0 0 0 (3,065) (.010) 0.00
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