-----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, P/Q6CQBg4n2YtYjFv4rJtMEfvYGQglac6F6AlSeirUeE5hWCZDE9LuPHtzwwYdbF XsthK8su02tVEJYUX9HR7w== 0000950129-96-002945.txt : 19961115 0000950129-96-002945.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950129-96-002945 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KRUG INTERNATIONAL CORP CENTRAL INDEX KEY: 0000096793 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 310621189 STATE OF INCORPORATION: OH FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02901 FILM NUMBER: 96662483 BUSINESS ADDRESS: STREET 1: 6 NORTH MAIN STREET SUITE 500 CITY: DAYTON STATE: OH ZIP: 45402 BUSINESS PHONE: 5132249066 MAIL ADDRESS: STREET 2: 6 NORTRH MAIN ST SUITE 500 CITY: DAYTON STATE: OH ZIP: 45402 FORMER COMPANY: FORMER CONFORMED NAME: TECHNOLOGY INC DATE OF NAME CHANGE: 19860803 FORMER COMPANY: FORMER CONFORMED NAME: COMANCO INDUSTRIES INC DATE OF NAME CHANGE: 19710719 10-Q 1 KRUG INTERNATIONAL CORP. - FORM 10-Q - 09/30/96 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 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 0-2901 KRUG INTERNATIONAL CORP. (Exact name of registrant as specified in its charter) Ohio 31-0621189 ------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1290 Hercules Drive Suite 120 Houston, Texas 77058 - ---------------------------------------------- ----- (Address of principal executive offices) (Zip Code) (281)212-1233 ------------- (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 filings requirements for the past 90 days. Yes X No ----- ----- The number of Common Shares, without par value. outstanding as of November 5, 1996 was 5,151,206. 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS KRUG INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands) September 30, March 31, 1996 1996 ------ ------ ASSETS ------ Current Assets: Cash $ 5,045 $ 439 Receivables 17,488 18,309 Inventories (Note C) 7,340 8,635 Prepaid expenses 959 627 ---------- -------- Total Current Assets 30,832 28,010 ---------- -------- Property, Plant and Equipment 16,272 15,701 Less accumulated depreciation 6,973 6,444 ---------- -------- 9,299 9,257 ---------- -------- Pension Asset 2,354 2,316 Deferred Tax Assets 1,995 2,508 Other Assets 371 280 ---------- -------- $ 44,851 $ 42,371 ========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Bank borrowings $ $ 31 Accounts payable 9,253 8,205 Accrued expenses 5,870 5,534 Income taxes 223 218 Net current liabilities of discontinued operations (Note E) 474 500 Current maturities of long-term debt 1,169 1,166 ---------- -------- Total Current Liabilities 16,989 15,654 ---------- -------- Long-Term Debt 11,620 11,982 Net Non-Current Liabilities of Discontinued Operations (Note E) 205 ---------- -------- Total Liabilities 28,609 27,841 ---------- -------- Shareholders' Equity: Common Shares, no par value: issued and outstanding, 5,151,206 at September 30, 1996 and 5,076,950 at March 31, 1996 2,576 2,538 Additional paid in capital 4,399 4,224 Retained earnings 9,003 7,870 Foreign currency translation adjustment 264 (102) ---------- -------- Total Shareholders' Equity 16,242 14,530 ---------- -------- Total Liabilities and Shareholders' Equity $ 44,851 $ 42,371 ========== ======== See notes to consolidated financial statements 3 KRUG INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except per share) THREE MONTHS ENDED September 30, ------------------------------ 1996 1995 ------------------------------ Revenues $ 26,669 $ 23,904 Costs and Expenses: Costs, including product development 23,250 20,790 Selling and administrative 2,298 2,192 Restructuring charge (Note B) 800 Interest expense 231 272 Other (income) expense (7) 4 ---------- ---------- 26,572 23,258 ---------- ---------- Earnings before Income Taxes 97 646 Income Taxes (Note D) 13 230 ---------- ---------- Net Earnings $ 84 $ 416 ========== ========== Net Earnings Per Share $ 0.02 $ 0.08 ========== ========== Average Common and Common Equivalent Shares Outstanding 5,210 5,051 ========== ========== See notes to consolidated financial statements 4 KRUG INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except per share) SIX MONTHS ENDED September 30, ------------------------------ 1996 1995 ------------------------------ Revenues $ 53,176 $ 48,929 Costs and Expenses: Costs, including product development 45,692 42,576 Selling and administrative 4,566 4,549 Restructuring charge (Note B) 800 Interest expense 521 569 Other (income) expense (71) (7) ---------- ---------- 51,508 47,687 ---------- ---------- Earnings before Income Taxes 1,668 1,242 Income Taxes (Note D) 535 437 ---------- ---------- Net Earnings $ 1,133 $ 805 ========== ========== Net Earnings Per Share $ 0.22 $ 0.16 ========== ========== Average Common and Common Equivalent Shares Outstanding 5,192 5,045 ========== ========== See notes to consolidated financial statements 5 KRUG INTERNATIONAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) increase (decrease) in cash
SIX MONTHS ENDED September 30, ------------------------------ 1996 1995 ------------------------------ Net Cash Provided by Operating Activities $ 5,246 $ 3,348 --------- --------- Cash Flows From Investing Activities: Expenditures for property, plant and equipment (249) (130) Proceeds from sale of assets 5 - --------- --------- Net Cash Used in Investing Activities (244) (130) --------- --------- Cash Flows From Financing Activities: Bank borrowings - net (31) (1,082) Payments on long-term debt (642) (495) Sale of Common Shares under Options 212 92 --------- --------- Net Cash Used in Financing Activities (461) (1,485) --------- --------- Effect of Exchange Rate Changes on Cash 65 (6) --------- --------- Net Increase in Cash 4,606 1,727 Cash at Beginning of Period 439 363 --------- --------- Cash at End of Period $ 5,045 $ 2,090 ========= ========= Cash Paid For: Income Taxes $ 0 $ 314 ========= ========= Interest $ 658 $ 586 ========= ========= Non-Cash Investing and Financing Activities- Capital leases $ 132 $ 197 ========= =========
See notes to consolidated financial statements 6 KRUG INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS QUARTER ENDED SEPTEMBER 30, 1996 (dollars in thousands) Note A -- Basis of Presentation The Condensed Consolidated Financial Statements for the three and six months ended September 30, 1996 are unaudited and have been prepared in accordance with Rule 10-01 of Regulation S-X of the Securities and Exchange Commission and, as such, do not include all information required by generally accepted accounting principles. They should be read in conjunction with the audited financial statements included in the Corporation's Annual Report on Form 10-K filed on July 1, 1996. In the opinion of management, the Condensed Consolidated Financial Statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for the periods indicated. Note B -- Restructuring Charge In July 1996, the Corporation announced that it would close its executive offices in Dayton, Ohio in September 1996 and consolidate its headquarters activities with its primary operations facility adjacent to the NASA Johnson Space Center in Houston, Texas. A restructuring charge of $800 was recognized during the quarter ended September 30, 1996 for this office consolidation. The charge consists primarily of costs related to severance for former employees and rent and other costs related to the vacated offices in Dayton, Ohio. The consolidation was completed October 1, 1996. Note C -- Inventories September 30, March 31, 1996 1996 ------------- --------- Finished goods $ 5,139 $ 6,352 Work-in-process 907 1,101 Raw materials and supplies 1,294 1,182 ------------- --------- $ 7,340 $ 8,635 ============= ========= Note D -- Income Taxes The provision (benefit) for income taxes is composed of the following: Three Months Ended September 30, 1996 1995 -------------------------------- --------- -------- Domestic $ (237) $ 119 Foreign 250 111 --------- -------- $ 13 $ 230 ========= ======== 7 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Note D -- Income Taxes (continued) Six Months Ended September 30, 1996 1995 ------------------------------ --------- --------- Domestic $ (172) $ 135 Foreign 707 302 --------- --------- $ 535 $ 437 ========= ========= Note E -- Discontinued Operations In prior years, the Corporation discontinued the operations and disposed of substantially all of the net assets of its Industrial Segment. Remaining obligations related to this Segment include a leased property in Knoxville, Tennessee, a leased property in Toronto, Canada, and product liability claims related to products sold prior to the disposal of the Industrial Segment. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following discussion contains certain forward-looking statements that are based upon assumptions believed by management to be relevant to an understanding of the Corporation's business, including anticipated levels of U.S. government defense and aerospace spending, timing, volume and pricing of customers orders and industry-specific economic outlooks. Forward-looking statements herein are subject to risks and uncertainties that could cause actual results to differ materially from those outlined in the forward-looking statements. Revenues of $26.7 million for the quarter ended September 30, 1996 were $2.8 million, or 7%, higher than the comparable quarter of fiscal 1996. The U.K. Leisure Marine Segment revenue increased by $0.4 million, or 13%, from the same period in fiscal 1996. Increased sales of inboard engine products was the main cause of the revenue increase. Chandlery, Sea Doo personal watercraft and parts and accessories sales also increased from the prior year. The U.K. Housewares Segment sales volume increased by $0.8 million, or 11%, which was partially offset by $0.1 million unfavorable effect of foreign currency translation during the second quarter of fiscal 1997 as compared to the prior year comparable quarter. Sales of child safety gates in the quarter ended September 30, 1996 increased substantially from the prior year because the product was being introduced during the comparable quarter last year. Sales of ladders and ironing tables also increased from the prior year. Revenues of the U.S. Life Sciences and Engineering Segment for the quarter ended September 30, 1996 increased by $1.7 million, or 14%, from the second quarter of fiscal 1996. Increased material and subcontract services purchased for the U.S. Air Force resulted in the increased second quarter fiscal 1997 revenues. Revenues for the first half of fiscal 1997 increased by $4.2 million to $53.2 million, or 9%, from $48.9 million in the first half of fiscal 1996. The Leisure Marine Segment revenue increased by $1.9 million, or 13%, from the same period in fiscal 1996. A $2.4 million increase in sales volume for the segment was offset by $0.5 million of unfavorable foreign currency translation. All Leisure Marine product groups had higher sales volume over the prior year. The Housewares Segment revenue increased by $0.5 million or 4%, from the comparable period of fiscal 1996. A $1.0 million increase in sales volume was offset by $0.5 million of unfavorable foreign currency translation. All product groups in the Housewares Segment had higher or the same sales volume as compared to the prior year. The Life Sciences and Engineering Segment revenue increased by $1.8 million, or 8% in the first half of fiscal 1997 as compared to fiscal 1996. The increase in revenue was substantially due to the increased material purchases and subcontract services provided to the U.S. Air Force in the current year. Life Sciences and Engineering order backlog at September 30, 1996 was $42.6 million compared with $60.4 million at March 31, 1996 and $68.0 million at September 30, 1995. In August 1996, the Life Sciences and Engineering Segment was awarded a new contract for equipment calibration at the Wright Laboratory, Wright-Patterson Air Force Base. The contract consists of a base period beginning August 1, 1996 plus four one-year options through September 30, 2000. The contract value with the options is approximately $5.0 million. In February 1996, KRUG Life Sciences Inc. (KLSI) signed a nine month extension to its current Medical Operations and Research Support Contract with NASA's Johnson Space Center. With this extension, the contract will end on November 30, 1996. In addition, three one month options were included with the nine month extension. KLSI has been notified that the first one month option will be exercised by NASA which will extend the contract to December 31, 1996. The option will add approximately $25.0 million to the order backlog. The original support contract was a $136 million five-year contract. It has grown to $170 million as a result of added materials purchased and contract extensions. This contract represents approximately one-third of the Corporation's revenues and a 9 corresponding percentage of its net earnings. It is anticipated that the work performed under the current NASA contract will be split into three separate new contracts - Medical Operations, Biotechnology and Flight Hardware. NASA has issued Requests for Proposals to KLSI for sole-source follow-on contracts for the Biotechnology and Flight Hardware work. The Flight Hardware contract is expected to begin December 1, 1996. KLSI has submitted its competitive bid for the Medical Operations contract covering five years of future service. The revenue generated from all three new contracts, if awarded, is expected to approximate the Corporation's current contract volume with NASA. However, there is no assurance the Corporation will, in fact, receive all of these contracts and the level of profitability is uncertain until the final contracts are negotiated. The gross profit margin (Revenue minus Cost, including product development) for the quarter ended September 30, 1996 decreased to 12.8% from 13.0% for the same quarter of the previous fiscal year. The decrease is due to a decrease in the Life Sciences and Engineering Segment margin in the current fiscal year. In the second quarter of fiscal 1996, $0.2 million of contract close-out profits were realized for a contract on which work was completed several years ago. This decrease was somewhat offset by an increased Housewares Segment margin in the current year. The margin increased to 11.7% from 6.4% last year due to higher product selling prices and decreased raw material prices. The Leisure Marine Segment margin was unchanged from the second quarter of last year. For the six months ended September 30, 1996, the gross profit margin increased to 14.1% compared to 13.0% for the same period of the previous fiscal year. The increase is due to increased margin in the Housewares Segment which has increased to 11.7% from 5.2% last year due to increased selling prices and lower raw material costs. The Leisure Marine Segment margin was unchanged for the six months of fiscal 1997 as compared to the prior year. The six month fiscal 1997 Life Sciences and Engineering Segment margin decreased from the prior year due to the non-recurrence of the contract close-out profits and lower fees from material purchases for the NASA contract extension. Selling and administrative expenses for the second quarter of fiscal 1997 increased by $0.1 million as compared to the same period of the prior fiscal year, but remained unchanged for the six months ended September 30, 1996. The increase during the second quarter was due to increased selling expense by the Leisure Marine Segment as a result of increased sales volume. The Corporation announced in July the closing of its executive office in Dayton, Ohio and consolidating its headquarters with its primary operations facility adjacent to the NASA Johnson Space Center in Houston, Texas. A pre-tax charge of $0.8 million was recognized in the second quarter of fiscal 1997 for this office consolidation. The charge consisted primarily of costs related to severance for former employees and rent and other costs related to the vacated office in Dayton, Ohio. The office consolidation was completed October 1, 1996. Interest expense for the six months and three months ended September 30, 1996 decreased by 8% and 15%, respectively, compared to the prior years comparable periods due to lower debt levels in both the U.S. and U.K. Net earnings were $ 0.08 million for the second quarter of fiscal 1997 compared to $0.42 million for the comparable period in fiscal 1996. The pre-tax restructuring charge of $0.8 million for the headquarters consolidation caused the decreased earnings. Excluding the restructuring charge, net earnings for the second quarter would have been $0.6 million and would have exceeded by $0.2 million, or 47%, the second quarter of fiscal 1996. Net earnings for the first six months of fiscal 1997 were $1.1 million compared to $0.8 million for the comparable period in fiscal 1996. Excluding the restructuring charge, increased Leisure Marine and Housewares Segments revenues and increased Housewares Segment gross margin resulted in the increased earnings for both the six and three months periods. Excluding the restructuring charge, six months net earnings increased $0.9 million or 106%, from the prior year. 10 Discontinued Operations The adequacy of the provision for losses related to the discontinued Industrial Segment were reviewed by the Corporation during the first six months of fiscal 1997 and no changes were deemed appropriate. Liquidity and Capital Resources Under the Corporation's revolving credit facility with a U.S. business credit corporation, the Corporation had a loan outstanding of $4.7 million at September 30, 1996. Availability under the revolving credit facility is based upon the amount of billed and unbilled U.S. accounts receivable and is limited to a maximum of $10.0 million. The credit facility expires March 31, 2000. At September 30, 1996, the Corporation had a $1.8 million mortgage outstanding on its Dayton, Ohio real property. The mortgage was provided by five U.S. banks and matures on March 31, 1998. The Corporation's U.K. subsidiaries at September 30, 1996 had two term loans outstanding totaling $5.6 million. The loans require quarterly principal payments and mature in fiscal 2005. In addition, the Corporation has an unused line of credit of $3.9 million available at September 30, 1996 for its U.K. subsidiaries. The Corporation believes it has adequate financing in both the U.S. and U.K. to support its current level of operations. The Corporation generated cash of $5.2 million from operating activities in the first six months of fiscal 1997. The cash generation is a result of decreased accounts receivable in the U.S. and U.K., decreased inventory in the U.K. and increased accounts payable in the U.K. On November 1, 1996, the Corporation announced that the U.K. Housewares Segment subsidiary, Beldray Limited acquired Hago Products Limited, the largest manufacturer of child safety gates and fireguards in the United Kingdom. Beldray completed the acquisition with internally available funds. The purchase price was approximately $1.7 million. 11 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (A) Exhibits 27 - Financial Data Schedule 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, KRUG International Corp. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KRUG International Corp. By: /s/ Robert M. Ellis ---------------------------------- Robert M. Ellis Principal Accounting Officer Dated : November 13, 1996 13 EXHIBIT INDEX 27 -- Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS MAR-31-1997 SEP-30-1996 5,045 0 18,240 753 7,340 30,832 16,272 6,973 44,851 16,989 11,620 0 0 2,576 13,666 44,851 53,176 53,176 45,692 45,692 0 0 521 1,668 535 1,133 0 0 0 1,133 0.22 0
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