<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 4, 1998
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 May 8, 1998.
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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 Period
Ended April 4, 1998
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
PART I - FINANCIAL INFORMATION:
- --------------------------------
Item 1 - Financial Statements
--------------------
Condensed Consolidated Balance Sheets at
April 4, 1998 (Unaudited) and December 31, 1997............................................................. 3
Condensed Consolidated Statements of Operations
for the Three-Month Periods Ended
April 4, 1998 (Unaudited) and April 5, 1997 (Unaudited) .................................................... 4
Condensed Consolidated Statements of Cash Flows
for the Three-Month Periods Ended
April 4, 1998 (Unaudited) and April 5, 1997 (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)
<TABLE>
<CAPTION>
April 4, December 31,
1998 1997
(Unaudited)
----------- ----------
<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 2,980 $ 7,218
Accounts receivable, less allowance for doubtful
accounts of $998 in 1998 and $994 in 1997 43,961 41,350
Inventories 25,214 24,767
Income taxes receivable 112 44
Prepaid expenses 2,535 1,273
-------- --------
Total current assets 74,802 74,652
Property and equipment at cost, net 106,534 105,839
Cost in excess of net assets acquired, less accumulated
amortization of $29,764 in 1998 and $28,909 in 1997 89,776 90,759
Other intangible assets, less accumulated amortization of
$9,327 in 1998 and $12,501 in 1997 4,526 4,721
Other assets, net 8,737 8,670
-------- --------
$284,375 $284,641
======== ========
Liabilities and Stockholders' Deficiency
----------------------------------------
Current Liabilities:
Short-term borrowings $2,146 $4,502
Current installments of long-term debt 9,005 5,199
Accounts payable 16,060 19,140
Accrued liabilities 15,272 18,142
-------- --------
Total current liabilities 42,483 46,983
Long-term debt 242,620 238,571
Deferred income taxes 10,525 10,831
Other liabilities 20,934 20,497
-------- --------
Total liabilities 316,562 316,882
-------- --------
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 1998
1997 31 31
Additional paid-in capital 77,937 77,937
Accumulated deficit (100,900) (101,705)
Accumulated other comprehensive income (8,695) (7,948)
Notes receivable from officers for purchase of common stock (574) (570)
-------- --------
Total stockholders' deficiency (32,187) (32,241)
-------- --------
$284,375 $284,641
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
CALMAR INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
THREE-MONTH
PERIODS ENDED
--------------------------
April 4, April 5,
1998 1997
----------- ------------
<S> <C> <C>
Net sales $65,492 $59,937
Cost of sales 47,665 44,193
----------- ------------
Gross profit 17,827 15,744
Selling, general and administrative expenses 10,134 9,817
----------- ------------
Operating income 7,693 5,927
Other income 150 449
Interest expense (6,469) (6,274)
----------- ------------
Income before income taxes 1,374 102
Income taxes 569 96
----------- ------------
Net income $805 $6
=========== ============
</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
------------------------------------------
April 4, April 5,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities: $805 $6
Net income
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 6,164 5,946
Amortization of discount on notes payable 8 10
Additions to notes receivable from officers 0 (4)
Gain on sale of property and equipment 9 (48)
Deferred income tax benefit (254) (299)
Changes in assets and liabilities:
Accounts receivable (3,096) (4,257)
Inventories (708) (454)
Income taxes receivable (68) (94)
Prepaid expenses (1,285) 34
Accounts payable (3,099) (2,999)
Accrued liabilities (2,585) (3,095)
Other liabilities 590 380
--------- ---------
Net cash used in operating activities (3,519) (4,874)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (6,478) (4,693)
Proceeds from sales of equipment 1 48
Increase in other assets (339) (239)
--------- ---------
Net cash used in investing activities (6,816) (4,884)
--------- ---------
Cash flows from financing activities:
Proceeds (repayments) of short-term borrowings, net (2,265) 705
Net change in Revolver 1,000 -
Increase in cash overdraft 253 1,198
Proceeds from issuance of long-term debt 8,337 2,749
Principal payments on long-term debt (1,243) (1,293)
Repurchase of common stock - (50)
--------- ---------
Net cash provided by financing activities 6,082 3,309
--------- ---------
Effect of exchange rate changes on cash and cash equivalents 15 (133)
--------- ---------
Net decrease in cash and cash equivalents (4,238) (6,582)
Cash and cash equivalents, beginning of period 7,218 9,198
--------- ---------
Cash and cash equivalents, end of period $2,980 $2,616
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $201 $316
========= =========
Interest $9,828 $9,554
========= =========
</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 Period
Ended April 4, 1998 and April 5, 1997
(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, 1997 included in the Company's annual report on Form 10-K for the year
ended December 31, 1997. 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. The results for the three-months ended
April 4, 1998 are not necessarily indicative of the results of operations
and cash flows for the full fiscal year.
(2) 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 4, Dec. 31,
1998 1997
-------------- --------------
<S> <C> <C>
Raw materials $ 4,163 $ 4,483
Work in process 10,862 10,960
Finished goods 10,189 9,324
-------- --------
$ 25,214 $ 24,767
======== ========
</TABLE>
(3) Comprehensive Income
- -------------------------
As set forth in the Company's annual report on Form 10-K, the Company is
required to adopt Statement of Financial Accounting Standards No. 130
entitled "Reporting Comprehensive Income" (SFAS No. 130") in the first
quarter of the current year. Comparative financial statements are required
to be reclassified in accordance with SFAS No. 130. This statement is
solely a disclosure standard and does not cause any change in measurement
or recognition.
Total comprehensive income (loss) for the three-month period ended April 4, 1998
and April 5, 1997 is as follows:
<TABLE>
<CAPTION>
April 4, Dec. 31,
1998 1997
-------------- --------------
<S> <C> <C>
Net Income $ 805 $ 6
Other comprehensive income, net of tax
Foreign currency translation adjustment (747) (2,646)
------- --------
Total comprehensive income (loss) $ 58 $ (2,640)
======= ========
</TABLE>
6
<PAGE>
The change in the component of other comprehensive income for the three-month
period ended April 4, 1998 and April 5, 1997 is as follows:
<TABLE>
<CAPTION>
April 4, April 5,
1998 1997
------------------------ ------------------------
<S> <C> <C>
Beginning Balance $ (7,948) $ (3,473)
Current period change in foreign currency
translation adjustment, net of tax (747) (2,646)
-------- --------
Ending Balance $ (8,695) $ (6,119)
======== ========
</TABLE>
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 4, 1998 and April 5, 1997
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, 1997 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
-------------------------------------------------
APR. 4, APR. 5,
1998 1997
-------------------- ---------------------
<S> <C> <C>
Sprayers 62.3% 56.9%
Dispensers 32.0 32.6
Other Products 5.7 10.5
-------------------- ---------------------
Net Sales 100.0% 100.0%
==================== =====================
Gross Profit 27.2% 26.3%
Selling, General & Admin. Expenses 15.5% 16.4%
-------------------- ---------------------
Operating Income 11.7% 9.9%
==================== =====================
</TABLE>
RESULTS OF OPERATIONS
Comparison of the Three-month Period Ended April 4, 1998 to the Three-month
Period Ended April 5, 1997.
Net sales for the three-month period ended April 4, 1998 were $65.5 million, an
increase of $5.6 million or 9.3% above the comparable 1997 period. Net sales
would have grown by 13.5%, but for the unfavorable impact in foreign exchange
rates of $2.5 million. Total sprayer sales increased $6.7 million or 19.7% from
the comparable period in 1997 due primarily to increased volume demand for body
splash products and new product introductions. Total dispenser sales increased
$1.4 million or 7.2% from the comparable period in 1997, due primarily to higher
unit sales resulting from the growth in the market for liquid soap and body
lotions and as a result of the timing of customer product promotions. The
increase in sales was partially offset by a decrease in other component parts of
$1.7 million or 63% due to lower sales for component parts to certain Asian
customers.
Gross profit for the three-month period ended April 4, 1998 increased $2.1
million or 13.2% from the comparable 1997 period. As a percentage of net sales,
gross profit increased from 26.3% to 27.2%. The gross profit increase is
attributable to improved sales volume, improved fixed cost absorption and cost
savings obtained from an increase in molding capacity in Europe.
8
<PAGE>
Selling, general and administrative expenses were $10.1 million or 15.5% of net
sales for the three-month period ended April 4, 1998, as compared to $9.8
million or 16.4% of net sales for the comparable 1997 period. The dollar
increase was due to the inclusion of the South American companies which were
formed during the second quarter of 1996.
Operating income for the three-month period ended April 4, 1998 increased to
$7.7 million or 11.7% of net sales, as compared to $5.9 million or 9.9% of net
sales, from the comparable 1997 period. The increase is the result of higher
sales volume and the resulting increased gross profit.
A relatively small U.S. tax liability is expected to exist for the year ending
1998, due to the application of large U.S. net operating loss carryovers to
reduce 1998 tax liability. As such, the income tax provisions for the three-
month periods ended in 1998 and 1997 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 April 4, 1998 increased by $0.8
million from the comparable 1997 period. The increase in net income is due
primarily to higher sales and improved gross profit margins.
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 decreased by $1.4 million for the three-month
period ended April 4, 1998, from the comparable 1997 period. The decrease in
cash used for accounts receivable and increase in net income was partially
offset by the increase in cash used for prepaid expenses. Working capital at
April 4, 1998 was $32.3 million compared to $27.7 million at December 31, 1997.
The increase in working capital is primarily attributed to the increases in
accounts receivable and prepaid expenses and decreases in short-term borrowings,
accounts payable, and accrued liabilities. The decrease in cash and increase in
current installments of long-term debt offset these accounts.
The net cash used in investing activities increased by $1.9 million for the
three-month period ended April 4, 1998, due to increased capital expenditures in
1998. For the three-month period ended April 4, 1998, capital expenditures were
$6.5 million, which were funded by an increase in the senior secured credit
agreement (the "Credit Facility") and available cash. The Company plans to fund
new equipment purchases through equipment financing and leasing, existing cash
balances (which were $3.0 million as of April 4, 1998) and cash flow from
operations.
The net cash provided by financing activities increased $2.8 million for the
three-month period ended April 4, 1998, due to the Company borrowing an
additional $5.0 million dollars on the Series A obligations of the Credit
Facility and increased European debt of $3.3 million offset by net short-term
borrowing repayments. 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 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 April 4, 1998, the borrowing
base test permitted the Company to borrow up to $12.0 million. At such date,
the Company had borrowings outstanding of $6.0 million and letters of credit of
$1.0 million, leaving $5.0 million available for borrowing. In addition, the
Company had unused credit facilities available to its European subsidiaries of
$1.3 million at April 4, 1998.
The indenture that 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
9
<PAGE>
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 April 4, 1998, 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 other 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 4, 1998, the Consolidated Cash Flow Ratio
was 2.1 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.
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 $83.4 million have accumulated on the Company's
outstanding Series A and Series B Preferred Stock through April 4, 1998. Such
dividends, payable in shares of Series A and Series B Preferred Stock,
respectively, had not been declared as of April 4, 1998.
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 which
expires September 15, 1999.
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 $36.7 million at December 31, 1997, to $27.6 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, 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.
10
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENT
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information" (SFAS No. 131); in February 1998, FASB
issued Statement of Financial Accounting Standards No. 132, "Employers'
Disclosure about Pensions and Other Postretirement Benefits" (SFAS No. 132)
(collectively, the "Statements"). The Statements are effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 establishes standards for
reporting financial and descriptive information about an enterprise's operating
segments in its annual financial statements. SFAS No. 132 revised employers'
disclosures about pension and other postretirement benefit plans.
Reclassification or restatement of financial information for earlier periods is
required upon adoption of SFAS No. 131, and SFAS No. 132. The Statements are
not required to be applied to interim financial statements in the initial year
of adoption. The Company intends to implement SFAS No. 131 and SFAS No. 132 in
the year end financial statements.
YEAR 2000
The Company recognizes the need to ensure its operations will not be adversely
impacted by Year 2000 software failures. Processing errors due to Year 2000
software failures are a known risk. The Company has established processes for
evaluating and managing the risks and costs associated with this potential
problem. The cost of achieving Year 2000 compliance is not expected to be
material and will be incurred and expensed through fiscal 1999.
11
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1 - Legal Proceedings
-----------------
See "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 4, 1998.
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 8th day of May, 1998.
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
<PAGE>
CALMAR INC. AND SUBSIDIARIES
Exhibit Index
Exhibit Page
Number Description Number
------ ----------- ------
27.1 Financial Data Schedule 15
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> APR-04-1998
<CASH> 2,980
<SECURITIES> 0
<RECEIVABLES> 44,959
<ALLOWANCES> 998
<INVENTORY> 25,214
<CURRENT-ASSETS> 74,802
<PP&E> 247,973
<DEPRECIATION> 141,439
<TOTAL-ASSETS> 284,375
<CURRENT-LIABILITIES> 42,483
<BONDS> 120,000
0
14
<COMMON> 31
<OTHER-SE> (32,232)
<TOTAL-LIABILITY-AND-EQUITY> 284,375
<SALES> 65,492
<TOTAL-REVENUES> 65,492
<CGS> 47,665
<TOTAL-COSTS> 57,799
<OTHER-EXPENSES> (150)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,469
<INCOME-PRETAX> 1,374
<INCOME-TAX> 569
<INCOME-CONTINUING> 805
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 805
<EPS-PRIMARY> 0.0
<EPS-DILUTED> 0.0
</TABLE>
