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Previous: DEFINED ASSET FDS EQUITY INCOME FD INCOME GROWTH FD 1993 SER, 485BPOS, 1996-05-09 |
Next: COMMAND CREDIT CORP, 10QSB, 1996-05-09 |
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
MARK ONE:
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the transition period from _____ to ______
Commission File No. 0-18204
AJAY SPORTS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 39-1644025
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1501 E. Wisconsin Street,
Delavan, Wisconsin 53115 (414) 728-5521
(Address of principal executive offices) (Registrant's Telephone Number,
including (Zip Code) 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 report), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /x/ No / /
Number of shares of common stock outstanding at 4/10/96 is 23,345,018.
<PAGE>
Item 1. FINANCIAL STATEMENTS
AJAY SPORTS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
March 31, 1996 December 31,
(Unaudited) 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 189 $ 362
Trade accounts receivable, net 6,265 5,196
Inventories 9,090 8,909
Prepaid expenses and other current assets 626 365
Deferred tax benefit 102 102
------ ------
Total current assets 16,389 14,934
Fixed assets, net 1,933 1,888
Other assets 364 236
Deferred tax benefit 223 106
Goodwill 1,313 1,322
------ ------
Total assets $20,105 $18,486
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank $ 7,788 $ 5,793
Current portion of capital lease 7 6
Accounts payable 2,218 2,181
Accrued expenses 505 631
------ ------
Total current liabilities 10,518 8,611
Note payable - long term 5,128 5,111
Stockholders' equity:
Preferred stock, 10,000,000 shares authorized
Series B, $0.01 par value, 12,500 shares
outstanding at liquidation value 1,250 1,250
Series C, $10.00 par value, 313,290 and 313,790 shares
outstanding at stated value, respectively 3,133 3,138
Common stock, $.01 par value, 50,000,000
shares authorized, 23,345,018 and
23,337,746 shares outstanding, respectively 234 234
Additional paid-in capital 9,129 9,123
Accumulated deficit (9,287) (8,981)
------ ------
Total stockholders' equity 4,459 4,764
------ ------
Total liabilities and stockholders' equity $20,105 $18,486
====== ======
</TABLE>
2
<PAGE>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1996 1995
-------------------------
<S> <C> <C>
Net sales $6,262 $5,454
Cost of sales 5,133 4,362
----- -----
Gross profit 1,129 1,092
Selling, general and
administrative expenses 1,192 752
----- -----
Operating income (loss) (63) 340
Non-operating (income) expense:
Interest expense, net 279 185
Other, net 2 ---
----- -----
Total non-operating expense 281 185
----- -----
Income (loss) before income taxes (344) 155
Income tax expense (benefit) (117) ---
----- -----
Net income (loss) $(227) $ 155
====== ======
Income (loss) per common share outstanding* $ (.01) $ .01
====== ======
Income (loss) per common share & equivalents $ (.01) $ .00
====== ======
outstanding**
Weighted average common shares outstanding 23,345 22,546
====== ======
Weighted average common and common
equivalents outstanding 36,600 32,629
====== ======
</TABLE>
* Computed by dividing net income or loss, after reduction for preferred stock
dividends, by the weighted average number of common shares outstanding.
** Computed by dividing net income or loss, after reduction for preferred stock
dividends, by the weighted average number of common share and common share
equivalents outstanding.
3
<PAGE>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1996 1995
------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (227) $ 155
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 119 52
Adjustment to retained earnings - 5
Change in assets [(increase)/decrease] and liabilities [increase/(decrease)]:
Trade accounts receivable, net (1,069) (2,112)
Inventories (181) 308
Prepaid expenses and other current assets (261) (38)
Other assets (128) 11
Deferred tax benefits (117)
Accounts payable 38 162
Accrued expenses (126) 33
------ ------
Net cash used in
operating activities (1,952) (1,424)
------ ------
Cash flows from investing activities:
Purchase of property, plant, equipment (155) (64)
Net cash used in
investing activities (155) (64)
------ ------
Cash flows from financing activities:
Net change in bank loan 2,012 (15)
Net change in note payable to affiliate - 1,420
Preferred stock conversion 1
Dividends (79)
Net cash provided by
financing activities 1,934 1,405
------ ------
Net decrease in cash and cash equivalents (173) (83)
Cash and cash equivalents at beginning of period 362 105
------ ------
Cash and cash equivalents at end of period $ 189 $ 22
====== ======
Supplemental disclosures of cash flow information:
Cash paid for interest $ 263 $ 185
====== ======
Cash paid for income tax --- ---
====== ======
</TABLE>
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by Ajay Sports, Inc. (the "Company") without audit and pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of the Company, the financial statements reflect all adjustments, which consist
only of normal recurring adjustments, necessary to present fairly the financial
position of the Company at March 31, 1996 and the results of operations for the
three-month periods ended March 31, 1996 and 1995 and the cash flows for the
same three-month periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the SEC rules and regulations dealing
with interim financial statements. However, the Company believes that the
disclosures made in the condensed financial statements included herein are
adequate to make the information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's 1995 Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.
The year-end condensed balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
Note 2. INVENTORIES
The major classes of inventories (rounded to thousands) are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
Raw Materials $5,460 $4,608
Work in Process 959 1,014
Finished Goods 2,671 3,287
------ ------
$9,090 $8,909
====== ======
</TABLE>
5
<PAGE>
Note 3. LIQUIDITY
As part of the Company's loan agreement with the United States National Bank of
Oregon ("U. S. Bank") the Company is required to maintain a minimum tangible net
worth of $2,000,000 and a ratio of liabilities to tangible net worth of not
greater than 4.5 to 1. On April 3, 1996 U. S. Bank approved a temporary waiver
(through May 1996) to increase the ratio of liabilities to tangible net worth to
not greater than 6.0 to 1. The ratios for January, February and March were 4.91,
5.25 and 5.18 respectively. The ratios increased as a result of goodwill
generated from two 4th quarter acquisitions.
Note 4. BUSINESS SEGMENT REPORTING
The relative contributions to net sales, operating profit and identifiable
assets of the Company's two industry segments for the quarter ended March 31,
1996 (unaudited) are as follows (in thousands):
<TABLE>
<CAPTION>
Quarter Ended March 31, 1996
Furniture Golf Consolidated
<S> <C> <C> <C>
Net sales 960 5,302 6,262
Operating income/(loss) 30 (93) (63)
Total assets 2,207 17,898 20,105
Depreciation/amortization 31 88 119
Capital expenditures 8 147 155
</TABLE>
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION - At March 31, 1996 the Company had working capital of
$5,871,000, as compared with $6,324,000 at December 31, 1995. The ratio of
current assets to current liabilities at March 31, 1996 was 1.6 to 1, compared
to 1.7 at December 31, 1995. Working capital was primarily used to finance
seasonal growth in accounts receivable.
At March 31, 1996 the Company had increased its short term borrowings by
$1,995,000 since December 31, 1995. This was primarily due to the first quarter
operating loss and seasonal increases in accounts receivable $1,069,000,
inventories $181,000 and other current assets $205,000.
LIQUIDITY - At March 31, 1996 Ajay had $12,788,000 outstanding under its
$13,500,000 loan agreement with U. S. Bank. The seasonal nature of the Company's
sales creates fluctuating cash flow. The peak seasonal period has historically
been from February through May. The Company believes its line is sufficient to
finance its needs for 1996.
RESULTS OF OPERATIONS - During the quarter ended March 31, 1996 the Company had
net sales of $6,262,000 compared to $5,454,000 for the same period in 1995. The
overall sales increase of 15% was a result of the increase in sales in the
furniture business. The golf business has had a slower start due to timing in
customer order placement. It is expected that volume will increase throughout
the balance of the year more than offsetting the slow first quarter.
Gross profit for the three months ended March 31, 1996 was 18% of net sales,
compared to 20% for the same period in 1995. This resulted from the Company
selling, at low margins, slow moving inventory obtained in connection with its
4th quarter acquisitions.
Selling, general and administrative expenses expressed as a percentage of sales
were 19.0% for the first quarter of 1996, versus 13.8% for 1995. Contributing to
this was the acquisition in the 4th quarter of 1995 of Palm Springs Golf whose
business runs at an SG&A rate nearly twice that of the balance of the Company's
business.
Operating loss for the first quarter of 1996 was $63,000 compared to operating
income of $340,000 for the first quarter of 1995. This is due primarily to a
timing variance in customer orders and a loss at the recently acquired Palm
Springs Golf subsidiary.
Interest expense increased $94,000 in the first quarter of 1996 compared to the
first quarter of 1995 as a result of higher debt to finance the needs of two 4th
quarter acquisitions, offset by a lower rate that the Company paid on its bank
lines in the first quarter of 1996 versus the same period of 1995.
As a result of the above, the net loss for the first quarter ending March 31,
1996 was $227,000, compared to net income of $155,000 for the same period last
year.
7
<PAGE>
Part II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) No reports on Form 8-K were filed during the quarter ended
March 31, 1996.
b) Exhibit #27: Financial Data Schedule
8
<PAGE>
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.
AJAY SPORTS, INC.
By: /s/Robert R. Hebard
--------------------------------
Its: Corporate Secretary
By: /s/Duane R. Stiverson
----------------------------------
Its: Chief Financial Officer
Date: May 8, 1996
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 189
<SECURITIES> 0
<RECEIVABLES> 6,265
<ALLOWANCES> 0
<INVENTORY> 9,090
<CURRENT-ASSETS> 16,389
<PP&E> 2,553
<DEPRECIATION> 620
<TOTAL-ASSETS> 20,105
<CURRENT-LIABILITIES> 10,518
<BONDS> 0
3,133
1,250
<COMMON> 234
<OTHER-SE> (158)
<TOTAL-LIABILITY-AND-EQUITY> 20,105
<SALES> 6,262
<TOTAL-REVENUES> 6,262
<CGS> 5,133
<TOTAL-COSTS> 1,192
<OTHER-EXPENSES> 2
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 279
<INCOME-PRETAX> (344)
<INCOME-TAX> (117)
<INCOME-CONTINUING> (227)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (227)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
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