<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 1, 1998
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-22717
ACORN PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3265462
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 DUBLIN AVENUE, COLUMBUS, OHIO 43215
(Address of principal executive offices, including zip code)
(614) 222-4400
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
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 the
filing requirements for at least the past 90 days. YES X NO
----- -----
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 6,464,105 shares of
Common Stock, $.001 par value, were outstanding at June 11, 1998.
<PAGE>
FORM 10-Q
ACORN PRODUCTS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets 3
August 1, 1997 and May 1, 1998
Consolidated Statements of Operations For the Quarter 4
and the Nine Months Ended May 2, 1997 and May 1, 1998
Consolidated Statements of Cash Flows For the Nine Months Ended 5
May 2, 1997 and May 1, 1998
Interim Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7-9
Condition and Results of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 10
Signatures 11
</TABLE>
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<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACORN PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 1, MAY 1,
1997 1998
--------- ------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,509 $ 1,730
Accounts receivable, less allowance for
doubtful accounts ($713 and $971, respectively). . . . . . . . . . . 18,462 36,487
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,642 31,559
Prepaids and other current assets . . . . . . . . . . . . . . . . . . . 3,773 1,602
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 51,386 71,378
Property, plant and equipment, net of accumulated depreciation. . . . . 15,650 16,407
Goodwill, net of accumulated amortization . . . . . . . . . . . . . . . 29,374 30,997
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . 2,480 2,462
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,890 $121,244
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . $ 12,837 $ 26,164
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,872 11,750
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,707 4,764
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . 350 258
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . 711 674
-------- --------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . 24,477 43,610
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,098 9,358
Other long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . 4,496 4,308
Net liabilities of discontinued operations . . . . . . . . . . . . . . . . 595 --
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 35,666 57,276
Stockholders' equity:
Common stock, par value of $.001 per share, 20,000,000 shares
authorized, 6,464,105 shares issued and outstanding at August 1,
1997 and May 1, 1998, respectively. . . . . . . . . . . . . . . . 78,391 78,391
Contributed capital-stock options. . . . . . . . . . . . . . . . . . . . . 460 460
Minimum pension liability. . . . . . . . . . . . . . . . . . . . . . . . . (133) (133)
Retained earnings (deficit). . . . . . . . . . . . . . . . . . . . . . . . (15,494) (14,750)
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . 63,224 63,968
-------- --------
Total liabilities and stockholders' equity . . . . . . . . . . . . . $ 98,890 $121,244
-------- --------
-------- --------
</TABLE>
See accompanying notes.
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<PAGE>
ACORN PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE NINE MONTHS ENDED
------------------------ -------------------------
MAY 2, MAY 1, MAY 2, MAY 1,
1997 1998 1997 1998
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . $ 37,270 $ 37,911 $ 77,967 $ 79,470
Cost of goods sold . . . . . . . . . . . . . 26,935 29,440 57,077 61,057
--------- --------- --------- ---------
Gross profit . . . . . . . . . . . . . . . . 10,335 8,471 20,890 18,413
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . 4,807 5,526 13,448 14,756
Interest expense . . . . . . . . . . . . . . 2,500 720 5,743 1,761
Amortization of intangibles. . . . . . . . . 202 231 604 668
Other expenses, net. . . . . . . . . . . . . (36) 102 1,222 181
--------- --------- --------- ---------
Income (loss) from continuing
operations before income taxes . . . . . . 2,862 1,892 (127) 1,047
Income taxes . . . . . . . . . . . . . . . . 52 549 52 303
--------- --------- --------- ---------
Income (loss) from continuing
operations . . . . . . . . . . . . . . . . 2,810 1,343 (179) 744
Discontinued operations:
Loss from operations . . . . . . . . . . . 602 -- (461) --
Loss from disposal . . . . . . . . . . . . (3,095) -- (9,114) --
--------- --------- --------- ---------
Loss from discontinued
operations . . . . . . . . . . . . . . (2,493) -- (9,575) --
--------- --------- --------- ---------
Net income (loss). . . . . . . . . . . . . . $317 $1,343 $(9,754) $744
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income (loss) applicable to
common stock . . . . . . . . . . . . . . . $38 $1,343 $(10,591) $744
PER SHARE DATA (BASIC AND DILUTED):
Income (loss) from continuing
operations . . . . . . . . . . . . . . . . $1.88 $0.21 $(0.12) $0.12
Loss from discontinued operations. . . . . . $(1.66) $-- $(6.40) $--
Preferred stock dividend . . . . . . . . . . $(0.19) $-- $(0.56) $--
--------- --------- --------- ---------
Net income (loss) applicable to
common stock . . . . . . . . . . . . . . . $0.03 $0.21 $(7.08) $0.12
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average shares
outstanding. . . . . . . . . . . . . . . . 1,498,056 6,464,105 1,495,249 6,464,105
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See accompanying notes.
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<PAGE>
ACORN PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-------------------------
MAY 2, MAY 1,
1997 1998
-------- --------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,754) $ 744
Adjustments to reconcile net income (loss) to net cash provided by
(used in) continuing operations:
Loss from discontinued operations. . . . . . . . . . . . . . . . . . 9,575 --
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . 2,402 2,886
Financing fees, net. . . . . . . . . . . . . . . . . . . . . . . . . 30 --
Issuance of stock options. . . . . . . . . . . . . . . . . . . . . . 120 --
Changes in operating assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . (20,875) (17,464)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,276) (2,701)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (53) 1,755
Accounts payable and accrued expenses. . . . . . . . . . . . . . . 8,432 5,541
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . (911) (92)
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . (711) (225)
-------- --------
Net cash provided by (used in) continuing operations . . . . . . . . . (19,021) (9,556)
Net cash provided by (used in) discontinued operations . . . . . . . . 3,598 (625)
-------- --------
Net cash provided by (used in) operating activities. . . . . . . . . . (15,423) (10,181)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net assets from acquisitions . . . . . . . . . . . . . . . . . . . . . (6,455) (3,260)
Purchases of property, plant and equipment, net. . . . . . . . . . . . (1,639) (2,925)
Proceeds from disposal of discontinued operations. . . . . . . . . . . 6,177 --
-------- --------
Net cash provided by (used in) investing activities. . . . . . . . . . (1,917) (6,185)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on acquisition loan . . . . . . . . . . . . . . . . . . . . 8,268 3,260
Net activity on revolving loan . . . . . . . . . . . . . . . . . . . . 8,482 13,327
Issuance of stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 88 --
-------- --------
Net cash provided by (used in) financing activities. . . . . . . . . . 16,838 16,587
-------- --------
Net increase (decrease) in cash. . . . . . . . . . . . . . . . . . . . (502) 221
Cash at beginning of period. . . . . . . . . . . . . . . . . . . . . . 502 1,509
-------- --------
Cash at end of period. . . . . . . . . . . . . . . . . . . . . . . . . $ -- $1,730
-------- --------
-------- --------
Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,186 $1,354
-------- --------
-------- --------
</TABLE>
See accompanying notes.
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<PAGE>
ACORN PRODUCTS, INC. AND SUBSIDIARIES
INTERIM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Footnote disclosure which would substantially duplicate the disclosure
contained in the Annual Report to Stockholders for the year ended August 1, 1997
has not been included. The unaudited interim consolidated financial statements
reflect all adjustments, in the opinion of management, that are necessary to a
fair statement of results for the periods presented and to present fairly the
consolidated financial position of Acorn Products, Inc. (the "Company") as of
May 1, 1998. All such adjustments are of a normal recurring nature.
2. Inventories of the Company are stated at the lower of cost or market.
Cost is determined using the first-in, first-out (FIFO) method. Inventories
consist of the following:
<TABLE>
<CAPTION>
AUGUST 1, MAY 1,
1997 1998
--------- -------
(IN THOUSANDS)
<S> <C> <C>
Finished goods . . . . . . . . . . . . . . . $14,460 $15,418
Work in process. . . . . . . . . . . . . . . 7,041 7,101
Raw materials and supplies . . . . . . . . . 6,741 9,677
------- -------
28,242 32,196
Valuation reserves . . . . . . . . . . . . . (600) (637)
------- -------
Total inventories. . . . . . . . . . . . . . $27,642 $31,559
------- -------
------- -------
</TABLE>
3. In June 1998, the Company completed the acquisition of Thompson
Manufacturing Company ("Thompson") for approximately $6.65 million. The final
purchase price is subject to certain closing working capital adjustments. The
Company will account for the acquisition as a purchase. Based in Chino,
California, Thompson manufactures and markets consumer-oriented hose attachment
products, such as spray nozzles and sprinklers, as well as commercial irrigation
systems. The Company borrowed approximately $6.7 million through the
acquisition line of its bank credit facility to finance the Thompson
acquisition.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
consolidated financial statements of the Company and the other financial
information included elsewhere in this Quarterly Report on Form 10-Q, as well as
the factors set forth under the caption "Forward-Looking Information" below.
FORWARD-LOOKING INFORMATION
Statements in the following discussion that indicate the Company's or
management's intentions, hopes, beliefs, expectations or predictions of the
future are forward-looking statements. It is important to note that the
Company's actual results could differ materially from those projected in such
forward-looking statements. Additional information concerning factors that
could cause actual results to differ materially from those suggested in the
forward-looking statements is contained under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the Company's Annual Report on Form 10-K for the year ended August 1, 1997,
as well as in the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on September 18, 1997, as the same may be
amended from time to time.
THREE MONTHS ENDED MAY 1, 1998 COMPARED TO THREE MONTHS ENDED MAY 2, 1997
NET SALES. Net sales increased 1.7%, or $641,000, to $37.9 million in
the third quarter of fiscal 1998 compared to $37.3 million in the third
quarter of fiscal 1997. The increase in net sales reflected $3.9 million of
net sales by the Company's injection molding division and the Company's
watering products subsidiary, as well as sales of new products, partially
offset by a decline in net sales of long handle tools of approximately $3.2
million.
GROSS PROFIT. Gross profit decreased 18.0%, or $1.9 million, to $8.5
million in the third quarter of fiscal 1998 compared to $10.3 million in the
third quarter of fiscal 1997. Gross margin decreased to 22.3% in the third
quarter of fiscal 1998 compared to 27.7% in the comparable period in fiscal
1997. The decrease in gross margin primarily was due to lower net sales of
long handle tools and lower overhead absorption rates realized as the Company
decreased production in response to sluggish demand, as well as additional
promotional pricing in response to competitive pressures.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 15.0%, or $719,000, to $5.5 million in the
third quarter of fiscal 1998 compared to $4.8 million in the third quarter of
fiscal 1997. As a percentage of net sales, selling, general and
administrative expenses increased to 14.6% in the third quarter of fiscal
1998 from 12.9% in the third quarter of fiscal 1997. The increase primarily
resulted from increased selling expenses related to trade shows and
cooperative advertising and to increased administrative expenses resulting
from the Company's public company reporting requirements and pursuit of the
Company's acquisition strategy. The Company also incurred additional
selling expenses related to its injection molding division and watering
products subsidiary.
OTHER EXPENSES, NET. Other expenses, net, increased to $102,000 in the
third quarter of fiscal 1998 compared to other income, net of $36,000 in the
third quarter of fiscal 1997 primarily due to foreign currency transaction
gains in the third quarter of 1997 not realized in 1998.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
before income taxes decreased 33.9%, or $970,000, to $1.9 million in the third
quarter of fiscal 1998 compared to $2.9 million in the same period of fiscal
1997. The Company recognized taxes of $549,000 in the third quarter of
fiscal 1998, bringing income from continuing operations to $1.3 million in
the third quarter of fiscal 1998 compared to $2.8 million in the third
quarter of fiscal 1997. The decrease in income from continuing operations
primarily was due to the decline in net sales and gross profit discussed
above, partially offset by a $1.8 million reduction in interest expense as a
result of the retirement of indebtedness in connection with the Company's
initial public offering in July 1997.
NET INCOME. Net income increased $1.0 million to $1.3 million in the
third quarter of fiscal 1998 compared to $317,000 in the third quarter of
fiscal 1997. The Company incurred a loss from discontinued operations of $2.5
million in the third quarter of fiscal 1997.
NINE MONTHS ENDED MAY 1, 1998 COMPARED TO NINE MONTHS ENDED MAY 2, 1997
NET SALES. Net sales increased 1.9%, or $1.5 million, to $79.5 million
in the first nine months of fiscal 1998 compared to $78.0 million in the
first nine months of fiscal 1997. The increase in net sales reflected $7.0
million of net sales by the Company's injection molding division and the
Company's recently acquired H.B. Sherman Manufacturing
-7-
<PAGE>
Company watering products subsidiary, as well as sales of new products,
partially offset by a decline in net sales of long handle tools and snow
tools of approximately $5.4 million.
GROSS PROFIT. Gross profit decreased 11.9%, or $2.5 million, to $18.4
million in the first nine months of fiscal 1998 compared to $20.9 million in
the first nine months of fiscal 1997. Gross margin decreased to 23.2% in the
first nine months of fiscal 1998 compared to 26.8% in the first nine months
of fiscal 1997. The decrease in gross margin primarily was due to lower net
sales of long handle tools and lower overhead absorption rates realized as
the Company decreased production in response to sluggish demand, as well as
additional promotional pricing in response to competitive pressures. Gross
margin also was adversely affected by increased manufacturing costs related
to new product development and lower gross margins realized on sales by the
Company's injection molding division.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 9.7%, or $1.3 million, to $14.8 million in
the first nine months of fiscal 1998 compared to $13.4 million in the first
nine months of fiscal 1997. As a percentage of net sales, selling, general
and administrative expenses increased to 18.6% in the first nine months of
fiscal 1998 compared to 17.2% in the same period of fiscal 1997. The
increase primarily resulted from the addition of selling expenses related to
trade shows and cooperative advertising and to increased administrative
expenses resulting from the Company's public company reporting requirements
and pursuit of the Company's acquisition strategy. The Company also incurred
additional selling expenses related to its injection molding division and
watering products subsidiary.
OTHER EXPENSES, NET. Other expenses, net, decreased $1.0 million to
$181,000 in the first nine months of fiscal 1998 compared to $1.2 million in
the first nine months of fiscal 1997. The Company incurred bank fees of
$951,000 in the second quarter of fiscal 1997.
INCOME FROM CONTINUING OPERATIONS. Income from continuing operations
before income taxes increased to $1.0 million in the first nine months of
fiscal 1998 from a loss of $127,000 in the first nine months of fiscal 1997.
The Company recognized taxes of $303,000 in the in the first nine months of
fiscal 1998, bringing income from continuing operations to $744,000 compared
to a loss of $179,000 in the comparable period of fiscal 1997. The increase
in income from continuing operations primarily was due to a $4.0 million
reduction in interest expense as a result of retirement of indebtedness in
connection with the Company's initial public offering in July 1997 and a $1.0
million reduction in other expenses, net.
NET INCOME. Net income increased $10.5 million to $744,000 in the first
nine months of fiscal 1998 compared to a loss of $9.8 million in the first
nine months of fiscal 1997. The Company incurred a loss from discontinued
operations of $9.6 million in the first nine months of fiscal 1997.
ACQUISITIONS
In June 1998, the Company completed the acquisition of Thompson for
approximately $6.65 million. The final purchase price is subject to certain
closing working capital adjustments. Based in Chino, California, Thompson
manufactures and markets consumer-oriented hose attachment products, such as
spray nozzles and sprinklers, as well as commercial irrigation systems. The
Company borrowed approximately $6.7 million through the acquisition line of
its bank credit facility to finance the Thompson acquisition.
SEASONAL AND QUARTERLY FLUCTUATIONS; IMPACT OF WEATHER
The lawn and garden industry is seasonal in nature, with a high
proportion of sales and operating income generated in January through May.
Accordingly, the Company's sales tend to be greater during its third and
fourth fiscal quarters. As a result, the Company's operating results depend
significantly on the spring selling season. To support this sales peak, the
Company must anticipate demand and build inventories of finished goods
throughout the fall and winter. Accordingly, the Company's level of raw
materials and finished goods inventories tend to be at their highest,
relative to sales, during the Company's first and second fiscal quarters.
These factors increase variations in the Company's quarterly results of
operations and potentially expose the Company to greater adverse effects of
changes in economic and industry trends. Moreover, actual demand for the
Company's products may vary substantially from the anticipated demand,
leaving the Company with excess inventory or insufficient inventory to
satisfy customer orders.
Weather is the single most important factor in determining market demand
for the Company's products and also is the least predictable. For example,
while floods in the Midwest adversely affected the sale of most types of lawn
and garden equipment in 1992, the severe winter of 1994 resulted in a surge
in demand for snow shovels. In addition, bad weather during the spring
gardening season, such as that experienced throughout most of the U.S. in the
spring of 1995 and 1998, can adversely affect overall annual sales.
-8-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
There have been no significant changes in the Company's liquidity or
capital resources as of May 1, 1998 from those discussed in the Company's
Annual Report on Form 10-K for the year ended August 1, 1997.
In July 1997, the Company used approximately $9.6 million of the net
proceeds from its initial public offering to redeem outstanding preferred
stock and pay accumulated dividends thereon, approximately $11.0 million of
the net proceeds from its initial public offering to repay a portion of
certain subordinated notes and accrued interest thereon and approximately
$20.6 million of the net proceeds from its initial public offering to repay a
portion of the indebtedness outstanding under its bank credit facility and
accrued interest thereon. The Company also exchanged the remaining $24
million aggregate principal amount of its outstanding subordinated notes for
1,716,049 shares of its Common Stock.
DISPOSITION OF NON-LAWN AND GARDEN BUSINESS OPERATIONS
In December 1996, the Company sold substantially all of the assets of
VSI Fasteners, Inc. ("VSI"), a distributor of packaged fasteners, for
approximately $6.9 million, plus the assumption of approximately $2.3 million
of related liabilities. In August 1997, the Company sold substantially all
of the assets of McGuire-Nicholas Company, Inc. ("McGuire-Nicholas"), a
manufacturer and distributor of leather, canvas and synthetic fabric tool
holders and work aprons, for approximately $4.3 million, plus the assumption
of approximately $4 million of related liabilities. VSI's and
McGuire-Nicholas' results of operations are shown as "Loss from Discontinued
Operations" in the consolidated financial statements appearing elsewhere in
this Quarterly Report on Form 10-Q. Net liabilities of the discontinued VSI
and McGuire-Nicholas operations are shown as "net liabilities of discontinued
operations" on the consolidated balance sheets appearing elsewhere in this
Quarterly Report on Form 10-Q.
IMPACT OF THE YEAR 2000 ON COMPUTER SYSTEMS
Some of the Company's older computer programs were written using two
digits rather than four to define the applicable year. As a result, those
computer programs have time-sensitive software that recognize a date using
"00" as the year 1900 rather than the year 2000. This could cause a system
failure or miscalculations causing disruptions of operations, including a
temporary inability to process transactions, send invoices or engage in
similar normal business activities.
The Company has determined that it will have to modify or replace
portions of its computer software and hardware so that its computer systems
will function properly with respect to dates in the year 2000 and thereafter.
In addition, the Company has initiated communications with its significant
customers and suppliers to determine the extent to which the Company's
interface systems are vulnerable to the failure of such customers and
suppliers to remediate their own year 2000 issues.
The Company anticipates completing its year 2000 project by December 31,
1998, which is prior to any anticipated impact on its operating systems. The
total cost of the year 2000 project is estimated at approximately $500,000,
which includes approximately $300,000 for the purchase of new computer
software and hardware that will be capitalized and approximately $200,000
that will be expensed as incurred.
The cost of the Company's year 2000 project and its anticipated date of
completion are based on management's current estimates. There can be no
assurance that the Company will not experience cost overruns or delays in the
completion of its year 2000 project. Factors that could cause such cost
overruns or delays include, among other things, an unavailability of properly
trained personnel, unforeseen difficulty locating and correcting relevant
computer codes and similar uncertainties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER MATTERS.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K.
The Registrant did not file any Current Reports on Form 8-K with the
Securities and Exchange Commission for the quarter ended May 1, 1998.
-10-
<PAGE>
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.
ACORN PRODUCTS, INC.
Date: June 11, 1998 By: /s/ Gabe Mihaly
--------------------------------------------
Gabe Mihaly, President and Chief Executive
Officer (Principal Executive Officer)
Date: June 11, 1998 By: /s/ Stephen M. Kasprisin
--------------------------------------------
Stephen M. Kasprisin, Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
-11-
<PAGE>
ACORN PRODUCTS, INC. AND SUBSIDIARIES
FORM 10-Q
EXHIBIT INDEX
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
27 Financial Data Schedule.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUL-31-1998 JUL-31-1998
<PERIOD-START> FEB-01-1998 AUG-02-1997
<PERIOD-END> MAY-01-1998 MAY-1-1998
<EXCHANGE-RATE> 1 1
<CASH> 1,730 1,730
<SECURITIES> 0 0
<RECEIVABLES> 36,487 36,487
<ALLOWANCES> 0 0
<INVENTORY> 31,559 31,559
<CURRENT-ASSETS> 71,378 71,378
<PP&E> 16,407 16,407
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 121,244 121,244
<CURRENT-LIABILITIES> 43,610 43,610
<BONDS> 0 0
0 0
0 0
<COMMON> 78,391 78,391
<OTHER-SE> (14,423) (14,423)
<TOTAL-LIABILITY-AND-EQUITY> 121,244 121,244
<SALES> 37,911 79,470
<TOTAL-REVENUES> 37,911 79,470
<CGS> 29,440 61,057
<TOTAL-COSTS> 29,440 61,057
<OTHER-EXPENSES> 333 849
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 720 1,761
<INCOME-PRETAX> 1,892 1,047
<INCOME-TAX> 549 303
<INCOME-CONTINUING> 1,343 744
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,343 744
<EPS-PRIMARY> 0.21 0.12
<EPS-DILUTED> 0.21 0.12
</TABLE>
