Nice report! seems to me this stock is poised to move up to proper valuation!
ay 7, 1998
AMERICAN MATERIALS & TECHNOLOGIES CORP
(AMTK)
Quarterly Report (SEC form 10QSB)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
(Dollar amounts in thousands, except per share)
RESULTS OF OPERATIONS
The American Materials & Technologies Corporation ("AMT" or "the Company") was incorporated
in March 1995 to acquire and manage businesses in the advanced materials and technologies
industries. AMT acquired Culver City Composites Corporation ("CCC"), a supplier of prepreg
materials to the aerospace industry, on December 19, 1995, and Grafalloy Corporation
("Grafalloy"), a manufacturer of graphite golf club shafts, on February 27, 1997. The results of
operations of the acquired companies are included in the Company's financial statements from the
respective dates of acquisition.
Three months ended March 31, 1998 compared to three months ended March 31, 1997
Sales for the quarter ended March 31, 1998 were $11,715, an increase of 64% over sales of
$7,152 in the corresponding quarter of 1997. Adjusting to include sales by Grafalloy for the entire
first quarter of 1997, the increase in sales was 32%. Sales for CCC rose 27% compared to the
prior year period, reflecting higher shipments to its aerospace customers and the addition of new
business. Grafalloy's sales growth resulted in part from the addition of two original equipment
manufacturers as customers.
The Company's sales increased 81% compared to the fourth quarter of 1997. That period was
marked by depressed aerospace sales because of production slowdowns at The Boeing Company,
and lower sales at Grafalloy caused by seasonal factors.
Gross profit (net sales less materials and manufacturing costs) was $3,380 in the first quarter of
1998, an increase of 69% over the gross profit of $1,999 in the first quarter of 1997. As a
percentage of sales, gross profit improved to 28.9% in the first quarter of 1998 compared to 28.0%
in the first quarter of 1997, reflecting the addition of the higher margin Grafalloy business. The cost of
materials increased as a percentage of sales, but this was more than offset by lower manufacturing
costs as a percentage of sales, as fixed costs were spread over a larger sales base.
Selling, general and administrative expenses were $2,351 in the first quarter of 1998, an increase of
64% compared to $1,433 in the prior year's first quarter. This percentage increase was equal to the
percentage increase in sales. Sales and marketing costs declined as a percentage of sales, but
general and administrative costs rose in relation to sales because of increased goodwill amortization
and higher investor relations and legal expenses.
Research and development expenses rose to $500 for the quarter, an increase of 71% compared to
the first quarter of 1997. The Company has continued to expand its product
development activities and its efforts to qualify existing and new products with customers in the
aerospace industry.
Operating income for the first quarter of 1998 was $529, an increase of 94% over operating income
of $273 in the comparable period of 1997. This growth exceeded the percentage increase in sales,
as certain fixed manufacturing, sales, and marketing costs were spread over the larger sales base.
Interest expense rose 146% to $207 in the quarter ended March 31, 1998, reflecting the
Company's significantly higher debt levels following the purchase of Grafalloy in February 1997.
Similarly, interest income declined substantially compared to the first quarter of 1997, as cash
balances available in the first two months of 1997 were used in the Grafalloy purchase.
No provision for income taxes is required in 1998 because of the availability of net operating loss
carryforwards. Taxes were accrued at a rate of 19% in the first quarter of 1997.
Net income for the quarter ended March 31, 1998 was $350, an increase of 28% over net income
of $274 in the corresponding quarter of 1997. Diluted earnings per share were $0.08 in the first
quarter of 1998 compared to $0.06 in the corresponding 1997 period.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operations in the first quarter of 1998 was $1,729, primarily because of the substantial
increase in accounts receivable compared to December 31, 1997. This was financed by advances
on the Company's lines of credit. Working capital increased to $1,910 at March 31, 1998,
compared to a deficit of $1,096 at December 31, 1997, while long-term debt increased by $1,979.
In January 1998 the Company issued 172,582 shares of common stock (from shares held in
treasury) upon the exercise of employee stock options. Payment was made by the cancellation of
notes payable of $345.
At March 31, 1998, a total of $5,565 was borrowed under the Company's revolving credit lines,
and approximately $1,000 was available based on eligible collateral. The Company was in
compliance with the financial covenants in its credit agreements at March 31, 1998. The Company
has negotiated extended payment terms with several of its major suppliers.
At December 31, 1997, the Company had a net operating loss carryforward for federal income tax
purposes of $3,900 available to offset taxable income of the Company through 2012. Additional
carryforwards of approximately $32,165 are available as a result of the acquisition of CCC in
December 1995. The change-in-ownership provisions of Section 382 of the Internal Revenue Code
limit the amount available to offset future taxable income to approximately $500 per year through
2010.
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AMTK a small stock getting ready to move!!!IMHO |
