-----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, Pr2hvhJNp+2lgj24JLSnTIpPKt3FYG39iX3shR3yHMyDZtLNPco+/fguw9N4l5Ub ss0jy6RW8PCVtyuhg4RbBw== 0000950130-96-000372.txt : 19960206 0000950130-96-000372.hdr.sgml : 19960206 ACCESSION NUMBER: 0000950130-96-000372 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951201 FILED AS OF DATE: 19960205 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARIETTA CORP CENTRAL INDEX KEY: 0000792969 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 161074992 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14699 FILM NUMBER: 96511357 BUSINESS ADDRESS: STREET 1: 37 HUNTINGTON ST CITY: CORTLAND STATE: NY ZIP: 13045 BUSINESS PHONE: 6077536746 MAIL ADDRESS: STREET 1: 37 HUNTINGTON STREET CITY: CORTLAND STATE: NY ZIP: 13045 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended December 30, 1995 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 014699 ------------- MARIETTA CORPORATION (Exact name of registrant as specified in its charter) New York 16-1074992 - ------------------------------- -------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 37 Huntington Street, Cortland, New York 13045 - ---------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) (607) 753-6746 ---------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable ---------------------------------------------------- (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 ------- -------- As of February 1, 1996 there were outstanding 3,596,049 shares of the registrant's Common Stock, par value $.01 per share. INTRODUCTORY NOTE Marietta Corporation ("Marietta" or the "Company") entered into an Agreement and Plan of Merger, dated as of August 26, 1995, with BFMA Holding Corporation ("Parent"), and BFMA Acquisition Corporation ("Newco"), which provides for the merger (the "Merger"), of Newco, a wholly-owned subsidiary of Parent, with and into the Company, with the result that the Company will become a wholly-owned subsidiary of Parent. Parent is a corporation controlled by Barry W. Florescue, a director of the Company since August 31, 1995, and the beneficial owner of approximately 8.7% of the issued and outstanding shares of common stock, par value $.01 per share (the "Common Stock"). If the Merger is consummated, Mr. Florescue and his affiliates will acquire the entire equity interest in the Company and shareholders of the Company (other than Mr. Florescue and his affiliates) will receive $10.25 per share in cash. The closing of the transaction is subject to several conditions, including: Mr. Florescue obtaining the financing necessary to approve the transaction; and approval of the transaction by holders of at least 66 2/3% of the Common Stock. There can be no assurance that the conditions will be satisfied. MARIETTA CORPORATION -------------------- FORM 10-Q INDEX ----- PART I. FINANCIAL INFORMATION: Item 1. Financial Statements: Consolidated Statements of Operations Consolidated Balance Sheets Consolidated Statements of Cash Flows Notes to Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K SIGNATURES PART 1. FINANCIAL INFORMATION Item 1. Financial Statements Marietta Corporation Consolidated Statements of Operations (Unaudited)
Three Months Ended December 30, December 31, 1995 1994 Net sales $19,010,972 $13,108,956 Cost of sales 14,015,600 9,404,265 ----------- ----------- Gross profit 4,995,372 3,704,691 Selling, general, and administrative expenses 4,386,464 3,413,644 ----------- ----------- Operating income 608,908 291,047 Other income (expense), net 106,333 47,423 ----------- ----------- Income before income taxes 715,241 338,470 Income tax provision 307,399 151,459 ----------- ----------- Net income $ 407,842 $ 187,011 =========== =========== Earnings per share $0.11 $0.05 =========== =========== Weighted average shares and common share equivalents 3,621,516 3,592,702 =========== ===========
See accompanying notes to condensed, consolidated financial statements. Marietta Corporation and Subsidiaries Consolidated Balance Sheets ASSETS
December 31, September 30, 1995 1995 (unaudited) Current assets: Cash and cash equivalents $ 7,141,619 $ 4,384,686 Accounts receivable, net 10,494,299 13,668,876 Inventories 15,134,166 12,626,817 Refundable income taxes 325,000 548,792 Other current assets 319,819 433,887 Deferred tax asset 682,787 601,952 ----------- ----------- Total current assets 34,097,690 32,265,010 Property, plant and equipment, net 22,462,876 23,162,584 Restricted cash 2,800,000 2,700,000 Marketable securities 1,276,598 2,432,050 Excess of cost over net assets acquired, net 3,168,193 3,202,052 Other assets 353,143 368,888 ----------- ----------- Total assets $64,158,500 $64,130,584 =========== =========== LIABILITY AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,330,341 $ 4,528,147 Accrued payroll 1,275,068 1,708,637 Accrued rebates 465,911 483,653 Accrued expenses 2,027,934 1,448,565 Current maturities of long-term debt 300,906 336,699 Income taxes payable 241,211 137,541 ----------- ----------- Total current liabilities 8,641,371 8,643,242 Long-term debt, less current maturities 6,316,438 6,514,335 Convertible subordinated note 279,120 278,040 Deferred tax liability 2,144,617 2,197,228 ----------- ----------- Total liabilities 17,381,546 17,632,845 ----------- ----------- Shareholders' equity: Preferred stock, $0.01 par value, authorized 1,000,000 shares Common stock, $0.01 par value, authorized 10,000,000 shares 40,109 40,109 Additional paid-in capital 36,762,049 36,762,049 Common stock notes receivable (607,500) (607,500) Treasury stock, at cost (3,877,333) (3,877,333) Retained earnings 15,164,189 14,756,349 Equity adjustment from foreign currency translation (812,620) (702,505) Marketable securities net unrealized holding gain 108,060 126,570 ----------- ----------- Total shareholders' equity 46,776,954 46,497,739 ----------- ----------- Total liabilities and shareholders' equity $64,158,500 $64,130,584 =========== ===========
See accompanying notes to condensed, consolidated financial statements. Marietta Corporation Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended December 30, December 31, 1995 1994 Cash flows from operating activities: Net income $407,842 $187,011 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 852,335 861,528 Provision for loss on accounts receivable 59,031 58,902 Provision for inventory obsolescence 162,256 160,902 Loss on disposal of assets 8,630 0 Deferred income taxes (136,090) (66,700) Restricted cash (100,000) (100,000) Other assets 0 (4,443) Stock bonuses 0 61,040 Changes in working capital: Accounts receivable 3,091,444 1,987,347 Inventories (2,705,075) (2,734,291) Other current assets 113,476 104,645 Accounts payable and accrued expenses (64,279) (704,683) Income taxes 327,849 (199,778) ---------- ---------- Net cash provided by (used in ) operating activities 2,017,419 (388,520) ---------- ---------- Cash flows from investing activities: Capital expenditures (135,381) (938,317) Sales of marketable securities 1,136,942 0 Purchases of marketable securities 0 (26,061) ---------- ---------- Net cash provided by (used in) investing activities 1,001,561 (964,378) ---------- ---------- Cash flows from financing activities: Payments on long-term debt (233,690) (221,137) Purchase of treasury stock 0 (55,800) ---------- ---------- Net cash used in financing activities (233,690) (276,937) ---------- ---------- Effect of foreign currency translation (28,357) (76,622) ---------- ---------- Net decrease in cash and cash equivalents 2,756,933 (1,706,457) Cash and cash equivalents, beginning of period 4,384,686 7,476,101 ---------- ---------- Cash and cash equivalents, end of period $7,141,619 $5,769,644 ========== ========== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $152,314 $138,493 Income taxes 59,491 421,374
See accompanying notes to condensed, consolidated financial statements. MARIETTA CORPORATION NOTES TO FINANCIAL STATEMENTS Note 1. Basis of Presentation The statements for the periods ended December 30, 1995 and December 31, 1994 are unaudited. In the opinion of the Company the statements include all adjustments necessary for a fair presentation of the results for the periods. The results of operations for the period ended December 31, 1995 are not necessarily indicative of the results of operations to be expected for the year ending September 28, 1996. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes thereto for the year ended September 30, 1995 included in the Company's Annual Report. Note 2. Inventories Inventories are stated at lower of cost or market. Cost is determined on the first-in, first-out method. Inventories consisted of the following: December 30, September 30, 1995 1995 ---- ---- Raw materials and $ 6,264,829 $ 4,568,609 supplies Finished goods 8,869,337 8,058,208 ----------- ----------- $15,134,166 $12,626,817 =========== =========== Note 3. Legal Proceedings As previously reported, an action has been commenced by a former owner of Marietta American, Inc. (formerly American Soap Company, Inc.), and by California Soap, Inc. and two of its shareholders. This complaint alleges, among other things, misrepresentations and omissions in connection with the Company's acquisition of Marietta American, Inc., misrepresentations in and omissions from various financial and other statements made by the Company, breaches of contract and other violations of federal and state laws. This action seeks an unspecified amount of damages. No assurance can be given as to the outcome of this action, which could have a material adverse effect on the Company. Note 4. Fair Value of Financial Instruments The Company will adopt Statement of Financial Accounting Standard No. 107, "Disclosures About Fair Value of Financial Instruments" in the current fiscal year. The Company has not yet determined the effect that this Standard will have on the Company's financial statements. Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- Net sales increased in the quarter ended December 30, 1995 by 45.0% to $19,011,000 from $13,109,000 in the prior year's first quarter. The increase of $5,902,000 was attributable to an increase in guest amenity sales of $2,088,000 (22.9% over the prior year's first quarter) and an increase in custom packaging sales of $3,814,000 (95.4% over the prior year's first quarter). Guest amenity sales were positively affected by the price increase put into effect in August 1995 and the continued improvement in hotel occupancy rates. The increase in custom packaging sales was the result of large orders from two consumer products companies. For the first quarter of fiscal 1996 the Company's gross profit decreased to 26.3% of sales from 28.3% during the same period of fiscal 1995. This was primarily a result of the product mix and the higher custom packaging sales which carried a lower gross profit percentage. Although the gross profit percentage decreased from the first quarter of 1995, the gross profit percentage compares favorably to the gross profit percentage of 23.0% achieved during fiscal 1995. This improvement is primarily attributable to the improvement in the custom packaging business and the absorption of manufacturing overhead. Selling, general and administrative expenses as a percentage of sales decreased to 23.1% in the first quarter of fiscal 1996 from 26.1% in the first quarter of 1995. This percentage decrease is attributable to the significant increase in sales. During the first quarter of fiscal 1996 the Company expensed $375,000 in respect of the fee to Goldman, Sachs & Co. in connection with its retention as the Company's financial advisor. Other income (expense), net represents the netting of interest expense, investment income and other miscellaneous income and expense. For the first quarter of fiscal 1996 interest and other expense of $173,000 was comparable to $161,000 for the first quarter of fiscal 1995. Investment income in the first quarter of fiscal 1996 was $238,000 compared to $126,000 in the first quarter of 1995. This increase was due to an increase in interest income and to significant gains from the sale of marketable securities. Other miscellaneous income, which is primarily profit on the sale of inventory components, decreased to $41,000 in the first quarter of fiscal 1996 as compared to $82,000 in the first quarter of 1995. Marietta's effective tax rate for federal, state and foreign income taxes was 43.0% in the first quarter of fiscal 1996 compared to 44.7% for the first quarter of fiscal 1995. Both the 1996 and 1995 tax rates were increased by state and provincial franchise/equity taxes. Liquidity and Capital Resources - ------------------------------- The Company's working capital increased to $25,456,000 at December 30, 1995 from $23,622,000 at September 30, 1995. Cash provided by operating activities for the first quarter of fiscal 1996 was $2,017,000 compared to $389,000 being used in operations for the first quarter of fiscal 1995. The increase in cash provided by operating activities was primarily attributable to the following factors: an increase in net income, a decrease in accounts receivable, an increase in accrued expenses, an increase in income taxes payable and a decrease in refundable taxes. The decrease in accounts receivable is primarily attributable to collections in the first quarter of fiscal 1996 of the elevated accounts receivable balance at the end of fiscal 1995 that had resulted from an increase in sales in the last two months of fiscal 1995. Cash provided from investing activities of $1,002,000 in the first quarter of fiscal 1996 was the result of lower capital expenditures and the proceeds received from the sale of marketable securities. This is contrasted with $964,000 used in investing activities in the first quarter of fiscal 1995 primarily in connection with capital expenditures. The provision made by the Company for loss on accounts receivable is adjusted each period based upon actual write-offs charged and recoveries credited to the allowance for doubtful accounts receivable at the end of a fiscal period. The Company has a $12,000,000 Revolving Credit Facility which expires in October 1996. Borrowings under the facility bear interest at the prime rate or, if elected by the Company, at an interest rate 1.1% above the LIBOR rate. There are currently no borrowings under the facility. In addition, the Company is currently not in compliance with a financial covenant contained in such facility. Accordingly, the Company is not permitted to make borrowings under such facility without obtaining an appropriate waiver from its bank. Management believes that the Company is in sound financial condition as evidenced by its total shareholders' equity of $46,777,000 versus its long-term debt of $6,896,000. Management believes that its current assets plus funds provided by operations and the Company's debt capacity are adequate to meet its anticipated capital and short-term needs. Management also believes that inflation has not had a material effect on its business. It is the Company's practice to review on an on-going basis the marketability of its inventory and the Company makes provision for inventory obsolescence as it deems appropriate. Shareholders' equity was negatively affected by approximately $110,000 as a result of a reduction in the Canadian exchange rate from 74.5% to 73.3%. In fiscal 1996 the Company expects to undertake capital improvements of approximately $3,000,000. In addition, the Company expects to enter into capital leases on a new computer system totaling approximately $1,500,000. The Company is unable to determine the impact upon the Company's financial condition of an adverse determination, if any, in any action, proceeding or investigation arising out of the event discussed in Note 3 of the Financial Statements. Seasonality - ----------- The Company's guest amenity business is subject to some fluctuation in results reflecting the seasonal nature of the travel and lodging industry. As a consequence the revenues from the Company's guest amenity business in its third and fourth fiscal quarters tend to be slightly higher than during the rest of the year. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit No. ----------- 27 Financial Data Schedule (b) None. 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. MARIETTA CORPORATION Date: February 5, 1996 By: /s/ Stephen D. Tannen ----------------- Stephen D. Tannen President and Chief Executive Officer By: /s/ Philip A. Shager ---------------- Philip A. Shager Vice President, Chief Accounting Officer and Treasurer EXHIBIT INDEX Filed Exhibit Herewith No. Description Page No. ------- ----------- -------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL HISTORY EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE IN THE FINANCIAL STATEMENTS. 3-MOS DEC-30-1995 OCT-01-1995 DEC-30-1995 7141619 0 10824165 (329866) 15134166 34097690 42227619 (19764743) 64158500 8641371 6595558 40109 0 0 46736845 64158500 19010972 19010972 14015600 14015600 0 59031 138914 715241 307399 407842 0 0 0 407842 .11 .11
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