<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 September 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 September 30, 1995, was as follows:
Common Stock, $O.01 Par Value per share - 3,552,500
<PAGE>
Part I
FINANCIAL INFORMATION
The following comparative financial statements for the three and six month
periods ended September 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.
Operating results for the three and six month periods ended September 30,1995
are not necessarily indicative of the results that may be expected for the year
ending March 31, 1996. 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>
September 30 March 31
1995 1995
---------------- --------------
<S> <C> <C>
Assets
Current Assets:
Cash and Cash Equivalents $105,748 $117,268
Trade accounts and notes receivable,
less allowance for doubtful accounts
of $158,000, at September 30, 1995,
and $175,000 at March 31, 1995 3,758,474 2,460,725
Inventories (Note 2) 3,126,249 3,501,750
Prepaid expenses and other assets 117,282 147,302
Deferred Income Taxes 382,030 345,000
---------------- --------------
TOTAL CURRENT ASSETS 7,489,783 6,572,045
Property and Equipment at cost, Net (Note 3) 2,184,050 2,183,029
Due from related parties (Note 5) 164,444 204,236
Other Assets 98,276 28,864
---------------- --------------
$9,936,553 $8,988,174
---------------- --------------
---------------- --------------
Liabilities and Stockholders' Equity
Current Liabilities:
Lines of Credit $2,409,359 $1,542,898
Accounts Payable 3,631,166 2,931,587
Current portion of long-term debt (Note 4) 117,664 116,807
Accrued Liabilities 592,943 1,208,182
---------------- --------------
TOTAL CURRENT LIABILITIES 6,751,132 5,799,474
Long-Term Debt, less current portion (Note 4) 1,049,828 997,562
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 September 30, 1995
and March 31, 1995 35,525 35,525
Additional Paid in capital 352,852 352,852
Retained Earnings 1,336,216 1,391,761
---------------- --------------
TOTAL STOCKHOLDERS' EQUITY 1,724,593 1,780,138
---------------- --------------
$9,936,553 $8,988,174
---------------- --------------
---------------- --------------
</TABLE>
"Unaudited"
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended
September September
1995 1994
-------------- --------------
<S> <C> <C>
NET SALES:
Unaffiliated $7,299,044 $7,381,801
Affiliated and related parties
-------------- --------------
7,299,044 7,381,801
Cost of Sales 6,045,259 5,578,773
-------------- --------------
Gross Margin 1,253,785 1,803,028
Selling, General, and Administrative Expenses 1,119,067 1,416,829
-------------- --------------
Operating Income (Loss) 134,718 386,199
Interest and Other Expense 94,170 73,379
-------------- --------------
Earnings (Loss) before income taxes 40,548 312,820
Provision for Income Taxes 16,219 125,128
-------------- --------------
NET EARNINGS (LOSS) 24,329 187,692
-------------- --------------
-------------- --------------
Earnings (loss) per common share 0.01 0.05
-------------- --------------
-------------- --------------
Weighted average number of common shares
and common share equivalents outstanding 3,552,500 3,552,500
-------------- --------------
-------------- --------------
</TABLE>
"Unaudited"
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Six Months Ended
September September
1995 1994
--------------- ---------------
<S> <C> <C>
NET SALES:
Unaffiliated $13,497,541 $13,968,971
Affiliate and related parties
--------------- ---------------
13,497,541 13,968,971
Cost of Sales 11,349,764 10,616,081
--------------- ---------------
Gross Margin 2,147,777 3,352,890
Selling, General, and Administrative Expenses 2,068,378 2,522,193
--------------- ---------------
Operating Income (Loss) 79,399 830,697
Interest and Other Expense 171,974 143,750
--------------- ---------------
Earnings (Loss) before income taxes (92,575) 686,947
Provision for Income Taxes (37,030) 274,779
--------------- ---------------
NET EARNINGS (LOSS) (55,545) 412,168
--------------- ---------------
--------------- ---------------
Earnings (loss) per common share (0.02) 0.12
--------------- ---------------
--------------- ---------------
Weighted average number of common shares
and common share equivalents outstanding 3,552,500 3,552,500
--------------- ---------------
--------------- ---------------
</TABLE>
"Unaudited"
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
September September
1995 1994
-------------- --------------
<S> <C> <C>
Cash Flow (Loss) from Operating Activities
Net earnings (loss) $24,329 187,692
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 141,296 142,117
Deferred income taxes 16,219
Changes in operating assets and
liabilities:
Trade accounts and notes receivable (947,768) (754,895)
Inventories 362,533 (607,447)
Prepaid expenses and other assets (9,883) (27,835)
Accounts payable and accrued
liabilities 59,094 704,832
Due from officer/stockholders and
affiliates 5,555 3,555
-------------- --------------
Net cash provided by (used in) operating activities (348,625) (351,981)
-------------- --------------
Cash Flow (Loss) from Investing Activities
Purchases of property and equipment (69,943) (267,531)
Proceeds from sale of property and equipment, net
-------------- --------------
Net cash provided by (used in) investing activities (69,943) (267,531)
-------------- --------------
Cash Flow (Loss) from Financing Activities
Proceeds from long-term debt
Payments on long-term debt (29,480) (43,781)
Net proceeds (payments) from revolving
credit line 438,019 597,078
-------------- --------------
Net cash provided by (used in) financing
activities 408,539 553,297
-------------- --------------
Net increase (decrease) in cash and cash
equivalents (10,029) (66,215)
Cash and cash equivalents at beginning of period 115,777 77,979
-------------- --------------
Cash and cash equivalents at end of period $105,748 $11,764
-------------- --------------
-------------- --------------
</TABLE>
"Unaudited"
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
September September
1995 1994
--------------- ---------------
<S> <C> <C>
Cash Flow (Loss) from Operating Activities
Net earnings (loss) ($55,545) 412,168
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 279,569 260,614
Deferred income taxes (37,030) (4,000)
Changes in operating assets and
liabilities:
Trade accounts and notes receivable (1,297,749) (1,433,547)
Inventories 375,501 (923,243)
Prepaid expenses and other assets (39,392) 8,519
Accounts payable and accrued
liabilities 84,340 1,560,119
Due from officer/stockholders and
affiliates 39,792 (33,820)
--------------- ----------------
Net cash provided by (used in) operating activities (650,514) (153,190)
--------------- ----------------
Cash Flow (Loss) from Investing Activities
Purchases of property and equipment (280,590) (453,329)
Proceeds from sale of property and equipment, net
--------------- ----------------
Net cash provided by (used in) investing activities (280,590) (453,329)
--------------- ----------------
Cash Flow (Loss) from Financing Activities
Proceeds from long-term debt
Payments on long-term debt 53,123 (12,303)
Net proceeds (payments) from revolving
credit line 866,461 515,747
--------------- ----------------
Net cash provided by (used in) financing
activities 919,584 503,444
--------------- ----------------
Net increase (decrease) in cash and cash
equivalents (11,520) (103,075)
Cash and cash equivalents at beginning of period 117,268 114,839
--------------- ----------------
Cash and cash equivalents at end of period $105,748 $11,764
--------------- ----------------
--------------- ----------------
</TABLE>
"Unaudited"
The accompanying notes are an integral part of these financial statements.
7
<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>
September 30 March 31
1995 1995
------------------ --------------
<S> <C> <C>
Raw Materials $2,012,565 $2,399,143
Work in Progress 238,367 221,878
Finished Goods 875,317 880,729
------------------ --------------
TOTAL $3,126,249 $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>
September 30 March 31
1995 1995
------------------ --------------
<S> <C> <C>
Machinery and Equipment $3,487,502 $3,399,171
Tools, Dies and Molds 2,692,980 2,537,057
Furniture, Fixtures, and Vehicles 601,178 596,591
Buildings and Leasehold Improvements 155,496 140,243
Research and Development Equipment 273,321 256,825
------------------ --------------
$7,210,477 $6,929,887
Accumulated Depreciation and Amortization 5,026,427 4,746,858
------------------ --------------
$2,184,050 $2,183,029
------------------ --------------
------------------ --------------
</TABLE>
8
<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>
September 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. $569,428 $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. $113,064 $119,784
Unsecured subordinated note payable, bearing interest at
14%, principal payments due quarterly increasing from
$2,500 to $40,000 through December 2000. $485,000 $490,000
----------------- ---------------
$1,167,492 $1,114,369
Less current portion $117,664 $116,807
----------------- ---------------
$1,049,828 $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 September 30, 1995, advances to officers stockholders and affiliates totaling
$164,444 are outstanding, this represents a decrease of $39,792 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.
9
<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 September 30,
1995, $2,409,359 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 all but two of these restrictive covenants as of
September 30, 1995 and has received a waiver from the bank covering these
items.
Accounts receivable (before allowance for doubtful accounts) at September 30,
1995 were $3,916,474 compared to $2,635,725 at March 31, 1995. This 48.6%
increase is primarily due to an increase in sales for the three months ended
September 30, 1995 from the three months ended March 31, 1995 of $1,939,246 or
36.2%.
The current ratio has dropped slightly as of September 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 $280,590 in the six months ended
September 30, 1995. The Company aniticipates purchases to remain constant
throughout the rest of fiscal year ended March 31, 1996.
(2) Results of Operation
Sales for the six months ended September 30, 1995 decreased by 3.4% from the
same six month period in 1994. This decrease is due to severe weather
conditions across the country which affected the building industry during the
six months ended September 30,1995.
Cost of sales as a percent of sales increased for the six months ended September
30, 1995 to 84.1% from 76.0% 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, and lower selling prices in competitive
marketplaces.
Selling, general, and administrative expenses were 15.3% of sales for the six
months ended September 30, 1995 compared to 18.1% 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 .3% in the six
months ended September 30, 1995 from the same period for 1994. This increase is
due primarily to increased borrowing 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
six months ended September 30, 1995.
Net income decreased by 3.4% of sales for the six months ended September 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 six months ended
September 30, 1995.
PART II-OTHER INFORMATION
Items 1, 2, 3, 4, & 5 are inapplicable.
10
<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.
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
---------------
---------------
(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: November 9, 1995
FIREPLACE MANUFACTURERS,INC.
BY: WILLARD P. HARRIS
-------------------------
Willard P. Harris
Chief Executive Officer
JANE ANN IOVINE
-------------------------
Jane Ann Iovine
Vice President of Finance
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 105,748
<SECURITIES> 0
<RECEIVABLES> 3,758,474
<ALLOWANCES> 158,000
<INVENTORY> 3,126,249
<CURRENT-ASSETS> 7,489,783
<PP&E> 7,210,477
<DEPRECIATION> 5,026,427
<TOTAL-ASSETS> 9,936,553
<CURRENT-LIABILITIES> 6,751,132
<BONDS> 0
<COMMON> 35,525
0
0
<OTHER-SE> 1,689,068
<TOTAL-LIABILITY-AND-EQUITY> 9,936,553
<SALES> 13,497,541
<TOTAL-REVENUES> 13,497,541
<CGS> 11,349,764
<TOTAL-COSTS> 11,349,764
<OTHER-EXPENSES> 171,974
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (92,575)
<INCOME-TAX> (37,030)
<INCOME-CONTINUING> (55,545)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (55,545)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
