<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
___________________________
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly period Ended April 5, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-97056
CALMAR INC.
(exact name of registrant as specified in its charter)
Delaware 95-3833709
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 South Turnbull Canyon Road
City of Industry, California 91745
(Address of principal executive offices)
Registrant's telephone number, including area code: (818) 330-3161
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
3,092,031 shares of Common Stock, par value $.01 per share, as of May 9, 1997.
================================================================================
Page 1 of 13 Pages
Exhibit Index Appears at Page: 13
<PAGE>
CALMAR INC. AND SUBSIDIARIES
Index to Form 10-Q
For The Three-Month Periods
Ended April 5, 1997 and March 30, 1996
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
PART I - FINANCIAL INFORMATION:
- --------------------------------
Item 1 - Financial Statements
--------------------
Condensed Consolidated Balance Sheets at
April 5, 1997 (Unaudited) and December 31, 1996............................................................... 3
Condensed Consolidated Statements of Operations
for the Three-Month Periods Ended
April 5, 1997 (Unaudited) and March 30, 1996 (Unaudited)...................................................... 4
.
Condensed Consolidated Statements of Cash Flows
for the Three-Month Periods Ended
April 5, 1997 (Unaudited) and March 30, 1996 (Unaudited)...................................................... 5
Notes to Condensed Consolidated Financial Statements.......................................................... 6-7
Item 2 - Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations....................................................... 8-10
---------------------------------------------
PART II - OTHER INFORMATION:
- ----------------------------
Item 1 - Legal Proceedings.................................................................................. 11
-----------------
Item 6 - Exhibits and Reports on Form 8-K................................................................... 11
--------------------------------
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
--------------------
CALMAR INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
April 5, December 31,
1997 1996
(Unaudited)
----------- -----------
Assets
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,616 $ 9,198
Accounts receivable, less allowance for doubtful
accounts of $1,523 in 1997 and $1,563 in 1996 37,949 35,153
Inventories 20,297 20,679
Income taxes receivable 498 444
Prepaid expenses 1,572 1,710
----------- -----------
Total current assets 62,932 67,184
Property and equipment, net 103,818 106,619
Cost in excess of net assets acquired, less accumulated
amortization of $26,395 in 1997 and $26,360 in 1996 92,810 93,649
Other intangible assets, less accumulated amortization of
$13,156 in 1997 and $12,758 in 1996 5,868 6,275
Other assets, net 8,956 9,011
----------- -----------
$ 274,384 $ 282,738
=========== ===========
Liabilities and Stockholders' Deficiency
----------------------------------------
Current Liabilities:
Short-term borrowings $ 3,095 $ 2,640
Current installments of long-term debt 5,551 5,857
Accounts payable 16,119 18,941
Accrued liabilities 15,722 19,246
----------- -----------
Total current liabilities 40,487 46,684
Long-term debt 234,069 232,867
Deferred income taxes 11,867 12,380
Other liabilities 20,053 20,205
----------- -----------
Total liabilities 306,476 312,136
----------- -----------
Stockholders' deficiency:
Preferred stock, par value $.01 per share; liquidation
preference aggregating $54,250 for all outstanding
preferred stock:
Series A Preferred Stock, liquidation preference $100
per share; authorized 450,000 shares; issued and
outstanding 442,500 shares 4 4
Series B Preferred Stock, liquidation preference $10
per share; authorized 1,000,000 shares; issued and
outstanding 1,000,000 shares 10 10
Common stock, par value $.01 per share. Authorized
8,500,000 shares; issued and outstanding 3,092,031
shares in 1997 and 3,097,031 in 1996. 31 31
Additional paid-in capital 77,936 77,986
Accumulated deficit (103,396) (103,402)
Accumulated translation adjustment (6,119) (3,473)
Notes receivable from officers for purchase of common stock (558) (554)
----------- -----------
Total stockholders' deficiency (32,092) (29,398)
----------- -----------
$ 274,384 $ 282,738
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
CALMAR INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
THREE-MONTH
PERIODS ENDED
--------------------------------
April 5, March 30,
1997 1996
------------ -------------
<S> <C> <C>
Net sales $ 59,938 $ 55,338
Cost of sales 44,195 41,410
------------ -------------
Gross profit 15,743 13,928
Selling, general and administrative expenses 9,817 9,156
------------ -------------
Operating income 5,926 4,772
Other income 450 370
Interest expense (6,274) (6,228)
------------ ------------
Income (loss) before income tax provision 102 (1,086)
Income tax provision 96 22
------------ ------------
Net income (loss) $ 6 $ (1,108)
============ ============
Net loss per share of common stock $ (1.39) $ (1.56)
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
CALMAR INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
THREE-MONTH
PERIODS ENDED
--------------------------
<S> <C> <C>
April 5, March 30,
1997 1996
-------- ---------
Cash flows from operating activities:
Net income (loss) $ 6 $ (1,108)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 5,946 6,032
Amortization of discount on notes payable 10 32
Additions to notes receivable from officers for purchase of common stock (4) (4)
Gain on sale of property and equipment (48) (2)
Deferred income tax benefit (299) (297)
Changes in assets and liabilities:
Accounts receivable (4,257) (1,707)
Inventories (454) (1,349)
Income taxes receivable (94) (105)
Prepaid expenses 34 258
Accounts payable (2,999) 314
Accrued liabilities (3,095) 396
Other liabilities 380 287
--------- ---------
Net cash provided by (used in) operating activities (4,874) 2,747
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (4,692) (1,886)
Proceeds from sales of equipment 48 5
Increase in other assets (240) (103)
--------- ---------
Net cash used in investing activities (4,884) (1,984)
--------- ---------
Cash flows from financing activities:
Proceeds (repayments) of short-term borrowings, net 704 (383)
Increase (decrease) in cash overdraft 1,198 (1,188)
Proceeds from issuance of long term debt 2,750 -
Principal payments on long-term debt (1,293) (1,588)
Repurchase of common stock (50) -
--------- ---------
Net cash provided by (used in) financing activities 3,309 (3,159)
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents (133) (148)
--------- ---------
Net decrease in cash and cash equivalents (6,582) (2,544)
Cash and cash equivalents, beginning of period 9,198 9,037
--------- ---------
Cash and cash equivalents, end of period $ 2,616 $ 6,493
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 316 $ 429
========= =========
Interest $ 9,554 $ 9,479
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
CALMAR INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For The Three-Month Periods
Ended April 5, 1997 and March 30, 1996
(1) Condensed Consolidated Financial Statements
- ------------------------------------------------
The accompanying unaudited condensed consolidated financial statements do
not include all information and footnotes necessary for a fair presentation
of consolidated financial position, results of operations, and cash
flows, in conformity with generally accepted accounting principles, and
should be read in conjunction with the Calmar Inc. and Subsidiaries (the
"Company") Consolidated Financial Statements for the year ended December
31, 1996. However, the information furnished does reflect all adjustments
(consisting only of a normal and recurring nature) which are, in the
opinion of management, necessary for a fair presentation of the results for
the interim periods presented, but are not necessary indicative of the
results of operations and cash flows for a full fiscal year.
(2) Loss Per Share of Common Stock
- -----------------------------------
The calculations of loss per share of common stock are as follows (dollars
in thousands, except per share data):
<TABLE>
<CAPTION>
THREE-MONTH
PERIODS ENDED
----------------------------
APRIL 5, MARCH 30,
1997 1996
----------- -------------
<S> <C> <C>
Net income (loss) $ 6 $ (1,108)
Undeclared dividends on preferred stock (4,297) (3,708)
---------- -----------
Loss attributable to common stockholders (4,291) (4,816)
========== ===========
Weighted average common shares outstanding 3,095,198 3,097,031
========== ===========
Net loss per share of common stock $ (1.39) $ (1.56)
========== ===========
</TABLE>
Loss per share of common stock does not include the effect of common share
equivalents (stock options and warrants) because their inclusion would be
anti-dilutive. Cumulative dividends aggregating $64.6 million have
accumulated on the Company's outstanding Series A and Series B Preferred
Stock through April 5, 1997.
(3) Inventories
-----------------
Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) method and consist of the following (dollars in
thousands):
<TABLE>
<CAPTION>
APRIL 5, DEC. 31,
1997 1996
-------- --------
<S> <C> <C>
Raw materials $ 4,373 $ 4,713
Work in process 9,675 10,063
Finished goods 6,249 5,903
-------- --------
$20,297 $20,679
======== ========
</TABLE>
(4) Income Taxes
------------------
The Company's federal income tax returns for calender years 1986 through
1991 are currently under examination by the Internal Revenue Service
("IRS"). On March 10, 1997, the Company received notice from the IRS of
proposed adjustments for
6
<PAGE>
such calendar years which could result in additional Federal taxes of up to
$5,500,000, plus interest from the date when such additional taxes would
have been due, and in the reduction of the Company's net operating loss
carryovers from $45,600,000 at December 31, 1996, to $36,500,000. Most of
the proposed adjustments relate to the Company's amortization deductions
with respect to a covenant not to compete purchased from the Company's
former parent corporation when that corporation sold a controlling interest
in the Company in 1988.
The Company, after consultation with tax counsel, continues to believe in
the propriety of its positions set forth in its tax returns and will
vigorously contest the adjustments being proposed by the IRS. The Company
is currently in the process of preparing a written protest regarding the
proposed adjustments, which protest is expected to be filed with the IRS
during the second quarter of 1997.
7
<PAGE>
Item 2 - Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
CALMAR INC. AND SUBSIDIARIES
For The Three-Month Periods
Ended April 5, 1997 and March 30, 1996
General
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the consolidated financial statements and
notes thereto which were included in the December 31, 1996 Form 10-K.
The following table sets forth selected results of operations as percentages of
net sales for the periods indicated:
<TABLE>
<CAPTION>
THREE-MONTH
PERIODS ENDED
--------------------
APRIL 5, MAR. 30,
1997 1996
------ ------
<S> <C> <C>
Sprayers 56.9% 59.0%
Dispensers 32.6 31.0
Other Products 10.5 10.0
------ ------
Net Sales 100.0% 100.0%
====== ======
Gross Profit 26.3% 25.2%
Selling, General & Administrative Expenses 16.4 16.5
------ ------
Operating Income 9.9% 8.7%
====== ======
</TABLE>
RESULTS OF OPERATIONS
Net sales for the three-month period ended April 5, 1997, were $59.9 million, an
increase of $4.6 million or 8.3% above the comparable 1996 period. Net sales
were unfavorably impacted by $2.4 million due to foreign exchange rate changes.
Sprayer sales increased $1.6 million or 4.8% from the comparable period in 1996.
The increase in trigger sprayer sales primarily reflects customer new product
introductions and increased demand in North America, Latin America and Europe.
Fine mist sprayer sales declined slightly, as lower order volume and lower
prices in Europe more than offset strong growth in North America, principally
resulting from new customers. Total dispenser sales increased $2.0 million or
11.2% from the comparable period in 1996, due primarily to strong demand for
dispensers for liquid soap and body lotion applications. Other product sales
increased significantly due to higher sales to licensees.
Gross profit for the three-month period ended April 5, 1997, increased $1.8
million or 13.0% from the comparable 1996 period. As a percentage of sales,
gross profit increased from 25.2% to 26.3%. The increase in North American
gross profit is due primarily to higher sales volume in most major product
categories while gross profit in Europe remained relatively unchanged. The
improved gross profit was realized despite increased price competition.
8
<PAGE>
Selling, general and administrative ("SG&A") expenses were $9.8 million or 16.4%
of net sales for the three-month period ended April 5, 1997, as compared to $9.2
million or 16.5% of sales for the comparable 1996 period. The increase in SG&A
expenses for such period resulted primarily from increased research and
development, compensation and travel expenses in North America while European
SG&A expenses for such period remained relatively unchanged.
Operating income for the three-month period ended April 5, 1997, increased to
$5.9 million or 9.9% of net sales, as compared to $4.8 million or 8.7% of net
sales, from the comparable 1996 period. The increase is primarily the result of
higher sales volume and the resulting increased gross profit offset by the
increased SG&A expenses as discussed above.
Interest expense for the three-month period ended April 5, 1997, remained
essentially unchanged relative to the comparable 1996 period. As no income tax
benefit is recorded against the U.S. losses due to uncertainty of its ultimate
realization, the income tax provisions for the three-month periods ended in 1997
and 1996 are primarily related to income from the Company's foreign operations.
Net income for the three-month period ended April 5, 1997, increased by $1.1
million from a net loss of $1.1 million for the comparable 1996 period. The
increase in net income is due primarily to higher operating income as discussed
above.
Liquidity and Capital Resources
The Company funds its cash needs through cash flow from operations, existing
cash balances, equipment financing and the revolving facility (the "Revolver")
under the Company's new senior secured credit agreement (the "New Credit
Facility"). The Company's primary source of cash continues to be its cash flow
from operations. In addition the Revolver is available to support the Company's
working capital requirements. The net cash used in operating activities
increased by $7.6 million for the three-month period ended April 5, 1997, from
the comparable 1996 period. The cash used in the changes in accounts receivable,
accounts payable and accrued liabilities was partially offset by the change in
cash provided by net income and inventories. Working capital, at April 5, 1997,
was $22.4 million compared to $20.5 million. The increase in working capital is
primarily attributed to decreased accounts payable and accrued liabilities, as
well as increased accounts receivable, offset by lower cash and cash
equivalents. The Company has entered into certain interest rate cap agreements
to reduce the risk of significant fluctuations in interest rates on interest
payments for the term loan portion of the New Credit Facility.
The net cash used in investing activities increased $2.9 million for the three-
month period ended April 5, 1997, due to a planned delay in the outlay for
capital expenditures in 1996. For the three-month period ended April 5, 1997,
capital expenditures were $4.7 million which were funded by equipment financing
and available cash. The Company plans to fund new equipment purchases through
equipment financing and leasing, existing cash balances (which were $2.6 million
as of April 5, 1997) and cash flow from operations. Beginning in September 1996,
a certain European subsidiary had entered into several non-cancelable
commitments which, as of April 5, 1997, totaled $1.5 million for capital
expenditures to increase its manufacturing capacity. In addition, such
subsidiary had entered into a sale and leaseback agreement for the construction
of an adjacent manufacturing facility which has now been completed and has
resulted in operating lease commitments totaling approximately $4.4 million
extended over a term of fourteen years.
The net cash provided by financing activities increased $6.5 million for the
three-month period ended April 5, 1997, due to increased financing of capital
expenditures, increased utilization of European short-term borrowing facilities
and a higher domestic cash overdraft position.
The Company amended its New Credit Facility in October 1996, which among other
things, reduced the maximun borrowings permitted under the Revolver. As amended,
the Revolver permits borrowing of up to the lesser of $12.0 million or the
maximum amount permitted under an eligible borrowing base test and contains a
$5.0 million sublimit for letters of credit. At April 5, 1997, the borrowing
base test permitted the Company to borrow up to $12.0 million. At such date, the
Company had no borrowings outstanding and letters of credit of $1.0 million,
leaving $11.0 million available for borrowing. In addition, the Company had
unused credit facilities available to its European subsidiaries of $4.2 million
at April 5, 1997.
9
<PAGE>
The indenture which governs the terms of the Senior Subordinated Notes (the
"Indenture") and the New Credit Facility contain significant financial and
operating covenants. The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its subsidiaries to incur debt,
issue certain preferred stock, create liens securing subordinated debt, sell or
transfer assets, make restricted payments (dividends, redemptions, investments,
and unscheduled payments on subordinated debt) and engage in certain
transactions with affiliates and certain mergers. The New Credit Facility
contains certain financial covenants, including, but not limited to, covenants
related to a minimum interest coverage ratio, a minimum consolidated EBITDA, a
maximum leverage ratio and a minimum current ratio. In addition, the New Credit
Facility contains other affirmative and negative covenants relating to (among
other things) limitations on capital expenditures, other indebtedness, liens,
investments, guarantees, restricted junior payments (dividends, redemptions, and
payments on subordinated debt), mergers and acquisitions, sales of assets,
leases and transactions with affilites. The New Credit Facility also contains
customary events of default, including certain changes of control of the
Company. As of April 5, 1997, the Company was in compliance with all covenants
contained in such debt instruments.
The terms of the Indenture allow for additional indebtedness, including Senior
Debt (as defined in the Indenture) and secured indebtedness. The incurrence of
additional indebtedness is limited by certain conditions, including compliance
with a Consolidated Cash Flow Ratio (as defined in the Indenture), calculated
on a pro forma basis to reflect such additional indebtedness, of 2.0 to 1.0. At
April 5, 1997, the Consolidated Cash Flow Ratio was 1.9 to 1.0. In addition and
notwithstanding the foregoing, the Indenture permits the Company, and in certain
cases its subsidiaries, to incur certain specified additional indebtedness
without regard to compliance with the Consolidated Cash Flow Ratio referred to
above. The terms of the New Credit Facility permit the Company, and in certain
cases its subsidiaries, to incur additional indebtedness only under certain
circumstances.
The Company has a substantial amount of indebtedness. The degree to which the
Company is leveraged could have important consequences to investors, including
the following: (i) the Company's ability to obtain additional financing in the
future for refinancing indebtedness, working capital, capital expenditures,
acquisitions or general corporate purposes may be impaired, (ii) a substantial
portion of the Company's consolidated cash flow from operations must be used for
the payment of interest and principal on its indebtedness, (iii) the Company may
be more highly leveraged than its competitors, which may place it at a
competitive disadvantage, (iv) the Indenture and the New Credit Facility
contain restrictive financial and operating covenants, (v) the borrowings under
the New Credit Facility have floating rates of interest, which cause the Company
to be vulnerable to increases in interest rates, and (vi) the Company's
substantial degree of leverage could make it more vulnerable to a downturn in
general economic conditions.
Cumulative dividends aggregating $64.6 million have accumulated on the Company's
outstanding Series A and Series B Preferred Stock through April 5, 1997. Such
dividends, payable in shares of Series A and Series B Preferred Stock,
respectively, had not been declared as of April 5, 1997.
The Company believes that cash flow from operations, existing cash balances and
the financial resources available to it, including the Revolver and equipment
financing and leasing, will be sufficient to meet its debt service, working
capital and capital investment needs through the term of the Revolver.
The Company's Federal income tax returns for calendar years 1986 through 1991
are currently under examination by the Internal Revenue Service ("IRS"). On
March 10, 1997, the Company received notice from the IRS of proposed adjustments
for such calendar years which could result in additional Federal taxes of up to
$5.5 million, plus interest from the date when such additional taxes would have
been due, and in the reduction of the Company's net operating loss carryovers
from $45.6 million at December 31, 1996, to $36.5 million. Most of the proposed
adjustments relate to the Company's amortization deductions with respect to a
covenant not to compete purchased from the Company's former parent corporation
when that corporation sold a controlling interest in the Company in 1988.
The Company, after consultation with tax counsel, continues to believe in the
propriety of its positions set forth in its tax returns and will vigorously
contest the adjustments being proposed by the IRS. The Company is currently in
the process of preparing a written protest regarding the proposed adjustments,
which protest is expected to be filed with the IRS during the second quarter of
1997.
10
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1 - Legal Proceedings
-----------------
See Note 4 to the Condensed Consolidated Financial
Statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operation -
Liquidity and Capital Resources" for a discussion of the
pending tax audit of the Company.
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit 27.1 - Financial Data Schedule
(b) No reports on Form 8-K were filed during
the three-month period ended
April 5, 1997.
11
<PAGE>
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 on this 12th day of May, 1997.
CALMAR INC.
By: /s/C. Richard Huebner
-----------------------
C. Richard Huebner, in his
dual capacity as a duly
authorized Officer of the
Registrant, Executive Vice
President, and as Registrant's
Principal Financial Officer.
12
<PAGE>
CALMAR INC. AND SUBSIDIARIES
Exhibit Index
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit Page
Number Description Number
------ ----------- ------
27.1 Financial Data Schedule 14
</TABLE>
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> APR-05-1997
<CASH> 2,616
<SECURITIES> 0
<RECEIVABLES> 39,472
<ALLOWANCES> 1,523
<INVENTORY> 20,297
<CURRENT-ASSETS> 62,932
<PP&E> 232,047
<DEPRECIATION> 128,229
<TOTAL-ASSETS> 274,384
<CURRENT-LIABILITIES> 40,487
<BONDS> 120,000
0
14
<COMMON> 31
<OTHER-SE> (32,137)
<TOTAL-LIABILITY-AND-EQUITY> 274,384
<SALES> 59,938
<TOTAL-REVENUES> 59,938
<CGS> 44,195
<TOTAL-COSTS> 54,012
<OTHER-EXPENSES> (450)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,274
<INCOME-PRETAX> 102
<INCOME-TAX> 96
<INCOME-CONTINUING> 6
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6
<EPS-PRIMARY> (1.39)
<EPS-DILUTED> (1.39)
</TABLE>
