-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, dlXUGWV9N5dibZ/sK7OMSh6vf3VCg5vWpIRGCi/IQNNgqd3MNK/YDUK7z4ybhOl0 7zHDmjuEPNcDnSHNSLE8ng== 0000950152-95-000400.txt : 19950616 0000950152-95-000400.hdr.sgml : 19950616 ACCESSION NUMBER: 0000950152-95-000400 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19950323 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPECIALTY CHEMICAL RESOURCES INC CENTRAL INDEX KEY: 0000703645 STANDARD INDUSTRIAL CLASSIFICATION: ADHESIVES & SEALANTS [2891] IRS NUMBER: 341366838 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11013 FILM NUMBER: 95522775 BUSINESS ADDRESS: STREET 1: 9100 VALLEY VIEW RD CITY: MACEDONIA STATE: OH ZIP: 44056 BUSINESS PHONE: 2164681380 MAIL ADDRESS: STREET 1: 9100 VALLEY VIEW ROAD CITY: MACEDONIA STATE: OH ZIP: 44056 FORMER COMPANY: FORMER CONFORMED NAME: MOMENTUM INC DATE OF NAME CHANGE: 19920105 FORMER COMPANY: FORMER CONFORMED NAME: ELECTRONIC THEATRE RESTAURANTS CORP DATE OF NAME CHANGE: 19870120 10-Q/A 1 SPECIALTY CHEMICAL 10-Q/A 1 - ------------------------------------------------------------------------- - ------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q/A QUARTERLY REPORT Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarter ended September 30, 1994 Commission file number 1-11013 SPECIALTY CHEMICAL RESOURCES, INC. ---------------------------------------------------- Exact name of registrant as specified in its charter Delaware 34-1366838 ---------------------- ------------------------ State of incorporation I.R.S. Employer I.D. No. 9100 Valley View Road; Macedonia, Ohio 44056 --------------------------------------------- Address of principal executive offices and zip code (216) 468-1380 --------------------------------------------------- Registrant's telephone number, including area code Indicate by a 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 twelve (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 ninety (90) days. Yes__X__ No_____. The number of outstanding shares of the registrant's common stock as of October 25, 1994 was 3,932,777. The registrant has no other class of stock outstanding. _________________________________________________________________________ ______________________________Page 1 of 14_______________________________ 2 Specialty Chemical Resources, Inc. Form 10-Q/A For the quarter ended September 30, 1994 Index Part I Financial Information Page Item 1. Financial Statements..........................................3 Condensed Balance Sheets......................................3 Condensed Statements of Operations, 3 Months..................5 Condensed Statements of Operations, 9 Months..................6 Condensed Statements of Cash Flows, 3 Months..................7 Condensed Statements of Cash Flows, 9 Months..................8 Notes to Financial Statements.................................9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................10 Part II Other Information Item 1. Legal Proceedings............................................13 Item 6. Exhibits & Reports on Form 8-K...............................13 2 of 14 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Specialty Chemical Resources, Inc. Condensed Balance Sheets
September 30, 1994 December 31, 1993 (Unaudited) (Audited) ------------- ----------------- Current assets Cash and cash equivalents $ 18,324 $ 32,691 Accounts Receivables 6,401,224 6,824,594 Receivables - Other (Note C) -0- 4,308,481 Inventories (Note B) 7,254,311 6,342,379 Prepaid expenses 366,654 165,731 Refundable Income Taxes -0- 853,783 ------------ ------------ Total current assets 14,040,513 18,527,659 Property, plant and equipment At cost 10,411,060 10,187,905 Less accumulated depreciation and amortization (2,544,627) (1,956,503) ------------ ------------ 7,866,433 8,231,402 Other assets Goodwill 21,124,496 21,586,547 Other 1,404,245 1,568,208 ------------ ------------- 22,528,741 23,154,755 ------------ ------------- Total assets $ 44,435,687 $ 49,913,816 ============ ============ See accompanying Notes to Financial Statements.
3 of 14 4 Specialty Chemical Resources, Inc. Condensed Balance Sheets (continued)
September 30, 1994 December 31, 1993 (Unaudited) (Audited) ---------------- ----------------- Current liabilities Capital lease obligations $ 2,800 $ -0- Accounts payable 5,018,261 6,660,088 Deferred Income Taxes 337,261 326,345 Accrued expenses 998,315 487,436 Accrued other, including acquisition costs 137,845 171,160 ----------- ----------- Total current liabilities 6,494,482 7,645,029 Long-term obligations less current maturities 4,800,000 9,948,000 Capital lease obligations 10,171 -0- Deferred Income Taxes 1,690,111 2,507,018 ---------- ---------- Total non-current liabilities 6,500,282 12,455,018 Stockholders' equity Preferred stock - $.01 par value; authorized 2,000,000 shares Common Stock - $.10 par value; authorized 13,000,000 shares; issued and outstanding 3,932,777 and 3,932,780 393,279 393,279 Additional paid in capital 41,878,573 41,878,573 Accumulated deficit (10,830,929) (12,458,083) ----------- ----------- 31,440,923 29,813,769 ----------- ----------- $44,435,687 $49,913,816 =========== =========== See accompanying Notes to Financial Statements.
4 of 14 5 Specialty Chemical Resources, Inc. Condensed Statements of Operations (Unaudited) For the 3 month periods ended:
September 30, 1994 September 30, 1993 ------------------ ------------------ Net Sales $11,942,573 $12,821,542 Cost of Goods Sold 9,966,231 9,961,541 ----------- ----------- Gross profit 1,976,342 2,860,001 Selling, general and administrative expenses 1,698,557 1,602,314 Amortization of intangibles 218,448 215,769 ----------- ----------- Operating profit (loss) 59,337 1,041,918 Other (income) expense Interest expense 134,648 141,682 Other (15,084) ( 7,850) ----------- ----------- 119,564 133,832 ----------- ----------- Earnings (loss) before income taxes and extraordinary items ( 60,227) 908,086 Income taxes (benefit) (211,000) 329,200 ----------- ----------- Net Earnings (loss) before extra- ordinary items 150,773 578,886 Extraordinary gain (loss) (831,000) - ----------- ----------- Net earnings (loss) $ (680,227) $ 578,886 ----------- ----------- Earnings (loss) per common share: Earnings (loss) before extra- ordinary item $ .04 $ .15 Extraordinary item $ (.21) $ .00 ---------- ----------- Net Earnings $ (.17) $ .15 ========== =========== Weighted average shares outstanding 3,932,777 3,948,377 See accompanying Notes to Financial Statements.
5 of 14 6 Specialty Chemical Resources, Inc. Condensed Statements of Operations (Unaudited) For the 9 month periods ended:
September 30, 1994 September 30, 1993 ------------------ ------------------ Net Sales $32,437,452 $34,223,709 Cost of Goods Sold 27,147,678 26,723,960 ----------- ----------- Gross profit 5,289,774 7,499,749 Selling, general and administrative expenses 5,007,951 4,684,052 Amortization of intangibles 655,344 647,306 ----------- ----------- Operating profit (loss) (373,521) 2,168,391 Other (income) expense Interest expense 455,295 364,564 Other (18,173) (28,217) ----------- ----------- 437,122 336,347 ----------- ----------- Earnings (loss) before income taxes and extraordinary items (810,643) 1,832,044 Income taxes (benefit) (274,000) 669,000 ----------- ----------- Net earnings (loss) before extra- ordinary items (536,643) 1,163,044 Extraordinary gain (net of income taxes) (Note C) 2,163,797 -0- ----------- ----------- Net earnings $ 1,627,154 $ 1,163,044 =========== =========== Earnings (loss) per common share: Earnings (loss) before extra- ordinary item $ (.14) $ .29 Extraordinary item $ .55 $ -0- ---------- ---------- Net earnings $ .41 $ .29 ========== ========== Weighted average shares outstanding 3,932,777 3,945,423 See accompanying Notes to Financial Statements.
6 of 14 7 Specialty Chemical Resources, Inc. Condensed Statements of Cash Flows (Unaudited) For the 3 month periods ended:
September 30, 1994 September 30, 1993 ------------------ ------------------ Net cash provided (used) by operating activities $ (399,461) $ (488,037) Cash flows from investing activities: Expenditures for property, plant and equipment - net (259,278) 37 ----------- ---------- Net cash provided (used) by investing activities (259,278) 37 Cash flows from financing activities: Increase (decrease) in capital lease obligations 10,171 - Payments on revolver (1,870,000) (4,760,000) Proceeds on revolver 2,514,000 5,248,000 ----------- ----------- Net cash provided (used) by financing activities 654,171 488,000 ----------- ----------- Net increase (decrease) in cash and cash equivalents ( 4,568) - Cash and cash equivalents at beginning of period 22,892 980 ----------- ----------- Cash and cash equivalents at end of period $ 18,324 $ 980 =========== =========== See accompanying Notes to Financial Statements.
7 of 14 8 Specialty Chemical Resources, Inc. Condensed Statements of Cash Flows (Unaudited) For the 9 month periods ended:
September 30, 1994 September 30, 1993 ------------------ ------------------ Net cash provided (used) by operating activities $ 5,477,895 $(4,390,722) Cash flows from investing activities: Expenditures for property, plant and equipment - net (354,433) ( 74,739) ----------- ---------- Net cash provided (used) by investing activities (354,433) ( 74,739) Cash flows from financing activities: Payments on revolver (15,165,000) (11,809,330) Increase (decrease) in capital lease obligations 10,171 - Proceeds on revolver 10,017,000 16,197,000 ----------- ----------- Net cash provided (used) by financing activities (5,137,829) 4,387,670 ----------- ----------- Net increase (decrease) in cash and cash equivalents (14,367) (77,791) Cash and cash equivalents at beginning of period 32,691 78,771 ----------- ----------- Cash and cash equivalents at end of period $ 18,324 $ 980 =========== =========== See accompanying Notes to Financial Statements.
8 of 14 9 Specialty Chemical Resources, Inc. Notes to Financial Statements Note A - Summary of Significant Accounting Policies The accompanying audited and unaudited financial statements have been prepared in conformity with generally accepted accounting principles and all adjustments are of a normal recurring nature and are, in the opinion of management, necessary to present fairly the financial position of Specialty Chemical Resources, Inc. (The Company) at December 31, 1993 and September 30, 1994 and the results of operations and cash flows for the interim periods ended September 30, 1994. Company inadvertently used a 10 year life for depreciation in machinery and equipment placed into service this year (assets replaced due to December, 1992 Macedonia plant fire). The Company has determined the useful life on this machinery and equipment to be 16 years. For the nine-months ended September 30, 1994, the impact (related to the change in depreciation) to earnings before taxes and extraordinary items was $164,042 and for the quarter $55,397. The effective tax rate for the nine-months ended September 30, 1994 was revised to 33.8% upon electing gain recognition on the replacement of the fire damaged assets with the filing of the tax return in the third quarter. The tax affect based on this revised rate for the nine-months ended September 30, 1994 and the quarter was a benefit of $211,000. The extraordinary gain booked in the second quarter had a tax impact of $831,000 of tax, which arose on the replacement of the fire damaged assets with the filing of the tax return. Any other significant accounting policies employed in the preparation of the financial statements are included in the Company's most recent Form 10-K. Note B - Inventories Inventories are stated at the lower of cost or market determined by the last-in, first-out (LIFO) method for raw materials and the first-in, first-out (FIFO) method for finished goods. The Company's inventories consisted of the following at:
September 30, December 31, 1994 1993 ------------ ----------- Raw materials $4,490,782 $4,181,837 Finished goods 3,337,302 2,734,315 ---------- ---------- Total FIFO cost 7,828,084 6,916,152 Less: Excess of FIFO cost over LIFO 573,773 573,773 ---------- ---------- Total LIFO cost $7,254,311 $6,342,379 ---------- ----------
9 of 14 10 Note C - Receivables - Other and Extraordinary Item During the nine-month period ended September 30, 1994, the Company received a total of $8,396,814 from its insurance carrier. The final payment, received June 24, 1994, in the amount of $6,588,333 represents final settlement on all claims for the December, 1992 fire. The repayment of these monies was first used to reduce "Receivables - Other" with the remainder resulting in an extraordinary gain of $2,163,797 (net of taxes). Note E - Legal Proceedings There have been no material changes in the status of legal proceedings pending against the Company other than that which was reported on the Company's most recent Form 10-K. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations In December, 1992, the company experienced a non-chemical fire at its Macedonia, Ohio facility. The fire adversely effected production capabilities at this facility, which adverse effect continued through 1993. The following table sets forth, for the periods indicated, the percentage relationship to net sales of certain items included in the Company's Statement of Operations.
Nine Months Ended Three Months Ended September 30, September 30, ----------------- ----------------- 1994 1993 1994 1993 ---- ---- ---- ---- Net sales......................................... 100.0% 100.0% 100.0% 100.0% Cost of goods sold................................ 83.7% 78.1% 83.5% 77.7% ------ ------ ------ ------ Gross profit.................................... 16.3% 21.9% 16.5% 22.3% Selling, general and administrative expenses...... 15.4% 13.7% 14.2% 12.5% Operating profit.(loss)......................... (1.2%) 6.3% .5% 8.1% Interest expense.................................. 1.4% 1.1% 1.1% 1.1%
Net sales of $32,437,452 for the nine-month period ended September 30, 1994, were $1,786,257, or 5.2%, below the comparable period in the prior year. This decrease was a result of reduced demand for automotive and industrial maintenance products. For the third quarter ended September 30, 1994, net sales of $11,942,573 were $878,969, or 6.9%, below the comparable period, in the 10 of 14 11 prior year. This decrease was mainly attributable to the same factors discussed above with respect to the nine-month period ended September 30, 1994. Cost of goods sold for the nine-month period ended September 30, 1994, increased by $423,718 as compared to the same period in the prior year. This increase was due principally to increased charges for utilities and increased repair/maintenance expense. Cost of goods sold increased as a percentage of net sales from 78.1% to 83.7% for the nine-month periods ended September 30, 1993 and 1994, respectively. The increase in percent of sales was due to reduced sales during the 1994 period. Cost of goods sold increased by $4,690 for the three-months ended September 30, 1994. Cost of goods sold increased as a percentage of net sales from 77.7% to 83.5% for the three-months ended September 30, 1994 as compared to the same period in the prior year. The increase was due primarily to reduce sales during the 1994 period. Selling, general and administrative expenses were $5,007,951 for the nine-month period September 30, 1994, or 15.4% of net sales. Selling, general and administrative expenses were $4,684,052 or 13.7% of net sales for the same period in 1993. The increase of $323,899 was due principally to an increase in commission expense incurred from the sales of branded products and increased freight charges. The increase in percent of sales was due primarily to reduced sales during the 1994 period. Selling, general, and administrative expenses were $1,698,557 for the quarter end September 30, 1994, or 14.2% of net sales. Selling, general, and administrative expenses were $1,602,314, or 12.5% of net sales for the same period in 1993. The increase $96,243 was due principally to an increase in commission expense incurred from the sales of branded products. The increase in percent of sales was due to reduced sales during the 1994 period. Interest expense for the nine-months ended September 30, 1994, was 1.4% of net sales versus 1.1% for the comparable period in the prior year. Interest expense was $455,295 for the nine-months ended September 30, 1994, an increase of $90,731 from the nine-months ended September 30, 1993. This increase was due to increased borrowing as well as higher interest rates. See "Liquidity and Capital Resources". Interest expense for the quarters ended, September 30, 1994, was 1.1% of net sales the same as 1.1% for the comparable period in the prior year. Interest expense was $134,648 for the quarter ended September 30, 1994, a decrease of $7,034 from the quarter ended September 30, 1993. See "Liquidity and Capital Resources". The Company recorded net earnings for the nine-months ended September 30, 1994, of $1,627,154, or $.41 per share on weighted average shares 11 of 14 12 outstanding of 3,932,777. This compared to a net earnings of $1,163,044, or $.29 per share on weighted average shares outstanding of 3,945,423 for the same period in the prior year. The earnings for the nine-month period ended September 30, 1994 were the result of an extraordinary gain of $2,163,797 (net of taxes), or $.55 per share on weighted average shares outstanding of 3,932,777. The extraordinary gain resulted from the insurance settlement on the property and business interruption costs related to the December, 1992 fire at the Macedonia, Ohio plant. Had the Company not recognized the extraordinary gain, a net loss would have been reported of $536,643, or $.14 per share on 3,932,777 weighted average shares outstanding. For the quarter ended September 30, 1994, the Company lost $.17 per share on weighted average shares outstanding of 3,932,777 as compared to earning $.15 per share on weighted average shares outstanding of 3,948,777 for the same period in the prior year. The earnings for the quarter ended September 30, 1994, were effected by an $831,000 tax adjustment or $.21 per share on the extraordinary gain realized in the second quarter. The tax adjustment arose upon electing gain recognition on the replacement of the fire damaged assets with the filing of the tax return in the third quarter. Had the Company not recognized the extraordinary loss, a net gain would have been reported of $150,773, or $.04 per share on 3,932,777 weighted average shares outstanding. Liquidity and Capital Resources As of September 30, 1994, the Company's ratio of current assets to current liabilities was 2.39 to 1 and the quick ratio (cash, cash equivalents, and accounts receivable, divided by current liabilities) was 1.13 to 1. During the nine-months ended September 30, 1994, the Company incurred $455,295 in interest expense and made interest payments totaling $368,657. Accrued interest at September 30, 1994 was $76,514. Substantially all of the Company's interest expense was related to the "Credit Agreement" discussed below. The Company, as borrower, is a party to a credit agreement (the "Credit Agreement") that provides for a $10,000,000 revolving line of credit at an interest rate equal to the prime rate or the London Inter-Bank Offered Rate (LIBOR), at the Company's election. The Credit Agreement, entered into on March 30, 1992 and expiring on May 31, 1995, is a facility that allows for borrowings based upon a formula comprised of inventory, accounts receivable and fixed assets, less environmental compliance reserve, if any. Under the terms of the Credit Agreement, the Company is required to comply with various covenants, the most restrictive of which relate to restrictions on distributions from the Company to its stockholders, maintenance of certain financial ratios and levels of tangible net worth and limits on capital expenditures. As of September 30, 1994, 12 of 14 13 approximately $5,380,000 was unused and available under the Credit Agreement. The Company spent $223,155 on capital improvements during the nine-month period ended September 30, 1994. The Company expects to spend approximately $500,000 on capital improvements during the current fiscal year. Such expenditures are expected to be funded from cash generated by operations and borrowings under the Credit Agreement. Part II - Other Information Item 1. Legal Proceedings There have been no material changes in the status of legal proceedings pending against the Company. Item 6. Exhibits and Reports on Form 8-K (a) No exhibits are included with this report. (b) The Company filed no reports on Form 8-K during the quarter ended September 30, 1994. 13 of 14 14 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. Specialty Chemical Resources, Inc. By: /s/ COREY ROTH March 22, 1995 ----------------------------------- Corey Roth Vice President, and Treasurer (Principal Financial Officer) 14 of 14 -----END PRIVACY-ENHANCED MESSAGE-----