-----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, V+WmJ6OrPR9CTqtNap/WqbDpGJQXFW3tjOjeaP+UTL4YNfmbhUCVyRbz7x/vkwNb 3JMQvSSimOh8xdvtq02iqA== 0001012410-99-000040.txt : 19991018 0001012410-99-000040.hdr.sgml : 19991018 ACCESSION NUMBER: 0001012410-99-000040 CONFORMED SUBMISSION TYPE: 6-K CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19991004 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MFC BANCORP LTD CENTRAL INDEX KEY: 0000016859 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 131818111 STATE OF INCORPORATION: A1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: SEC FILE NUMBER: 001-04192 FILM NUMBER: 00000000 BUSINESS ADDRESS: STREET 1: 6 RUE CHARLES BONNET STREET 2: GENEVA SWITZERLAND CITY: 1206 BUSINESS PHONE: 41228182999 MAIL ADDRESS: STREET 1: 6 RUE CHARLES BONNET STREET 2: GENEVA CITY: SWITZERLAND 1206 FORMER COMPANY: FORMER CONFORMED NAME: ARBATAX INTERNATIONAL INC DATE OF NAME CHANGE: 19960603 FORMER COMPANY: FORMER CONFORMED NAME: NALCAP HOLDINGS INC DATE OF NAME CHANGE: 19950725 6-K 1 1998 THIRD QUARTER REPORT TO SHAREHOLDERS 1 ============================================================================== U.S. SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the Month of November 1998 MFC BANCORP LTD. (Exact Name of Registrant as specified in its charter) 6 Rue Charles-Bonnet, 1206 Geneva, Switzerland (41 22) 818 2999 (Address and telephone number of Registrant's executive office) (Indicate by check mark whether the Registrant files or will file annual reports under cover of Form 20-F or Form 40-F). [ X ] Form 20-F [ ] Form 40-F (Indicate by check mark whether the Registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934). Yes No X --------- --------- (If "Yes" is marked, indicate below the file number assigned to the Registrant in connection with Rule 12g3-2(b): 82- ). --------------- ============================================================================== 2 MFC BANCORP LTD. 1998 THIRD QUARTER REPORT TO SHAREHOLDERS SEPTEMBER 30, 1998 FORWARD-LOOKING STATEMENTS Statements in this report, to the extent that they are not based on historical events, constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements appear in a number of different places in this report and include statements regarding the intent, belief or current expectations of MFC Bancorp Ltd., and its directors and officers, primarily with respect to the future market size and future operating performance of MFC Bancorp Ltd. and its subsidiaries. Forward-looking statements include, without limitation, statements regarding the outlook for future operations, forecasts of future costs and expenditures, evaluation of market conditions, the outcome of legal proceedings, the adequacy of reserves, or other business plans. Investors are cautioned that any such forward-looking statements are not guarantees and may involve risks and uncertainties, and that actual results may differ from those in the forward-looking statements as a result of various factors such as general economic and business conditions, including changes in interest rates, prices and other economic conditions; actions by competitors; natural phenomena; actions by government authorities, including changes in government regulation; uncertainties associated with legal proceedings; technological development; future decisions by management in response to changing conditions; the ability to execute prospective business plans; and misjudgments in the course of preparing forward-looking statements. 3 MFC BANCORP LTD. 1998 THIRD QUARTER REPORT President's Letter to Shareholders: We are pleased to enclose the Company's third quarter results for 1998. Revenues and earnings remained strong in the third quarter of 1998. The following table is a summary of selected financial information concerning the Company for the periods indicated:
Nine Months Ended Nine Months Ended ---------------------- ---------------------- September 30, September 30, ---------------------- ---------------------- 1998 1997 1998 1997 ---------- ---------- ---------- ---------- (U.S. Dollars in (Canadian Dollars in thousands except per thousands except per share amounts) share amounts) Information Only Revenue $ 54,733 $ 44,100 $ 80,125 $ 60,704 Net income 12,880 9,658 18,858 13,295 Net income per share: Basic 1.05 0.80 1.54 1.10 Fully diluted 0.95 0.74 1.39 1.02 September 30, December 31, September 30, December 31, 1998 1997 1998 1997 ------------- ------------ ------------- ------------ (U.S. Dollars in (Canadian Dollars in thousands except per thousands except per share amounts) share amounts) Information Only Cash and cash equivalents $ 42,514 $ 29,544 $ 64,872 $ 42,222 Securities 48,162 52,863 73,491 75,546 Total assets 174,703 158,765 266,580 226,890 Accrued losses, claims and settlement expenses 2,991 5,874 4,564 8,395 Debt 26,372 29,110 40,241 41,602 Shareholders' equity 92,952 84,078 141,837 120,156 Net book value per share 7.71 6.82 11.77 9.75 - --------------- Notes: A key strategic proprietary investment is the Company's royalty interest, consisting of an indirect interest in an iron ore mine located in Newfoundland, Canada. The Company's mineral royalty interest is stated on the Company's balance sheet at its historical cost of $1.7 million. The value of the interest was appraised by an independent valuator in October 1998 at an average of $30.0 million on a pre-tax basis using an 11% rate of return and a market comparison model. The difference between the historical cost and the appraisal value of the royalty interest is equal to approximately $2.35 per share.
The Company is in the financial services business specializing in private and investment banking internationally. The Company's banking business is conducted by its wholly-owned subsidiary, MFC Merchant Bank S.A. (the "Bank"), a licensed full-service Swiss bank acquired in early February 1997. In the third quarter of 1997, the Company acquired Bank Rinderknecht AG 2 4 ("BRA"), which was active in private banking and securities trading for Swiss and foreign customers since 1870. Following the acquisition, the Company merged BRA with the Bank. Private banking focuses on asset management and servicing the Bank's worldwide base of clients, including corporations, small to mid-sized institutions and high net-worth individuals. Investment banking services include providing finance and advisory services to clients with respect to corporate finance transactions and underwriting issuances of securities. The Company's personalized approach to client development for both its private and investment banking activities has continued to increase its client base. The Company will continue to focus on providing its clients with creative solutions through both its existing operations and strategic acquisitions and alliances. The Bank requires substantially less regulatory capital than traditional North American banks as the majority of its customer deposits are placed in the European fiduciary market. Such placements are off-balance sheet items which allow the Bank to generate fee income without tying up significant amounts of its capital. On the other hand, the traditional method of placing deposits, whereby income is generated on the spread between deposits and return on investments, requires significant amounts of capital, which will hinder growth. The Bank does not engage in commercial or real estate lending. The Company also conducts proprietary investing/merchant banking activities, which consist of the Company using its own resources and expertise to invest for its own account. These activities concentrate on the identification and acquisition of control of undervalued assets and the development and realization of the full potential thereof. The Company invests globally with the objective of maximizing total return measured through both long-term appreciation and recognized gains. The Company has established a solid foundation for its financial services business and looks forward to continued growth in the last quarter of 1998. Respectfully submitted, M.J. Smith November 1998 President 3 5 MFC BANCORP LTD. CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (Unaudited) 4 6 MFC BANCORP LTD. CONSOLIDATED BALANCE SHEETS As at September 30, 1998 and 1997 (Unaudited) (dollars in thousands)
1998 1998 1997 ---------------- ---------- ---------- (U.S. Dollars) (Canadian Dollars) Information Only ASSETS Cash and cash equivalents $ 42,514 $ 64,872 $ 94,700 Securities 48,162 73,491 86,706 Loans 24,793 37,832 25,483 Receivables 33,063 50,451 26,462 Property held for sale 4,097 6,251 8,097 Notes receivable 4,744 7,239 8,621 Excess cost of net assets acquired 12,281 18,740 18,136 Premises and equipment 1,918 2,926 3,641 Prepaid and other 3,131 4,778 3,639 ---------- ---------- ---------- $ 174,703 $ 266,580 $ 275,485 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $ 18,478 $ 28,196 $ 79,869 Accounts payable and accrued expenses 32,287 49,265 32,917 Debt 26,372 40,241 44,832 Accrued losses, claims and settlement expenses 2,991 4,564 7,473 ---------- ---------- ---------- 80,128 122,266 165,091 Minority interest 1,623 2,477 2,465 Shareholders' equity Common shares 43,034 65,666 70,265 Cumulative translation adjustment 6,114 9,331 (365) Retained earnings 43,804 66,840 38,029 ---------- ---------- ---------- 92,952 141,837 107,929 ---------- ---------- ---------- $ 174,703 $ 266,580 $ 275,485 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 5 7 MFC BANCORP LTD. CONSOLIDATED STATEMENTS OF OPERATIONS For the Nine Months Ended September 30, 1998 and 1997 (Unaudited) (dollars in thousands except per share amounts)
1998 1998 1997 ---------------- ---------- ---------- (U.S. Dollars) (Canadian Dollars) Information Only Revenues Banking and financial services $ 24,131 $ 35,326 $ 18,534 Investments 29,585 43,310 40,802 Other 1,017 1,489 1,368 ---------- ---------- ---------- 54,733 80,125 60,704 Expenses Investments 28,032 41,036 31,650 General and administrative 11,432 16,735 12,252 Interest 2,427 3,553 3,593 ---------- ---------- ---------- 41,891 61,324 47,495 ---------- ---------- ---------- Income before income taxes 12,842 18,801 13,209 Provision for income taxes (176) (257) (170) ---------- ---------- ---------- 12,666 18,544 13,039 Minority interest 214 314 256 ---------- ---------- ---------- Net income $ 12,880 $ 18,858 $ 13,295 ========== ========== ========== Earnings per share: Basic $ 1.05 $ 1.54 $ 1.10 ========== ========== ========== Fully diluted $ 0.95 $ 1.39 $ 1.02 ========== ========== ========== Weighted average number of shares outstanding (in thousands) 14,835 14,835 13,600 ========== ========== ========== Dividends paid on: Common shares $ 257 $ 369 $ 104 ========== ========== ========== Preferred shares $ - $ - $ 396 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 6 8 MFC BANCORP LTD. CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended September 30, 1998 and 1997 (Unaudited) (dollars in thousands except per share amounts)
1998 1998 1997 ---------------- ---------- ---------- (U.S. Dollars) (Canadian Dollars) Information Only Revenues Banking and financial services $ 4,711 $ 7,391 $ 10,301 Investments 12,408 18,602 15,670 Other 146 237 284 ---------- ---------- ---------- 17,265 26,230 26,255 Expenses Investments 9,963 15,044 13,353 General and administrative 3,216 4,916 4,480 Interest expense 846 1,279 1,418 ---------- ---------- ---------- 14,025 21,239 19,251 ---------- ---------- ---------- Income before income taxes 3,240 4,991 7,004 Provision for income taxes (8) (15) (161) ---------- ---------- ---------- 3,232 4,976 6,843 Minority interest 44 70 166 ---------- ---------- ---------- Net income $ 3,276 $ 5,046 $ 7,009 ========== ========== ========== Earnings per share: Basic $ 0.28 $ 0.42 $ 0.57 ========== ========== ========== Fully diluted $ 0.26 $ 0.39 $ 0.52 ========== ========== ========== Weighted average number of shares outstanding (in thousands) 14,617 14,617 13,938 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. 7 9 MFC BANCORP LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1998 and 1997 (Unaudited) (dollars in thousands)
Canadian Dollars ---------------------------- 1998 1997 ------------ ------------ Inflow (outflow) of cash and cash equivalents related to the following activities: Operating Net income $ 18,858 $ 13,295 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Items not affecting cash Depreciation and amortization 1,397 1,184 Gain on investments (847) (1,878) Gain on debt securities (7,660) (2,715) Minority interest (314) (256) Other (836) (3,951) ------------ ------------ 10,598 5,679 Changes in current assets and liabilities Investments 6,208 6,531 Receivables (27,789) (3,976) Properties held for sale 507 165 Accounts payable and accrued expenses 23,782 (1,641) Accrued losses, claims and settlement expenses (1,925) (3,711) Other 1,179 (1,231) ------------ ------------ 12,560 1,816 Financing Net (decrease) increase in deposits (6,539) 18,621 Loan repayments (3,719) (10,132) Borrowings 15,515 14,017 Issuance of shares, net of repurchase (4,703) 3,982 Dividends paid (369) (500) Other (40) - ------------ ------------ 145 25,988 Investing Net decrease in loans 5,585 7,696 Purchases of subsidiaries, net of cash acquired (760) 41,802 Other (224) (165) ------------ ------------ 4,601 49,333 Exchange rate effect on cash and cash equivalents 5,344 - ------------ ------------ Increase in cash and cash equivalents 22,650 77,137 Cash and cash equivalents: Beginning of period 42,222 17,563 ------------ ------------ End of period $ 64,872 $ 94,700 ============ ============
The accompanying notes are an integral part of these financial statements. 8 10 MFC BANCORP LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998 (Unaudited) NOTE 1. Basis of Presentation --------------------- The consolidated financial statements contained herein include the accounts of MFC Bancorp Ltd. and its subsidiaries (the "Company"). The interim period consolidated financial statements have been prepared by the Company in accordance with Canadian generally accepted accounting principles. All financial summaries included are presented on a comparative and consistent basis showing the figures for the corresponding period in the preceding year. The preparation of financial data is based on accounting principles and practices consistent with those used in the preparation of annual financial statements. Certain information and footnote disclosure normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These interim period statements should be read together with the audited consolidated financial statements and the accompanying notes included in the Company's latest annual report on Form 20-F. In the opinion of the Company, its unaudited interim consolidated financial statements contain all adjustments necessary in order to present a fair statement of the results of the interim periods presented. Certain reclassifications have been made to the prior period financial statements to conform with the current period presentation. NOTE 2. Nature of Business ------------------ The Company is in the financial services business and its principal activities focus on private and investment banking. NOTE 3. Earnings Per Share ------------------ Basic earnings per share are computed on the weighted average number of shares outstanding during the period. For the calculation of fully diluted earnings per share, under Canadian generally accepted accounting principles, options are deemed to be exercised at the date of grant and convertible securities are deemed to be converted at the date of issuance. Under U.S. generally accepted accounting principles, options affect diluted earnings per share when "in-the-money". 9 11 NOTE 4. Reporting Currency ------------------ The Company reports its results in Canadian dollars. Certain amounts herein have also been reported in U.S. dollars for reference purposes. Amounts reported in U.S. dollars have been translated from Canadian dollars at a rate of U.S.$1.00 = Canadian $1.5259 for period end purposes and U.S.$1.00 = Canadian $1.4639 for the nine months ended September 30, 1998. 10 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the results of operations and the financial condition of the Company for the three and nine months ended September 30, 1998, respectively, should be read in conjunction with the consolidated financial statements and related notes included elsewhere herein. In this document, unless the context otherwise requires, the "Company" refers to MFC Bancorp Ltd. and its subsidiaries and all references to monetary amounts are in Canadian dollars unless otherwise indicated. Selected financial information has also been provided in U.S. dollars for information purposes. RESULTS OF OPERATIONS - Nine Months Ended September 30, 1998 ------------------------------------ The Company operates in the financial services business, specializing in private and investment banking internationally. It also engages in proprietary investing/merchant banking activities for its own account. The Company conducts its banking activities through its wholly-owned subsidiary, MFC Merchant Bank S.A. (the "Bank"), which was acquired in February 1997. The Company further expanded its operations by acquiring the MFC Securities group of companies ("MFC Securities") and Bank Rinderknecht AG ("BRA") in the second and third quarters of 1997, respectively. Revenues in the nine months ended September 30, 1998 increased by approximately 32.0% to $80.1 million from $60.7 million in the comparative period of 1997. The increase is primarily attributable to an increase in revenues from banking and financial services to $35.3 million in the current period from $18.5 million in the comparative period of 1997. In the first nine months of 1998, revenues from sales of investment securities increased to $43.3 million from $40.8 million in the same period of 1997. Costs and expenses increased to $61.3 million in the nine months ended September 30, 1998 from $47.5 million in the comparative period of 1997, primarily as a result of an increase in costs and expenses from sales of investment securities. General and administrative expenses increased to $16.7 million in the nine months ended September 30, 1998 from $12.3 million in the same period of 1997, primarily due to the acquisition of the Bank, MFC Securities and BRA. Interest expense was $3.6 million during the first nine months of 1998 and 1997, respectively. Net income in the nine months ended September 30, 1998 was $18.9 million or $1.54 per share on a basic basis ($1.39 per share on a fully diluted basis), compared to $13.3 million or $1.10 per share on a basic basis ($1.02 per share on a fully diluted basis) in the same period of 1997. Increased revenues from banking and financial services contributed to improved earnings in the nine months ended September 30, 1998, which were partially offset by increased costs and expenses related to investment securities and higher general and administrative expenses. 11 13 RESULTS OF OPERATIONS - Three Months Ended September 30, 1998 ------------------------------------- Revenues in the third quarter of 1998 were $26.2 million, compared to $26.3 million in the comparative quarter of 1997. In the three months ended September 30, 1998, revenues from banking and financial services decreased to $7.4 million from $10.3 million in the comparative period of 1997, primarily as a result of weaker capital markets. In the current quarter of 1998, revenues from sales of investment securities increased to $18.6 million from $15.7 million in the comparative period of 1997. Costs and expenses increased to $21.2 million in the three months ended September 30, 1998 from $19.3 million in the three months ended September 30, 1997, primarily as a result of an increase in costs and expenses from sales of investment securities. During the current period, costs and expenses related to sales of investment securities increased to $15.0 million from $13.4 million in the comparative period of 1997. General and administrative expenses increased to $4.9 million in the current period of 1998 from $4.5 million in the same period of 1997, primarily due to an expansion of activities at the Bank. Interest expense was $1.3 million during the three months ended September 30, 1998, compared to $1.4 million in the three months ended September 30, 1997. Net income in the quarter ended September 30, 1998 was $5.0 million or $0.42 per share on a basic basis ($0.39 per share on a fully diluted basis), compared to $7.0 million or $0.57 per share on a basic basis ($0.52 per share on a fully diluted basis) in the same period of 1997. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1998, the Company's cash and cash equivalents were $64.9 million, compared to $94.7 million at September 30, 1997. At September 30, 1998, the Company had securities of $73.5 million, compared to $86.7 million at September 30, 1997. Operating Activities - -------------------- Operating activities provided cash of $12.6 million in the nine months ended September 30, 1998, compared to $1.8 million for the same period in 1997. The Company's purchase of debt securities resulted in a gain of $7.7 million in the nine months ended September 30, 1998. A decrease in investments provided cash of $6.2 million in the nine months ended September 30, 1998, compared to $6.5 million in the nine months ended September 30, 1997. An increase in receivables related to trading activities used cash of $27.8 million in the current period of 1998, compared to $4.0 million in the same period of 1997. An increase in accounts payable and accrued expenses primarily related to trading activities provided cash of $23.8 million in the current period of 1998, compared to a decrease in same using cash of $1.6 million in the same period of 1997. The Company expects to generate sufficient cash flow from operations to meet its working capital requirements. 12 14 Financing Activities - -------------------- Financing activities provided cash of $0.1 million in the nine months ended September 30, 1998, compared to $26.0 million in the same period in 1997. A net decrease in deposits used cash of $6.5 million during the current period of 1998, compared to an increase in deposits providing cash of $18.6 million in the comparative period of 1997. A net increase in borrowings provided cash of $11.8 million in the nine months ended September 30, 1998, compared to $3.9 million in the comparative period of 1997. Net repurchases of the Company's shares used cash of $4.7 million in the nine months ended September 30, 1998, compared to an issuance of shares providing cash of $4.0 million in the comparative period of 1997. During the nine months ended September 30, 1998, the Company used $0.4 million to pay cash dividends to common shareholders. Investing Activities - -------------------- Investing activities provided cash of $4.6 million in the nine months ended September 30, 1998, primarily as a result of payments received on the Company's outstanding loans. Payments made with respect to the acquisition of MFC Securities and the Bank in 1997 used cash of $0.8 million in the current period of 1998. In the comparative period of 1997, the net purchase of subsidiaries provided cash of $41.8 million. The Company anticipates that there will be further purchases of businesses or commitments to projects during the fourth quarter of 1998. To achieve its long-term goals of expanding its asset-base and earnings both with respect to client services and proprietary investments, the Company may require substantial capital resources. The necessary resources will be generated from cash flow from operations, cash on hand, borrowing against its assets and/or the sale of assets. 13 15 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. Registrant MFC BANCORP LTD. ------------------------------ By /s/ Michael J. Smith ------------------------------ MICHAEL J. SMITH, PRESIDENT Date November 27, 1998 ------------------------------ -----END PRIVACY-ENHANCED MESSAGE-----