<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-13746
FIREPLACE MANUFACTURERS, INCORPORATED
(Exact Name of Registrant as specified in its charter)
California 95-3244946
(State or other jurisdiction) (I.R.S. Employer I.D. No.)
2701 South Harbor Boulevard Santa Ana, California 92704
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 549-7782
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 proceeding 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 / /
The number of shares outstanding of each of the Registrant's classes of
Common Stock on June 30, 1995, was as follows:
Common Stock, $0.01 Par Value per share -- 3,552,500
<PAGE>
Part I
FINANCIAL INFORMATION
The following comparative financial statements for the quarter ended June 30,
1995, have not been audited by independent public accountants; but, in the
opinion of management, all adjustments necessary to present fairly the
results of operations for the period have been included.
The statements have been prepared by the company pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations.
It is suggested that the condensed financial statements be read in
conjunction with the financial statements and accompanying notes included in
the Company's 1995 Annual Report on Form 10-KSB.
2
<PAGE>
FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30 MARCH 31
1995 1995
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash $115,777 $117,268
Trade accounts and notes receivable,
less allowance for doubtful accounts
of $165,500, at June 30, 1995,
and $175,000 at March 31, 1995 2,810,706 2,460,725
Inventories (Note 2) 3,488,782 3,501,750
Prepaid expenses and other assets 103,791 147,302
Deferred Income Taxes 398,249 345,000
---------- ----------
TOTAL CURRENT ASSETS 6,917,305 6,572,045
Property and Equipment at cost, Net (Note 3) 2,255,403 2,183,029
Due from related parties (Note 6) 169,999 204,236
Other Assets 101,885 28,864
---------- ----------
$9,444,592 $8,988,174
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Lines of Credit $1,971,340 $1,542,898
Accounts Payable 3,485,487 2,931,587
Current portion of long-term debt (Note 5) 117,664 116,807
Accrued Liabilities 679,528 1,208,182
---------- ----------
TOTAL CURRENT LIABILITIES 6,254,019 5,799,474
Long-Term Debt, less current portion (Note 5) 1,079,308 997,562
Deferred Income Taxes 411,000 411,000
Preferred Stock: $1.00 par value, authorized
1,000,000 shares authorized; none
issued or outstanding
Common Stock: $.01 par value, authorized
10,000,000 shares; issued and outstanding
3,552,500 shares at June 30, 1995 and
March 31, 1995 35,525 35,525
Additional Paid in capital 352,852 352,852
Retained Earnings 1,311,888 1,391,761
TOTAL STOCKHOLDERS' EQUITY 1,700,265 1,780,138
---------- ----------
$9,444,592 $8,988,174
========== ==========
</TABLE>
"Unaudited"
The accompanying notes are an integral part of these financial statements.
<PAGE>
FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE JUNE
1995 1994
---------- ----------
<S> <C> <C>
NET SALES:
Unaffiliated $6,198,497 $6,587,170
Affiliate and related parties
---------- ----------
6,198,497 6,587,170
Cost of Sales 5,304,505 5,037,308
---------- ----------
Gross Margin 893,992 1,549,862
Selling, General, and Administrative Expenses 949,311 1,105,364
---------- ----------
Operating Income (Loss) (55,319) 444,498
Interest and Other Expense 77,804 70,371
---------- ----------
Earnings (Loss) before income taxes (133,123) 374,127
Provision for Income Taxes (53,249) 149,651
---------- ----------
NET EARNINGS (LOSS) ($79,874) $224,476
========== ==========
Earnings (loss) per common share ($0.02) $0.06
========== ==========
Weighted average number of common shares
and common share equivalents outstanding 3,552,500 3,522,500
========== ==========
</TABLE>
"Unaudited"
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE JUNE
1995 1994
-------- --------
<S> <C> <C>
CASH FLOW (LOSS) FROM OPERATING ACTIVITIES
Net earnings (loss) ($79,874) $224,476
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 138,273 118,497
Deferred income taxes (53,249) (4,000)
Changes in operating assets and
liabilities:
Trade accounts and notes receivable (349,981) (678,651)
Inventories 12,968 (315,796)
Prepaid expenses and other assets (29,510) 36,354
Accounts payable and accrued
liabilities 25,247 855,287
Due from officer/stockholders and
affiliates 34,237 (37,375)
-------- --------
Net cash provided by (used in) operating activities (301,889) 198,792
-------- --------
CASH FLOW (LOSS) FROM INVESTING ACTIVITIES
Purchases of property and equipment (210,647) (185,798)
Proceeds from sale of property and equipment, net
-------- --------
Net cash provided by (used in) investing activities (210,647) (185,798)
-------- --------
CASH FLOW (LOSS) FROM FINANCING ACTIVITIES
Proceeds from long-term debt 31,477
Payments on long-term debt 82,603
Net proceeds (payments) from revolving
credit line 428,442 (81,331)
-------- --------
Net cash provided by (used in) financing
activities 511,045 (49,854)
-------- --------
Net increase (decrease) in cash and cash
equivalents (1,491) (36,860)
Cash and cash equivalents at beginning of period 117,268 114,839
-------- --------
Cash and cash equivalents at end of period $115,777 $77,979
======== =========
</TABLE>
"Unaudited"
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
SELECTED FINANCIAL DATA
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its presently inactive, wholly-owned subsidiary (Fireplace Industries of
California, Inc.). All material inter-company transactions have been
eliminated. All adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the results of operations have been
included.
2. INVENTORIES
Inventories are comprised of:
<TABLE>
<CAPTION>
June 30 March 31
1995 1995
---------- ----------
<S> <C> <C>
Raw Materials $2,363,401 $2,399,143
Work in Progress 221,878 221,878
Finished Goods 903,503 880,729
---------- ----------
TOTAL $3,488,782 $3,501,750
========== ==========
</TABLE>
3. PROPERTY AND EQUIPMENT
The Company's investment in property and equipment, at cost, less related
accumulated depreciation and amortization is summarized below:
<TABLE>
<CAPTION>
June 30 March 31
1995 1995
---------- ----------
<S> <C> <C>
Machinery and Equipment 3,460,907 3,399,171
Tools, Dies and Molds 2,655,373 2,537,057
Furniture, Fixtures, and Vehicles 596,808 596,591
Buildings and Leasehold Improvements 154,125 140,243
Research and Development Equipment 273,321 256,825
$7,140,534 $6,929,887
---------- ----------
Accumulated Depreciation and Amortization 4,885,131 4,746,858
$2,255,403 $2,183,029
========== ==========
</TABLE>
6
<PAGE>
FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
4. LONG-TERM DEBT
Long-Term debt is summarized as follows:
<TABLE>
<CAPTION>
June 30 March 31
1995 1995
---------- ----------
<S> <C> <C>
Equipment term loans payable to bank,
bearing interest at the bank's prime rate
plus 1% due in monthly principal amounts
from $4,294 to $7,292 plus interest, through
March 1999. $591,303 $504,585
Notes payable to a finance company, bearing
interest at 8.75% due in monthly principal
and interest payments of $2,550 through
March 2000. $118,169 $119,784
Unsecured subordinated note payable, bearing
interest at 14%, principal payments due
quarterly increasing from $2,500 to $40,000
through December 2000. $487,500 $490,000
---------- ----------
$1,196,972 $1,114,369
Less current portion $117,664 $116,807
---------- ----------
$1,079,308 $997,562
========== ==========
</TABLE>
The Company assumed primary responsibility for payment of the 14%
subordinated note payable and interest thereon as consideration for the
reacquisition of shares of the Company's stock and canceled advances from its
former major stockholder, Rampart General, Inc. in 1987. This note is also
collateralized by stock and property owned by Rampart General, Inc. The note
is convertible into the common stock of Rampart General, Inc., a related
party, and is subordinate to all of the Company's bank-related debt. The
note is convertible into the common stock of Rampart General, Inc. at the
rate of $1.00 per share, subject to certain antidilution provisions.
5. RELATED PARTY TRANSACTIONS
On June 30, 1995, advances to officers stockholders and affiliates totaling
$169,999 are outstanding, this represents a decrease of $34,237 from the
period ended March 31, 1995. Principal payments on these advances will be due
in semiannual installments over the next three years, with interest on the
notes ranging from 7% to 10%. In the event that the amounts are not repaid,
the principal and interest due will be charged to these individuals as
compensation expense over the remaining repayment period.
7
<PAGE>
FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(1) Liquidity and Capital Resources
The Company has lines of credit with a bank for an aggregate $3,350,000 with
an interest rate of .75 percent above prime, payable monthly. At June
30,1995, $1,971,340 was owed under the lines of credit compared to $1,542,898
at March 31, 1995. The line of credit agreements contain restrictive
covenants which require maintenance of working capital and other financial
ratios, prohibit the payment of dividends and have certain other limitations.
The Company was in compliance with these restrictive covenants as of June
30, 1995.
Accounts receivable (before allowance for doubtful accounts) at June 30, 1995
were $2,976,239 compared to $2,635,725 at March 31, 1995. This 12.9%
increase is primarily due to an increase in sales for the three months ended
June 30, 1995 from the three months ended March 31, 1995 of $1,130,667 or
21.1%.
The current ratio has dropped slightly during the quarter ended June 30,1995
to 1.11:1 from 1.13:1 at March 31, 1995. The Company believes its current
efforts to control costs and spending along with better management of its
accounts payable will help to improve the current ratio.
The Company has made capital additions of $210,647 in the three months ended
June 30, 1995. The Company anticipates purchases to remain constant
throughout the rest of fiscal year ended March 31, 1996.
(2) Results of Operation
Sales for the three months ended June 30, 1995 decreased by 6% from the same
three month period in 1994. This decrease is due to severe weather
conditions across the country which affected the building industry during the
three months ended June 30, 1995.
Cost of sales as a percent of sales increased for the three months ended June
30, 1995 to 85.6% from 76.5% for the same period in 1994. This increase is
due to higher than anticipated labor and materials cost related to the
introduction of new products into manufacturing.
Selling, general, and administrative expenses were 15.3% of sales for the
three months ended June 30, 1995 compared to 16.8% for the same period in
1994. This decrease was due to cost cutting attempts on the part of
management including a decrease from the prior year to bonus' which are tied
to net income.
Interest expense as a percent of sales increased slightly by .2% in the three
months ended June 30, 1995 from the same period for 1994. This increase is
due primarily to increased borrowings on a higher available line of credit
which was first negotiated during the quarter ended December 31, 1994.
Borrowing has increased to fund the higher materials and labor costs
experienced during the quarter ended June 30, 1995.
Net income decreased by 4.7% of sales for the three months ended June 30,
1995 compared to the same period in 1994. This decrease is due to the lower
sales and higher cost of goods sold experienced during the three months ended
June 30, 1995
PART II -- OTHER INFORMATION
Items 1, 2, 3, 4, & 5 are inapplicable.
8
<PAGE>
FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
ITEM 6
(a) Exhibits
(11) Earnings Per Share:
Earnings per common share and common share equivalents are based on the
weighted average number of shares and common share equivalents outstanding
during the year.
<TABLE>
<S> <C>
Weighted average number of shares
outstanding during the period 3,552,500
Number of common shares equivalents
and warrants outstanding, calculated
under treasury stock method,
using the average market price ---------
3,552,500
=========
</TABLE>
(12) Financial statements furnished to security holders.
None furnished this quarter.
Other Exhibits are omitted because they are inapplicable.
(b) Reports on Form 8-K
No Form 8-K was filed during this quarter.
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.
Date: August 8, 1995
FIREPLACE MANUFACTURERS, INC.
BY: WILLARD P. HARRIS
--------------------------
Willard P. Harris
Chief Executive Officer
JANE ANN IOVINE
--------------------------
Jane Ann Iovine
Vice President of Finance
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> JUN-30-1995
<CASH> 115,777
<SECURITIES> 0
<RECEIVABLES> 2,976,206
<ALLOWANCES> 165,500
<INVENTORY> 3,488,782
<CURRENT-ASSETS> 6,917,305
<PP&E> 7,140,534
<DEPRECIATION> 4,885,131
<TOTAL-ASSETS> 9,444,592
<CURRENT-LIABILITIES> 6,254,019
<BONDS> 0
<COMMON> 35,525
0
0
<OTHER-SE> 1,664,740
<TOTAL-LIABILITY-AND-EQUITY> 9,444,592
<SALES> 6,198,497
<TOTAL-REVENUES> 6,198,497
<CGS> 5,304,505
<TOTAL-COSTS> 5,304,505
<OTHER-EXPENSES> 1,027,115
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (133,123)
<INCOME-TAX> (53,249)
<INCOME-CONTINUING> (79,874)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (79,874)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
