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 Quarter Ended March 31, 1996
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
Commission File Number 0-275
Allen Organ Company
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1263194
(State of Incorporation) (I.R.S. Employer Identification No.)
150 Locust Street, P. O. Box 36, Macungie, Pennsylvania 18062-0036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-966-2200
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 _____
Number of shares outstanding of each of the issuer's classes of common
stock, as of May 14, 1996:
Class A - Voting 84,984 shares
Class B - Non-voting 1,257,948 shares
<PAGE>
ALLEN ORGAN COMPANY
INDEX
Part I Financial Information
Item 1. Financial Statements
Consolidated Condensed Statements of Income for the three months
ended March 31, 1996 and 1995
Consolidated Condensed Balance Sheets at March 31, 1996 and
December 31, 1995
Consolidated Condensed Statements of Cash Flows for the three
months ended March 31, 1996 and 1995
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
ALLEN ORGAN COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
For the 3 Months
Ended:
3/31/96 3/31/95
Net Sales $8,449,206 $6,498,325
Costs and expenses
Costs of sales 5,395,293 4,432,436
Selling, general and
administrative 1,477,287 1,012,620
Research and development 661,509 160,604
Total Costs and Expenses 7,534,089 5,605,660
Income from operations 915,117 892,665
Other Income (Expense)
Interest and other income 622,255 406,707
Interest expense (8,603) --
Minority interests in
consolidated subsidiaries 22,219 --
Total Other Income and
Expense 635,871 406,707
Income before taxes on
income 1,550,988 1,299,372
Provision for taxes on
income 542,000 475,000
Net Income $1,008,988 $824,372
Earnings per share $0.74 $0.60
Shares used in per share
calculation 1,360,309 1,364,147
Dividends per share - Cash $0.13 $0.13
See accompanying notes.
<PAGE>
ALLEN ORGAN COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, Dec 31,
ASSETS 1996 1995
(Unaudited) (Audited)
Current Assets
Cash $ 437,970 $ 196,100
Investments Including Accrued Interest 30,999,005 30,766,266
Accounts Receivable 4,476,453 4,431,499
Inventories:
Raw Materials 5,251,536 6,788,504
Work in Process 6,779,131 5,658,610
Finished Goods 1,289,156 981,471
Total Inventories 13,319,823 13,428,585
Prepaid Income Taxes 316,630 856,630
Prepaid Expenses 274,606 103,420
Total Current Assets 49,824,487 49,782,500
Property, Plant and Equipment 17,164,009 17,057,373
Less Accumulated Depreciation (9,441,269) (9,278,875)
Total Property, Plant and Equipment 7,722,740 7,778,498
Other Assets
Prepaid Pension Costs 901,517 1,021,517
Inventory Held for Future Service 1,218,016 1,219,872
Note Receivable 122,586 122,586
Cash Value of Life Insurance 629,481 629,481
Intangible and Other Assets 3,840,653 4,744,972
Total Other Assets 6,712,253 7,738,428
Total Assets $64,259,480 $65,299,426
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Current Portion of Long Term Debt $ -- $ 347,000
Accounts Payable 639,695 535,276
Deferred Income Taxes 64,322 64,322
Other Accrued Expenses 1,856,720 1,691,328
Customer Deposits 680,202 463,019
Total Current Liabilities 3,240,939 3,100,945
Noncurrent Liabilities
Deferred Liabilities 799,776 841,687
Long Term Debt, Net of Current Portion -- 1,388,000
Total Noncurrent Liabilities 799,776 2,229,687
Total Liabilities 4,040,715 5,330,632
STOCKHOLDERS' EQUITY
Common Stock 1996 1995
Class A 128,104 shares; 128,104 shares 128,104 128,104
Class B 1,409,889 shares; 1,409,889 shares 1,409,889 1,409,889
Capital in Excess of Par Value 12,758,610 12,758,610
Retained Earnings
Balance, Beginning 49,786,163 46,524,142
Net Income 1,008,988 4,015,105
Dividends - Cash 1996 and 1995 (177,182) (753,084)
Balance, End 50,617,969 49,786,163
Unrealized Gain on Investments 35,541 94,136
Minority Interest 185,081 313,941
Treasury Stock
1996 - 43,120 Class A shares
151,941 Class B shares (4,916,429) --
1995 - 43,120 Class A shares
131,835 Class B shares -- (4,522,049)
Total Stockholders' Equity 60,218,765 59,968,794
Total Liabilities and Stockholders' Equity $64,259,480 $65,299,426
See accompanying notes.
<PAGE>
ALLEN ORGAN COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the 3 Months Ended:
3/31/96 3/31/95
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,008,988 $824,372
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 212,532 130,414
Minority interest in consolidated
subsidiaries (22,219) --
Change in assets and liabilities
(Increase) Decrease in accounts
receivable (44,954) (221,417)
(Increase) Decrease in inventories (520,267) (631,672)
(Increase) Decrease in prepaid income
taxes 540,000 276,580
(Increase) Decrease in prepaid expenses (171,186) (87,491)
(Increase) Decrease in prepaid pension
costs 120,000 --
(Increase) Decrease in deferred income
tax benefits -- 54,735
(Decrease) Increase in accounts payable 104,419 49,046
(Decrease) Increase in accrued taxes -- 145,508
(Decrease) Increase in accrued expenses (161,073) 26,135
(Decrease) Increase in customer deposits 217,183 18,179
(Decrease) Increase in other noncurrent
liabilities (41,911) 82,725
Net Cash Provided by Operating
Activities 1,241,512 667,114
CASH FLOW FROM INVESTING ACTIVITIES
Net additions to plant and equipment (116,746) (55,115)
Purchase of minority shareholders'
interest in subsidiary (20,000) --
Net sale (or purchase) of short term
investments (291,334) 61,023
Net Cash Provided by (Used In)
Investing Activities (428,080) 5,908
CASH FLOWS FROM FINANCING ACTIVITIES
Reacquired Class B common shares (394,380) (24,943)
Dividends paid in cash (177,182) (177,305)
Net Cash Used In Financing Activities (571,562) (202,248)
NET INCREASE (DECREASE) IN CASH 241,870 470,774
CASH, BEGINNING 196,100 105,067
CASH, ENDING $437,970 $575,841
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for:
Income Taxes $ -- $87,945
Interest $51,616 $ --
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Purchase price adjustment of August 1, 1995
acquisition:
Decrease in accrued liability incurred
to purchase inventory $630,885 $ --
Decrease in long term debt 1,735,000 --
Decrease in minority interest 86,641 --
Decrease in inventory (630,885) --
Decrease in intangible assets (Goodwill) (864,291) --
Increase in current accrued liabilities (957,350) --
Total $ -- $ --
See accompanying notes.
<PAGE>
ALLEN ORGAN COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The results of operations for the interim periods shown in this report
are not necessarily indicative of results to be expected for the fiscal
year. In the opinion of management, the information contained herein
reflects all adjustments necessary to make the results of operations
for the interim periods a fair statement of such operations. All such
adjustments are of a normal recurring nature.
Certain notes and other information have been condensed or omitted from
the interim financial statements presented in the Quarterly Report on
Form 10-Q. Therefore, these financial statements should be read in
conjunction with the company's 1995 Annual Report on Form 10-K.
2. Subsequent Event
On May 10, 1996, the Company entered into an agreement with the seller
of the three data communications companies acquired on August 1, 1995,
to settle an indemnity claim against the seller by adjusting the
purchase price and payment terms for the acquired companies.
The terms of the agreement provide for the $880,885 balance due on the
obligation incurred to purchase some of the inventory to be satisfied
by the payment of $250,000. Further, the Note Payable of $1,735,000
issued as part of the purchase price has been canceled in exchange for
a current payment of $900,000 and a contingent annual payment for five
years, effective January 1, 1996, of 4.5% of the acquired companies
annual sales exceeding $7,000,000 (the acquired companies proforma net
sales were $7,397,472 and $5,208,003 in 1995 and 1994 respectively).
The agreement provides that the total of the contingent payments shall
not exceed $2,000,000. The employment agreement between VIR and its
President (majority owner of the selling companies) has been modified
so that he shall now be a consultant to the companies, with payment
based on the number of hours worked at the request of the companies.
The March 31, 1996 financial statements have been adjusted to reflect
the terms of the agreement.
3. Pro Forma Financial Information
The following pro forma financial information has been prepared giving
effect to the acquisition of VIR, ERI, and LSC as if the transaction
had taken place at the beginning of the applicable period. The pro
forma financial information is not necessarily indicative of the
results of operations which would have been attained had the
acquisitions been consummated on any of the foregoing dates or which
may be attained in the future.
For the 3 Months Ended:
3/31/95
Net Sales $8,293,889
Net Income 913,677
Net Income Per Share $0.67
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.
Sales and Operating Income
For the 3 Months
Ended:
3/31/96 3/31/95
Net Sales
Musical Instruments 5,883,393 5,934,161
Data Communications 1,629,571 --
Electronic Assemblies 936,242 564,164
Total 8,449,206 6,498,325
Income from operations
Musical Instruments 739,371 814,152
Data Communications 41,507 --
Electronic Assemblies 134,239 78,513
Total 915,117 892,665
Musical Instruments Segment
Sales, gross profit margins, selling, general and administrative
expenses for the first quarter of 1996 remained approximately the same as
the same period in 1995.
Sales decreased $379,256 from the preceding quarter ended December 31,
1995 from a lower volume of incoming orders. Gross profit margins on
sales, and selling, general and administrative expenses were approximately
equal to the same period in 1995.
Data Communications Segment
Sales increased slightly from the preceding quarter ended December 31,
1995 from increased order volume. Gross profit margins increased to 60.6%
of sales from 57.2% in the preceding quarter ended December 31, 1995 from
higher sales over which to absorb fixed costs and variations in product
mix. Selling, general and administrative expenses increased slightly from
the preceding quarter ended December 31, 1995 primarily due to higher sales
and marketing costs. Research and development expenses were $462,521, an
increase of $77,561, when compared to the preceding quarter ended December
31, 1995. These expenditures, which the company plans to continue at a
similar pace in the future, reflects the segments commitment to new product
development and support. For information pertaining to an agreement
affecting the data communications segments, see note 2 to the Consolidated
Condensed Financial Statements.
Electronic Assemblies Segment
Sales for the first quarter of 1996 increased $372,078 over the same
period in 1995 and $472,087 from the preceding quarter ended December 31,
1995 from increased order volume. Operating income increased
proportionally with the increase in sales volume.
Other Income and Expense
Increase of $229,164 is primarily attributable to realized gains on
sales of investments.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1996.
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.
Allen Organ Company
(Registrant)
Date: May 14, 1996 STEVEN MARKOWITZ
Steven Markowitz, President and
Chief Executive Officer
Date: May 14, 1996 LEONARD W. HELFRICH
Leonard W. Helfrich, Treasurer and
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARCH 31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
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<RECEIVABLES> 4,476,453
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<INVENTORY> 13,319,823
<CURRENT-ASSETS> 49,824,487
<PP&E> 17,164,009
<DEPRECIATION> (9,441,269)
<TOTAL-ASSETS> 64,259,480
<CURRENT-LIABILITIES> 3,240,939
<BONDS> 0
<COMMON> 1,537,993
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<OTHER-SE> 58,680,772
<TOTAL-LIABILITY-AND-EQUITY> 64,259,480
<SALES> 8,449,206
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<CGS> 5,395,293
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<OTHER-EXPENSES> 2,138,796
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<INCOME-PRETAX> 1,550,988
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