<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED January 31, 1996 Commission File Number 2-63481
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Athanor Group, Inc.
(Exact name of registrant as specified in its chapter)
California 95-2026100
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(State or other jurisdiction (IRS Employer Identification No.)
incorporation of organization)
921 East California Avenue, Ontario, California 91761
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(Address of principal executive offices)
Registrant's telephone number, including area code (909) 467-1205
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Former name, former address and former fiscal year, if changed since last
report.
3452 East Foothill Boulevard, Suite 417, Pasadena, California 91107
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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.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this report:
1,571,354 shares as of March 31, 1996.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE> 3
ATHANOR GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JANUARY 31, 1996 AND OCTOBER 31, 1995
(THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Current Assets:
Cash $ 105 $ 62
Trade Receivables, Less Allowance
for Doubtful Accounts of $12,000
and $12,000 2,719 2,145
Notes Receivable:
Net of Allowance of $534,062 25 25
Inventories:
Raw Materials 1,070 835
Work in Progress 397 519
Finished Goods 1,649 1,618
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3,116 2,972
Prepaid Expenses 90 136
Deferred Income Tax Asset 191 191
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Total Current Assets 6,246 5,531
Property, Plant and Equipment, at Cost 4,640 4,456
Less Accumulated Depreciation and
Amortization 3,428 3,347
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Net Property, Plant and Equipment 1,212 1,109
Other Assets 46 83
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$ 7,504 $ 6,723
======= =======
</TABLE>
The accompanying notes are an integral part of these statements
SUBJECT TO AUDITOR'S YEAR END ADJUSTMENTS
<PAGE> 4
ATHANOR GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JANUARY 31, 1996 AND OCTOBER 31, 1995
(THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Current Liabilities:
Notes Payable $ 1,307 $ 1,177
Current Portion of Long-Term Debt 399 366
Accounts Payable 1,957 1,538
Accrued Expenses 605 606
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Total Current Liabilities $ 4,268 $ 3,687
Long-Term Debt, Less Current Portion 995 974
Deferred Gain on Sale-Leaseback 29 39
Noncurrent Deferred Income Tax Liability 55 55
Stockholders' Equity:
Common Stock 15 15
Additional Paid-In Capital 1,447 1,447
Retained Earnings 695 506
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Total Stockholders' Equity 2,157 1,968
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$ 7,504 $ 6,723
======= =======
</TABLE>
The accompanying notes are an integral part of these statements
SUBJECT TO AUDITOR'S YEAR END ADJUSTMENTS
<PAGE> 5
ATHANOR GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JANUARY 31,
(THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Net Sales $ 6,075 $ 4,662
Cost of Sales 5,053 3,836
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Gross Profit 1,022 826
Selling, General & Administrative 599 570
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Operating Profit 423 256
Other Income (Expense)
Interest Expense (74) (55)
Equity in Loss of Unconsolidated Investee (50) -
Miscellaneous - Net 21 22
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Earnings Before Income Taxes 320 223
Income Tax Expense 131 92
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NET EARNINGS $ 189 $ 131
======= =======
</TABLE>
The accompanying notes are an integral part of these statements
SUBJECT TO AUDITOR'S YEAR END ADJUSTMENTS
<PAGE> 6
ATHANOR GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
(UNAUDITED)
THREE MONTHS ENDED JANUARY 31,
(THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Earnings Per Common Shares: $ 0.12 $ 0.08
======= =======
Primary and Fully Diluted $ 0.12 $ 0.08
======= =======
NET EARNINGS
</TABLE>
The accompanying notes are an integral part of these statements
SUBJECT TO AUDITOR'S YEAR END ADJUSTMENTS
<PAGE> 7
ATHANOR GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED JANUARY 31,
(THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Cash Flows From Operating Activities
Net Earnings $ 189 $ 131
Adjustments to Reconcile Net Earnings to Net Cash
Provided (Used) by Operating Activities:
Equity in Loss of Unconsolidated Investee 50 -
Provision for Deferred Income Taxes - -
Depreciation and Amortization 81 69
Amortization of Deferred Gain on Sale and Leaseback (10) (10)
(Increase) Decrease in Operating Assets:
Accounts Receivable (574) (45)
Inventories (144) (64)
Prepaid Expenses 46 (57)
Other 37 (30)
Increase (Decrease) in Operating Liabilities:
Accounts Payable 419 (30)
Accrued Liabilities (1) (115)
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Net Cash Provided (Used) by Operating Activities 93 (151)
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Cash Flows from Investing Activities:
Purchase of Property and Equipment (184) (15)
Investment / Advances In Unconsolidated Investee (50) -
Short Term Loan - -
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Net Cash Used in Investing Activities (234) (15)
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Cash Flows from Financing Activities:
Net Borrowings Under Line of Credit 130 222
Payment of Loans Payable, Net - (58)
Net Proceeds Long Term Debt 54 -
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Net Cash Provided (Used) in Financing Activities 184 164
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Net increase (Decrease) in Cash 43 (2)
Cash at Beginning of Year 62 149
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Cash at End of Period $ 105 $ 147
======= =======
</TABLE>
The accompanying notes are an integral part of these statements
SUBJECT TO AUDITOR'S YEAR END ADJUSTMENTS
<PAGE> 8
ATHANOR GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
THREE MONTHS ENDED JANUARY 31,
(THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 74 $ 55
======= =======
Income Taxes Paid $ 0 $ 95
======= =======
Supplemental Schedule of Noncash Investing and
Financing Activities:
January 31, 1996
- ----------------
None
January 31, 1995
- ----------------
None
</TABLE>
The accompanying notes are an integral part of these statements
SUBJECT TO AUDITOR'S YEAR END ADJUSTMENTS
<PAGE> 9
Notes to Consolidated Financial Statements
(Unaudited)
January 31, 1996 and 1995
Note 1
Primary earnings per common share are computed by using the weighted average
number of common shares outstanding during the year 1,571,354 shares in 1996
and 1,571,434 shares in 1995.
Note 2
In management's opinion, all adjustments necessary to a fair settlement of the
results of operations for the interim periods, have been reflected.
Note 3
The consolidated financial statements include the accounts of Athanor Group,
Inc., and its subsidiary, Alger Manufacturing Co., Inc. Significant
intercompany accounts and transactions have been eliminated.
Note 4
During 1994, the company changed its method of accounting for deferred taxes
from the deferred method under APB No. 11 to the asset and liability method now
required under SFAS No. 109.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. In addition, net operating loss carryforwards and
credit carryforwards are included as deferred tax assets. A valuation
allowance against deferred tax assets is recorded if necessary. All deferred
tax amounts are measured using enacted tax rated expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Changes in tax rates are recognized in income in the
period that includes the enactment date.
<PAGE> 10
Notes to Consolidated Financial Statements, Continued
Note 5
The Company accounts for its investment in Core Software Technology (Core) on
the equity method of accounting which requires the Company to record its shares
of Core's earnings or losses. During 1995, the Company invested an additional
$123,500 into Core which was subsequently reduced to zero, as of October 1995,
because of losses incurred by Core. During 1996, the Company has invested an
additional $50,000 into Core, which has been written off, due to expected
losses at Core during the same period. At January 31, 1996 and 1995 the
Company owned approximately 21.5% of the issued and outstanding common stock of
Core.
Summarized unaudited financial statements for Core for the year ended December
31, 1996 are as follows:
Assets $ 1,317,000
Liabilities $ 2,729,000
Deficit Equity $(1,410,000)
Sales $ 1,070,000
Expenses $ 2,297,000
Loss $(1,344,000)
Note 6
In April 1995 the Company consummated a transaction, whereby it agreed to
acquire 100,000 shares of its common stock at $2 per share. The agreement
called for 20% down, or $40,000, at the closing and the balance of $160,000 to
be paid in equal annual installments of $40,000 beginning on April 1, 1996,
through April 1, 1999. Interest payments on the unpaid balance are to be paid
quarterly at 8%.
The unpaid balance is secured by an equal amount of the company's common stock
as defined in the agreement.
<PAGE> 11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at January 1996 of $1,978,000 remained healthy
when compared to $1,844,00 at October 1995 and $1,940,000 at January 1995. The
Company's current sales growth continues to require the Company to maintain
high inventory levels to service customers needs as well as for on-time
deliveries.
The Company's credit agreement provides for a total line of credit of
$3,100,000, of which $1,700,000 is for working capital, a $1,000,000 long term
machinery and equipment loan, and a $400,000 line for the acquisition of
additional equipment. At January 1996, the Company had approximately $693,000
available under the working capital line and $300,000 available under the
equipment line as compared to $823,000 and $300,000 , respectively, at October
1995 and $558,000 and $400,000 respectively, at January 1995. The Company
believes that the lines of credit are adequate to fund the working capital
requirements during the balance of 1996. The Company's credit agreement
terminates in August 1996 unless extended in writing by the lender. The company
has no reason to believe that the line of credit will not be extended by the
lender.
The Company acquired $184,000 of new equipment during the first quarter of
1996. $132,000 of the equipment was financed through a five year equipment
lease. The Company anticipates additional equipment purchases during 1996 of
$200,000 to $300,000. The Company's current equipment line of credit of
$300,000 is expected be adequate to fund any additional equipment purchases.
The Company has plans to expand its Phoenix division during 1996. Even though a
specific new location has not yet been designated, it is anticipated that a
minimum of 12,000 to 15,000 square feet will be required. The larger facility
will allow for planned expansion over the next few years as well as provide the
division with a better equipped, autonomous working environment. The expansion
is expected to cost between $150,000 and $200,000, including equipment and
leasehold improvements, over a period of six to twelve months. The Company
believes it will be able to fund these costs from working capital and its
equipment line of credit.
RESULTS OF OPERATIONS
Sales for the first quarter of 1996 showed a 30% growth over the same period in
1995. The growth was a continuation of the sales increases the company had
experienced during all of 1995. The Company anticipates a slight downturn in
sales for the balance of 1996, as the economy appears to be slowing. Even
though the Company's backlog
<PAGE> 12
of $5,931,000 at January 1996 continues to show a strong demand for our
services, as compared to $6,134,000 at October 1995 and $5,503,000 at January
1995, there are indications of a slow down in recent orders and delivery
schedules.
Operating profits of $423,000 for the quarter ended January 1996 as compared to
$256,000 for January 1995 directly reflect the Company's higher sales activity.
The increase in sales has also caused an increase in borrowings under the
Company's working capital line of credit. The combination of the increased
borrowings under the line and the equipment purchases in 1995, are the factors
in a 35% increase in interest expense during 1996.
In February 1995, the Company leased 17,000 square feet of additional
manufacturing facilities in Ontario, California. The lease is effective March
1995 through September 1997. Improvements to the additional facilities cost
approximately $50,000, in addition to the labor and overhead associated with
setting up the facility, before the facility became functional.
<PAGE> 13
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) None
(b) No reports on Form 8-K have been filed during the
quarter for which this report is filed.
<PAGE> 14
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.
ATHANOR GROUP, INC.
Date March 20, 1996 By /s/ Duane L. Femrite
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Duane L. Femrite
President, Chief Executive Officer,
Chief Operating Officer,
Chief Financial Officer, and
Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF EARNINGS AND CONSOLIDATED BALANCE SHEETS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 105
<SECURITIES> 0
<RECEIVABLES> 2,731
<ALLOWANCES> 12
<INVENTORY> 3,116
<CURRENT-ASSETS> 6,246
<PP&E> 4,640
<DEPRECIATION> 3,428
<TOTAL-ASSETS> 7,504
<CURRENT-LIABILITIES> 4,268
<BONDS> 0
<COMMON> 15
0
0
<OTHER-SE> 2,142
<TOTAL-LIABILITY-AND-EQUITY> 7,504
<SALES> 6,075
<TOTAL-REVENUES> 6,075
<CGS> 5,053
<TOTAL-COSTS> 5,652
<OTHER-EXPENSES> 29
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74
<INCOME-PRETAX> 320
<INCOME-TAX> 131
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 189
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
