FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the period ended September 30, 1995
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 1-7737
ARROW AUTOMOTIVE INDUSTRIES, INC.
________________________________________________________________________
(Exact name of registrant as specified in its charter)
____________MASSACHUSETTS_________ ___________04-1449115__________
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
3 SPEEN STREET, FRAMINGHAM, MASSACHUSETTS ___01701____
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 872-3711
Indicate by check mark whether the registrant (1) has filed all reports 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 __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 2,873,083 shares of the
Company's Common Stock ($.10 par value) were outstanding as of November 7,
1995.
Page 1 of 10
<PAGE>
ARROW AUTOMOTIVE INDUSTRIES, INC.
INDEX
PAGE NUMBER
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited):
Condensed Balance Sheets - September 30, 1995
and June 24, 1995 ................................ 3
Condensed Statements of Income - Three Months
Ended September 30, 1995 and September 24, 1994 .. 4
Condensed Statements of Cash Flows - Three Months
Ended September 30, 1995 and September 24, 1994 .. 5
Notes to Condensed Financial Statements ........... 6
ITEM 2. Management's Discussion and Analysis of the
Financial Condition and Results of Operations .... 7 - 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings ................................. 9
ITEM 2. Changes in Securities ............................. 9
ITEM 3. Default upon Senior Securities .................... 9
ITEM 4. Submission of Matters to a Vote of Security
Holders .......................................... 9
ITEM 5. Other Information ................................. 9
ITEM 6. Exhibits and Reports on Form 8-K .................. 9
SIGNATURES .................................................... 10
Page 2
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PART I. - ITEM 1 -- FINANCIAL INFORMATION
ARROW AUTOMOTIVE INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, June 24,
1995 1995
<S> <C> <C>
_____________ _____________
ASSETS
CURRENT ASSETS
Cash and equivalents $ 441,470 $ 753,010
Accounts receivable, less
allowances 15,332,088 12,535,646
Inventories - Note B 36,732,046 36,307,861
Prepaid expenses and other
current assets 3,488,737 4,200,578
____________ ____________
TOTAL CURRENT ASSETS 55,994,341 53,797,095
PROPERTY, PLANT AND EQUIPMENT 35,601,082 35,459,351
Less allowances for depreciation 22,494,412 22,174,393
____________ ____________
13,106,670 13,284,958
OTHER ASSETS 1,971,084 1,923,519
____________ ____________
TOTAL ASSETS $ 71,072,095 $ 69,005,572
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of advances under
revolving line of credit $ 3,299,667 $ 2,729,975
Accounts payable 2,814,828 3,089,034
Cash overdrafts 2,374,383 1,216,348
Other current liabilities 5,800,159 5,237,342
Current portion of long-term debt 1,367,948 1,372,486
____________ ____________
TOTAL CURRENT LIABILITIES 15,656,985 13,645,185
LONG-TERM DEBT 18,926,536 19,265,190
DEFERRED INCOME TAXES 1,634,000 1,634,000
ACCRUED RETIREMENT BENEFITS 1,783,067 1,721,867
STOCKHOLDERS' EQUITY
Common stock 296,887 296,887
Other stockholders' equity 33,223,944 32,891,767
Less cost of Common Stock in treasury 449,324 449,324
____________ ____________
TOTAL STOCKHOLDERS' EQUITY 33,071,507 32,739,330
____________ ____________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 71,072,095 $ 69,005,572
============ ============
</TABLE>
See accompanying notes to the condensed financial statements.
Page 3
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ARROW AUTOMOTIVE INDUSTRIES, INC.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED
_____________________________
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 24,
<S> <C> <C>
1995 1994
(14 weeks) (13 weeks)
_____________ _____________
Net sales $ 29,137,199 $ 32,817,611
Cost and expenses:
Cost of products sold 22,866,342 25,117,344
Selling, administrative and general 5,186,275 6,380,339
Interest 547,404 441,888
____________ ____________
28,600,021 31,939,571
____________ ____________
Income before income taxes 537,178 878,040
Provision for income taxes 205,000 334,000
____________ ____________
NET INCOME $ 332,178 $ 544,040
============ ============
Weighted average number of shares
outstanding 2,872,395 2,871,895
============ ============
EARNINGS PER SHARE $ 0.12 $ 0.19
====== ======
</TABLE>
See accompanying notes to the condensed financial statements.
Page 4
<PAGE>
ARROW AUTOMOTIVE INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
_____________________________
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 24,
<S> <C> <C>
1995 1994
(14 weeks) (13 weeks)
_____________ _____________
Operating Activities
Net cash (used in) provided by
operating activities $ (325,399) $ 1,247,720
____________ ____________
Investing Activities
Net cash used in investing activities (212,641) (304,105)
____________ ____________
Financing Activities
Payment of long-term debt and capital
lease obligations (343,192) (338,864)
Increase (Decrease) in advances
under revolving line of credit 569,692 (551,534)
____________ ____________
Net cash provided by (used in)
financing activities 226,500 (890,398)
____________ ____________
Decrease (Increase) in cash and
equivalents (311,540) 53,217
____________ ____________
Cash and equivalents at beginning of
period 753,010 445,320
____________ ____________
CASH AND EQUIVALENTS AT END OF PERIOD $ 441,470 $ 498,537
============ ============
</TABLE>
See accompanying notes to the condensed financial statements.
Page 5
<PAGE>
ARROW AUTOMOTIVE INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended September 30, 1995 are not necessarily indicative of the results that
may be expected for the year ending June 29, 1996. For further information,
refer to the financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended June 24, 1995. The
balance sheet at June 24, 1995 has been derived from the audited financial
statements at that date.
NOTE B -- INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
September 30, June 24,
1995 1995
<S> <C> <C>
_____________ _____________
Stated at cost on first-in, first-out
(FIFO) method:
Finished goods $ 11,233,901 $ 10,471,077
Work in process and materials 32,313,145 32,651,784
____________ ____________
43,547,046 43,122,861
Less reserve required to state
inventory on the last-in, first-out
(LIFO) method 6,815,000 6,815,000
____________ ____________
$ 36,732,046 $ 36,307,861
============ ============
</TABLE>
Page 6
<PAGE>
PART 1
Item 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net income for the first quarter of fiscal 1996, which ended September
30, 1995 was $332,000 compared to net income for the first quarter of fiscal
1995 of $544,000. The first quarter of fiscal 1996 included 14 weeks compared
to 13 weeks in the first quarter of fiscal 1995.
Net sales for the first quarter of the current fiscal year were
$29,137,000, an 11.2% decline from net sales in the first quarter of fiscal
1995 which had recorded the highest quarterly sales in the Company's history.
However, both net income and net sales during the current quarter showed
improvement over the results of operations and sales levels reported in the
third and fourth quarters of fiscal 1995. Net sales were $19,820,000 and
$24,773,000 for the third and fourth quarters of fiscal 1995, respectively,
while the Company recorded net losses of $749,000 and $109,000, respectively,
for those same periods.
Unit sales were 7.1% lower in the first quarter of the current fiscal
year compared to the first quarter of the prior fiscal year. As mentioned in
the Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's 1995 Annual Report, the loss of several customer
accounts during fiscal 1995 and the first quarter of fiscal 1996 contributed
to the decline in the net sales and net income in the first quarter of fiscal
1996 when compared to the same period in fiscal 1995. New business acquired
in the latter part of the current first quarter has the potential to more than
offset this lost business. The Company continues to pursue new business
opportunities to mitigate the impact of customer turnover.
The gross margin percentage generated in the first quarter of fiscal 1996
was 21.5% compared to 23.5% for the same period in fiscal 1995. The decline
in the gross margin percentage reflects the mix of products sold, as well as a
higher than usual level of customer product returns during the period. These
returns occur in the normal course of business for cores, stock adjustments
and warranty. While over longer periods of time the relationship of returns
to sales remains relatively constant, occasional quarterly fluctuations do
occur. When returns are higher than average, gross margins decline and,
alternatively, when returns are lower than average, gross margins increase.
Selling, general and administrative expenses in the first quarter of
fiscal 1996 of $5,186,000, or 17.8% of net sales, are down from those expenses
for the same period last year of $6,380,000 or 19.4%. The Company implemented
various cost reduction measures in the fourth quarter of fiscal 1995. These
measures included the discontinuation of certain administrative functions and
contracted services, a 10%
Page 7
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reduction in administrative staff and the implementation of improvements to
the purchasing process. These measures contributed to the decline in the
current fiscal quarter's spending. Also, the first quarter of last year
included customer acquisition expenses that exceeded similar expenses in the
current year by approximately $491,000.
Interest expense in the current period of $547,000 exceeded the prior
year interest expense of $442,000. Higher average borrowing during the first
quarter of fiscal 1996 contributed to the increase in the current year
expenses.
The Company anticipates that cash generated from operations, combined
with available credit lines, will be adequate to provide for the Company's
cash requirements for fiscal 1996.
Page 8
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ARROW AUTOMOTIVE INDUSTRIES, INC.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
None.
ITEM 3. Default upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
None.
Page 9
<PAGE>
ARROW AUTOMOTIVE INDUSTRIES, INC.
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.
ARROW AUTOMOTIVE INDUSTRIES, INC.
(Registrant)
November 13, 1995 /s/ Jim L. Osment
_____________________________________
Jim L. Osment
President and Chief Executive Officer
November 13, 1995 /s/ James F. Fagan
_____________________________________
Executive Vice President, Treasurer
and Chief Financial Officer
Page 10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AND STATEMENT OF INCOME, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> SEP-30-1995
<CASH> 441
<SECURITIES> 0
<RECEIVABLES> 15832
<ALLOWANCES> 500
<INVENTORY> 36732
<CURRENT-ASSETS> 55994
<PP&E> 35601
<DEPRECIATION> 22494
<TOTAL-ASSETS> 71072
<CURRENT-LIABILITIES> 15657
<BONDS> 18927
<COMMON> 297
0
0
<OTHER-SE> 32775
<TOTAL-LIABILITY-AND-EQUITY> 71072
<SALES> 29137
<TOTAL-REVENUES> 29137
<CGS> 22866
<TOTAL-COSTS> 22866
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 547
<INCOME-PRETAX> 537
<INCOME-TAX> 205
<INCOME-CONTINUING> 332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 332
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
