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<PAGE> 1
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 JULY 2, 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: 0-14729
--------------
POLK AUDIO, INC.
------------------------------------------------------------
(Exact name of the registrant as specified in its charter)
MARYLAND 52-0954180
------------------------------ -------------------------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
5601 METRO DRIVE, BALTIMORE, MARYLAND 21215
------------------------------------------------------------
(Address and principal executive offices) (Zip code)
(410) 358-3600
------------------------------------------------------------
(Registrant's telephone number, including area code)
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.
/X/ Yes / / No
Number of shares of common stock of the registrant outstanding as of August 3,
1995: 1,632,035 SHARES.
page 1
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
POLK AUDIO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 2, March 26,
Assets 1995 1995
------ (Unaudited)
----------- -----------
<S> <C> <C>
Current assets:
Cash and short-term investments $ -- 615,150
Trade accounts receivable, net of allowance
for doubtful accounts of $163,589 at
July 2 and $160,287 at March 26 7,326,701 8,599,560
Inventories:
Finished goods 4,490,725 4,019,699
Work-in-process 636,314 882,336
Raw materials and supplies 3,505,232 3,127,715
----------- -----------
Total inventories 8,632,271 8,029,750
----------- -----------
Note Receivable 15,000 85,443
Deferred income taxes 470,000 470,000
Prepaid expenses and other current assets 1,068,972 456,003
----------- -----------
Total current assets 17,512,944 18,255,906
Property and equipment, at cost less accumulated
depreciation and amortization 4,038,803 3,045,095
Other assets 291,294 644,612
Deferred income taxes 278,000 278,000
----------- -----------
Total assets $ 22,121,041 22,223,613
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable, trade $ 3,102,917 2,522,595
Accrued expenses and other current liabilities 1,512,618 2,221,577
Current portion of Long-term debt 400,000 400,000
Current portion of accrued product warranty 253,201 249,700
----------- -----------
Total current liabilities 5,268,736 5,393,872
Long-term debt, net of current portion 2,500,000 2,400,000
Accrued product warranty, less current portion 199,300 193,300
Pension liability 83,836 83,836
----------- -----------
Total liabilities 8,051,872 8,071,008
Stockholders' equity:
Common stock, par value $.01 per share. Authorized
20,000,000 shares; issued 1,632,035 shares. 16,317 16,320
Additional paid-in-capital 82,986 302,514
Foreign currency translation adjustment (5,810) (27,177)
Retained earnings 13,975,676 13,860,948
----------- -----------
Total stockholders' equity 14,069,169 14,152,605
----------- -----------
Total liabilities and stockholders' equity $ 22,121,041 22,223,613
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
page 2
<PAGE> 3
POLK AUDIO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended
-----------------------------------
July 2, June 26,
1995 1994
(14-Weeks) (13-Weeks)
------------ ------------
<S> <C> <C>
Net sales $ 9,742,321 $ 6,695,431
Cost of goods sold 5,569,885 4,003,052
------------- ------------
Gross profit 4,172,436 2,692,379
Selling, research, general and 4,313,345 3,241,970
administrative expenses ------------- ------------
Operating loss (140,909) (549,591)
Other income (expense):
Interest income 22,912 7,327
Other, net -- 4,024
Interest expense (58,805) --
------------- ------------
Total other income (expense) (35,893) 11,351
------------- ------------
Losses before
income taxes (176,802) (538,240)
Income tax benefit (72,000) (197,984)
------------- ------------
Net loss (104,802) (340,256)
Retained earnings at beginning
of period 14,080,478 12,409,012
------------- ------------
Retained earnings at end of
period $13,975,676 $12,068,756
------------- ------------
Loss per share $(.06) $(.21)
(note 2) ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
page 3
<PAGE> 4
POLK AUDIO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
----------------------------
July 2, June 26,
1995 1994
(14-Weeks) (13-Weeks)
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net losses $ (104,802) (340,256)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 461,638 317,171
Gain on sale of fixed assets 1,093 --
Increase (decrease) from changes in:
Accounts receivable 1,272,859 1,476,273
Inventories (602,522) (819,018)
Income taxes recoverable or payable (85,739) (237,111)
Prepaid expenses and other current assets (527,230) (170,331)
Accounts payable, trade 580,321 677,075
Accrued product warranty 9,501 (2,500)
Accrued expenses and other current
liabilities (708,960) (266,432)
Other (1,733) (20,735)
------------ ------------
Net cash provided by operating activities 294,426 614,136
------------ ------------
Cash flows from investing activities:
Repayments of notes receivable 70,443 --
Purchases of property and equipment (1,454,704) (387,546)
(Increase) decrease in other assets 353,318 (98,802)
------------ ------------
Net cash used in investing
activities (1,030,943) (486,348)
------------ ------------
Cash flows from financing activities -
Increases in long-term notes payable 1,000,000 --
Payments on long-term notes payable (900,000)
------------ -----------
Net cash provided by financing
activities 100,000 --
------------ -----------
Net increase (decrease) in cash and cash
equivalents (636,517) 127,788
Effect of exchange rate changes on 21,367 --
Cash and cash equivalents, beginning of period 615,150 1,028,696
------------- -----------
Cash and cash equivalents, end of period $ -- 1,156,484
============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
page 4
<PAGE> 5
POLK AUDIO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Consolidated financial statements
The consolidated financial statements included herein do not include all
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles. For
further information, such as the significant accounting policies followed by
the Company, refer to the Notes to Financial Statements set forth in the
Company's Annual Report on Form 10-K for the fiscal year ended March 26, 1995.
In the opinion of management, the consolidated financial statements
include all necessary adjustments (consisting of normal recurring accruals) for
a fair presentation of the financial position, results of operations and cash
flows for the interim periods presented.
The results of operations and cash flows for the periods ended July 2,
1995 and June 26, 1994 are not necessarily indicative of the results to be
expected for the full fiscal year.
(2) Earnings per share
Earnings per share are based on the weighted average number of shares of
common stock and common stock equivalents outstanding during each period. The
number of shares used in the computations for the three month periods were
1,632,035 in fiscal 1996 and 1,596,035 in fiscal 1995.
page 5
<PAGE> 6
PART I. FINANCIAL INFORMATION (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the first quarter of fiscal 1996, net losses were $(104,802) or
$(.06) per share, compared with net losses of $(340,256), or $(.21) per share,
for the first quarter of fiscal 1995. The following table presents the
components of net losses as a percentage of net sales for the periods
indicated.
<TABLE>
<CAPTION>
Quarter ended
------------------------------
July 2, June 26,
1995 1994
(14 Weeks) (13 Weeks)
(Unaudited)
------------------------------
<S> <C> <C>
Net sales 100.0 % 100.0 %
Cost of goods sold (57.2) (59.8)
------ ------
Gross profit 42.8 40.2
Selling, research, general
& administrative expenses (44.3) (48.4)
------ ------
Operating income (1.5) (8.2)
Other income, net (0.3) 0.2
------ ------
Loss before income
taxes (1.8) (8.0)
Income taxes 0.7 3.0
------ ------
Net loss (1.1)% (5.0)%
====== ======
</TABLE>
NET SALES AND COST OF GOODS SOLD
Net sales increased 45.5% to $9,742,321 for the fourteen-week first
quarter of fiscal 1996 as compared to the thirteen-week first quarter of fiscal
1995. The increase in net sales resulted from higher demand experienced in the
domestic, export and military markets. This increased demand, in part, is
related to new product introductions during the first quarter of fiscal 1996
coupled with increased distribution and stronger world economic conditions as
compared with the prior year.
page 6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED
Cost of goods sold, as a percentage of net sales, decreased to 57.2% for
the first quarter of fiscal 1996 from 59.8% for the first quarter of fiscal
1995. The decrease in cost of goods sold, as a percentage of net sales,
primarily resulted from decreases in direct labor costs and from the higher
absorption of factory overhead costs, partially offset by higher direct
material costs when compared with the prior year.
SELLING, RESEARCH, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, research, general and administrative (SRG&A) expenses increased
33% to $4,313,345 for the first quarter of fiscal 1996 as compared to the first
quarter of fiscal 1995. As a percentage of net sales, SRG&A expenses decreased
to 44.3% for the first quarter of fiscal 1996 from 48.4% for the first quarter
of fiscal 1995. The increase in SRG&A expenses resulted primarily from higher
variable selling costs resulting from the increase in net sales, higher sales
promotion costs and higher research and development expenses in addition to an
increase in costs incurred for an additional week in the fourteen-week first
quarter in fiscal 1996 compared with the thirteen-week first quarter of fiscal
1995.
OTHER INCOME AND EXPENSE AND INCOME TAXES
Other income (expense) was $(35,893) for the first quarter of fiscal
1996 as compared to $11,351 for the first quarter of fiscal 1995. The change
in other income (expense) was largely a result of interest costs incurred on
higher bank loan borrowings during the quarter when compared with the prior
year. Income taxes, as a percentage of earnings before income taxes, were
40.7% for the first quarter of fiscal 1996 compared to 36.8% for the first
quarter of fiscal 1995. The increase in income taxes, as a percentage of
earnings before income taxes, primarily results from higher state income taxes
and certain lower federal tax credits anticipated for fiscal 1996.
SEASONALITY
The home audio market is somewhat seasonal, with the majority of the
Company's sales and earnings occurring historically in the quarters ending
December and March.
page 7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations through cash
generated by operations, term loan borrowings, revolving credit line borrowings
and normal trade credit extended by its suppliers.
Net cash provided by operating activities during the first quarter of fiscal
1996 was $294,426. As of July 2, 1995, the Company's working capital was
$12,244,208 and its current ratio was 3.3 to 1. In addition, the Company
presently has an unsecured revolving credit agreement with a commercial bank
providing for maximum borrowings of $5,000,000, of which $4,000,000 was
available at July 2,1995, and an unsecured five-year term loan agreement with
the same bank for $2,000,000, $1,900,000 was outstanding at July 2, 1995. The
Company believes working capital and temporary borrowings from its credit
agreement will be sufficient to meet its current operating needs and
anticipated capital expenditures for the remainder of fiscal 1996.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27
- Financial Data Schedule
(b) Reports on Form 8-K:
None.
page 8
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POLK AUDIO, INC.
----------------
(Registrant)
August 3, 1995 /S/ George M. Klopfer
--------------------------------
George M. Klopfer
President & CEO
/S/ Gary B. Davis
--------------------------------
Gary B. Davis
Chief Financial Officer
and Chief Accounting
Officer
page 9
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
EX-NO. DESCRIPTION
- ------ -----------
<S> <C>
EX-27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> MAR-27-1995
<PERIOD-END> JUL-02-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 7,490,290
<ALLOWANCES> 163,589
<INVENTORY> 8,632,271
<CURRENT-ASSETS> 17,512,944
<PP&E> 9,582,112
<DEPRECIATION> 5,543,309
<TOTAL-ASSETS> 22,121,041
<CURRENT-LIABILITIES> 5,268,736
<BONDS> 0
<COMMON> 16,317
0
0
<OTHER-SE> 14,052,852
<TOTAL-LIABILITY-AND-EQUITY> 22,121,041
<SALES> 9,742,321
<TOTAL-REVENUES> 9,742,321
<CGS> 5,569,885
<TOTAL-COSTS> 5,569,885
<OTHER-EXPENSES> 4,313,345
<LOSS-PROVISION> 30,000
<INTEREST-EXPENSE> 58,805
<INCOME-PRETAX> (176,802)
<INCOME-TAX> (72,000)
<INCOME-CONTINUING> (104,802)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (104,802)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
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