<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 March 30, 1996
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.
Securities registered pursuant to Section 12(b) of the Act: None
Name of Each Exchange
On Which Registered
- ----------------------
None
Securities registered pursuant to Section 12 (g) of the Act:
Title of Each Class
- -------------------
Common, Par Value $0.01 Per Share
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 April 24, 1996 - 3,878,094
<PAGE> 2
SELFIX, INC. AND SUBSIDIARIES
INDEX
Page
Number
------
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 7
Management's Discussion and Analysis of Results of 10
Operations and Financial Condition
Part II. Other Information 13
Signatures 14
2
<PAGE> 3
PART I - FINANCIAL STATEMENTS
FORM 10-Q
Selfix, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
________________________________________________________________________________
<TABLE>
<CAPTION>
March 30, December 30,
ASSETS 1996 1995
----------- -------------
<S> <C> <C>
Cash and cash equivalents........................... $ 1,889 $ 2,982
Investments in marketable securities -- available
for sale ........................................... 233 516
Accounts receivable................................. 5,365 4,690
Notes receivable and other receivables.............. 65 83
Refundable income taxes............................. 222 222
Inventories......................................... 4,942 5,151
Prepaid expenses and other current assets........... 206 175
---------- ---------
Total current assets.............................. 12,922 13,819
PROPERTY, PLANT AND EQUIPMENT......................... 21,146 21,231
Less accumulated depreciation and amortization...... 13,199 12,909
---------- ---------
7,947 8,322
LAND.................................................. 131 131
---------- ---------
8,078 8,453
OTHER ASSETS
Intangible assets................................... 2,660 2,693
Other............................................... 60 11
---------- ---------
Total other assets................................ 2,720 2,704
---------- ---------
TOTAL ASSETS $ 23,720 $ 24,976
========== =========
</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>
March 30, December 30,
1996 1995
---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term obligations...................... $ 877 $ 892
Accounts payable................................................. 2,015 1,334
Accrued liabilities.............................................. 4,019 4,881
-------- --------
Total current liabilities...................................... 6,911 7,107
LONG-TERM OBLIGATIONS - net of current
maturities....................................................... 7,015 7,022
STOCKHOLDERS' EQUITY
Preferred stock - authorized 500,000 shares; - -
$.01 par value; none issued....................................
Common stock - authorized 7,500,000 shares; $.01 par value;
issued and outstanding, 3,878,094 shares at March 30, 1996
and 3,861,784 at December 30, 1995............................ 39 38
Additional paid-in-capital....................................... 10,825 10,766
Retained earnings (deficit)...................................... (626) 490
Cumulative foreign currency translation adjustment............... (186) (192)
Unrealized net holding gains on available-for-sale securities ... 6 9
Common stock held in treasury at cost (58,762 shares) ........... (264) (264)
-------- --------
Total stockholders' equity..................................... 9,794 10,847
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 23,720 $ 24,976
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
PART I - 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 Week Ended
March 30, 1996 April 1, 1995
-------------- -------------
<S> <C> <C>
Net sales............................................ $ 8,625 $ 10,742
Cost of goods sold................................... 5,767 6,712
----------- -----------
Gross profit..................................... 2,858 4,030
Operating expenses................................... 3,826 4,170
----------- -----------
Operating (loss)................................. (968) (140)
Other income (expense)
Interest (expense)................................. (180) (217)
Other income - net................................. 32 123
----------- -----------
(148) (94)
----------- -----------
(Loss) before income taxes....................... (1,116) (234)
Income tax expense................................... - 12
----------- -----------
Net (loss)....................................... (1,116) (246)
Retained earnings at beginning of period............. 490 4,500
----------- -----------
Retained earnings at end of period................... $ (626) $ 4,254
=========== ===========
Net loss per common and common equivalent shares..... $ (0.29) $ (0.07)
Number of common and common equivalent shares........ 3,817,181 3,603,637
</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>
Thirteen Week Ended
March 30, 1996 April 1, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net (loss).............................................. $ (1,116) $ (246)
Adjustments to reconcile net (loss) to net
cash provided by operating activities
Depreciation and amortization....................... 562 647
Amortization of intangible assets................... 43 164
Provision for losses on accounts receivable......... 34 34
(Gain) loss on sale of fixed assets.................. 13 (11)
Amortization of bond premium........................ 3 -
Changes in assets and liabilities
(Increase) in accounts receivable..................... (709) (1,334)
(Increase) decrease in inventories.................... 209 (749)
Decrease in refundable income taxes.................. - 256
(Increase) decrease in prepaid expenses and deposits.. (34) 20
(Increase) in other assets............................ (38) -
Increase (decrease) in accounts payable............... 681 (265)
(Decrease) in accrued liabilities..................... (733) (175)
Decrease in notes and other receivables............... 7 1,676
--------- --------
Total adjustments................................... 38 263
--------- --------
Net cash provided by (used in) operations........... (1,078) 17
Cash flows from investing activities
Purchase of property, plant and equipment (net)........ (330) (346)
Proceeds from maturity of marketable securities........ 280 -
Restricted cash - Industrial Revenue Bond.............. - 5
--------- --------
Net cash (used) by investing activities............. (50) (341)
Cash flows from financing activities
Payments on borrowings.................................. (16) (102)
Reduction of capital lease obligation................... (7) (6)
Issuance of common stock................................ 59 -
--------- --------
Net cash provided (used) by financing activities.... 36 (108)
--------- --------
Effect of exchange rate changes on cash................... - (5)
Net (decrease) in cash and cash equivalents......... (1,093) (437)
--------- --------
Cash and cash equivalents at beginning of period.......... 2,982 4,859
--------- --------
Cash and cash equivalents at end of period................ $ 1,889 $ 4,422
========= ========
Supplemental disclosures of cash flow information
Cash (refunded) paid during the period for
Interest and swap fees................................ $ 140 $ 206
Income taxes, net..................................... $ 1 $ (243)
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
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
March 30, 1996 and for the thirteen weeks ended March 30, 1996 and April
1, 1995 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 of 1995
information which were necessary to present the results of operations
and change in financial condition on a consistent basis with 1996.
4. Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
March 30, December 30,
1996 1995
--------- ------------
<S> <C> <C>
Finished Goods $2,186 $3,165
Work-in-Process 1,439 893
Raw Materials 1,317 1,093
------ ------
$4,942 $5,151
====== ======
</TABLE>
5. No provision was made for income taxes in 1996 due to net operating loss
carryforwards available to the Company. The provision for income taxes
for 1995 reflects the taxes on income of foreign subsidiaries.
7
<PAGE> 8
PART I - FINANCIAL STATEMENTS
FORM 10-Q
SELFIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
________________________________________________________________________________
6. Earnings per share have been computed by dividing net earnings (loss) for
1996 and 1995 by 3,817,181 and 3,603,637 of common shares respectively.
Common share equivalents are not included in the computation since their
effect under the treasury stock method would be anti-dilutive.
7. During the fourth quarter of 1995, the Company recorded a $2.1 million
charge to exit certain unprofitable product lines, close the Company's
Canadian facility and move the Canadian operations to the Chicago
manufacturing and distribution facilities. As of December 30, 1995
approximately $.6 million of obsolete inventory reserves, $.2 million of
accrued legal and accrued severance and $.5 million of accrued facility
closing costs remained on the Company's books. The amount of cash paid
for legal and severance benefits, obsolete inventory disposed of and cash
paid and fixed asset write-offs charged to facility closing costs in 1996
is detailed as follows:
<TABLE>
<CAPTION>
FACILITY LEGAL AND
INVENTORY CLOSING SEVERANCE
RESERVES COSTS BENEFITS
-------- ----- --------
<S> <C> <C> <C>
Balance at 12/30/95 $.6 million $.5 million $.2 million
Charges to reserves .3 million .2 million .1 million
---------- ---------- ----------
Balance at 3/30/96 $.3 million $.3 million $.1 million
=========== =========== ===========
</TABLE>
The payouts will be substantially completed by the end of 1996.
8. On February 8, 1996, the Company's Board of Directors granted 26,000
options to certain key employees at a price of $4.625 per share which
equaled the market price on the date of grant.
8
<PAGE> 9
PART I - FINANCIAL STATEMENTS
FORM 10-Q
SELFIX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
________________________________________________________________________________
9. Subsequent events:
On April 12, 1996 the Company completed the consolidation of its banking
relationships and entered into a new Credit Agreement. The Credit
Agreement provides an $8,000 line of credit subject to asset based
availability formulas and a line of credit to support letters of credit
required for the Company's Industrial Development Finance Authority Bonds.
All of the Company's assets are pledged as collateral in support of the
Credit Agreement. At April 24, 1996 there were no borrowings outstanding
under the asset based line of credit.
On April 12, 1996 the Company dismissed Grant Thornton LLP as its
independent public accountants. The Company's Board of Directors approved
the audit committee's recommendation to change accountants. The Company
has engaged Arthur Andersen LLP as its new independent public accountants
effective with the dismissal of its former accountants.
10. On January 12, 1996, the Company issued 16,310 shares of common stock to
various employees in conjunction with the 1995 Employee Stock Purchase
Plan.
9
<PAGE> 10
Item 2 - Management's Discussion and Analysis of Results of Operations and
Financial Condition
In the discussion and analysis that follows, all references to 1996
and 1995 refer to the 13 week periods ended March 30, 1996 and
April 1, 1995. The following amounts are in thousands of dollars.
Results of operations for the 13 weeks ended March 30, 1996 and April 1, 1995.
Net sales decreased $2,117 (20%) from 1995 due to lower sales at both of the
Company's home improvement and housewares segments. Sales of the home
improvement segment decreased approximately 27% during the period as a result
of the inclement weather primarily in the northeastern United States. The
Company anticipates that sales of this segment will improve during the summer
as deferred home improvement projects are initiated. Sales of the housewares
segment declined approximately 18% due to inventory restrictions implemented by
certain key retail customers, the discontinuation of certain products and the
absence in 1996 of pipeline fill sales to a certain customer. The Company
anticipates that sales will improve as inventory adjustments are completed.
Additionally, the Company anticipates that new products introduced during the
first quarter will favorably impact sales in the second half of the year.
Gross profit margins declined from 37.5% to 33.1%. The decrease in the gross
margin percentage is primarily associated with lower overhead absorption due to
reduced activity, labor inefficiencies and increased tool repairs at the
Company's home improvement segment. The gross profit margin at the housewares
segment was essentially unchanged during the period. Lower overhead absorption
associated with the reduction in housewares sales was offset by improved gross
margins resulting from the 1995 decision to exit certain unprofitable product
lines as well as lower resin prices.
10
<PAGE> 11
Operating expenses at the housewares segment decreased approximately 11% from
last year primarily due to personnel reductions and the absence this year of a
marketing expense accrual. In addition, volume related reductions for freight
and commissions as well as lower amortization expense associated with the 1995
write-downs of certain intangible assets contributed to the decrease in
operating expense at the housewares segment.
Operating expenses at the home improvement segment increased approximately 11%
from 1995 primarily due to increased marketing and selling expenses for
collateral costs for new product brochures, salaries and benefits, patent fees,
convention costs and product samples. These increases were more than offset by
the operating expense decrease at the housewares segment.
Interest expense decreased $37 from last year due to 1995 debt reductions
totaling $2,400.
Other income decreased $91 compared to last year primarily as a result of
reduced interest income due to lower cash balances and the maturity of
interest-bearing marketable securities.
Income tax expense decreased $12 compared to last year. No tax expense was
recorded in 1996 due to the availability of net operating loss carryforwards.
FINANCIAL CONDITION
Working capital decreased $701 since cash was needed to fund the net loss
during the period. Cash used by operations increased $1,095 compared to last
year due to the 1995 collection of a patent infringement suit ($1,600).
Also contributing to the increase in cash used by operations was the higher net
loss and the funding of severance and other items related to the closing of the
Company's Canadian facility. On the positive side, efforts to control
inventories and reductions in receivables generated increased cash flow over
last year.
11
<PAGE> 12
On April 12, 1996 the Company completed the consolidation of its banking
relationships and entered into a new Credit Agreement. The Credit Agreement
provides an $8,000 line of credit subject to asset based availability formulas
and a line of credit to support letters of credit required for the Company's
Industrial Development Finance Authority Bonds. All of the Company's assets
are pledged as collateral in support of the Credit Agreement.
Sales of the Company's home improvement products are generally lower in the
first and fourth quarter of the calendar year. Net earnings vary
proportionately more than sales due to the effect of fixed costs. Results of
operations for the 13 week period ended March 30, 1996 are not necessarily
indicative of the results to be expected for the 52 week period ending December
28, 1996.
12
<PAGE> 13
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 - On March 29, 1996 Theodore W. Lucore, Senior
Vice President Operations, retired.
ITEM 6. A. Exhibits and Reports There were no reports on Form 8-K filed during
the thirteen weeks ended March 30, 1996
13
<PAGE> 14
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: May 7, 1996
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> MAR-30-1996
<CASH> 1,889
<SECURITIES> 233
<RECEIVABLES> 6,846
<ALLOWANCES> 1,481
<INVENTORY> 4,942
<CURRENT-ASSETS> 12,922
<PP&E> 21,277
<DEPRECIATION> 13,199
<TOTAL-ASSETS> 23,720
<CURRENT-LIABILITIES> 6,911
<BONDS> 7,015
0
0
<COMMON> 39
<OTHER-SE> 9,755
<TOTAL-LIABILITY-AND-EQUITY> 23,720
<SALES> 8,625
<TOTAL-REVENUES> 8,625
<CGS> 5,767
<TOTAL-COSTS> 5,767
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 34
<INTEREST-EXPENSE> 180
<INCOME-PRETAX> (1,116)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,116)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,116)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> (0.29)
</TABLE>
