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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1994 Commission File No. 1-4290
ANTHONY INDUSTRIES, INC.
(exact name of registrant as specified in its charter)
DELAWARE 95-2077125
(State of Incorporation) (I.R.S. Employer Identification No.)
4900 South Eastern Avenue
Los Angeles, California 90040
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (213) 724-2800
Former name, former address and former fiscal year, if changed since last
report:
Not applicable
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of April 30, 1994.
Common Stock, par value $1 11,235,474 Shares
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FORM 10-Q QUARTERLY REPORT
PART - 1 FINANCIAL INFORMATION
Item 1. Financial Statements
STATEMENTS OF CONSOLIDATED INCOME (condensed)
(In thousands except for per share figures)
(Unaudited)
<TABLE>
<CAPTION>
Three months
ended March 31
-------------------
1994 1993(a)
-------------------
<S> <C> <C>
Net sales $109,735 $97,976
Other income 368 393
-------- -------
110,103 98,369
Costs and expenses
Cost of products sold 83,053 73,329
Selling, G&A expenses 24,766 21,911
Interest expense 1,574 1,760
-------- -------
109,393 97,000
Pretax income 710 1,369
Provision for income taxes 250 480
-------- -------
NET INCOME $460 $889
======== =======
PER SHARE
Net Income $.04 $.08
Cash dividend $.11 $.105
Average shares outstanding 11,342 11,178
</TABLE>
(a) Shares and per share figures have been retroactively adjusted for the 5%
stock dividend paid in December 1993.
See notes to financial statements.
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CONSOLIDATED BALANCE SHEETS (condensed)
<TABLE>
<CAPTION>
March 31 December 31
1994 1993
(Unaudited)
----------- -----------
(thousands)
<S> <C> <C>
Assets
- - ------
Current Assets
Cash and cash equivalents $3,692 $5,860
Accounts receivable, less allowances of
$4,378 in 1994 and $7,262 in 1993 95,505 90,056
Inventories
Finished goods 57,658 55,322
Work in process 9,535 8,985
Raw materials 23,715 24,164
-------- --------
90,908 88,471
Less LIFO reserve 6,377 6,096
-------- --------
84,531 82,375
Deferred taxes 6,875 6,392
Prepaid expenses and other current assets 3,877 3,073
-------- --------
Total current assets 194,480 187,756
Property, Plant and Equipment 123,835 122,085
Less allowance for depreciation 73,920 71,991
-------- --------
49,915 50,094
Intangibles, principally goodwill 15,609 15,829
Other 3,251 3,600
-------- --------
Total Assets $263,255 $257,279
======== ========
</TABLE>
See notes to financial statements.
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CONSOLIDATED BALANCE SHEETS (condensed)
<TABLE>
<CAPTION>
March 31 December 31
1994 1993
(Unaudited)
----------- -----------
(thousands)
<S> <C> <C>
Liabilities and Shareholders' Equity
- - ------------------------------------
Current Liabilities
Bank loans $ 6,687 $ 6,288
Accounts payable 26,995 25,144
Accrued payroll and related 17,194 17,442
Other accruals 16,709 14,378
Current portion of long-term debt 6,934 6,724
---------- ----------
Total current liabilities 74,519 69,976
Long-Term Debt 88,743 87,271
Deferred Taxes 11,283 11,376
Commitments and Contingencies
Shareholders' Equity
Preferred Stock $1 par value, authorized
12,500,000 shares, none issued
Common Stock, $1 par value, authorized
$40,000,000 shares, issued shares -
11,697,805 in 1994 and 11,681,393 in 1993 11,698 11,681
Additional paid-in capital 57,012 56,863
Retained earnings 30,120 30,895
Employee Stock Ownership Plan and
stock option loans (3,359) (3,361)
Treasury shares at cost, 469,681 shares (3,993) (3,993)
Cumulative translation adjustments (2,768) (3,429)
---------- ----------
Total Shareholders' Equity 88,710 88,656
---------- ----------
Total Liabilities and Shareholder's Equity $263,255 $257,279
========== ==========
</TABLE>
See notes to financial statements.
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STATEMENTS OF CONSOLIDATED CASH FLOWS (condensed)
<TABLE>
<CAPTION>
Three months
ended March 31
(Unaudited)
------ ------
1994 1993
----------------
(thousands)
<S> <C> <C>
Operating Activities
Net income $ 460 $ 889
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,296 2,344
Deferred taxes (576) 318
Changes in operating assets and liabilities:
(Increase) in accounts receivable (5,449) (5,185)
(Increase) decrease in inventories (2,156) 929
(Increase) decrease in prepaid expense and other
current assets (266) 682
Increase in accounts payable 1,851 964
Increase in payroll, taxes and other accruals 2,621 2,150
------ ------
Net cash provided by (used in) operating
activities (1,219) 3,091
Investing Activities
Property, plant & equipment expenditures (1,880) (1,421)
Disposals of property, plant & equipment 37 83
Other items, net 48 (346)
------ ------
Net cash used in investing activities (1,795) (1,684)
Financing Activities
Borrowings under long-term debt and revolving
lines of credit 5,328
Payments of long-term debt and revolving
lines of credit (3,646) (1,829)
Dividends paid (1,235) (1,164)
Net increase in short-term bank loans 399 1,495
------ ------
Net cash provided by (used by) financing activities 846 (1,498)
------ ------
Net decrease in cash and cash equivalents (2,168) (91)
Cash and cash equivalents at beginning of year 5,860 2,123
------ ------
Cash and cash equivalents at end of period $3,692 $2,032
====== ======
Supplemental disclosure of cash flow information:
Interest paid $ 818 $1,118
Income taxes paid 826 220
------ ------
$1,644 $1,338
====== ======
</TABLE>
See notes to financial statements.
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NOTE 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulations S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31,
1994 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1994. For further information, refer to the
Consolidated Financial Statements and Notes to Financial Statements included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1993.
NOTE 2 - Long-Term Debt Dividend Restrictions
The $60 million revolving credit line is subject to an agreement which among
other things, restricts amounts available for payment of cash dividends by the
Company. As of March 31, 1994, retained earnings of $5.1 million were free of
such restrictions.
NOTE 3 - Change in Method of Accounting for Cash Equivalents
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Under Statement 115, debt securities that the Company has both the
positive intent and ability to hold to maturity may be carried at amortized
cost. All of the Company's cash equivalents are debt securities and are
classified as "hold-to-maturity." The adoption of Statement 115 had no effect on
the Company's financial position or results from operations.
NOTE 4 - Commitments and Contingencies
The Company is subject to various legal actions and proceedings in the normal
course of business. While the ultimate outcome of these matters cannot be
predicted with certainty, management does not believe these matters will have a
material adverse effect on the Company's financial position or results from
operations.
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ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
A. Comparative First Quarter Results of Operations
Consolidated net sales for the first quarter of 1994 increased 12%, to $109.7
million from $98.0 million in the year-earlier period. Net income for the
quarter was $460,000, or 4 cents a share, down from $889,000 or 8 cents a share
in 1993.
Net sales of the Recreational Products Group for the first quarter increased
$8.8 million, to $69.9 million from $61.1 million in the prior year. The
increase in sales was largely the result of new products and markets entered
into recently. Shipments of K2 Exotech in-line skates were delivered in the
first quarter on a worldwide basis as initial orders from customers were filled.
Improved sales of snowboards and Norway-produced alpine skis also contributed to
the improved quarter. In its first full quarter since its acquisition by the
Company, shipments of Proflex full-suspension mountain bikes and accessories
were made in the U.S. and Europe. A contribution to increased sales was also
the result of increased demand for several new shirt styles and jackets
introduced by Hilton for the ad specialty and imprint markets. Finally, an
improvement in the economy has helped increase pool and remodel sales in the
East Coast, Florida and Texas. The Industrial Products Group reported sales of
$39.8 million, up $2.9 million from the prior years total of $36.9 million, due
to sales gains in utility light poles and industrial building products partially
offset by lower sales of paperweaving monofilaments.
Cost of goods sold increased $9.7 million from the year-ago period. The 1994
period included approximately $2.0 million of costs incurred in the development
and installation of production processes capable of producing cap skis for sale
under the K2, Olin, and Pre brands. These conversion costs appear to be
substantially completed. The remaining increase in cost of goods sold was
primarily volume-related, however, the quarter also included the favorable
impact of lower costs incurred in the manufacture of active wear, jackets and
flotation devices and in the construction of swimming pools. Selling, general
and administrative expenses as a percent of sales increased slightly during the
period. Interest expense declined $358,000 due to lower interest rates, which
was partially offset by an increase of $172,000 on $10.7 million of higher
average borrowings. Pretax income declined $659,000, from $1.4 million in the
prior year, reflecting
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the impact of the cap ski production conversion costs which more than offset the
volume and manufacturing gains obtained.
B. Financial Condition
Cash used by operations for the three months ended March 30, 1994 was $1.2
million as compared with cash provided by operations of $3.1 million in the
corresponding quarter a year ago. The change in cash flow was primarily the
result of an increase in inventories from the acquisition of Girvin in October
of 1993. Consistent with prior years, the allowance for doubtful items
decreased as a result of a seasonal reduction in the allowance for volume
discounts.
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
(c) At the Annual Meeting of the Stockholders of the Company
held May 5, 1994, the following action was taken:
(1) Election of directors:
Myron P. Anthony, 9,060,816 votes for, 622,032 votes
withheld;
B.I. Forester, 9,097,114 votes for, 585,734 votes
withheld;
R.L. Goldberg, 9,088,911 votes for, 593,937 votes
withheld.
(2) 1994 Incentive Stock Option Plan:
7,005,882 votes for, 1,031,727 votes against, 157,919 votes
abstaining, 1,487,320 broker nonvotes.
(3) Ratification of Ernst & Young as the Company's
independent auditors:
9,522,825 votes for, 80,695 votes against, 79,328 votes
abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended March 31, 1994.
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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.
ANTHONY INDUSTRIES,INC.
(registrant)
Date: May 12, 1994 /s/ Bernard I. Forester
-----------------------
B.I. Forester
Chairman and Chief Executive
Date: May 12, 1994 /s/ John J. Rangel
------------------
John J. Rangel
Senior Vice President - Finance
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