<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 June 30, 1996
----------------------
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
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POLK AUDIO, INC.
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(Exact name of the registrant as specified in its charter)
MARYLAND 52-0954180
--------------------------------- ---------------------
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or organization)
5601 METRO DRIVE, BALTIMORE, MARYLAND 21215
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(Address and principal executive offices) (Zip code)
(410) 358-3600
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(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 8,
1996: 1,798,035 SHARES.
page 1
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PART I. FINANCIAL INFORMATION
Item 1. Financial statements
POLK AUDIO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, March 31,
Assets 1996 1996
(Unaudited)
------------- ------------
<S> <C> <C>
Current assets:
Cash and short-term investments $ 131,980 184,118
Trade accounts receivable, net of allowance
for doubtful accounts of $182,017 at
June 30 and $170,396 at March 31 10,751,096 15,660,909
Inventories:
Finished goods 3,587,111 3,579,287
Work-in-process 1,066,771 596,436
Raw materials and supplies 4,206,684 3,752,715
------------- ------------
Total inventories 8,860,566 7,928,438
------------- ------------
Income taxes recoverable 41,504 --
Deferred income taxes 469,000 469,000
Prepaid expenses and other current assets 403,571 298,831
------------- ------------
Total current assets 20,657,717 24,541,296
Property and equipment, at cost less accumulated
depreciation and amortization 4,572,919 4,626,848
Other assets 263,576 262,775
Notes receivable-officers 224,237 224,237
Deferred income taxes 536,000 536,000
------------- ------------
Total assets $ 26,254,449 30,191,156
============= ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade $ 3,939,649 4,666,043
Bank overdraft -- 450,336
Income taxes payable -- 228,445
Accrued expenses and other current liabilities 2,144,095 2,429,938
Current portion of long-term debt 400,000 400,000
Current portion of accrued product warranty 297,585 290,000
------------- ------------
Total current liabilities 6,781,329 8,464,762
Long-term debt, net of current portion 3,714,774 6,055,149
Accrued product warranty, less current portion 248,629 235,000
------------- ------------
Total liabilities 10,744,732 14,754,911
------------- ------------
Stockholders' equity:
Common stock, par value $.01 per share.
Authorized 20,000,000 shares; issued
1,798,035 shares. 17,980 17,970
Additional paid-in-capital 1,261,229 1,253,489
Foreign currency translation adjustment (24,335) (55,373)
Note receivable-stock (814,500) (814,500)
Retained earnings 15,069,343 15,034,659
------------- ------------
Total stockholders' equity 15,509,717 15,436,245
------------- ------------
Total liabilities and stockholders'
equity $ 26,254,449 30,191,156
============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
page 2
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POLK AUDIO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended
--------------------------
June 30, July 2,
1996 1995
(13-Weeks) (14-Weeks)
------------- ------------
<S> <C> <C>
Net sales $11,283,956 9,742,321
Cost of Goods Sold 6,512,478 5,569,885
------------- ------------
Gross profit 4,771,478 4,172,436
Selling, research, general and
administrative expenses 4,637,066 4,313,345
------------- ------------
Operating income (loss) 134,412 (140,909)
------------- ------------
Other income (expense):
Interest income 760 22,912
Other, net 2,607 --
Interest expense (79,595) (58,805)
------------- ------------
Total other expense (76,228) (35,893)
------------- ------------
Earnings (loss) before
income taxes 58,184 (176,802)
Income taxes 23,500 (72,000)
------------- ------------
Net earnings (loss) 34,684 (104,802)
Retained earnings at beginning
of period 15,034,659 14,080,478
------------- ------------
Retained earnings at end of
period $15,069,343 13,975,676
============= ============
Earnings (loss) per share $.02 (.06)
(note 2) ===== ====
</TABLE>
See accompanying notes to consolidated financial statements.
page 3
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POLK AUDIO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
--------------------------
June 30, July 2,
1996 1995
(13-Weeks) (14-Weeks)
--------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 34,684 (104,802)
Adjustments to reconcile net earnings
(loss) to net
cash provided by (used in) operating
activities:
Depreciation and amortization 474,914 461,638
Gain on sale of fixed assets (1,050) 1,093
Increase (decrease) from changes in:
Accounts receivable 4,909,813 1,272,859
Inventories (932,128) (602,522)
Income taxes recoverable or payable (269,949) (85,739)
Prepaid expenses and other current assets (104,740) (527,230)
Accounts payable, trade (726,394) 580,321
Accrued product warranty 21,214 9,501
Accrued expenses and other current
liabilities (285,843) (708,960)
Other -- (1,733)
------------- ------------
Net cash provided by operating
activities 3,120,521 294,426
------------- ------------
Cash flows from investing activities:
Purchases of property and equipment (420,984) (1,454,704)
(Increase) decrease in other assets (802) 353,318
Repayments of notes receivable -- 70,443
Proceeds from sale of property and equipment 1,050 --
------------- ------------
Net cash used in investing
activities (420,736) (1,030,943)
------------- ------------
Cash flows from financing activities:
Decrease in bank overdraft (450,336) --
Payments on long-term notes payable (2,340,375) (900,000)
Increases in long-term notes payable -- 1,000,000
Proceeds from exercise of stock options 7,750 --
------------- ------------
Net cash provided by (used in) financing
activities (2,782,961) 100,000
------------- ------------
Net decrease in cash and cash
equivalents (83,176) (636,517)
Effect of exchange rate changes on cash 31,038 21,367
Cash and cash equivalents, beginning of period 184,118 615,150
------------- ------------
Cash and cash equivalents, end of period $ 131,980 --
============= ============
</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 31, 1996.
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 June 30,
1996 and July 2, 1995 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
1,828,370 in fiscal 1997 and 1,632,035 in fiscal 1996. Dilutive stock options
granted to employees are treated as common stock equivalents.
page 5
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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 1997, net earnings were $34,684 or $0.02 per
share, compared with a net loss of $(104,802), or $(0.06) per share, for the
first quarter of fiscal 1996. The following table presents the components of
net earnings (loss) as a percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
Quarter ended
---------------------------
June 30, July 2,
1996 1995
(13 Weeks) (14 Weeks)
(Unaudited)
---------------------------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold (57.7) (57.2)
-------- --------
Gross profit 42.3 42.8
Selling, research, general
& administrative expenses (41.1) (44.3)
-------- --------
Operating income 1.2 (1.5)
Other expense, net (0.7) (0.3)
-------- --------
Earnings (loss) before
income taxes 0.5 (1.8)
Income taxes (0.2) 0.7
-------- --------
Net earnings (loss) 0.3% (1.1)%
======== ========
</TABLE>
NET SALES AND COST OF GOODS SOLD
Net sales increased 15.8% to $11,283,956 for the thirteen-week first quarter
of fiscal 1997 as compared to the fourteen-week first quarter of fiscal 1996.
The increase in net sales resulted from increased demand related to new product
introductions during the last quarter of fiscal 1996 coupled with higher demand
experienced in the Domestic, Canadian, European and certain other Export
markets.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED
Cost of goods sold, as a percentage of net sales, increased to 57.7% for the
first quarter of fiscal 1997 from 57.2% for the first quarter of fiscal 1996.
The increase in cost of goods sold primarily resulted from higher material
costs, as a percentage of net sales, offset partially by lower labor costs and
lower factory overheads, as a percentage of net sales.
SELLING, RESEARCH, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, research, general and administrative (SRG&A) expenses increased
7.4% to $4,637,066 for the first quarter of fiscal 1997 as compared to the
first quarter of fiscal 1996. As a percentage of net sales, SRG&A expenses
decreased to 41.1% for the first quarter of fiscal 1997 from 44.3% for the
first quarter of fiscal 1996. The dollar increase in SRG&A expenses resulted
primarily from increased variable selling costs related to the higher sales
volume, higher sales promotion costs and higher general and administrative
expenses, partially offset by lower R&D expenses resulting from the completed
development of the Eosone line shipped during the fourth quarter of fiscal
1996.
OTHER EXPENSE AND INCOME TAXES
Other expense was $(76,228) for the first quarter of fiscal 1997 as compared
to $(31,275) for the first quarter of fiscal 1996. 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 40.4% for the first
quarter of fiscal 1997 compared to 40.7% for the first quarter of 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
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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 1997 was $3,120,521. As of June 30, 1996, the Company's working capital
was $13,876,388 and its current ratio was 3.0 to 1. In addition, the Company
presently has an unsecured revolving credit agreement with a commercial bank
providing for maximum borrowings of $6,500,000, of which approximately
$3,885,000 was available at June 30,1996, and an unsecured five-year term loan
agreement with the same bank for $2,000,000, of which $1,500,000 was
outstanding at June 30, 1996. The Company believes working capital and
temporary borrowings from its credit agreements will be sufficient to meet its
current operating needs and anticipated capital expenditures for the remainder
of fiscal 1997.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
Form 8-K was filed on June 14, 1996 to report the Company's decision to
trade the common stock of Polk Audio, Inc. on the American Stock Exchange. The
Company was formerly traded on the Nasdaq National Market. There were no
financial statements filed in conjunction with this filing.
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 8, 1996 /s/ George M. Klopfer
-----------------------
George M. Klopfer
Chief Executive Officer
/s/ Gary B. Davis
-----------------------
Gary B. Davis
Treasurer, Chief Financial Officer
and Chief Accounting
Officer
page 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> MAR-27-1995
<PERIOD-END> MAR-31-1996
<CASH> 184,118
<SECURITIES> 0
<RECEIVABLES> 15,831,305
<ALLOWANCES> 170,396
<INVENTORY> 7,928,438
<CURRENT-ASSETS> 24,541,296
<PP&E> 9,553,922
<DEPRECIATION> 4,927,074
<TOTAL-ASSETS> 30,191,156
<CURRENT-LIABILITIES> 8,464,762
<BONDS> 0
0
0
<COMMON> 17,970
<OTHER-SE> 15,418,275
<TOTAL-LIABILITY-AND-EQUITY> 30,191,156
<SALES> 52,170,684
<TOTAL-REVENUES> 52,170,684
<CGS> 29,888,990
<TOTAL-COSTS> 49,953,835
<OTHER-EXPENSES> 246,138
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 294,482
<INCOME-PRETAX> 1,970,711
<INCOME-TAX> 797,000
<INCOME-CONTINUING> 1,173,711
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,173,711
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.69
</TABLE>
