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, 2001
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 No. 0-9220
METATEC INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
OHIO 31-1647405
(State of Incorporation) (IRS Employer Identification No.)
7001 Metatec Boulevard
Dublin, Ohio 43017
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (614) 761-2000
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Number of Common Shares outstanding as of November 13, 2001: 6,136,113
Page 1 of 12
METATEC INTERNATIONAL, INC.
INDEX PAGE
----- ----
Part I : Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets as of September 30,
2001 (unaudited) and December 31, 2000 3
Consolidated Statements of Operations
for the three months ended September 30, 2001
and 2000 (unaudited) 4
Consolidated Statements of Operations
for the nine months ended September 30, 2001
and 2000 (unaudited) 5
Consolidated Statement of Shareholders'
Equity for the nine months ended
September 30, 2001 (unaudited) 6
Consolidated Statements of Cash Flows
for the nine months ended September 30,
2001 and 2000 (unaudited) 7
Notes to Consolidated Financial
Statements (unaudited) 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
Item 3 - Quantitative and Qualitative Disclosures about
Market Risk 11
Part II: Other Information
Items 1-6 12
Signatures 12
Page 2 of 12
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
METATEC INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, At December 31,
2001 2000
------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 884,502 $ 2,086,228
Accounts receivable, net of allowance
for doubtful accounts of $254,000
and $351,000 10,854,753 15,146,714
Inventory 3,053,942 2,970,219
Prepaid expenses 1,264,387 1,054,362
Deferred income taxes 588,107 588,107
------------ -----------
Total current assets 16,645,691 21,845,630
Property, plant and equipment - net 44,115,136 50,455,317
Goodwill - net 4,053,862 4,631,036
Other long term assets 250,470 296,890
Deferred income taxes 104,000 104,000
------------ -----------
TOTAL ASSETS $ 65,169,159 $77,332,873
============ ===========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,326,802 $ 6,472,385
Current maturities of long-term debt
and capital lease obligations 19,607,491 6,978,028
Current maturities of long-term real
estate debt 147,874 170,087
Accrued expenses:
Royalties 4,953,781 3,712,796
Personal property taxes 834,675 1,270,425
Payroll 610,680 1,193,054
Other 1,570,353 1,209,600
Unearned income 181,530 234,235
------------ -----------
Total current liabilities 32,233,186 21,240,610
Long-term real estate debt 18,575,795 18,623,708
Other long-term debt and capital lease
obligations, less current maturities 1,093,782 16,769,506
Other long-term liabilities 652,078 527,172
------------ -----------
Total liabilities 52,554,841 57,160,996
------------ -----------
Shareholders' equity:
Common stock - no par value;
authorized 10,000,000 shares;
issued 2001 - 7,217,855,
2000 - 7,177,855 shares 35,031,138 34,991,138
Accumulated deficit (15,078,279) (7,573,362)
Accumulated other comprehensive loss (1,491,004) (1,423,362)
Treasury stock, at cost - 1,081,742 shares (5,822,537) (5,822,537)
Unamortized restricted stock (25,000) --
------------ -----------
Total shareholders' equity 12,614,318 20,171,877
------------ -----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 65,169,159 $77,332,873
============ ===========
See notes to condensed consolidated financial statements.
Page 3 of 12
METATEC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended September 30,
---------------------------------
2001 2000
----------- -----------
NET SALES $17,478,841 $26,351,076
Cost of sales 13,837,858 19,442,686
----------- -----------
Gross profit 3,640,983 6,908,390
Selling, general and administrative
expenses 5,886,266 6,989,379
Restructuring expenses 415,577 --
----------- -----------
OPERATING LOSS (2,660,860) (80,989)
Other income (expense):
Investment income 4,819 2,881
Interest expense (826,732) (1,042,518)
----------- -----------
LOSS BEFORE INCOME TAXES (3,482,773) (1,120,626)
Income tax benefit 0 (234,000)
----------- -----------
NET LOSS $(3,482,773) $ (886,626)
=========== ===========
NET LOSS PER COMMON SHARE
Basic and diluted $ (0.57) $ (0.15)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic and diluted 6,136,113 6,087,771
=========== ===========
See notes to condensed consolidated financial statements.
Page 4 of 12
METATEC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Nine Months Ended September 30,
--------------------------------
2001 2000
----------- -----------
NET SALES $57,389,254 $80,166,339
Cost of sales 42,841,109 57,780,275
----------- -----------
Gross profit 14,548,145 22,386,064
Selling, general and administrative
expenses 18,901,782 20,024,690
Restructuring expenses 525,142 430,561
----------- -----------
OPERATING EARNINGS (LOSS) (4,878,779) 1,930,813
Other income (expense):
Investment income 45,519 24,530
Interest expense (2,671,657) (3,251,008)
----------- -----------
LOSS BEFORE INCOME TAXES (7,504,917) (1,295,665)
Income tax benefit 0 (311,000)
----------- -----------
NET LOSS $(7,504,917) $ (984,665)
=========== ===========
NET LOSS PER COMMON SHARE
Basic and diluted $ (1.22) $ (0.16)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic and diluted 6,135,965 6,081,863
========== ===========
See notes to condensed consolidated financial statements.
Page 5 of 12
METATEC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
Accumulated Other Unamortized
Common Accumulated Comprehensive Treasury Restricted
Stock Deficit Loss Stock Stock Total
----------- ------------ ----------------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 2000 $34,991,138 $ (7,573,362) $(1,423,362) $(5,822,537) $ 0 $20,171,877
Comprehensive Loss:
Net loss (7,504,917) (7,504,917)
Foreign currency translation
adjustments (67,642) (67,642)
-----------
Comprehensive loss (7,572,559)
Issuance of restricted shares 40,000 (40,000) 0
Amortization of restricted stock 15,000 15,000
----------- ------------ ----------- ----------- -------- -----------
BALANCE AT SEPTEMBER 30, 2001 $35,031,138 $(15,078,279) $(1,491,004) $(5,822,537) $(25,000) $12,614,318
=========== ============ =========== =========== ======== ===========
See notes to consolidated financial statements.
Page 6 of 12
METATEC INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the nine months ended September 30, 2001 2000
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,504,917) $ (984,665)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 8,090,738 10,932,639
Net (gain) loss on sales of property, plant and equipment 3,277 (148,917)
Changes in assets and liabilities:
Accounts receivable 4,169,318 3,847,499
Inventory (86,781) 650,511
Prepaid expenses and other assets (207,972) 860,029
Accounts payable and accrued expenses (1,321,778) (5,010,662)
Unearned income (46,879) 13,830
------------ ------------
Net cash provided by operating activities 3,095,006 10,160,264
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (1,329,663) (4,456,030)
Proceeds from the sales of property, plant and equipment 7,200 126,250
------------ ------------
Net cash used in investing activities (1,322,463) (4,329,780)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in debt 20,247,419 4,139,597
Payment of debt and capital lease obligations (23,363,806) (11,491,024)
Stock options exercised 0 32,000
------------ ------------
Net cash used in financing activities (3,116,387) (7,319,427)
------------ ------------
Effect of exchange rate on cash 142,118 108,460
Decrease in cash and cash equivalents (1,201,726) (1,380,483)
Cash and cash equivalents at beginning of period 2,086,228 1,695,884
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 884,502 $ 315,401
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 2,430,566 $ 3,235,289
============ ============
Income taxes paid/(refunds received) $ (122,267) $ 147,835
============ ============
Assets purchased by the assumption of a liability $ 174,830 $ 403,222
============ ============
Amortization of Restricted Stock $ 15,000 $ 0
============ ============
See notes to condensed consolidated financial statements.
Page 7 of 12
METATEC INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of presentation - The consolidated balance sheet as of September 30,
2001, the consolidated statements of operations for the three and nine months
ended September 30, 2001 and 2000, the consolidated statement of shareholders'
equity for the nine months ended September 30, 2001, and the consolidated
statements of cash flows for the nine month ended September 30, 2001 and 2000
have been prepared by the Company, without audit. In the opinion of management,
all adjustments, which consist solely of normal recurring adjustments, necessary
to present fairly, in accordance with accounting principles generally accepted
in the United States of America, the financial position, results of operations
and changes in cash flows for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
December 31, 2000 annual report on Form 10-K. The results of operations for the
period ended September 30, 2001 are not necessarily indicative of the results
for the full year.
2. Accounting Pronouncements - Derivative Instruments and Hedging Activities -
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 133
on January 1, 2001. SFAS 133, as amended, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. Under SFAS 133, certain
contracts that were not formerly considered derivatives may now meet the
definition of a derivative. The adoption of SFAS 133 did not have a significant
impact on the financial position, results of operations, or cash flows of the
Company.
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
142, "Goodwill and Other Intangibles." SFAS 142 is effective for all fiscal
years beginning after December 15, 2001, and requires changes in the
amortization of certain goodwill and intangible assets. These assets, which were
previously being amortized, will be assessed at least annually for impairment.
The Company has not yet evaluated the impact the adoption of SFAS 142 will have
on its operations and financial position.
In August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment or
Disposal of Long-Lived Assets." While this statement supercedes SFAS No. 121,
"Accounting for Impairment of Long-Lived Assets to Be Disposed Of" it retains
the fundamental provisions of SFAS No. 121 for recognition and impairments of
assets to be held and used, and assets to be disposed of by sale. This statement
is effective for the first quarter in the year ended December 31, 2002.
3. Long-term Debt - The Company's credit facilities include a term note,
revolving line of credit and real estate debt. On October 25, 2001, the banks
declared the Company in default of the credit facilities due to the Company's
failure to satisfy a financial covenant contained in the loan agreement. The
Company is negotiating a standstill agreement with the banks pursuant to which
the banks would agree to forebear exercising their rights and remedies under the
loan agreement. However, there can be no assurance that the Company will be able
to reach agreement with the banks as to such a standstill arrangement. The
Company is also in default on certain equipment leases which have cross default
provisions with the above mentioned credit facilities. Such leases have
remaining lease payments of approximately $1,103,000.
4. Subsequent Event - During the fourth quarter of 2001, the Company announced
its plans to close its Milpitas, California (Silicon Valley) operations. The
Company will incur restructuring charges related to this plan during the fourth
quarter of 2001. Included in these charges will be approximately $700,000 in
severance and related costs. The Company may sell fixed assets with an
approximate net book value of $1,500,000 or transfer a portion of those assets
to its other operations. However in the current market, it is
Page 8 of 12
unlikely that the Company will realize the full net book value of this
equipment. In addition to the above charges, the Company will likely incur
charges related to the lease obligation of its Silicon Valley facility. The
remaining lease payments under this obligation are approximately $1,200,000 per
year through May, 2009.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 2000 AND THE NINE MONTHS ENDED SEPTEMBER 30, 2001
COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000.
RESULTS OF OPERATIONS
Net sales for the three months ended September 30, 2001 were $17,479,000, a
decrease of $8,872,000, or 34% over the same period of the prior year. This
decrease resulted primarily from CD-ROM manufacturing sales decreasing
$8,389,000 to $16,054,000 for the three months ended, or 34%. This decrease was
due to several factors. The pricing for CD-ROM products and services continued
to decline or remained at low levels industry-wide due to excess manufacturing
capacity, a trend the Company anticipates will continue for the remainder of
2001. In addition, the demand for the Company's CD-ROM products and services
declined due to several factors, including a decline in general economic
conditions, compounded by the events of September 11, 2001, the continued
increase in customers using on-line or electronic methods to distribute
information, and the continued maturation of the CD-ROM market. The company
anticipates that these factors may continue to impact the demand for the
Company's CD-ROM products and services for the remainder of 2001. Radio
syndication sales decreased $725,000, or 64%, to $400,000 for the three months
ended September 30, 2001, primarily as a result of some customers choosing to
use CD-Recordable as a distribution method for smaller size orders. The company
expects this trend to continue for the foreseeable future. DVD sales accounted
for $535,000 during the three months ended September 30, 2001, as compared to
$472,000 for the same period in the prior year.
Net sales for the nine months ended September 30, 2001 were $57,389,000, a
decrease of $22,777,000, or 28% over the same period of the prior year. This
decrease resulted primarily from CD-ROM manufacturing sales decreasing
$22,158,000 to $53,145,000 for the nine months ended, or 29%. This decrease was
due to the factors noted above. Radio syndication sales decreased $1,247,000, or
49%, to $1,306,000 for this same period as a result of the factors noted above.
DVD sales accounted for $1,673,000 during the nine months ended September 30,
2001, as compared to $1,417,000 for the same period in the prior year.
Gross profit was 21% of net sales for the three months ended September 30, 2001
as compared to 26% of net sales for the same period of the prior year. Gross
profit was 25% of net sales for the nine months ended September 30, 2001 as
compared to 28% of net sales for the same period of the prior year. The
reductions for the three-month and six-month periods were primarily caused by
reduced utilization of the Company's manufacturing capacity and the continued
decline of pricing for CD-ROM products and services.
Selling, general and administrative ("SG&A") expenses were $5,886,000, or 34% of
net sales, for the three months ended September 30, 2001 as compared to
$6,989,000, or 27% of net sales, for same period of the prior year. SG&A
expenses were $18,902,000, or 33% of net sales, for the nine months ended
September 30, 2001 as compared to $20,025,000, or 25% of net sales, for same
period of the prior year. The expense reductions for the three-month and
six-month periods were primarily attributed to restructuring and work force
reductions which occurred in the quarters ended March 31, 2001 and September 30,
2001, although the Company's decreased sales caused SG&A expenses to increase
as a percentage of net sales.
Page 9 of 12
Interest expense for the three months ended September 30, 2001 was $827,000 as
compared to $1,043,000 for the same period of the prior year. Interest expense
for the nine months ended September 30, 2001 was $2,672,000 as compared to
$3,251,000 for the same period of the prior year. The decrease in interest
expense was due to decreased borrowings under revolving loan and term loan
facilities, as well as decreases in interest rates.
No income tax benefit was realized for the nine months ended September 30, 2001,
due to the uncertainty of realizing the value of such benefit. In the prior year
a $311,000 income tax benefit was realized resulting in an effective tax rate of
24%.
As a result of the foregoing, the net loss for the three months ended September
30, 2001 was $3,483,000, or a net loss per common share of $.57, as compared to
a net loss in the same period of the prior year of $887,000, or a net loss per
common share of $.15. The net loss for the nine months ended September 30, 2001
was $7,505,000, or a net loss per common share of $1.22, as compared to a net
loss in the same period of the prior year of $985,000, or a net loss per common
share of $.16.
FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES
The Company financed its business during the nine months ended September 30,
2001 through cash generated from operations, the use of debt, and the use of
available cash balances. Cash flow from operating activities was $3,095,000 for
the nine months ended September 30, 2001, as compared to $10,160,000 for the
nine months ended September 30, 2000. The Company had cash and cash equivalents
of $885,000 as of September 30, 2001.
The Huntington National Bank and Bank One, NA (collectively, the "Banks") have
provided a $12,958,000 term loan facility and a $13,000,000 revolving loan
facility to the Company (the "Credit Facilities") pursuant to an amended and
restated loan agreement dated as of March 31, 2001 (the "Loan Agreement"). As of
September 30, 2001, $10,458,000 and $9,037,000 were outstanding under the term
loan facility and the revolving loan facility, respectively.
On October 25, 2001, the Banks declared the Company in default of the Credit
Facilities due to the Company's failure to satisfy a financial covenant
contained in the Loan Agreement. The Company is negotiating a standstill
agreement with the Banks pursuant to which the Banks would agree to forebear
exercising their rights and remedies under the Loan Agreement. However, there
can be no assurance that the Company will be able to reach agreement with the
Banks as to such a standstill arrangement. Under the terms of the Loan
Agreement, all principal and accrued interest under the Credit Facilities, or
approximately $19,680,000, is immediately due and payable to the Banks. In
addition, the Banks have notified the Company that the Credit Facilities will
bear interest at the default rate under the Loan Agreement, which is 3.5% in
excess of the prime interest rate of the Banks. The Credit Facilities are
secured by a first lien on all non-real estate business assets of the Company
and a pledge of the stock of the Company's subsidiaries.
In addition, the Company has an equipment lease agreement with Banc One Leasing
Company ("BOLC") relating to certain equipment used in the manufacturing
operations of the Company. Under the cross-default provisions contained in the
equipment lease agreement, on October 31, 2001, BOLC declared the Company to be
in default of the equipment lease agreement due to the Company's default under
the Loan Agreement. The Company is negotiating a standstill agreement with BOLC
pursuant to which BOLC would agree to forebear exercising its rights and
remedies under the equipment lease. However, there can be no assurance that the
Company will be able to reach agreement with BOLC as to such a standstill
arrangement. BOLC has notified the Company that BOLC contemplates the exercise
of its remedies against certain foreign currency exchange contracts by using
the proceeds therefrom to reduce the Company's obligations under the equipment
lease agreement.
The Company's closure of its Milpitas, California (Silicon Valley) operations
will also impact the Company's liquidity and capital resources. See "Subsequent
Event."
Page 10 of 12
The Company has a $19,000,000 loan facility administered by Huntington Capital
Corp, which is payable in monthly principal and interest payments based upon a
thirty year amortization schedule and bears interest at a fixed rate of 8.2%.
This term loan facility was used to permanently finance the Company's new
Dublin, Ohio distribution center and to pay down other bank debt. This loan
facility is payable in monthly installments over 10 years, with a 30 year
amortization period, and is secured by a first lien on all real property of the
Company and letters of credit in favor of the lender, in an aggregate amount of
$1,650,000.
As of September 30, 2001, the Company had a working capital deficiency of
approximately $15,600,000 primarily due to the $19,495,000 of term and
revolving notes (under the Loan Agreement described above) being due on April
1, 2002. As described above, the Banks have declared the Company in default of
the Credit Facilities, and all principal and accrued interest under the Credit
Facilities, or approximately $19,680,000, is immediately due and payable to the
Banks. The Company is negotiating a standstill agreement with the Banks
pursuant to which the Banks would agree to forebear exercising their rights and
remedies under the Loan Agreement. However, there can be no assurance that the
Company will be able to reach agreement with the Banks as to such a standstill
arrangement. However, the Company's liquidity and its current ability to meet
its financial obligations as they become due are dependent upon the Company
entering into a standstill agreement with the Banks. The Company's failure to
reach agreement with the Banks as to a standstill arrangement will have a
material adverse impact on the Company's financial position and continuing
operations.
SUBSEQUENT EVENT
The Company announced publicly on October 23, 2001, that it was initiating the
closing of its Milpitas, California (Silicon Valley) operations. The Silicon
Valley site focused primarily on optical disc production and offered limited
value-added services that characterize Metatec's sales and marketing focus
today. The plant was expensive to operate and was essentially limited to
offering a commodity service in an expensive market hit hard by the economic
downturn. The Company is currently projecting significant cost savings by
transferring business to its more efficient Dublin, Ohio facility.
The Company will be incurring a restructuring charge during the fourth quarter
of 2001 related to this closure. Included in these charges are approximately
$700,000 in severance and related costs. The Company may sell fixed assets with
an approximate net book value of $1,500,000 or transfer a portion of those
assets to its other operations. However in the current market, it is unlikely
that the Company will realize the full net book value of this equipment. In
addition to the above charges, the Company will likely incur charges related to
the lease obligation of its Silicon Valley facility. The remaining lease
payments under this obligation are approximately $1,200,000 per year through
May, 2009.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for historical information, all other statements made in this report are
"forward-looking" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements are subject to certain risks and
uncertainties that could cause the Company's actual results to differ materially
from those projected. Such risks and uncertainties that might cause such a
difference include, but are not limited to, changes in general business and
economic conditions, changes in demand for CD-ROM products, excess capacity
levels in the CD-ROM industry, the introduction of new products by competitors,
increased competition (including pricing pressures), changes in manufacturing
efficiencies, changes in technology, and other risks indicated in the company's
filings with the Securities and Exchange Commission, including Form 10-K for
Metatec's year ended December 31, 2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
In addition to the disclosures contained in the Company's Form 10-K for its
fiscal year ended December 31, 2000 regarding the quantitative and qualitative
disclosures about the Company' market risk, refer to the above mentioned
information.
Page 11 of 12
PART II - OTHER INFORMATION
Items 1-2. Inapplicable.
Item 3. Defaults Upon Senior Securities.
The Huntington National Bank and Bank One, NA (collectively, the "Banks") have
provided a $12,958,000 term loan facility and a $13,000,000 revolving loan
facility to the Company (the "Credit Facilities") pursuant to an amended and
restated loan agreement dated as of March 31, 2001 (the "Loan Agreement"). As of
September 30, 2001, $10,458,000 and $9,037,000 were outstanding under the term
loan facility and the revolving loan facility, respectively.
On October 25, 2001, the Banks declared the Company in default of the Credit
Facilities due to the Company's failure to satisfy a financial covenant
contained in the Loan Agreement. The Company is negotiating a standstill
agreement with the Banks pursuant to which the Banks would agree to forebear
exercising their rights and remedies under the Loan Agreement. However, there
can be no assurance that the Company will be able to reach agreement with the
Banks as to such a standstill arrangement. Under the terms of the Loan
Agreement, all principal and accrued interest under the Credit Facilities, or
approximately $19,680,000, is immediately due and payable to the Banks. In
addition, the Banks have notified the Company that the Credit Facilities will
bear interest at the default rate under the Loan Agreement, which is 3.5% in
excess of the prime interest rate of the Banks. The Credit Facilities are
secured by a first lien on all non-real estate business assets of the Company
and a pledge of the stock of the Company's subsidiaries.
Items 4. Submission of Matters to a Vote of Security Holders
Inapplicable.
Item 5. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K
None
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.
Metatec International, Inc.
/s/ Julia A. Pollner
BY: Julia A. Pollner
Date: November 14, 2001 Senior Vice President, Finance
(authorized signatory-
principal financial and
accounting officer)
Page 12 of 12