-----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, N1+q3elr9oT7M2M+7GY5QhGVtXazhni/JtNcczp1ZnPSFOXwelU+NkPJiwvVSY95 l85DQS6qhMheDMEr/3zV0g== 0000898430-97-000471.txt : 19970222 0000898430-97-000471.hdr.sgml : 19970222 ACCESSION NUMBER: 0000898430-97-000471 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970212 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATTHEWS STUDIO EQUIPMENT GROUP CENTRAL INDEX KEY: 0000855575 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 951447751 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18102 FILM NUMBER: 97526627 BUSINESS ADDRESS: STREET 1: 2405 EMPIRE AVE CITY: BURBANK STATE: CA ZIP: 91504 BUSINESS PHONE: 8436715X32 MAIL ADDRESS: STREET 1: 2405 EMPIRE AVENUE CITY: BURBANK STATE: CA ZIP: 91504 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Period ended DECEMBER 31, 1996 ------------------ or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ------------ ------------- Commission file number 0-18102 ------- MATTHEWS STUDIO EQUIPMENT GROUP ------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 95-1447751 -------------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2405 EMPIRE AVENUE, BURBANK, CA 91504-3399 ------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (818) 843-6715 --------------- (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 Exchange Act 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. COMMON STOCK, NO PAR --------------------- VALUE - 10,331,591 SHARES AS OF JANUARY 31, 1997. ------------------------------------------------- INDEX MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed consolidated balance sheets - December 31, 1996 and September 30, 1996 Condensed consolidated statements of income - Three months ended December 31, 1996 and 1995 Condensed consolidated statements of cash flows - Three months ended December 31, 1996 and 1995 Notes to condensed consolidated financial statements - December 31, 1996 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Change in Securities Item 3. Defaults upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS (UNAUDITED) MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES Condensed Consolidated Balance Sheets ($ in thousands)
December 31, September 30, 1996 1996 ------------ ------------- (Unaudited) (Note) ASSETS: Current Assets: Cash and cash equivalents $ 293 $ 462 Accounts receivable, less allowance of $545 at December 31, 1996 and $480 at September 30, 1996 4,941 5,145 Current portion of net investment in leases 788 794 Inventories 5,364 4,961 Prepaid expenses and other current assets 1,005 945 ------- ------- Total current assets 12,391 12,307 Property and equipment, less accumulated depreciation and amortization of $17,880 at December 31, 1996 and $17,214 at September 30, 1996 20,968 20,339 Investment in leases, less current portion 772 865 Other assets 929 973 ------- ------- Total assets $35,060 $34,484 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 1,520 $ 2,603 Accrued liabilities 2,419 1,626 Current portion of long-term debt and capital lease obligations 116 125 Income taxes payable 206 - ------- ------- Total current liabilities 4,261 4,354 Long-term debt and capital leases 19,212 18,914 Deferred income taxes 2,142 2,142 Shareholders' equity: Preferred stock - - Common stock 5,584 5,584 Retained earnings 3,861 3,490 ------- ------- Total shareholders' equity 9,445 9,074 ------- ------- Total liabilities and shareholders' equity $35,060 $34,484 ======= =======
Note: The balance sheet at September 30, 1996 has been derived from the audited financial statements at that date. See accompanying notes. MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES Condensed Consolidated Statements of Income (Unaudited) (in thousands, except per share data)
Three Months Ended December 31, 1996 1995 -------- -------- Net product sales $3,554 $3,077 Revenues from rental operations 5,768 3,287 ------ ------ 9,322 6,364 Costs and expenses: Cost of sales 2,332 1,925 Cost of rental operations 3,398 1,871 Selling, general and administrative 2,406 1,835 Interest 567 523 ------ ------ 8,703 6,154 Income before income taxes 619 210 Provision for income taxes 248 42 ------ ------ Net income $ 371 $ 168 ====== ====== Earnings per common share $ 0.04 $ 0.02 ====== ====== Weighted average number of common shares outstanding 10,332 10,321
See accompanying notes. MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) ($ in thousands)
Three Months Ended December 31, 1996 1995 --------- --------- Operating activities: Net income $ 371 $ 168 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for doubtful accounts 67 37 Depreciation and amortization 799 846 Gain on sale of assets (53) (63) Changes in operating assets and liabilities: Accounts receivable 137 (224) Inventory (403) 59 Net investment in leases 99 216 Prepaids and other assets (29) (64) Income tax refund receivable - 295 Accounts payable and accrued liabilities (290) 157 Income taxes payable 206 23 ------- ------- Net cash provided by (used in) operating activities 904 1,450 Investing activities: Purchase of property and equipment (1,376) (2,396) Proceeds from sale of property and equipment 150 53 ------- ------- Net cash used in investing activities (1,226) (2,343) Financing activities: Proceeds from exercise of stock options - 6 Proceeds from borrowings 153 1,321 ------- ------- Net cash provided by financing activities 153 1,327 Net increase (decrease) in cash and cash equivalents (169) 434 Cash and cash equivalents at beginning of period 462 438 ------- ------- Cash and cash equivalents at end of period $ 293 $ 872 ======= =======
See accompanying notes. MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Presentation The accompanying unaudited condensed consolidated financial statements of Matthews Studio Equipment Group and Subsidiaries (the "Company") 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 months ended December 31, 1996 are not necessarily indicative of the results that may be expected for the year ending September 30, 1997, due to fluctuations in film production activities. For further information refer to the consolidated financial statements and footnotes thereto included in the Matthews Studio Equipment Group's annual report on Form 10-K for the year ended September 30, 1996. 2. Accounting Policies Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Long-Lived Assets Long-lived assets used in operations are reviewed periodically to determine that the carrying values are not impaired and if indicators of impairment are present, or if long-lived assets are expected to be disposed of, impairment losses are recorded. Stock Based Compensation The Company accounts for its stock compensation arrangements under the provisions of APB 25, "Accounting for Stock Issued to Employees," and intends to continue to do so. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("FAS 123"). FAS 123 established a fair value-based method of accounting for compensation cost related to stock options and other stock-based compensation awards. However, FAS 123 allows an entity to continue to measure compensation costs using the principles of APB 25 if certain proforma disclosures are made. FAS 123 is effective for fiscal years beginning after December 15, 1995 (the Company's 1997 fiscal year). The Company intends to disclose the information required by FAS 123 beginning with its 1997 fiscal year end. MATTHEWS STUDIO EQUIPMENT GROUP AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited)-Continued 2. Accounting Policies (continued) Per Share Data Per share data has been computed based on the weighted average number of shares of common stock outstanding as dilutive options and warrants account for less than 3% of the outstanding common shares. For the first quarter of fiscal years 1997 and 1996, the effect of the stock options and warrants were antidilutive, using the modified treasury stock method as a result of exercise prices of options and warrants in excess of market. Inventories Inventories are principally stated at the lower of first-in, first-out cost or market. Income Taxes Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effective income tax rate is 40% for the current quarter versus approximately 20% for the same period of the prior year. The lower rate for last year was primarily attributable to the utilization of net operating loss and alternative minimum tax net operating loss carryforwards. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- Overview - -------- In the first three months of fiscal 1997, the Company continued the trends from fiscal 1996 of growth and improved operating results. The first three months of fiscal 1997 showed improvements in sales, net income, and earnings per share over the first three months of fiscal 1996. Revenues increased $2,958,000 or 46% to $9,322,000 for the first three months of fiscal 1997, from $6,364,000 for the first three months of fiscal 1996. Net income increased $203,000 to $371,000 for the first three months of fiscal 1997, from $168,000 for the first three months of fiscal 1996. Three-Month Period ended December 31, 1996 and December 31, 1995 - ---------------------------------------------------------------- Net Product Sales - ----------------- Net equipment and supply sales were $3,554,000 for the first three months of fiscal 1997, an increase of $477,000, or 16%, from $3,077,000 for the first three months of fiscal 1996. Sales of production equipment and accessories for lighting support, camera support, lighting control and equipment sales to the retail industry ("Equipment sales") increased to $2,470,000, an increase of $139,000, or 6%, from $2,331,000 in fiscal 1996. Sales of expendable supply products increased in the first quarter of fiscal 1997 to $1,002,000 from $693,000, an increase of $309,000 or 45% over the same period last year. Revenues From Rental Operations - ------------------------------- Revenues from rental operations were $5,768,000 for the first three months of fiscal 1997, compared to $3,287,000 for the same period last year, an increase of $2,481,000 or 75%. Production equipment rentals, primarily of lighting, grip, power generators and trucks, increased to approximately $5,643,000, an increase of $2,726,000 or 93% from approximately $2,917,000, for the same period last year. The increase was primarily due to a large-budget film project currently in progress and a general increase in industry activity. Also contributing to the increase in the Company's rental revenues was the addition of equipment to the Company's rental inventory base, including equipment added for the new marketing centers opened in fiscal 1996. Gross Profit - Sales - -------------------- Gross profit as a percentage of sales was approximately 34% for the first three months of fiscal 1997, compared to approximately 37% for the same period in fiscal 1996. The lower gross profit percentage realized by the Company on higher revenues was primarily attributable to the increase in expendable supply product sales, which carry lower gross profit margins than the Company's other products. The dollar amount of gross profit on net product sales increased only slightly in the first quarter of fiscal 1997 over the same period last year. Gross Profit - Rental - --------------------- Gross profit as a percentage of rental revenues was approximately 41% for the first three months of fiscal 1997 compared to 43% in fiscal 1996. While the gross profit from rental revenues increased by $954,000 for the first three months of fiscal 1997 as compared to fiscal 1996, the gross profit percentage decreased mainly as a result of substantially increased subrental costs to support the heavy increase in rental activity. Selling, General and Administrative - ----------------------------------- Selling, general and administrative expenses were $2,406,000 in the first three months of fiscal 1997 compared to $1,835,000 for the same period in fiscal 1996. As a percent of sales, selling, general and administrative expenses were 26% for the first three months of fiscal 1997 compared to 29% for the same period in fiscal 1996. The dollar increase was required to support the increase in operations and was due mainly to higher payroll and related costs, as well as higher advertising, sales commission and bonus expenses. Interest - -------- Interest increased to $567,000 in the first three months of fiscal 1997 from $523,000 in the first three months of fiscal 1996. Liquidity and Capital Resources - ------------------------------- During the three months ended December 31, 1996, the Company financed its operations primarily from internally generated cash flow. Working capital was $8,130,000 at December 31, 1996 compared to $7,953,000 at September 30, 1996. During the first three months of fiscal 1997, the Company generated cash from operating activities of $905,000. The major contributor to cash from operating activities was earnings before depreciation and amortization of $1,170,000. Operating cash flow was somewhat lower for the first three months of fiscal 1997 compared to the same period last year, due to increased working capital requirements to support the increase in business activity. The Company primarily applied cash from operating activities of $905,000, augmented by additional borrowings from the Company's bank line of $152,000, to finance the acquisition of capital equipment. The major component of the asset additions were equipment for the Company's Equipment rental operations of approximately $903,000. During the next twelve months, the Company expects to purchase new capital equipment to allow its operations to be more efficient, support growth and to minimize the subrental of equipment necessary to meet customer orders. The Company expects to finance its capital acquisition program through a combination of cash generated from operations and additional borrowings under its bank line of credit. The Company believes it will have sufficient funds from operations and bank borrowings to meet its anticipated requirements for working capital during the next twelve months. PART II. OTHER INFORMATION Items 1 through 5 are not applicable. Item 6. Exhibits and Reports on Form 8-K (a) The following exhibits are filed herewith: 27 Financial Data Schedule (b) The Company did not file any reports on Form 8-K during the three months ended December 31, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report on Form 10-Q for the period ending December 31, 1996, to be signed on its behalf by the undersigned hereunto duly authorized. MATTHEWS STUDIO EQUIPMENT GROUP (Registrant) Date: February 10, 1997 By: /s/ Gary Borman --------------------------------------------- Gary Borman Corporate Controller EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10Q FOR PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS SEP-30-1997 OCT-01-1996 DEC-31-1996 293 0 5,486 545 5,364 12,391 38,848 17,880 35,060 4,261 0 0 0 5,584 3,862 35,060 3,554 9,322 2,332 5,730 0 0 567 619 248 371 0 0 0 371 0.04 0.04
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