<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the Period Ended July 1, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
Commission file number 0-17237
SELFIX, INC.
----------------------------------
(Exact name of registrant as
specified in its Charter)
Delaware 36-2490451
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4501 West 47th Street
Chicago, Illinois 60632
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number including area code (312) 890-1010.
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. Yes __X__ No _____
Common shares, par value $0.01, outstanding as of July 20,1995 - 3,550,602
<PAGE> 2
SELFIX, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Part I. Financial Information
---------------------
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 5
and Retained Earnings
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
Part II. Other Information 15
-----------------
Signatures 16
</TABLE>
2
<PAGE> 3
PART I FINANCIAL STATEMENTS
FORM 10-Q
Selfix, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
July 1, December 31,
ASSETS 1995 1994
<S> <C> <C>
Cash and cash equivalents........................... $ 3,876 $ 4,859
Investments in marketable securities -- available
for sale......................................... 935 944
Accounts receivable................................. 7,022 4,947
Notes receivable and other receivables.............. 78 1,773
Refundable income taxes............................. 126 381
Inventories......................................... 6,363 5,650
Prepaid expenses and other current assets........... 190 189
--------- ---------
Total current assets.............................. 18,590 18,743
PROPERTY, PLANT AND EQUIPMENT......................... 22,236 21,578
Less accumulated depreciation and amortization...... 12,544 11,243
--------- ---------
9,692 10,335
LAND.................................................. 131 131
OTHER ASSETS
Restricted Cash - Industrial Revenue Bond........... - 5
Intangible assets................................... 1,270 1,536
Other............................................... 35 11
--------- ---------
Total other assets................................ 1,305 1,552
--------- ---------
TOTAL ASSETS $ 29,718 $ 30,761
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
PART I - FINANCIAL STATEMENTS
FORM 10-Q
Selfix, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
July 1, December 31,
1995 1994
---------- --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term obligations........... $ 891 $ 992
Accounts payable...................................... 1,235 1,921
Accrued liabilities................................... 4,954 4,804
---------- ----------
Total current liabilities........................... 7,080 7,717
LONG-TERM OBLIGATIONS - net of current maturities...... 9,368 9,421
STOCKHOLDERS' EQUITY
Preferred stock - authorized 500,000 shares;
$.01 par value; none issued......................... - -
Common stock - authorized 7,500,000 shares, $.01 par
value; issued, 3,609,364 shares at July 1, 1995
and 3,603,637 shares at December 31, 1994........ 36 36
Additional paid-in-capital.......................... 9,383 9,360
Retained earnings................................... 4,293 4,500
Cumulative foreign currency translation adjustment.. (198) (222)
Unrealized net holding gains (losses) on
available-for-sale securities....................... 20 (51)
Common stock held in treasury, at cost (58,762
shares in 1995)................................... (264) -
---------- ----------
Total stockholders' equity.......................... 13,270 13,623
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,718 $ 30,761
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
PART 1 - FINANCIAL STATEMENTS
FORM 10-Q
Selfix, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND RETAINED EARNINGS
(Dollars in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
July 1, 1995 June 25, 1994 July 1, 1995 June 25, 1994
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales....................................... $ 10,628 $ 11,107 $ 21,370 $ 21,039
Cost of goods sold.............................. 6,402 6,124 13,114 11,678
----------- ------------ ----------- -----------
Gross profit................................ 4,226 4,983 8,256 9,361
Operating expenses.............................. 4,041 4,040 8,211 8,148
----------- ------------ ----------- -----------
Operating profit ........................... 185 943 45 1,213
Other income (expense)
Interest (expense)............................ (258) (273) (475) (551)
Other - net................................... 113 9 236 80
----------- ------------ ----------- -----------
(145) (264) (239) (471)
----------- ------------ ----------- -----------
Earnings (loss) before income taxes......... 40 679 (194) 742
Income tax expense ............................. 1 270 13 199
----------- ------------ ----------- -----------
Net income (loss)........................... 39 409 (207) 543
Retained earnings at beginning of period........ 4,254 10,637 4,500 10,503
----------- ------------ ----------- -----------
Retained earnings at end of period.............. $ 4,293 $ 11,046 $ 4,293 $ 11,046
=========== ============ =========== ===========
Net earnings (loss) per common and common
equivalent shares............................. $0.01 $0.12 ($0.06) $0.15
Number of common and common equivalent
shares........................................ 3,568,563 3,554,218 3,586,100 3,555,862
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
PART I - FINANCIAL STATEMENTS
FORM 10-Q
Selfix, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
July 1, 1995 June 25, 1994
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss)..................................... $ (207) $ 543
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization......................... 1,296 1,246
Amortization of intangible assets..................... 265 438
Deferred income tax expense........................... - (32)
Provision for losses on accounts receivable........... 68 67
(Gain) on sale of fixed assets........................ (54) (2)
Amortization of bond premium.......................... 59 -
Changes in assets and liabilities
(Increase) in accounts receivable..................... (2,130) (2,880)
(Increase) in inventories............................. (692) (1,125)
Decrease in refundable income taxes................... 256 231
Decrease in prepaid expenses and deposits............. 22 17
(Increase) decrease in other assets................... (23) 52
(Increase) decrease in notes and other receivables.... 1,695 5
Increase (decrease) in accounts payable............... (687) 270
Increase (decrease) in accrued liabilities............ 145 (129)
Increase in income taxes payable...................... - 71
------------- -----------
Total adjustments................................... 220 (1,771)
------------- -----------
Net cash provided by (used in) operating activities. 13 (1,228)
Cash flows from investing activities:
Purchase of property, plant and equipment-(net)........ (595) (1,416)
Proceeds from sales of marketable securities........... - 707
Restricted cash - Industrial Revenue Bond.............. 5 791
Purchase of treasury stock............................. (264) -
------------- -----------
Net cash provided (used) by investing activities.... (854) 82
Cash flows from financing activities:
Borrowings from bank................................... - 1,500
Payments on borrowings................................. (140) (2,093)
Payment of capital lease obligation.................... (14) (12)
Exercise of common stock options....................... 23 11
------------- -----------
Net cash (used in) financing activities............. (131) (594)
</TABLE>
6
<PAGE> 7
PART I - FINANCIAL STATEMENTS
FORM 10-Q
Selfix, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
(unaudited)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
July 1, 1995 June 25, 1994
-----------------------------------
<S> <C> <C>
Effect of exchange rate changes on cash................. (11) (3)
------------- ------------
Net (decrease) in cash and cash equivalents....... (983) (1,743)
Cash and cash equivalents at beginning of period........ 4,859 4,390
------------- ------------
Cash and cash equivalents at end of period.............. $ 3,876 $ 2,647
============= ============
Supplemental disclosures of cash flow information
Cash paid (received) during the period for
Interest and swap fees.............................. $ 428 $ 489
Income taxes, net................................... $ (244) $ (72)
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
PART I - FINANCIAL STATEMENTS
FORM 10-Q
SELFIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
- -----------------------------------------------------------------------------
1. The condensed consolidated financial
statements included herein as of July 1, 1995
and June 25, 1994, and for the thirteen and
twenty-six weeks ended July 1, 1995 and June
25, 1994 are unaudited and, in the opinion of
the Company, reflect all adjustments (which
include normal recurring accruals) necessary
for the fair presentation of the financial
position and the results of operations and
cash flows.
2. These financial statements are presented in
accordance with the requirements of Form 10-Q
and, consequently, may not include all
disclosures normally required by generally
accepted accounting principles or those
normally in the Company's audited annual
financial statements. Accordingly, the
Company's audited consolidated financial
statements and notes thereto, included in its
Annual Report on Form 10-K, should be read in
conjunction with the accompanying condensed
consolidated financial statements.
3. The financial statements include certain
reclassifications which were necessary to
conform the presentation of the results of
operations and changes in financial condition
to the second quarter of 1995.
4. Inventories are summarized as follows:
<TABLE>
<CAPTION>
JULY, 1 DECEMBER 31,
1995 1994
------ --------
<S> <C> <C>
Finished Goods $3,507 $2,344
Work-in-Process 913 1,406
Raw Materials 1,943 1.900
------ ------
$6,363 $5,650
====== ======
</TABLE>
5. The provision for income taxes for 1995 reflects the taxes on income of
foreign subsidiaries.
The provision for income taxes as of June 25, 1994 reflects a
reduction of the deferred tax valuation allowance due to a change in
the
8
<PAGE> 9
PART I - FINANCIAL STATEMENTS
FORM 10-Q
SELFIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
- -------------------------------------------------------------------------------
estimate of the future realization of
net future tax deductions, as well as
tax benefits from foreign subsidiares.
6. Earnings (losses) per share have been
computed by dividing net earnings for
the thirteen weeks ended July 1, 1995
and June 25, 1994 by 3,568,563 and
3,554,218 common shares, respectively.
For the twenty-six weeks ended July 1,
1995 and June 25, 1994, earnings
(losses) per share have been computed
by dividing net earnings by 3,586,100
and 3,555,862 common shares
respectively. Common share
equivalents included in the
computation of common and common
equivalent shares represent shares
issuable upon assumed exercise of the
stock options using the treasury stock
method. Common share equivalents are
not included under the treasury stock
method when their effect is
antidulitive.
7. At July 1, 1995, the Company has a
$3.0 million line of credit all of
which remained undrawn.
8. During the third and fourth quarter of
1994, the Company recorded a $1.7
million charge relating to costs of
severance and termination benefits
paid or accrued for a change in the
level and composition of employees,
termination of existing employee
arrangements, inventory adjustments
and fixed asset write-downs related to
product lines to be discontinued. As
of December 31, 1994 approximately $.3
million of obsolete inventory reserves
and $.7 million of accrued severance
benefits remained on the Company's
books. The amount of cash paid for
severance benefits and obsolete
inventory disposed of in 1995 is as
detailed as follows:
9
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PART I - FINANCIAL STATEMENTS
FORM 10-Q
SELFIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
OBSOLETE SEVERANCE
INVENTORY BENEFITS
--------- --------------
<S> <C> <C>
Balance at 12/31/94 $.3 million $.7 million
Changes to reserves .3 million .5 million
------------ -----------
Balance at 7/1/95 $ - $.2 million
============ ===========
</TABLE>
9. On December 13, 1994, the Company's Board of
Directors approved the 1995 Employee Stock
Purchase Plan which allows eligible employees
of the Company to acquire up to 200,000
shares of the Company's common stock. On
July 11, 1995 the shareholders approved the
plan.
On May 9, 1995, options outstanding
aggregating 460,000 shares were cancelled and
reissued at prices ranging from $6.00 to
$8.00 which exceeded the market price at the
date of reissuance.
10
<PAGE> 11
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.
In the discussion and analysis that follows all references to 1995 and 1994
refer to the 13 and 26 week periods ended July 1, 1995 and June 25, 1994. The
following amounts are in thousands of dollars.
RESULTS OF OPERATIONS FOR THE 13 WEEKS ENDED JULY 1, 1995 AND JUNE 25, 1994
Net sales decreased $479 (4%) from 1994 due to reduced activity at the
Company's foreign subsidiaries and lower export sales. These decreases were
partially offset by increased sales of the home improvement product line. Cost
of goods sold as a percentage of sales increased to 60.2% from 55.1% compared
to the comparable period last year. The increase is associated with higher
inventory reserves ($296) on products to be discontinued and resin prices which
increased approximately 45-48% compared to 1994. Although some stabilization
of material costs is anticipated, the Company expects that material costs will
continue to adversely impact gross margins over the balance of the year as
compared to 1994. Additionally, the Company continues to review product line
profitability and strategic fit to determine whether to continue providing
certain lines to customers. As a result of this ongoing review, additional
inventory reserves may be identified. Slightly offsetting these items was the
impact of improved manufacturing efficiencies.
As a percentage of sales, 1995 operating expenses increased to 38.0%
from 36.4% during the 13 week period. Although expenses in dollars were
unchanged from 1994, the percentage increased due to the decrease in sales.
Lower wages and salaries associated with headcount reductions ($257), reduced
amortization expenses due to the expiration of non-compete agreements and the
1994 write-down of certain intangible assets ($118), lower warehousing costs
($84) and reduced trade show expense ($23) were offset by increased performance
related
11
<PAGE> 12
incentive compensation ($225), increased acquisition related professional fees
($96), and higher marketing costs ($154) related primarily to advertising and
new packaging development costs.
Interest expense decreased $15 compared to the 13 week period last year due
to the non-renewal of a swap agreement at one of the Company's subsidiaries.
During the 13 week period, other income increased $104 due to the gains on
sale of fixed assets ($37), a franchise tax refund ($21) and a foreign exchange
gain compared to a loss in 1994 ($20).
Income tax expense decreased $269 during the 13 week period primarily due to
a combination of lower pre-tax income at the Company's domestic operations and
a pre-tax loss compared to a pre-tax income last year at the Company's foreign
subsidiaries.
RESULTS OF OPERATIONS FOR THE 26 WEEKS ENDED JULY 1, 1995 AND JUNE 25, 1994
Net sales for the 26 week period of 1995 increased $331 (2%) from 1994 due
to increased sales of the home improvement product line and increased sales of
the Company's Canadian subsidiary. Partially offsetting these increases were
lower sales at the Company's other foreign subsidiaries and lower export sales.
During the 26 week period, cost of goods sold as a percentage of sales
increased to 61.4% from 55.5%. The increase is primarily driven by a
combination of increased resin costs ($601), a smaller increase in overhead
absorption ($289) and provisions to inventory reserves ($267). Also
contributing to the increase were higher electricity ($89) and depreciation
($34) costs.
12
<PAGE> 13
Operating expenses as a percentage of sales decreased to 38.4% from 38.7%.
Expenses year to year are essentially flat despite the positive impact of
reduced headcount ($251), warehousing costs ($181) and lower amortization of
intangibles ($173) resulting from 1994 second half write-downs. Offsetting
these reductions were increased professional fees related to acquisition
activities ($96), increased marketing costs ($222) and the impact of
performance based employee incentive plans ($334).
Interest expense decreased $76 during the 26 week period due to the
non-renewal of a swap agreement at one of the Company's subsidiaries as well as
the reduction in debt associated with scheduled repayments of principal.
Other income increased $156 primarily as a result of a foreign exchange gain
compared to a foreign exchange loss in 1994 ($18), increased gains on fixed
asset sales ($45) and franchise tax refunds (30).
Income tax expense decreased due to the pre-tax loss compared to the pre-tax
income in 1994 at the Company's domestic operations. The 1995 expense
primarily reflects taxes at the Company's foreign subsidiaries.
FINANCIAL CONDITION
Since the end of 1994, working capital has increased $484. This occurred as
a result of positive cash flow from operations, increased accounts receivable
and inventories together with a reduction in accounts payable. Cash generated
from operations during the 26 weeks ended July 1, 1995 was $13 an increase of
$1,241 from 1994. This improvement was largely the result of a collection of
the settlement payment from a patent infringement suit. The impact of reduced
net income ($750) was offset by improved use of working capital as both
accounts receivable and inventories increased less than the prior year. Notes
receivable and other receivables decreased
13
<PAGE> 14
due to the receipt of a settlement payment of $1,695 from a patent infringement
suit. The net settlement was recorded in other income in the fourth quarter
of 1994. The receipt of the settlement and cash were used to finance the
increases in accounts receivable and inventories.
Sales of the Company's products are generally lower in the first and fourth
quarter of the calendar year. Net earnings vary proportionately more than the
variation in sales due to the effect of fixed costs. Results of operations for
the 13 and 26 week periods ended July 1, 1995 are not necessarily indicative of
the results to be expected for the 52 week period ending December 30, 1995.
As of July 1, 1995 the Company's working capital was $11,510. Management
believes that this capital is adequate to finance foreseeable operating needs.
It may be necessary, however, to borrow on a short-term basis against a line of
credit during the remainder of the year. The Company has line of credit of
$3.0 million all of which remains undrawn.
14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings - None
ITEM 2. Changes in Securities - Not Applicable
ITEM 3. Default Upon Senior Securities - Not Applicable
ITEM 4. Submission of Matters to a Vote of Security Holders - Not Applicable
ITEM 5. Other Information - Edgar Freer resigned as Senior Vice
President, Domestic and International Sales
effective July 10, 1995.
On August 4, 1995 the Company announced the
appointment of Jeffrey R. Dolan to the
position of Senior Vice President of Sales
effective August 11, 1995. Mr. Dolan comes
to the Company from Rubbermaid. During his
16 years at Rubbermaid, Mr. Dolan held
various sales management positions, the most
recent being Vice President of National
Accounts at the Home Products Division.
ITEM 6.A. Exhibits and Reports - On June 29, 1995 the registrant filed a Form
8-K to report that it had signed a letter of
intent to acquire the common stock of Mericon
Child Safety Products, a division of the
Denshaw Corporation, Inc. Mericon Child
Safety Products is a manufacturer of juvenile
home safety products, such as toilet seat
locks, cabinet locks and electrical outlet
covers.
15
<PAGE> 16
SIGNATURE PAGE
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.
SELFIX, INC.
By: /s/ James E. Winslow
-------------------------------
James E. Winslow
Senior Vice President
Chief Financial Officer
Dated: August 4, 1995
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUL-01-1995
<CASH> 3,876
<SECURITIES> 935
<RECEIVABLES> 8,263
<ALLOWANCES> 1,241
<INVENTORY> 6,363
<CURRENT-ASSETS> 18,590
<PP&E> 22,367
<DEPRECIATION> 12,544
<TOTAL-ASSETS> 29,718
<CURRENT-LIABILITIES> 7,080
<BONDS> 9,368
<COMMON> 36
0
0
<OTHER-SE> 13,234
<TOTAL-LIABILITY-AND-EQUITY> 29,718
<SALES> 21,370
<TOTAL-REVENUES> 21,370
<CGS> 13,114
<TOTAL-COSTS> 13,114
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 68
<INTEREST-EXPENSE> 475
<INCOME-PRETAX> (194)
<INCOME-TAX> 13
<INCOME-CONTINUING> (207)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (207)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
