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, 1997
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 6, 1997:
Class A - Voting 84,984 shares
Class B - Non-voting 1,238,184 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, 1997 and 1996
Consolidated Condensed Balance Sheets at March 31, 1997
and December 31, 1996
Consolidated Condensed Statements of Cash Flows for the
three months ended March 31, 1997 and 1996
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:
3/31/97 3/31/96
Net Sales $ 8,878,959 $ 8,449,206
Costs and expenses
Costs of sales 5,873,259 5,395,293
Selling, general and
administrative 1,753,184 1,477,287
Research and development 609,620 661,509
Total Costs and Expenses 8,236,063 7,534,089
Income from operations 642,896 915,117
Other Income (Expense)
Interest and other income 412,178 622,255
Interest expense -- (8,603)
Minority interests in
consolidated subsidiaries 8,650 22,219
Total Other Income and Expense 420,828 635,871
Income before taxes on income 1,063,724 1,550,988
Provision for taxes on income 371,000 542,000
Net Income $ 692,724 $ 1,008,988
Earnings per share $0.52 $0.74
Shares used in per share
calculation 1,323,883 1,360,309
Dividends per share - Cash $0.14 $0.13
See accompanying notes.
<PAGE>
ALLEN ORGAN COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, Dec 31,
ASSETS 1997 1996
(Unaudited) (Audited)
Current Assets
Cash $ 802,883 $ 781,202
Investments Including Accrued Interest 28,157,525 29,016,935
Accounts Receivable 4,906,060 4,817,939
Inventories:
Raw Materials 6,977,242 6,449,729
Work in Process 6,502,158 5,912,456
Finished Goods 1,797,324 1,709,962
Total Inventories 15,276,724 14,072,147
Prepaid Income Taxes 250,539 397,404
Prepaid Expenses 217,125 142,769
Deferred Income Tax Benefits 50,850 --
Total Current Assets 49,661,706 49,228,396
Property, Plant and Equipment 18,199,913 17,741,131
Less Accumulated Depreciation (10,073,037) (9,893,616)
Total Property, Plant and Equipment 8,126,876 7,847,515
Other Assets
Prepaid Pension Costs 821,709 889,206
Inventory Held for Future Service 1,235,632 1,237,986
Note Receivable 163,148 163,148
Cash Value of Life Insurance 858,217 858,217
Intangible and Other Assets 3,707,551 3,742,178
Total Other Assets 6,786,257 6,890,735
Total Assets $64,574,839 $63,966,646
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts Payable $ 685,033 $ 396,173
Deferred Income Taxes -- 60,033
Other Accrued Expenses 749,231 499,355
Customer Deposits 582,780 761,739
Total Current Liabilities 2,017,044 1,717,300
Noncurrent Liabilities
Deferred Liabilities 780,314 782,189
Total Liabilities 2,797,358 2,499,489
STOCKHOLDERS' EQUITY
Common Stock 1997 1996
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 52,915,056 49,786,163
Net Income 692,724 3,865,876
Dividends - Cash 1997 and 1996 (185,318) (736,983)
Balance, End 53,422,462 52,915,056
Unrealized (Loss) Gain on Investments (73,871) 89,380
Minority Interest 152,883 157,826
Treasury Stock
1997 - 43,120 Class A shares;
171,372 Class B shares (6,020,596) --
1996 - 43,120 Class A shares;
170,636 Class B shares -- (5,991,708)
Total Stockholders' Equity 61,777,481 61,467,157
Total Liabilities and Stockholders' Equity $64,574,839 $63,966,646
See accompanying notes.
<PAGE>
ALLEN ORGAN COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the 3 Months
Ended:
3/31/97 3/31/96
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 692,724 $ 1,008,988
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 226,930 212,532
Minority interest in consolidated subsidiaries (8,650) (22,219)
Change in assets and liabilities
(Increase) Decrease in accounts receivable (88,121) (44,954)
(Increase) Decrease in inventories (1,202,223) (520,267)
(Increase) Decrease in prepaid income taxes 146,865 540,000
(Increase) Decrease in prepaid expenses (74,356) (171,186)
(Increase) Decrease in prepaid pension costs 67,497 120,000
(Decrease) Increase in accounts payable 288,860 104,419
(Decrease) Increase in accrued expenses 249,876 (161,073)
(Decrease) Increase in customer deposits (178,959) 217,183
(Decrease) Increase in other noncurrent liabilities (1,875) (41,911)
Net Cash Provided by Operating Activities 118,568 1,241,512
CASH FLOW FROM INVESTING ACTIVITIES
Net additions to plant and equipment (471,664) (116,746)
Purchase of minority shareholders'
interest in subsidiary -- (20,000)
Net sale (or purchase) of short term investments 585,276 (291,334)
Net Cash Provided by (Used In)
Investing Activities 113,612 (428,080)
CASH FLOWS FROM FINANCING ACTIVITIES
Reacquired Class B common shares (28,888) (394,380)
Dividends paid in cash (185,318) (177,182)
Subsidiary company stock reacquired from
minority shareholders (14,675) --
Subsidiary company stock issued to
minority shareholders 18,382 --
Net Cash Used In Financing Activities (210,499) (571,562)
NET INCREASE (DECREASE) IN CASH 21,681 241,870
CASH, BEGINNING 781,202 196,100
CASH, ENDING $ 802,883 $ 437,970
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for:
Income Taxes $ 224,000 $ --
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 1996 Annual Report on Form 10-K.
2. Subsequent Event
On April 1, 1997 the Company announced that it has purchased a 75%
interest in Legacy Audio in exchange for $1,500,000 in cash.
In connection with the acquisition, the company established a new
subsidiary, Legacy Audio, Inc. (LAI), to acquire the assets of the
seller. A founding owner of the seller contributed the remaining 25%
of the assets of the seller to the new company in exchange for a 25%
interest in LAI. Additionally, this founding owner has been named the
President and Chief Designer of LAI.
The acquisition will be accounted for as a purchase. The results of
operations of LAI will be included in the companies financial
statements from the date of the acquisition. Assets and liabilities
will be recorded at their estimated fair market values with the excess
being recorded as goodwill to be amortized over 40 years.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.
Sales and Operating Income
For the 3 Months Ended:
3/31/97 3/31/96
Net Sales
Musical Instruments 5,527,463 5,883,393
Data Communications 2,153,386 1,629,571
Electronic Assemblies 1,198,110 936,242
Total 8,878,959 8,449,206
Income from operations
Musical Instruments 546,991 739,371
Data Communications (51,229) 41,507
Electronic Assemblies 147,134 134,239
Total 642,896 915,117
Musical Instruments Segment
Sales declined $355,930 in the first quarter of 1997 when compared to
the same period in 1996 and declined $1,970,315 when compared to the
preceding quarter ended December 31, 1996. These declines are due to lower
incoming orders and changes in product mix. The preceding quarter ended
December 31, 1996 sales reflected reductions in the order backlog for pre-
holiday delivery of instruments.
Gross profit margins declined slightly to 31.3% of sales in the first
quarter of 1997 from 31.9% and 34% when compared to the same period in 1996
and the preceding quarter ended December 31, 1996, respectively. These
declines are primarily due to changes in product mix and lower sales volume
over which to absorb fixed costs.
Selling, general and administrative expenses increased slightly when
compared to the same period in 1996 and declined slightly when compared to
the preceding quarter ended December 31, 1996.
Data Communications Segment
Sales increased $533,177 in the first quarter of 1997 when compared to
the same period in 1996 and increased $111,032 from the preceding quarter
ended December 31, 1996 from higher order volume.
Gross profit margins were approximately equal to the preceding quarter
ended December 31, 1996 and decreased to 51.2% of sales from 60.6% when
compared to the same period in 1996 due to changes in product mix.
Selling, general and administrative expenses in the first quarter of
1997 increased when compared to the same period in 1996 primarily due to
the addition of personnel and expansion of marketing programs to further
promote the segment's products and obtain additional market share. These
expenses were approximately equal to the preceding quarter ended December
31, 1996.
Research and development expenses declined slightly when compared to the
same period in 1996 and the preceding quarter ended December 31, 1996.
These expenditures will increase in the future reflecting the segments
commitment to new product development and support.
Electronic Assemblies Segment
Sales for the first quarter of 1997 increased $261,868 over the same
period in 1996 and $386,170 from the preceding quarter ended December 31,
1996 from additional order volume. Operating income increased from the
higher sales volume.
Other Income and Expense
Decrease of $215,043 is primarily attributable to realized gains on sales
of investments in the first quarter of 1996 which did not reoccur in 1997.
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 31,1997.
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 7, 1997 STEVEN MARKOWITZ
Steven Markowitz, President and
Chief Executive Officer
Date: May 7, 1997 LEONARD W. HELFRICH
Leonard W. Helfrich,
Vice President - Finance
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARCH 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
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<PERIOD-END> MAR-31-1997
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<DEPRECIATION> (10,073,037)
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<CURRENT-LIABILITIES> 2,017,044
<BONDS> 0
<COMMON> 1,537,993
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<SALES> 8,878,959
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