<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 October 4, 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: (626) 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 November 14,
1997.
================================================================================
Page 1 of 14 Pages
Exhibit Index Appears at Page: 14
<PAGE>
CALMAR INC. AND SUBSIDIARIES
Index to Form 10-Q
For The Three-Month and Nine-Month Periods
Ended October 4, 1997 and September 28, 1996
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
PART I - FINANCIAL INFORMATION:
- --------------------------------
Item 1 - Financial Statements
- -----------------------------
Condensed Consolidated Balance Sheets at
October 4, 1997 (Unaudited) and December 31, 1996.......................................................... 3
Condensed Consolidated Statements of Operations
for the Three-Month and Nine-Month Periods Ended
October 4, 1997 (Unaudited) and September 28, 1996
(Unaudited)................................................................................................ 4
Condensed Consolidated Statements of Cash Flows
for the Three-Month and Nine-Month Periods Ended
October 4, 1997 (Unaudited) and September 28, 1996
(Unaudited)............................................................................................... 5
Notes to Condensed Consolidated Financial Statements (Unaudited)........................................... 6-7
Item 2 - Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of
----------------------------------
Operations........................................................................................ 8-11
----------
PART II - OTHER INFORMATION:
- ----------------------------
Item 1 - Legal Proceedings............................................................................... 12
-----------------
Item 6 - Exhibits and Reports on Form 8-K................................................................ 12
--------------------------------
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
CALMAR INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
Oct. 4, December 31,
1997 1996
(Unaudited)
---------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,061 $ 9,198
Accounts receivable, less allowance for doubtful
accounts of $1,313 in 1997 and $1,563 in 1996 43,332 35,153
Inventories 23,945 20,679
Income taxes receivable 280 444
Prepaid expenses 1,703 1,710
---------------- --------------
Total current assets 73,321 67,184
Property and equipment, net 103,195 106,619
Cost in excess of net assets acquired, less accumulated
amortization of $28,071 in 1997 and $26,360 in 1996 91,134 93,649
Other intangible assets, less accumulated amortization of
$13,897 in 1997 and $12,758 in 1996 5,124 6,275
Other assets, net 8,898 9,011
---------------- --------------
$281,672 $282,738
=============== =============
Liabilities and Stockholders' Deficiency
Current Liabilities:
Short-term borrowings $ 5,087 $ 2,640
Current installments of long-term debt 8,894 5,857
Accounts payable 13,809 18,941
Accrued liabilities 18,480 19,246
---------------- --------------
Total current liabilities 46,270 46,684
Long-term debt 236,378 232,867
Deferred income taxes 11,288 12,380
Other liabilities 20,126 20,205
---------------- --------------
Total liabilities 314,062 312,136
---------------- --------------
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 shares in 1996 31 31
Additional paid-in capital 77,936 77,986
Accumulated deficit (102,602) (103,402)
Accumulated translation adjustment (7,203) (3,473)
Notes receivable from officers for purchase of common stock (566) (554)
---------------- --------------
Total stockholders' deficiency (32,390) (29,398)
---------------- --------------
$281,672 $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 NINE-MONTH
PERIODS ENDED PERIODS ENDED
------------------------------ ------------------------------
Oct. 4, Sept. 28, Oct. 4, Sept. 28,
1997 1996 1997 1996
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net sales $57,709 $55,236 $175,251 $165,263
Cost of sales 41,602 41,099 127,665 123,038
-------------- -------------- ------------- --------------
Gross profit 16,107 14,137 47,586 42,225
Selling, general and administrative expenses 9,228 9,116 28,363 27,300
-------------- -------------- ------------- --------------
Operating income 6,879 5,021 19,223 14,925
Other income 278 159 772 1,028
Interest expense (6,284) (6,062) (18,724) (18,503)
-------------- -------------- ------------- --------------
Income (loss) before income tax provision 873 (882) 1,271 (2,550)
Income tax provision 382 204 477 491
-------------- -------------- ------------- --------------
Net income (loss) $491 ($1,086) $794 ($3,041)
============= ============= ============ =============
Net loss per share of common stock ($1.34) ($1.64) ($4.07) ($4.71)
============= ============= ============ =============
</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 NINE-MONTH
PERIODS ENDED PERIODS ENDED
------------------ ------------------------
Oct. 4, Sept. 28, Oct. 4, Sept. 28,
1997 1996 1997 1996
------ ------ ------- -------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $491 ($1,086) $ 794 ($ 3,041)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 5,887 5,772 18,094 17,841
Amortization of discount on notes payable (7) 12 29 93
Additions to notes receivable from officers (4) (3) (12) (11)
Gain on sale of property and equipment 5 (3) (69) (7)
Deferred income tax benefit (189) (199) (789) (794)
Changes in assets and liabilities:
Accounts receivable (3,928) (683) (10,245) (4,806)
Inventories (1,714) (1,344) (4,496) (980)
Income taxes receivable 196 (62) 114 162
Prepaid expenses 144 562 (145) 780
Accounts payable (1,578) 1,293 (7,055) (1,570)
Accrued liabilities (1,861) (3,227) (127) 1,087
Other liabilities 82 51 665 524
------ ------ ------- -------
Net cash provided by (used in) operating activities (2,476) 1,083 (3,242) 9,278
------ ------ ------- -------
Cash flows from investing activities:
Purchases of property and equipment (4,737) (2,398) (14,577) (7,086)
Proceeds from sales of equipment 23 7 116 14
Increase in other intangible assets - (3) - (67)
Increase in other assets (329) (45) (718) (125)
------ ------ ------- -------
Net cash used in investing activities (5,043) (2,439) (15,179) (7,264)
------ ------ ------- -------
Cash flows from financing activities:
Proceeds (repayments) of short-term borrowings, net 1,057 - 2,841 (376)
Net change in Revolver 8,700 - 8,700 -
Increase in cash overdraft 709 1,966 3,395 1,515
Proceeds from issuance of long-term debt - - 2,627 -
Principal payments on long-term debt (1,304) (912) (4,061) (7,887)
------ ------ ------- -------
Repurchase of common stock - - (50) -
------ ------ ------- -------
Net cash provided by (used in) financing activities 9,162 1,054 13,452 (6,748)
------ ------ ------- -------
Effect of exchange rate changes on cash and cash
equivalents (14) 28 (168) (124)
------ ------ ------- -------
Net increase (decrease) in cash and cash equivalents 1,629 (274) (5,137) (4,858)
Cash and cash equivalents, beginning of period 2,432 4,453 9,198 9,037
------ ------ ------- -------
Cash and cash equivalents, end of period $4,061 $4,179 $4,061 $ 4,179
====== ====== ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 531 $655 $847 $ 1,528
====== ====== ======= =======
Interest $9,623 $9,363 $21,878 $21,649
====== ====== ======= =======
Equipment acquired in exchange for long-term debt - - - $ 741
====== ====== ======= =======
</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 and Nine-Month Periods
Ended October 4, 1997 and September 28, 1996
(Unaudited)
(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 necessarily 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 NINE-MONTH
PERIODS ENDED PERIODS ENDED
------------------------ -------------------------
OCT. 4, SEPT. 28, OCT. 4, SEPT. 28,
1997 1996 1997 1996
--------- ---------- --------- ----------
<S> <C> <C>
Net income (loss) $ 491 $ (1,086) $ 794 $ (3,041)
Undeclared dividends on preferred stock (4,624) (3,991) (13,379) (11,546)
---------- ---------- ---------- ----------
Loss attributable to common stockholders $ (4,133) $ (5,077) (12,585) $ (14,587)
========== ========== ========== ==========
Weighted average common shares 3,092,031 3,097,031 3,093,087 3,097,031
outstanding ========== ========== ========== ==========
Net loss per share of common stock $ (1.34) $ (1.64) $ (4.07) $ (4.71)
========== ========== ========== ==========
</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 $73.7 million have
accumulated on the Company's outstanding Series A and Series B Preferred
Stock through October 4, 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>
OCTOBER 4, DEC. 31,
1997 1996
---------- ----------
<S> <C> <C>
Raw materials $ 4,195 $ 4,713
Work in process 10,765 10,063
Finished goods 8,985 5,903
---------- ----------
$23,945 $20,679
========== ==========
</TABLE>
6
<PAGE>
(4) Income Taxes
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 $5,500,000, 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.
On May 23, 1997, the Company filed a written protest regarding the proposed
adjustments with the IRS. The Company, after consultation with tax
counsel, believes its positions set forth in its tax returns are in
compliance with IRS rules and regulations and will vigorously contest the
adjustments being proposed by the IRS.
7
<PAGE>
Item 2 - Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
CALMAR INC. AND SUBSIDIARIES
For The Three-Month and Nine-Month Periods
Ended October 4, 1997 and September 28, 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 NINE-MONTH
PERIODS ENDED PERIODS ENDED
------------------------ ------------------------
OCT. 4, SEPT. 28, OCT. 4, SEPT. 28,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sprayers 59.0% 61.1% 57.8% 59.1%
Dispensers 32.7 29.6 32.3 30.8
Other Products 8.3 9.3 9.9 10.1
----------- ----------- ----------- -----------
Net Sales 100.0% 100.0% 100.0% 100.0%
=========== =========== =========== ===========
Gross Profit 27.9% 25.6% 27.2% 25.6%
Selling, General & Admin. Expenses 16.0% 16.5% 16.2% 16.5%
----------- ----------- ----------- -----------
Operating Income 11.9% 9.1% 11.0% 9.0%
=========== =========== =========== ===========
</TABLE>
RESULTS OF OPERATIONS
Comparison of the Three-month Period Ended October 4, 1997 to the Three-month
Period Ended September 28, 1996.
Net sales for the three-month period ended October 4, 1997, were $57.7 million,
an increase of $2.5 million or 4.5% above the comparable 1996 period. Net sales
would have grown by 9.5%, but for the unfavorable impact in foreign exchange
rates of $2.8 million. Total dispenser sales increased $2.5 million or 15.4%
from the comparable period in 1996, due primarily to growth in the market for
liquid soap and body lotions and as a result of customer product promotions.
Gross profit for the three-month period ended October 4, 1997, increased $2.0
million or 14.0% from the comparable 1996 period. As a percentage of net sales,
gross profit increased from 25.6% to 27.9%. The gross profit increase is
attributable to improved sales volume, increased cost absorption and cost
savings obtained from the molding capacity increase in Europe.
Selling, general and administrative expenses were $9.2 million or 16.0% of net
sales for the three-month period ended October 4, 1997, as compared to $9.1
million or 16.5% of net sales for the comparable 1996 period.
8
<PAGE>
Operating income for the three-month period ended October 4, 1997, increased to
$6.9 million or 11.9% of net sales, as compared to $5.0 million or 9.1% of net
sales, from the comparable 1996 period. The increase is the result of higher
sales volume and the resulting increased gross profit.
Other income for the three-month period ended October 4, 1997, increased $0.1
million and was relatively comparable to 1996. Interest expense increased $0.2
million from the comparable 1996 period due to increased borrowing levels.
No U.S. tax liability is expected to exist for the year ending 1997, due to
large U.S. net operating loss carryovers. In 1996, no income tax benefit was
recorded against the U.S. losses due to uncertainty of its ultimate realization.
As such, the income tax provisions for the three-month periods ended in 1997
and 1996 were primarily related to income from the Company's international
operations. The increase in the tax provision reflects higher earnings of the
combined European subsidiaries.
Net income for the three-month period ended October 4, 1997, increased by $1.6
million from a net loss of $1.1 million for the comparable 1996 period. The
increase in net income is due primarily to higher sales and improved gross
profit margins.
Comparison of the Nine-month Period Ended October 4, 1997 to the Nine-month
Period Ended September 28, 1996
Net sales for the nine-month period ended October 4, 1997, were $175.3 million,
an increase of $10.0 million or 6.0% from the comparable 1996 period. Net sales
would have grown by 13.3%, but for the unfavorable impact in foreign exchange
rates of $8.6 million. Sprayer sales increased $3.6 million or 3.7% from the
comparable period in 1996. The increase in sales resulted from product
promotions and increased demand by existing customers in all the major
geographical segments. Dispenser sales increased $5.6 million or 11.1% from the
comparable period in 1996, due primarily to growth in the market for liquid soap
and body lotion applications.
Gross profit for the nine-month period ended October 4, 1997, increased $5.4
million or 12.7% from the comparable 1996 period. As a percentage of net sales,
gross profit increased from 25.6% to 27.2%. The reasons for the gross profit
increase are the same as those for the three-month period.
Selling, general and administrative expenses were $28.4 million or 16.2% of net
sales for the nine-month period ended October 4, 1997, as compared to $27.3
million or 16.5% of net sales for the comparable 1996 period. The increase is
due primarily to increased research and development expense and administrative
compensation.
Operating income for the nine-month period ended October 4, 1997, increased to
$19.2 million, or 11.0% of net sales, as compared to $14.9 million or 9.0% of
net sales, from the comparable 1996 period. The increase reflects improved
gross profit, offset by higher selling, general and administrative expenses, as
described above.
Other income for the nine-month period ended October 4, 1997, decreased by $0.2
million from the comparable 1996 period. The decrease is primarily attributed
to loss from foreign currency transactions and disposal of fixed assets in the
United States. Interest expense for the nine-month period ended October 4,
1997, increased $0.2 million from the comparable 1996 period due to increased
borrowing levels.
No U.S. tax liability is expected to exist for the year ending 1997, due to
large U.S. net operating loss carryovers. In 1996, no income tax benefit was
recorded against the U.S. losses due to uncertainty of its ultimate realization.
As such, the income tax provisions for the nine-month periods ended in 1997 and
1996 were primarily related to income from the Company's international
operations. The increase in the tax provision in 1997 reflects higher earnings
of the combined European subsidiaries.
Net income for the nine-month period ended October 4, 1997, increased to $0.8
million as compared to a net loss of $3.0 million for the comparable 1996
period. The increase is due to higher sales and improved gross margins.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company funds its cash needs through cash flow from operations, existing
cash balances, equipment financing, the revolving facility (the "Revolver")
under the Company's senior secured credit agreement (the "Credit Facility") and
short-term borrowing facilities in Europe. A primary source of cash for the
Company is 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 $12.5 million for the nine-month
period ended October 4, 1997, from the comparable 1996 period. The cash used in
the changes in accounts receivable, inventories and accounts payable was
partially offset by the increase in cash provided by net income. Working
capital, at October 4, 1997, was $27.1 million compared to $20.5 million at
December 31, 1996. The increase in working capital is primarily attributed to
the increases in accounts receivable and inventories and decreases in accounts
payable, offset by the decrease in cash and cash equivalents and increased
current installments of long term debt. The Company has entered into certain
interest rate cap agreements to reduce the risk of significant fluctuations in
interest rates on interest payments and expense for the term loan portion of the
Credit Facility.
The net cash used in investing activities increased by $7.9 million for the
nine-month period ended October 4, 1997, due to increased capital expenditures
in 1997. For the nine-month period ended October 4, 1997, capital expenditures
were $14.6 million which were funded by equipment financing, the Revolver and
available cash. The Company plans to fund new equipment purchases through
equipment financing and leasing, existing cash balances (which were $4.0 million
as of October 4, 1997) and cash flow from operations.
The net cash provided by financing activities increased $20.2 million for the
nine-month period ended October 4, 1997, primarily due to the Company utilizing
$8.7 million on the Revolver in the current quarter, a higher domestic cash
overdraft position, increased utilization of European short-term borrowing
facilities and increased financing of capital expenditures.
The Revolver permits borrowings 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 October 4, 1997, the borrowing
base test permitted the Company to borrow up to $12.0 million. At such date,
the Company had borrowings outstanding of $8.7 million and letters of credit of
$1.0 million, leaving $2.3 million available for borrowing. In addition, the
Company had unused credit facilities available to its European subsidiaries of
$0.3 million at October 4, 1997.
The indenture which governs the terms of the Senior Subordinated Notes (the
"Indenture") and the 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 Credit Facility contains
certain financial covenants, including, but not limited to, covenants related to
a minimum interest coverage ratio, a minimum consolidated EBITDA and a minimum
current ratio. In addition, the Credit Facility contains 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
affiliates. The Credit Facility also contains customary events of default,
including certain changes of control of the Company. As of October 4, 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
October 4, 1997, the Consolidated Cash Flow Ratio was 2.0 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 Credit Facility permit the Company, and in
certain cases its subsidiaries, to incur additional indebtedness only under
certain circumstances.
10
<PAGE>
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 Credit Facility contain
restrictive financial and operating covenants, (v) the borrowings under the
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 $73.7 million have accumulated on the Company's
outstanding Series A and Series B Preferred Stock through October 4, 1997. Such
dividends, payable in shares of Series A and Series B Preferred Stock,
respectively, had not been declared as of October 4, 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.
On May 23, 1997, the Company filed a written protest regarding the proposed
adjustments with the IRS. The Company, after consultation with tax counsel,
believes its positions set forth in its tax returns are in compliance with IRS
rules and regulations and will vigorously contest the adjustments being proposed
by the IRS.
RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (Statement 128).
This Statement establishes standards for computing and presenting earnings per
share ("EPS"), and supersedes APB Opinion No. 15. Statement 128 replaces
primary EPS with basic EPS and requires dual presentation of basic and diluted
EPS. Statement 128 is effective for both interim and annual periods ending
after December 15, 1997. Earlier adoption is not permitted. After adoption,
all prior-period EPS data shall be restated to conform to Statement 128.
Proforma basic and diluted EPS, as calculated under Statement 128, would have
been ($1.34) and ($4.07) for the three-month and nine-month periods ended
October 4, 1997, respectively.
11
<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
October 4, 1997.
12
<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 17/th/ day of November, 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.
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> OCT-04-1997
<CASH> 4,061
<SECURITIES> 0
<RECEIVABLES> 44,645
<ALLOWANCES> 1,313
<INVENTORY> 23,945
<CURRENT-ASSETS> 73,321
<PP&E> 238,232
<DEPRECIATION> 135,037
<TOTAL-ASSETS> 281,672
<CURRENT-LIABILITIES> 46,270
<BONDS> 120,000
0
14
<COMMON> 31
<OTHER-SE> (32,422)
<TOTAL-LIABILITY-AND-EQUITY> 281,672
<SALES> 175,251
<TOTAL-REVENUES> 175,251
<CGS> 127,665
<TOTAL-COSTS> 156,028
<OTHER-EXPENSES> (772)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,724
<INCOME-PRETAX> 1,271
<INCOME-TAX> 477
<INCOME-CONTINUING> 794
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 794
<EPS-PRIMARY> (4.07)
<EPS-DILUTED> (4.07)
</TABLE>
