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, 2004
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from to
Commission File No. 333-43523
Elgin National Industries, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 36-3908410 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
2001 Butterfield Road, Suite 1020, Downers Grove, Illinois 60515-1050
(Address of principal executive offices)
Telephone Number: 630-434-7243
(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 filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (SS 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-Q or any amendment to this Form 10-Q. ¨ Yes x No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). ¨ Yes x No
As of September 30, 2004, there were outstanding 6,408.3 shares of Class A Common Stock and 19,951.7 shares of Preferred Stock.
ELGIN NATIONAL INDUSTRIES, INC.
TABLE OF CONTENTS
2
ELGIN NATIONAL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
(Unaudited)
| September 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and equivalents |
$ | $ | 3,391 | |||||
| Accounts receivable, net |
37,511 | 27,062 | ||||||
| Inventories, net |
20,658 | 17,495 | ||||||
| Prepaid expenses and other assets |
3,216 | 2,277 | ||||||
| Deferred income taxes |
3,497 | 3,497 | ||||||
| Total current assets |
64,882 | 53,722 | ||||||
| Property, plant and equipment, net |
19,329 | 20,308 | ||||||
| Loans receivable to related parties |
11,320 | 10,855 | ||||||
| Other assets |
30,309 | 29,507 | ||||||
| Goodwill |
18,995 | 18,995 | ||||||
| Total assets |
$ | 144,835 | $ | 133,387 | ||||
| LIABILITIES AND COMMON STOCKHOLDER’S DEFICIT | ||||||||
| Current liabilities: |
||||||||
| Current portion of long-term debt |
$ | 2,033 | $ | 2,019 | ||||
| Accounts payable |
28,473 | 25,076 | ||||||
| Accrued expenses |
14,127 | 9,568 | ||||||
| Total current liabilities |
44,633 | 36,663 | ||||||
| Long-term debt less current portion |
100,659 | 96,741 | ||||||
| Redeemable preferred stock units |
15,289 | 14,743 | ||||||
| Redeemable preferred stock |
4,194 | 4,044 | ||||||
| Other liabilities |
2,323 | 2,345 | ||||||
| Deferred income taxes |
4,428 | 4,411 | ||||||
| Total liabilities |
171,526 | 158,947 | ||||||
| Common stockholder’s deficit: |
||||||||
| Common stock, Class A par value $.01 per share; authorized 23,678 shares; 6,408 issued and outstanding as of September 30, 2004 and December 31, 2003 |
||||||||
| Retained deficit |
(26,958 | ) | (25,836 | ) | ||||
| Accumulated other comprehensive income |
267 | 276 | ||||||
| Total common stockholder’s deficit |
(26,691 | ) | (25,560 | ) | ||||
| Total liabilities and stockholder’s deficit |
$ | 144,835 | $ | 133,387 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements
3
ELGIN NATIONAL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
| For the Nine Months Ended September 30, |
For the Three Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net sales |
$ | 155,215 | $ | 93,667 | $ | 51,991 | $ | 33,461 | ||||||||
| Cost of sales |
128,379 | 70,868 | 43,386 | 25,707 | ||||||||||||
| Gross profit |
26,836 | 22,799 | 8,605 | 7,754 | ||||||||||||
| Selling, general and administrative expenses |
20,383 | 18,286 | 6,933 | 6,371 | ||||||||||||
| Operating income |
6,453 | 4,513 | 1,672 | 1,383 | ||||||||||||
| Other expenses (income) |
||||||||||||||||
| Interest income |
(518 | ) | (474 | ) | (183 | ) | (158 | ) | ||||||||
| Interest expense |
8,795 | 7,952 | 2,989 | 2,677 | ||||||||||||
| Loss before income taxes |
(1,824 | ) | (2,965 | ) | (1,134 | ) | (1,136 | ) | ||||||||
| Benefit for income taxes |
(702 | ) | (1,097 | ) | (436 | ) | (423 | ) | ||||||||
| Net loss |
$ | (1,122 | ) | $ | (1,868 | ) | $ | (698 | ) | $ | (713 | ) | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements
4
ELGIN NATIONAL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDER’S DEFICIT
For the Nine Months Ended September 30, 2004
(in thousands except share data)
(Unaudited)
| Common Stock |
Retained (Deficit) |
Accumulated Other Comprehensive Income |
Total Stockholder’s Deficit |
||||||||||||
| Balance as of December 31, 2003 |
$ | $ | (25,836 | ) | $ | 276 | $ | (25,560 | ) | ||||||
| Net loss for the nine months ended September 30, 2004 |
(1,122 | ) | (1,122 | ) | |||||||||||
| Foreign currency translation adjustments net of tax of $(5) |
(9 | ) | (9 | ) | |||||||||||
| Balance as of September 30, 2004 |
$ | $ | (26,958 | ) | $ | 267 | $ | (26,691 | ) | ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements
5
ELGIN NATIONAL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2004 and 2003
(in thousands)
(Unaudited)
| 2004 |
2003 |
|||||||
| Net cash (used in) provided by operating activities |
$ | (6,380 | ) | $ | 665 | |||
| Cash flows from investing activities: |
||||||||
| Proceeds from sale of assets |
5 | 37 | ||||||
| Purchase of property, plant and equipment |
(939 | ) | (610 | ) | ||||
| Net cash used by investing activities |
(934 | ) | (573 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Borrowings on long-term debt |
5,450 | 25,000 | ||||||
| Repayments of long-term debt |
(1,518 | ) | (23,005 | ) | ||||
| Debt issuance costs |
(2,087 | ) | ||||||
| Net cash provided by (used in) financing activities |
3,932 | (92 | ) | |||||
| Effect of exchange rates on cash |
(9 | ) | 0 | |||||
| Net decrease in cash |
(3,391 | ) | ||||||
| Cash and cash equivalents at beginning of period |
3,391 | |||||||
| Cash and cash equivalents at end of period |
$ | 0 | $ | 0 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements
6
ELGIN NATIONAL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Report Preparation
The accompanying consolidated financial statements, which have not been audited by independent certified public accountants, were prepared in conformity with accounting principles generally accepted in the United States and such principles were applied on a basis consistent with the preparation of the audited consolidated financial statements included in the Company’s December 31, 2003 Form 10-K filed with the Securities and Exchange Commission. Due to the timing of the change in the Company’s certifying accountants, this report on Form 10-Q has not been reviewed by the Company’s independent certified public accountants. The Company will file an amendment to this Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 as soon as practicable after this review is completed. The financial information furnished includes all normal recurring accrual adjustments which are, in the opinion of management, necessary for a fair statement of results for the interim period. Results for the first nine months of 2004 are not necessarily indicative of the results to be expected for the full year. For further information refer to the Company’s consolidated financial statements included in the annual report on Form 10K.
2. Inventories
Inventories consist of:
| September 30, 2004 |
December 31, 2003 | |||||
| (in thousands) | ||||||
| Finished goods |
$ | 12,456 | $ | 11,098 | ||
| Work-in-process |
3,015 | 2,420 | ||||
| Raw materials |
7,095 | 5,519 | ||||
| 22,566 | 19,037 | |||||
| Less excess and obsolete reserve |
1,908 | 1,542 | ||||
| $ | 20,658 | $ | 17,495 | |||
3. Comprehensive loss
Total comprehensive loss and its components, net of related tax are as follows:
| For the Nine Months Ended September 30, |
For the Three Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (in thousands) | ||||||||||||||||
| Net loss |
$ | (1,122 | ) | $ | (1,868 | ) | $ | (698 | ) | $ | (713 | ) | ||||
| Foreign currency translation |
(9 | ) | 37 | |||||||||||||
| $ | (1,131 | ) | $ | (1,868 | ) | $ | (661 | ) | $ | (713 | ) | |||||
The components of accumulated other comprehensive income, net of related tax consists of foreign currency translation of $267,000 and $276,000 as of September 30, 2004 and December 31, 2003, respectively.
7
ELGIN NATIONAL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
4. Components of Net Periodic Pension Cost
| Nine Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (in thousands) | ||||||||||||||||
| Service cost |
$ | 2,923 | $ | 787 | $ | 1,124 | $ | 263 | ||||||||
| Interest cost |
3,963 | 892 | 1,523 | |||||||||||||