<PAGE>
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 September 30, 1995 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 October 31, 1995.
Common Stock, par value $1 16,527,731 Shares
1
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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 Nine months
ended September 30 ended September 30
--------------------- ---------------------
1995 1994(a) 1995 1994(a)
-------- --------- ------- -------
<S> <C> <C> <C> <C>
Net sales $156,282 $127,863 $460,719 $369,363
Cost of products sold 114,911 93,387 341,670 271,735
-------- -------- -------- --------
Gross profit 41,371 34,476 119,049 97,628
Selling expenses 18,297 15,763 53,028 45,229
General and administrative expenses 11,760 9,905 37,720 33,002
-------- -------- -------- --------
Operating income 11,314 8,808 28,301 19,397
Interest expense 1,929 1,937 7,476 5,205
Other (income) (446) (101) (1,232) (1,194)
-------- -------- -------- --------
Income before taxes 9,831 6,972 22,057 15,386
Provision for income taxes 3,245 2,440 7,020 5,385
-------- -------- -------- --------
NET INCOME $ 6,586 $ 4,532 $ 15,037 $ 10,001
======== ======== ======== ========
PER SHARE
Net Income $.40 $.38 $1.09 $.84
Cash dividend $.11 $.105 $.33 $.315
Average shares outstanding 16,598 11,910 13,831 11,910
</TABLE>
(a) Shares and per share figures have been retroactively adjusted for the 5%
stock dividend paid in December 1994.
See notes to consolidated condensed financial statements.
2
<PAGE>
CONSOLIDATED BALANCE SHEETS (condensed)
<TABLE>
<CAPTION>
September 30 December 31
1995 1994
(Unaudited)
------------ -----------
(thousands)
<S> <C> <C>
Assets
------
Current Assets
Cash and cash equivalents $4,043 $7,700
Accounts receivable, less allowances of
$9,037 in 1995 and $8,425 in 1994 143,647 111,154
Inventories
Finished goods 89,721 66,900
Work in process 12,529 8,788
Raw materials 31,760 32,216
-------- --------
134,010 107,904
Less LIFO reserve 6,903 6,162
-------- --------
127,107 101,742
Deferred taxes 4,905 7,928
Prepaid expenses and other current assets 5,086 4,324
-------- --------
Total current assets 284,788 232,848
Property, Plant and Equipment 145,431 131,459
Less allowance for depreciation 86,436 79,095
-------- --------
58,995 52,364
Intangibles, principally goodwill 17,434 15,825
Other 3,198 3,377
-------- --------
Total assets $364,415 $304,414
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE>
CONSOLIDATED BALANCE SHEETS (condensed)
<TABLE>
<CAPTION>
September 30 December 31
1995 1994
(Unaudited)
------------ -----------
(thousands)
<S> <C> <C>
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities
Bank loans $ 50,534 $ 18,341
Accounts payable 29,016 26,858
Accrued payroll and related 19,582 18,697
Other accruals 20,349 15,788
Current portion of long-term debt 372 2,918
-------- --------
Total current liabilities 119,853 82,602
Long-Term Debt 53,619 109,921
Deferred Taxes 12,414 12,895
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 --
16,993,375 in 1995 and 12,322,851 in 1994 16,993 12,323
Additional paid-in capital 130,223 66,973
Retained earnings 39,100 28,994
Employee Stock Ownership Plan and
stock option loans (4,211) (3,937)
Treasury shares at cost, 481,059 shares (4,189) (4,189)
Cumulative translation adjustments 613 (1,168)
-------- --------
Total Shareholders' Equity 178,529 98,996
-------- --------
Total Liabilities and Shareholders' Equity $364,415 $304,414
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
STATEMENTS OF CONSOLIDATED CASH FLOWS (condensed)
<TABLE>
<CAPTION>
(Unaudited)
Nine months
ended September 30
---------------------------
1995 1994
---------------------------
(thousands)
<S> <C> <C>
Operating Activities
Net income $ 15,037 $ 10,001
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 8,166 7,409
Deferred taxes 2,513 1,142
Changes in operating assets and liabilities:
Increase in accounts receivable (31,993) (15,604)
Increase in inventories (24,055) (15,282)
Increase in prepaid expense and other current assets (615) (2,498)
Increase in accounts payable 1,329 3,704
Increase in payroll, taxes and other accruals 5,165 5,333
--------- --------
Net cash used in operating activities (24,453) (5,795)
--------- --------
Investing Activities
Property, plant & equipment expenditures (13,984) (7,561)
Disposals of property, plant & equipment 183 310
Other items, net (341) 705
--------- --------
Net cash used in investing activities (14,142) (6,546)
Financing Activities
Borrowings under long-term debt and revolving
lines of credit 9,000 16,666
Payments of long-term debt and revolving
lines of credit (68,558) (3,692)
Dividends paid (4,931) (3,708)
Net proceeds from stock offering 67,234
Net increase in short-term bank loans 32,193 2,282
--------- --------
Net cash provided by financing activities 34,938 11,548
--------- --------
Net decrease in cash and cash equivalents (3,657) (793)
Cash and cash equivalents at beginning of year 7,700 5,860
--------- --------
Cash and cash equivalents at end of period $ 4,043 $ 5,067
========= ========
Supplemental disclosure of cash flow information:
Interest paid $ 5,651 $ 4,001
Income taxes paid 4,478 4,243
--------- --------
$ 10,129 $ 8,244
========= ========
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
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 and nine month period
ended September 30, 1995 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1995. 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, 1994.
NOTE 2 - Summary of Significant Accounting Policies
The Company maintains its books using a 52/53 week year ending on the last
Sunday of December. For purposes of the consolidated financial statements, the
year-end is stated as December 31. The year ended 1994 consisted of 52 weeks
and each of the quarters consisted of 13 weeks. The year ended December 31,
1995 will consist of 53 weeks with the additional week included in the first
quarter ended March 31, 1995.
NOTE 3 - Borrowings
The $85 million credit facility and the $40 million 364-day unsecured revolving
short-term facility are subject to an agreement which, among other things,
restricts amounts available for payment of cash dividends by the Company. As of
September 30, 1995, retained earnings of $10.6 million were free of such
restrictions.
NOTE 4 - Stock Offering
On June 1, 1995, the Company completed its previously announced public offering
of 4.6 million primary shares of its common stock. The net proceeds of $67.2
million were used to reduce amounts outstanding under the $85 million credit
facility ("Credit Facility"). The Company may reborrow amounts repaid under the
Credit Facility for general corporate purposes, which may include the financing
of product sales growth, the development of new products and strategic
acquisitions.
On a proforma basis, assuming the offering had been completed on January 1,
1994, earnings per share were 40 cents for the 1995 third quarter versus 31
cents for the year earlier quarter and 98 cents for the 1995 nine month period
versus 71 cents for the corresponding year-ago period.
6
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
A. Comparative Third Quarter Results of Operations
Net sales for the quarter ended September 30, 1995 increased 22.2% to $156.3
million compared to $127.9 in the corresponding 1994 quarter. Third quarter
1995 net income rose 45.3% to a record $6.6 million from $4.5 million in the
third quarter of 1994. Earnings per share, reflecting the completion on June 1,
1995 of the Company's public offering of 4.6 million shares, advanced to $.40
per share from $.38 per share in the year-ago quarter.
Net Sales. In the sporting goods and other recreational products group, net
sales increased 26.4% to $109.1 million in the 1995 quarter compared to $86.3
million in 1994. Leading the improvement was a rise in sales of K2 Exotech in-
line skates, primarily in the international markets, and of K2 snowboards
worldwide. The continued popularity of the ProFlex full-suspension mountain
bike line also boosted sales. Stearns and Shakespeare fishing tackle
contributed to the quarter's sales growth with increased shipments of flotation
gear and new fishing tackle products. Dana Design backpacks, a 1995
acquisition, also contributed to the higher sales reported.
In the industrial products group, net sales increased 13.5% to $47.2 million in
the third quarter of 1995 compared to $41.6 million in the comparable period of
1994. The increase in sales was mainly attributable to growth of filament wound
and ornamental poles, military radio antenna shipments and paperweaving
monofilaments.
Gross profit. Gross profit increased 20.0% to $41.4 million, or 26.5% of net
sales, in the third quarter of 1995 as compared to $34.5 million, or 27.0% of
net sales, in the third quarter of 1994. The decline of gross profit as a
percentage of net sales was largely due to the cost of increasing the production
capacity of the rapidly growing line of Shakespeare fiberglass light poles.
Costs and Expenses. In the third quarter of 1995, selling expenses increased
16.1% to $18.3 million from $15.8 million in the same quarter of 1994, due to
increased sales volume; however, as a percentage of net sales, selling expenses
decreased to 11.7% from 12.3%. General and administrative expenses increased
18.7% to $11.8 million in the third quarter of 1995 compared to $9.9 million in
the year-earlier period reflecting higher development spending and the inclusion
of the 1995 acquisitions of Dana Design and Wilderness Experience. As a
percentage of net sales, general and administrative expenses decreased to 7.5%
from 7.7%.
Operating Income. Operating income improved by 28.5% to $11.3 million, or 7.2%
of net sales, in the third quarter of 1995 compared to $8.8 million or 6.9% of
net sales, in the comparable 1994 period. The percentage increase was due to
lower selling, general and administrative expenses as a percentage of net sales,
which was partially offset by the reduction in gross profit margin percentage.
7
<PAGE>
Interest Expense. Interest expense in the third quarter of 1995 was comparable
to the third quarter of 1994. Average borrowings declined $16.3 million
resulting in $0.3 million of reduced interest expense offset by an increase of
$0.3 million reflecting higher rates.
B. Comparative Nine-Month Results of Operations
Net sales for the nine months ended September 30, 1995 increased $91.4 million
to $460.7 million as compared with the prior year period. Net income of $15.0
million, or 1.09 cents a share, increased from the $10.0 million, or 84 cents a
share reported in 1994.
Net Sales. In the sporting goods and other recreational products group, net
sales increased 28.4% to $311.4 million from $242.6 million in the 1994 period.
The improvement was mainly attributable to worldwide shipments of K2 Exotech in-
line skates and snowboards and sales of Shakespeare fishing rods, reels and kits
and combos. Other factors contributing to the sales increase were shipments of
Proflex full-suspension mountain bikes and Girvin accessories, which
significantly improved from the prior year period, new product introductions at
Stearns and Hilton Active Apparel, which largely accounted for the sales
increases in those businesses, and Dana Design, a recently acquired backpack
business.
The industrial products group reported sales of $149.3 million, up 17.7% from
prior year's total of $126.8 million. The increase in sales was due to gains in
residential and industrial building products and fiberglass utility and light
poles and paperweaving monofilaments.
Gross Profit. Gross profit improved 21.9% to $119.0 million in the first nine
months of 1995 compared to $97.6 million in the corresponding year-ago period,
although as a percentage of net sales it decreased to 25.8% from 26.4% a year
ago. Increased costs of recycled corrugated scrap paper, only partially offset
by price increases, and costs of increasing the production capacity of the
Shakespeare fiberglass light poles unfavorably impacted the 1995 gross profit
percentage.
Costs and Expenses. Selling expenses increased 17.2%, to $53.0 million for the
1995 nine month period from $45.2 million in the same period in 1994, although
as a percentage of net sales they declined to 11.5% from 12.2%. General and
administrative expenses increased 14.3% to $37.7 million for the nine months
ended September 30, 1995 compared to $33.0 million in the same prior year
period, although as a percentage of net sales they also declined to 8.2% from
8.9%.
Operating Income. Operating income increased by 45.9% to $28.3 million, or 6.1%
of net sales, in the nine months ended September 30, 1995 compared to $19.4
million, or 5.3% of net sales, in the comparable 1994 period. The percentage
increase resulted from reduced selling, general and administrative expenses as a
percentage of sales and volume-related earnings increases in many of the
Company's businesses.
Interest Expense. Interest expense increased by $2.3 million in the nine months
ended September 30, 1995 from the year-ago period. Higher average borrowings of
$18.6 million accounted for $1.1 million of the increase and higher interest
rates accounted for the remainder.
8
<PAGE>
The higher average borrowings were required to finance the seasonal working
capital requirements in support of the higher sales volume.
Income Taxes. The provision for income taxes for the nine months ended
September 30, 1995 reflects a credit resulting from a first quarter $0.3 million
foreign tax settlement.
C. Financial Condition
The Company's operations used $24.5 million of cash during the nine month
period ended September 30, 1995 whereas the comparable period of 1994 used cash
of $5.8 million. The increase in use of cash for the current period was due
primarily to financing higher levels of accounts receivable and inventories
arising from the growth of new seasonal products and the recent acquisitions of
Dana Design and Wilderness Experience.
Net cash used for investment activities increased to $14.1 million in the first
nine months of 1995 from $6.5 million in the first nine months of 1994. The
increase in cash used in the 1995 period is attributable to capital expenditures
to increase manufacturing capacity and improve manufacturing efficiencies,
principally in the industrial products group, and the purchases of the Dana
Design and Wilderness Experience businesses.
Net cash provided by financing activities during the nine month period ended
September 30, 1995 was $34.9 million as compared with $11.5 million in the nine
month period a year ago. The increase in cash was due to new proceeds from the
stock offering that was completed on June 1, 1995 which were applied to
repayments of long-term debt plus an increase in short-term seasonal borrowings.
The Company anticipates its remaining cash needs in 1995 will be provided from
operations and borrowings under its $85 million Credit Line and $40 million
Short-Term Facility and from other existing credit lines.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended September 30, 1995.
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: November 10, 1995 /s/ BERNARD I. FORESTER
-------------------------------
B.I. Forester
Chairman and Chief Executive
Date: November 10, 1995 /s/ JOHN J. RANGEL
-------------------------------
John J. Rangel
Senior Vice President - Finance
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,043
<SECURITIES> 0
<RECEIVABLES> 152,684
<ALLOWANCES> (9,037)
<INVENTORY> 127,107
<CURRENT-ASSETS> 284,788
<PP&E> 145,431
<DEPRECIATION> 86,436
<TOTAL-ASSETS> 364,415
<CURRENT-LIABILITIES> 119,853
<BONDS> 0
<COMMON> 16,993
0
0
<OTHER-SE> 161,536
<TOTAL-LIABILITY-AND-EQUITY> 364,415
<SALES> 460,719
<TOTAL-REVENUES> 461,951
<CGS> 341,670
<TOTAL-COSTS> 341,670
<OTHER-EXPENSES> 89,368
<LOSS-PROVISION> 1,380
<INTEREST-EXPENSE> 7,476
<INCOME-PRETAX> 22,057
<INCOME-TAX> 7,020
<INCOME-CONTINUING> 15,037
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,037
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.08
</TABLE>
