<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 June 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 July 31, 1995.
Common Stock, par value $1 16,474,128 Shares
1
<PAGE>
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 Six months
ended June 30 ended June 30
------------------- -------- --------
1995 1994(a) 1995 1994(a)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $159,419 $131,765 $304,437 $241,500
Cost of products sold 117,047 95,295 226,759 178,348
-------- -------- -------- --------
Gross profit 42,372 36,470 77,678 63,152
Selling expenses 17,254 15,309 34,731 29,466
General and administrative
expenses 13,372 12,488 25,960 23,097
-------- -------- -------- --------
Operating income 11,746 8,673 16,987 10,589
Interest expense 2,715 1,694 5,547 3,268
Other (income) (468) (725) (786) (1,093)
-------- ------- -------- --------
Income before taxes 9,499 7,704 12,226 8,414
Provision for income taxes 3,135 2,695 3,775 2,945
-------- -------- -------- --------
NET INCOME $ 6,364 $ 5,009 $ 8,451 $ 5,469
======== ======== ======== ========
PER SHARE
Net income $.48 $.42 $.67 $.46
Cash dividend $.11 $.105 $.22 $.21
Average shares outstanding 13,127 11,903 12,626 11,903
</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>
June 30 December 31
1995 1994
(Unaudited)
----------- -----------
(thousands)
<S> <C> <C>
Assets
------
Current Assets
Cash and cash equivalents $ 2,790 $ 7,700
Accounts receivable, less allowances of
$8,037 in 1995 and $8,425 in 1994 124,694 111,154
Inventories
Finished goods 81,808 66,900
Work in process 12,640 8,788
Raw materials 29,702 32,216
-------- --------
124,150 107,904
Less LIFO reserve 6,723 6,162
-------- --------
117,427 101,742
Deferred taxes 6,255 7,928
Prepaid expenses and other current assets 5,766 4,324
-------- --------
Total current assets 256,932 232,848
Property, Plant and Equipment 142,272 131,459
Less allowance for depreciation 84,230 79,095
-------- --------
58,042 52,364
Intangibles, principally goodwill 17,604 15,825
Other 3,342 3,377
-------- --------
Total Assets $335,920 $304,414
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE>
CONSOLIDATED BALANCE SHEETS (condensed)
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
(Unaudited)
___________ ___________
(thousands)
<S> <C> <C>
Liabilities and Shareholders' Equity
____________________________________
Current Liabilities
Bank loans $ 34,621 $ 18,341
Accounts payable 26,671 26,858
Accrued payroll and related 19,414 18,697
Other accruals 19,151 15,788
Current portion of long-term debt 366 2,918
________ ________
Total current liabilities 100,223 82,602
Long-Term debt 49,222 109,921
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 -
16,955,187 in 1955 and 12,322,851 in 1994 16,955 12,323
Additional paid-in capital 129,858 66,973
Retained earnings 34,327 28,994
Employee Stock Ownership Plan and
stock option loans (3,833) (3,937)
Treasury shares at cost, 481,059 shares (4,189) (4,189)
Cumulative translation adjustments 943 (1,168)
-------- --------
Total Shareholders' Equity 174,061 98,996
-------- --------
Total Liabilities and Shareholder's Equity $335,920 $304,414
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
STATEMENTS OF CONSOLIDATED CASH FLOWS (condensed)
(Unaudited)
Six months
ended June 30
------------------------
1995 1994
------------------------
(thousands)
Operating Activities
Net income $ 8,451 $ 5,469
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 5,436 4,878
Deferred taxes 1,163 1,013
Changes in operating assets and
liabilities:
Increase in accounts receivable (13,040) (8,808)
Increase in inventories (14,375) (7,915)
Increase in prepaid expense and
other current assets (1,295) (939)
Increase (decrease) in accounts payable (718) 2,886
Increase in payroll, taxes and other
accruals 3,817 5,001
-------- -------
Net cash provided by (used in) operating activities (10,561) 1,585
-------- -------
Investing Activities
Property, plant & equipment expenditures (10,611) (4,391)
Disposals of property, plant & equipment 82 41
Other items, net (251) 1,039
-------- -------
Net cash used in investing activities (10,780) (3,311)
Financing Activities
Borrowings under long-term debt and revolving
lines of credit 9,000 8,747
Payments of long-term debt and revolving
lines of credit (72,961) (3,686)
Dividends paid (3,118) (2,471)
Net proceeds from stock offering 67,230
Net increase (decrease) in short-term
bank loans 16,280 (889)
-------- -------
Net cash provided by financing activities 16,431 1,701
-------- -------
Net decrease in cash and cash equivalents (4,910) (25)
Cash and cash equivalents at beginning of year 7,700 5,860
-------- -------
Cash and cash equivalents at end of period $ 2,790 $ 5,835
========= =======
Supplemental disclosure of cash flow information:
Interest paid $ 5,739 $ 3,159
Income taxes paid 2,583 1,932
-------- -------
$ 8,322 $ 5,091
========= =======
See notes consolidated condensed to 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 six month period ended
June 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 and Other Financial Instruments
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
June 30, 1995, retained earnings of $9.1 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 41 cents for the 1995 second quarter versus 33
cents for the year earlier quarter and 59 cents for the 1995 six month period
versus 40 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 Second Quarter Results of Operations
Net sales for the three months ended June 30, 1995 increased 21.0% to $159.4
million compared to $131.8 in the year-earlier period. Net income for the
second quarter of 1995 increased by 27.1% to $6.4 million or 48 cents a share,
from $5.0 million, or 42 cents a share in the corresponding 1994 period.
Net Sales. Net sales in the sporting goods and other recreational products
group increased 24.4% to $107.6 million from $86.5 million in the prior year
quarter. The increase in sales was broad based. Worldwide growth of in-line
skates and snowboards fueled K2 sales. Strong sales of new Shakespeare fishing
reels, kits and combos along with Stearns flotation devices, raingear, wetsuits
and other new products also contributed to the quarter's performance. Sales of
ProFlex full-suspension mountain bikes doubled while new model introductions of
activewear to the ad specialty business improved Hilton's sales. The recently
acquired Dana Design backpack business also provided sales gains. Partially
offsetting these gains were lower second quarter ski shipments.
Net sales of the industrial products group advanced 14.3% to $51.8 million from
$45.3 million in the prior year quarter. The increase was primarily due to the
Simplex products business, which experienced sales gains from virtually all
product lines. Sales also benefited from improvements in paperweaving
monofilaments and fiberglass light pole products.
Gross Profit. Gross profit increased 16.2% to $42.4 million in the second
quarter of 1995 compared to $36.5 million in the second quarter of 1994,
primarily reflecting higher sales levels. Gross profit in 1995 as a percentage
of net sales was adversely affected by higher lightpole manufacturing costs and
increased costs of recycled corrugated scrap paper, partially offset by price
increases.
Costs and Expenses. In the second quarter of 1995, selling expenses increased
12.7% to $17.3 million from $15.3 million in the same quarter of 1994, however,
as a percentage of net sales decreased to 10.8% from 11.6%. General and
administrative expenses increased 7.1% to $13.4 million in the second quarter of
1995 compared to $12.5 million in the year-earlier period. As a percentage of
net sales, general and administrative expenses decreased to 8.4% from 9.5%.
Operating Income. Operating income grew by 35.4% to $11.7 million, or 7.4% of
net sales, in the second quarter of 1995 compared to $8.7 million or 6.6% of net
sales, in the comparable 1994 period. The percentage increase in the second
quarter of 1995 was attributable to the reduction of selling, general and
administrative expenses as a percentage of net sales, partially reduced by the
reduction in gross profit margin percentage.
Interest Expense. Interest expense rose $1.0 million in the second quarter of
1995 compared to the second quarter of 1994. Higher average borrowings of $29.8
million resulted in $0.6 million of additional interest in the quarter and $0.4
million reflected higher rates.
7
<PAGE>
B. Comparative Six-Month Results of Operations
Net sales for the six months ended June 30, 1995 increased $62.9 million to
$304.4 million as compared with the prior year period. Net income of $8.5
million, or 67 cents a share, advanced from $5.5 million, or 46 cents a share,
reported in 1994.
Net Sales. In the sporting goods and other recreational products group, net
sales increased 29.4% to $202.3 million from $156.3 million in the 1994 period.
The improvement was mainly attributable to worldwide shipments of K2 Exotech in-
line skates and snowboards and sales of new Shakespeare fishing rods, reels,
and kits and combos. New product introductions at Hilton Active Apparel and
Stearns largely accounted for the overall sales increases in these businesses.
Shipments of Proflex full-suspension mountain bikes and Girvin accessories
significantly improved from the prior year period. Dana Design, a recently
acquired backpack business also contributed to the sales growth, although to a
lesser extent.
The Industrial Products Group reported sales of $102.1 million, up 19.8% from
prior year's total of $85.2 million. The increase was primarily due to sales
gains in residential and industrial building products. Fiberglass light poles
and paperweaving monofilaments sales growth also contributed to the period.
Gross Profit. Gross profit improved 23.0% to $77.7 million in the first six
month of 1995 compared to $63.2 in the corresponding year-ago period, although
as a percentage of net sales it decreased to 25.5% from 26.1% a year ago.
Increased costs of recycled corrugated scrap paper, only partially offset by
price increases, and higher manufacturing costs in the fiberglass light pole
business unfavorably impacted the 1995 gross profit margin percentage.
Costs and Expenses. Selling expenses increased 17.9% to $34.7 million for the
1995 six month period from $29.5 million in the same period in 1994, although as
a percentage of net sales declined to 11.4% from 12.2%. The percentage decrease
was mainly volume related. General and administrative expenses increased 12.4%
to $26.0 million for the six months ended June 30, 1995 compared to $23.1
million in the same prior year period. There was a decrease as a percentage of
net sales to 8.5% in 1995 compared to 9.6% in 1994.
Operating Income. Operating income increased by 60.4% to $17.0 million, or 5.6%
of net sales, in the six months ended June 30, 1995 compared to $10.6 million,
or 4.4% 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 increase of many of the
Company's businesses.
Interest Expense. Interest expense increased by $2.3 million in the six months
ended June 30, 1995 compared to the same year-ago period. Higher average
borrowings of $32.9 million accounted for $1.4 million of the interest expense
increase and higher interest rates accounted for $0.9 million of the remainder.
Higher borrowings were necessary to finance the seasonal working capital
requirements that support higher sales volume.
8
<PAGE>
Income Taxes. The provision for income taxes for the six months ended June 30,
1995 has been reduced as a result of a $0.3 million foreign tax settlement.
C. Financial Condition
The Company's operations used $10.6 million of cash during the six month period
ended June 30, 1995 whereas the comparable period in 1994 provided cash of $1.6
million. The recent increased use of cash has been primarily due 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 $10.8 million in the first
six months of 1995 from $3.3 million in the first six 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 six month period ended June
30, 1995 was $16.4 million from $1.7 million in the six month period ended June
30, 1994. The increase in cash was due to net proceeds from the stock offering
that was completed on June 1, 1995 offset by repayments of long-term debt plus
an increase in short-term seasonal borrowings.
Consistent with prior years, the allowance for doubtful items decreased as a
result of a seasonal reduction in the allowance for volume discounts. The
Company anticipates its cash need in 1995 will be provided from operations and
borrowings under its Credit Line and Short-Term Facility and other existing
credit lines.
9
<PAGE>
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 4, 1995, the following action was taken:
(1) Amend the Certificate of Incorporation to permit a Board of
Directors consisting of from six to nine directors:
9,000,865 votes for, 1,369,372 votes against, 149,606 votes
abstaining;
(2) Election of directors:
Abraham L. Gray, 10,440,221 votes for, 79,622 votes
withheld:
Hugh V. Hunter, 10,437,979 votes for, 81,864 votes
withheld;
Richard M. Rodstein, 10,433,719 votes for, 86,124
votes withheld.
(3) Ratification of Ernst & Young as the Company's independent
auditors:
10,414,491 votes for, 40,017 votes against, 65,335 votes
abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule, Article 5
(b) Report on Form 8-K
There were no reports on Form 8-K filed during the
quarter ended June 30, 1995.
10
<PAGE>
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: August 11, 1995 /s/ Bernard I. Forester
----------------------------
B.I. Forester
Chairman and Chief Executive
Date: August 11, 1995 /s/ John J. Rangel
-------------------------------
John J. Rangel
Senior Vice President - Finance
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,790
<SECURITIES> 0
<RECEIVABLES> 132,731
<ALLOWANCES> (8,037)
<INVENTORY> 117,427
<CURRENT-ASSETS> 256,932
<PP&E> 142,272
<DEPRECIATION> 84,230
<TOTAL-ASSETS> 335,920
<CURRENT-LIABILITIES> 100,223
<BONDS> 0
<COMMON> 16,955
0
0
<OTHER-SE> 157,106
<TOTAL-LIABILITY-AND-EQUITY> 335,920
<SALES> 304,437
<TOTAL-REVENUES> 305,223
<CGS> 226,759
<TOTAL-COSTS> 226,759
<OTHER-EXPENSES> 59,775
<LOSS-PROVISION> 916
<INTEREST-EXPENSE> 5,547
<INCOME-PRETAX> 12,226
<INCOME-TAX> 3,775
<INCOME-CONTINUING> 8,451
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,451
<EPS-PRIMARY> .67
<EPS-DILUTED> .67
</TABLE>
