<PAGE>
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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 July 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 August 11,
1997.
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Page 1 of 15 Pages
Exhibit Index Appears at Page: 15
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CALMAR INC. AND
SUBSIDIARIES
Index to Form 10-Q
For The Three-Month and Six-Month Periods
Ended July 5, 1997 and June 29, 1996
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
PART I - FINANCIAL INFORMATION:
- --------------------------------
Item 1 - Financial Statements
--------------------
Condensed Consolidated Balance Sheets at
July 5, 1997 (Unaudited) and December 31, 1996................................................3
Condensed Consolidated Statements of Operations
for the Three-Month and Six-Month Periods Ended
July 5, 1997 (Unaudited) and June 29, 1996
(Unaudited)...................................................................................4
Condensed Consolidated Statements of Cash Flows
for the Three-Month and Six-Month Periods Ended
July 5, 1997 (Unaudited) and June 29, 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.......................................8-12
---------------------------------------------
PART II - OTHER INFORMATION:
- ----------------------------
Item 1 - Legal Proceedings..................................................................13
-----------------
Item 6 - Exhibits and Reports on Form 8-K ..................................................13
--------------------------------
</TABLE>
2
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
--------------------
CALMAR INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in Thousands, Except Share Data)
<TABLE>
<CAPTION>
July 5, December 31,
1997 1996
(Unaudited)
----------- ------------
<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 2,432 $ 9,198
Accounts receivable, less allowance for doubtful
accounts of $1,423 in 1997 and $1,563 in 1996 39,406 35,153
Inventories 22,287 20,679
Income taxes receivable 471 444
Prepaid expenses 1,832 1,710
-------- --------
Total current assets 66,428 67,184
Property and equipment, net 102,962 106,619
Cost in excess of net assets acquired, less accumulated
amortization of $27,233 in 1997 and $26,360 in 1996 91,972 93,649
Other intangible assets, less accumulated amortization of
$13,558 in 1997 and $12,758 in 1996 5,463 6,275
Other assets, net 8,831 9,011
-------- --------
$275,656 $282,738
======== ========
Liabilities and Stockholders' Deficiency
----------------------------------------
Current Liabilities:
Short-term borrowings $4,024 $2,640
Current installments of long-term debt 5,290 5,857
Accounts payable 14,730 18,941
Accrued liabilities 20,321 19,246
------- -------
Total current liabilities 44,365 46,684
Long-term debt 232,537 232,867
Deferred income taxes 11,482 12,380
Other liabilities 20,041 20,205
-------- --------
Total liabilities 308,425 312,136
-------- --------
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 (103,099) (103,402)
Accumulated translation adjustment (7,089) (3,473)
Notes receivable from officers for purchase of common stock (562) (554)
-------- --------
Total stockholders' deficiency (32,769) (29,398)
-------- --------
$275,656 $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 SIX-MONTH
PERIODS ENDED PERIODS ENDED
------------------------------ ------------------------------
July 5, June 29, July 5, June 29,
1997 1996 1997 1996
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net sales $57,604 $54,689 $117,542 $110,027
Cost of sales 41,868 40,529 86,063 81,939
-------------- -------------- ------------- --------------
Gross profit 15,736 14,160 31,479 28,088
Selling, general and administrative expenses 9,318 9,028 19,135 18,184
-------------- -------------- ------------- --------------
Operating income 6,418 5,132 12,344 9,904
Other income 44 499 494 869
Interest expense (6,166) (6,213) (12,440) (12,441)
-------------- -------------- ------------- --------------
Income (loss) before income tax provision 296 (582) 398 (1,668)
Income tax provision (benefit) (1) 265 95 287
-------------- -------------- ------------- --------------
Net income (loss) $297 ($847) $303 ($1,955)
============= ============= ============= ==============
Net loss per share of common stock ($1.35) ($1.52) ($2.73) ($3.07)
============= ============= ============= ==============
</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 SIX-MONTH
PERIODS ENDED PERIODS ENDED
------------------------ -----------------------
July 5, June 29, July 5, June 29,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 297 ($ 847) $ 303 ($ 1,955)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 6,261 6,036 12,207 12,069
Amortization of discount on notes payable 26 49 36 81
Additions to notes receivable from officers (4) (3) (8) (8)
Gain on sale of property and equipment (26) (2) (74) (4)
Deferred income tax benefit (301) (298) (600) (595)
Changes in assets and liabilities:
Accounts receivable (2,060) (2,416) (6,317) (4,123)
Inventories (2,328) 1,713 (2,782) 364
Income taxes receivable 12 329 (82) 224
Prepaid expenses (323) (40) (289) 218
Accounts payable (2,478) (1,947) (5,477) (2,866)
Accrued liabilities 4,766 3,917 1,734 4,314
Other liabilities 203 186 583 473
---------- --------- ---------- ----------
Net cash provided by (used in) operating activities 4,045 6,677 (766) 8,192
---------- --------- ---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (5,148) (2,802) (9,840) (4,688)
Proceeds from sales of equipment 45 2 93 7
Increase in other intangible assets - (64) - (64)
(Increase) decrease in other assets (149) 24 (389) (80)
---------- --------- ---------- ----------
Net cash used in investing activities (5,252) (2,840) (10,136) (4,825)
----------- ---------- ---------- ----------
Cash flows from financing activities:
Proceeds (repayments) of short-term borrowings, net 1,080 7 1,784 (376)
Increase (decrease) in cash overdraft 1,488 (493) 2,686 (448)
Proceeds from issuance of long-term debt - - 2,687 -
Principal payments on long-term debt (1,524) (5,387) (2,817) (6,975)
Repurchase of common stock - - (50) -
----------- ---------- ---------- ----------
Net cash provided by (used in) financing activities 1,044 (5,873) 4,290 (7,799)
----------- ---------- ---------- ----------
Effect of exchange rate changes on cash and cash
equivalents (21) (4) (154) (152)
----------- ---------- ---------- ----------
Net decrease in cash and cash equivalents (184) (2,040) (6,766) (4,584)
Cash and cash equivalents, beginning of period 2,616 6,493 9,198 9,037
----------- ---------- ---------- ----------
Cash and cash equivalents, end of period $2,432 $4,453 $ 2,432 $ 4,453
========== ========== ========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 484 $ 444 $ 800 $ 873
========== ========== ========== ==========
Interest $2,701 $2,807 $12,255 $12,286
========== ========== ========== ==========
Equipment acquired in exchange for long-term debt - $ 741 - $ 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 Six-Month Periods
Ended July 5, 1997 and June 29, 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 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 SIX-MONTH
PERIODS ENDED PERIODS ENDED
--------------------------- -------------------------------
JULY 5, JUNE 29, JULY 5, JUNE 29,
1997 1996 1997 1996
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Net income (loss) $ 297 $ (847) $ 303 $ (1,955)
Undeclared dividends on preferred stock (4,458) (3,847) (8,755) (7,555)
----------- ------------ -------------- --------------
Loss attributable to common stockholders $ (4,161) $ (4,694) $ (8,452) $ (9,510)
=========== ============ ============== ==============
Weighted average common shares outstanding 3,092,031 3,097,031 3,093,614 3,097,031
=========== ============ ============== ==============
Net loss per share of common stock $ (1.35) $ (1.52) $ (2.73) $ (3.07)
=========== ============ ============== ==============
</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 $69.0 million have
accumulated on the Company's outstanding Series A and Series B Preferred
Stock through July 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>
JULY 5, DEC. 31,
1997 1996
--------------------- ---------------------
<S> <C> <C>
Raw materials $ 4,728 $ 4,713
Work in process 10,282 10,063
Finished goods 7,277 5,903
--------------------- ---------------------
$ 22,287 $ 20,679
===================== =====================
</TABLE>
(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
6
<PAGE>
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 Six-Month Periods
Ended July 5, 1997 and June 29, 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 SIX-MONTH
PERIODS ENDED PERIODS ENDED
---------------------- ------------------------
JULY 5, JUNE 29, JULY 5, JUNE 29,
1997 1996 1997 1996
------- -------- ------- --------
<S> <C> <C> <C> <C>
Sprayers 57.4% 57.4% 57.1% 58.1%
Dispensers 31.5 31.1 32.1 31.5
Other Products 11.1 11.5 10.8 10.4
----- ----- ----- -----
Net Sales 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Gross Profit 27.3% 25.9% 26.8% 25.5%
Selling, General & Admin. Expenses 16.2% 16.5% 16.3% 16.5%
----- ----- ----- -----
Operating Income 11.1% 9.4% 10.5% 9.0%
===== ===== ===== =====
</TABLE>
RESULTS OF OPERATIONS
Comparison of the Three-month Period Ended July 5, 1997 to the Three-month
Period Ended June 29, 1996.
Net sales for the three-month period ended July 5, 1997, were $57.6 million, an
increase of $2.9 million or 5.3% above the comparable 1996 period. Net sales
were unfavorably impacted by $3.0 million due to foreign exchange rate changes.
Sprayer sales increased $1.7 million or 5.4% from the comparable period in 1996.
The increase in trigger sprayer sales reflects stronger sales from the existing
customer base resulting from product promotions and increased demand in North
America, Europe, Latin America and Asia. Fine mist sprayer sales declined
slightly, as lower order volume in Europe offset higher growth in North America,
principally resulting from new customers. In addition, regular sprayers sales
experienced a moderate decline in Europe. Total dispenser sales increased $1.1
million or 6.7% from the comparable period in 1996, due primarily from increased
sales of large dispensers as a result of customer product promotions.
Gross profit for the three-month period ended July 5, 1997, increased $1.6
million or 11.1% from the comparable 1996 period. As a percentage of net sales,
gross profit increased from 25.9% to 27.3%. The gross profit increase is
attributable to improved sales volume and the resulting absorption of fixed
manufacturing costs and favorable product mix in North America. Higher resin
prices were offset by lower purchase part prices. In
8
<PAGE>
Europe, a slight increase in gross profit as measured in local currency was more
than offset by an unfavorable change in exchange rates.
Selling, general and administrative expenses were $9.3 million or 16.2% of net
sales for the three-month period ended July 5, 1997, as compared to $9.0 million
or 16.5% of net sales for the comparable 1996 period. The increase resulted
primarily from increased research and development expense and administrative
expenses relating to the new operations in Latin America.
Operating income for the three-month period ended July 5, 1997, increased to
$6.4 million or 11.1% of net sales, as compared to $5.1 million or 9.4% of net
sales, from the comparable 1996 period. The increase is the result of higher
sales volume and the resulting increased gross profit, offset by the increased
SG&A expenses as discussed above.
Other income for the three-month period ended July 5, 1997, decreased $0.5
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 three-month period ended July 5, 1997,
remained essentially unchanged relative to that in the comparable 1996 period.
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 decrease in the tax provision in 1997 reflects lower earnings
of the combined European subsidiaries.
Net income for the three-month period ended July 5, 1997, increased by $1.1
million from a net loss of $0.8 million for the comparable 1996 period. The
increase in net income is due primarily to higher operating income and a lower
income tax provision as discussed above.
Comparison of the Six-month Period Ended July 5, 1997 to the Six-month Period
Ended June 29, 1996
Net sales for the six-month period ended July 5, 1997, were $117.5 million, an
increase of $7.5 million or 6.8% from the comparable 1996 period. Net sales were
negatively impacted by changes in foreign exchange rates of $4.9 million.
Sprayer sales increased $3.3 million or 5.1% from the comparable period in 1996.
The increase in trigger sprayer sales results from product promotions and
increased demand by existing customers in all the major geographical segments.
The small decline in sales of fine mist sprayers reflects weaker demand in
Europe which was offset partially by growth in North America. Dispenser sales
increased $3.1 million or 9.0% from the comparable period in 1996, due primarily
to growth in the market for liquid soap and body lotion applications. Other
product sales increased significantly due to higher sales to Asian licensees.
Gross profit for the six-month period ended July 5, 1997, increased $3.4 million
or 12.1% from the comparable 1996 period. As a percentage of net sales, gross
profit increased from 25.5% to 26.8%. The reasons for the gross profit increase
are the same as those for the three-month period.
Selling, general and administrative expenses were $19.1 million or 16.3% of net
sales for the six-month period ended July 5, 1997, as compared to $18.2 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 six-month period ended July 5, 1997, increased to $12.3
million, or 10.5% of net sales, as compared to $9.9 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 six-month period ended July 5, 1997, decrease by $0.4
million from the comparable 1996 period. The reasons for the decreases are
generally the same as those for the three-month period. Interest expense for the
six-month period ended July 5, 1997, remained relatively unchanged from the
comparable 1996 period.
9
<PAGE>
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 decrease in the tax provision in 1997 reflects lower earnings of
the combined European subsidiaries.
Net income for the six-month period ended July 5, 1997, increased to $0.3
million as compared to a net loss of $2.0 million for the comparable 1996
period. The increase is due to increased operating income and a decreased
income tax provision.
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 new senior secured credit agreement (the "New 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 $9.0 million for the six-month period
ended July 5, 1997, from the comparable 1996 period. The cash used in the
changes in accounts receivable, inventories, accounts payable and accrued
liabilities was partially offset by the change in cash provided by net income.
Working capital, at July 5, 1997, was $22.1 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
short-term borrowings and accrued liabilities. 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 New Credit Facility.
The net cash used in investing activities increased by $5.3 million for the six-
month period ended July 5, 1997, due to increased capital expenditures in 1997.
For the six-month period ended July 5, 1997, capital expenditures were $9.8
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 $2.4 million as of July 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 July 5, 1997,
totaled $0.9 million for capital expenditures to increase its manufacturing
capacity. In addition, such subsidiary has 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 $12.1 million for the
six-month period ended July 5, 1997, due to decreased payment on long-term debt,
a higher domestic cash overdraft position, increased utilization of European
short-term borrowing facilities and increased financing of capital expenditures.
The Company amended its New Credit Facility in October 1996, which among other
things, reduced the maximum borrowings permitted under the Revolver. As amended,
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 July 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 $3.6 million
at July 5, 1997.
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
10
<PAGE>
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 and a minimum
current ratio. In addition, the New 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 New Credit Facility also contains customary events of default,
including certain changes of control of the Company. As of July 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
July 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 $69.0 million have accumulated on the Company's
outstanding Series A and Series B Preferred Stock through July 5, 1997. Such
dividends, payable in shares of Series A and Series B Preferred Stock,
respectively, had not been declared as of July 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.
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.
11
<PAGE>
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. Basic and diluted
EPS, as calculated under Statement 128, would have been ($1.35) and ($2.73) for
the three-month and six-month periods ended July 5, 1997, respectively.
12
<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
July 5, 1997.
13
<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 11th day of August, 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.
14
<PAGE>
CALMAR INC. AND SUBSIDIARIES
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
------- ----------- ------
<S> <C> <C>
27.1 Financial Data Schedule 16
</TABLE>
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUL-05-1997
<CASH> 2,432
<SECURITIES> 0
<RECEIVABLES> 40,829
<ALLOWANCES> 1,423
<INVENTORY> 22,287
<CURRENT-ASSETS> 66,428
<PP&E> 233,780
<DEPRECIATION> 130,818
<TOTAL-ASSETS> 275,656
<CURRENT-LIABILITIES> 44,365
<BONDS> 120,000
0
14
<COMMON> 31
<OTHER-SE> (32,814)
<TOTAL-LIABILITY-AND-EQUITY> 275,656
<SALES> 117,542
<TOTAL-REVENUES> 117,542
<CGS> 86,063
<TOTAL-COSTS> 105,198
<OTHER-EXPENSES> (494)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,440
<INCOME-PRETAX> 398
<INCOME-TAX> 95
<INCOME-CONTINUING> 303
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 303
<EPS-PRIMARY> (2.73)
<EPS-DILUTED> (2.73)
</TABLE>
