UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly 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 1-4433.
ARMATRON INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-1052250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Main Street
Melrose, Massachusetts 02176
(Address of principal executive offices) (Zip Code)
(617) 321-2300
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report.)
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 ____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes ______ No ______
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of Common Stock (par value $1) outstanding at
July 31, 1996 is 2,459,749 shares.
ARMATRON INTERNATIONAL, INC.
File No. 1-4433
-------------------
PAGE(S)
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Condensed Balance Sheets -
June 30, 1996 and 1995, and September 30, 1995 3 - 4
Consolidated Condensed Statements of Operations for
the three and nine months ended June 30, 1996 and 1995 5
Consolidated Condensed Statements of Cash Flows for
the nine months ended June 30, 1996 and 1995 6
Notes to Consolidated Condensed Financial Statements 7 - 8
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 11
PART II - OTHER INFORMATION
Item 6(b) Reports on Form 8-K 12
SIGNATURE 13
Page 2
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Balance Sheets
June 30, 1996 and 1995, and September 30, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 30, September 30,
1996 1995 1995
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 230 $ 340 $1,322
Trade accounts receivable,net 4,618 2,712 2,189
Inventories (Note 2) 2,196 3,218 2,225
Deferred tax asset 165 165 165
Prepaids & other current assets 203 405 154
______ ______ ______
Total Current Assets 7,412 6,840 6,055
MACHINERY & EQUIPMENT, NET 711 742 952
OTHER ASSETS 108 107 249
Total Assets $8,231 $7,689 $7,256
====== ====== ======
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
Page 3
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Balance Sheets
June 30, 1996 and 1995, and September 30, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 30, Sept. 30,
1996 1995 1995
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,811 $ 790 $1,112
Accrued liabilities (Note 3) 1,335 770 705
Notes Payable (Note 5) - 192 -
Total Current Liabilities 3,146 1,752 1,817
LONG-TERM DEBT (NOTE 4) 4,715 4,715 4,715
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per
share, 6,000,000 shares authorized;
shares issued at June 30, 1996 and
1995, and September 30, 1995,
2,606,481 shares 2,606 2,606 2,606
Paid-in capital 6,770 6,770 6,770
Retained earnings (deficit) (8,620) (7,768) (8,266)
756 1,608 1,110
Less:
Treasury stock at cost - 146,732
at June 30, 1996 and September 30,
1995, and 146,727 at June 30, 1995 386 386 386
Total Stockholders' Equity 370 1,222 724
Total Liabilities & Stockholders' Equity $8,231 $7,689 $7,256
====== ====== ======
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
Page 4
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Statements of Operations
for the Three and Nine Month Periods Ended June 30, 1996 and 1995
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Nine Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $6,717 $4,666 $10,909 $ 8,731
Cost of Products Sold 4,785 3,500 8,563 7,413
Selling, general and
administrative expenses 1,055 771 2,339 2,047
Interest expense-related parties 119 119 359 367
Interest expense-third parties 28 23 37 31
Other (income) expense - net (4) (14) (37) (68)
Net Income (Loss) $ 734 $ 267 $ (352) $(1,059)
====== ====== ====== =======
Per Share:
Net Income (Loss) $ .30 $ .11 $ (.14) $ (.43)
====== ====== ====== =======
Weighted average number of
common shares outstanding 2,459,749 2,459,754 2,459,749 2,459,754
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
Page 5
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Statements of Cash Flows
for the Nine Months Ended June 30, 1996 and 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
Nine Months Ended
June 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (352) $(1,059)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation 286 329
Loss on disposal of equipment (1) -
Change in operating assets & liabilities (980) (1,232)
Net cash flow from (used for)
operating activities: (1,047) (1,962)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for machinery and equipment (45) (472)
Net cash flow used for investing activities: (45) (472)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) on third party
line of credit - 192
Payments on long-term debt-related parties - (425)
Payments on long-term debt-third parties
Net cash flow used for financing activities: - (233)
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,092) (2,667)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,322 3,007
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 230 $ 340
====== =======
SUPPLEMENTAL INFORMATION:
Interest paid - related parties $ 41 $ 367
Interest paid - third parties $ 37 $ 31
Income taxes paid $ - $ -
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
Page 6
ARMATRON INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
1. OPINION OF MANAGEMENT
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (including normal
recurring adjustments) necessary to present fairly the consolidated
financial position as of June 30, 1996 and 1995, and September 30, 1995, and
the consolidated statements of operations and cash flows for the three and
nine months ended June 30, 1996 and 1995. These financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
September 30, 1995. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. The year-end
balance sheet data was derived from audited financial statements, but does
not include disclosures required by generally accepted accounting
principles. The accompanying unaudited, consolidated condensed financial
statements are not necessarily indicative of future trends or the Company's
operations for the entire year.
2. INVENTORIES
Inventories are stated on a first-in, first-out (FIFO) method at the
lower of cost or market.
Inventories consisted of the following:
<TABLE>
<CAPTION>
(In Thousands)
(Unaudited) (Audited)
June 30, September 30,
1996 1995 1995
<S> <C> <C> <C>
Purchased Components $1,796 $1,330 $1,606
Work in Process 80 100 84
Finished Goods 320 1,788 535
$2,196 $3,218 $2,225
====== ====== ======
</TABLE>
Page 7
ARMATRON INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following as of:
<TABLE>
<CAPTION>
(In thousands)
(Unaudited) (Audited)
June 30, September 30,
1996 1995 1995
<S> <C> <C> <C>
Salaries, commissions and benefits....... $ 434 $382 $321
Professional fees........................ 68 45 52
Warranty costs........................... 40 30 64
Advertising costs........................ 233 192 135
Other.................................... 560 121 133
$1,335 $770 $705
====== ==== ====
</TABLE>
4. LONG-TERM DEBT
The Company has a $7,000,000 line of credit from a realty trust
operated for the benefit of the Company's principal shareholders. This line
of credit, with interest at 10%, requires monthly payments of interest only,
is payable in full in October 1997, and is collateralized by all assets of
the Company. The Company had $4,715,000 outstanding under this line of
credit at June 30, 1996.
5. NOTE PAYABLE
The Company has a $3,500,000 revolving line of credit from a
commercial finance company which expires in December 1996. This line of
credit is collateralized by all assets of the Company. The terms of this
agreement include a borrowing limit which fluctuates depending on the levels
of accounts receivable and inventory which collaterlize the borrowings.
Interest on amounts outstanding is payable at 2 1/4% over the commercial
base rate. The commercial base rate was 8 1/4% at June 30, 1996. As of
June 30, 1996, the Company had outstanding letters of credit amounting to
approximately $624,000 under this agreement.
Page 8
ARMATRON INTERNATIONAL, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended June 30, 1996, operating activities used
$1,047,000 in cash. Trade accounts receivable increased $2,429,000. The
net loss was $352,000. Accounts Payable and other current liabilities
increased $699,000 and $630,000 respectively. Investing activities used
$45,000 for the purchase of equipment. As a result, primarily of these
factor, cash and cash equivalents decreased $1,092,000.
The Company has a revolving line of credit from a commercial finance company
which provides aggregate borrowings of $3,500,000 and which expires in
December 1996. Borrowings made against this line of credit are
collateralized by all assets of the Company. As of June 30, 1996, the
Company was contingently liable for outstanding letters of credit of
approximately $624,000 under this credit agreement.
The Company has a $7,000,000 line of credit from a realty trust operated for
the benefit of the Company's principal shareholders. This line of credit,
with interest payable at 10%, requires monthly payment of interest only, is
payable in full in October 1997, and is collateralized by all assets of the
Company. The Company had $4,715,000 outstanding under this line of credit
on June 30, 1996.
The ratio of current assets to current liabilities was 2.4 at June 30, 1996
as compared to 3.3 at September 30, 1995 and 3.9 at June 30, 1995. The
ratio of consolidated debt to consolidated net worth was 21.2 at June 30,
1996, 9.0 at September 30, 1995, and 5.3 at June 30, 1995.
Sales terms for the Industrial Products segment are 30 days net, and
following industry trade practice, the Consumer Products segment offers
extended payment terms for delivery of existing seasonal product items such
as the Flowtron leaf eater, bugkiller, biomister, compost bin and yard
carts, resulting in fluctuating requirements for working capital.
The Company anticipates it will have less fluctuating requirements for
working capital for its new product items, the plastic Handy Hauler Yard
Cart and plastic Storemore Storage Shed, as these items are subject to less
seasonal fluctuations than existing product lines.
The Company made an investment of $45,000 in capital expenditures in the
first three quarters of fiscal year 1996. These expenditures were mainly
for tooling and dies used in production. The Company anticipates
commitments of $88,000 for capital expenditures during the remaining quarter
of fiscal 1996.
The Company believes that its present working capital, lines of credit from
a commercial finance company and related party, and other sources of
financing will be sufficient to finance its seasonal borrowing needs,
operations and investment in capital expenditures in fiscal 1996.
Page 9
Other sources of financing, provided by the Company's principal stockholder,
are available to finance any working capital deficiencies.
RESULTS OF OPERATIONS
The results of consolidated operations for the quarter ended June 30, 1996
resulted in net income of $734,000, or $.30 per share, as compared with net
income of $267,000, or $.11 per share in the same period of the previous
year. The Company distributes its products primarily to major retailers
throughout the United States, with some products distributed under customer
labels. Substantially all of the Company's sales, as well as accounts
receivable, relate to business activities with such retailers. Sales
increased $2,051,000 to $6,717,000 for the three months ended June 30, 1996,
as compared to $4,666,000 for the corresponding period in the previous year.
The increase in sales was attributable to sales of storage sheds, bugkillers
and the ECHOVISION obstacle detection device.
Operating profit is the result of deducting operating expenses excluding
interest expense, general corporate expenses, and income taxes from total
revenue. Operations within the Consumer Products segment consist of the
manufacture and distribution of Flowtron leaf-eaters, bugkillers,
biomisters, compost bins, yard carts and storage sheds. Sales and operating
profits for the Consumer Products segment in the third quarter were
approximately $6,344,000 and $996,000, respectively, as compared to
$4,656,000 and $692,000, respectively, in the previous year. Sales
increased $1,688,000 due to increased sales of bugkillers and storage sheds.
Product lines within the Consumer Products segment are subject to seasonal
fluctuations, with most shipments occurring in the third and fourth quarters
of the Company's fiscal year.
The Industrial Products segment has introduced electronic obstacle avoidance
systems for automotive applications. Production began in January 1996.
Sales and operating income for the Industrial Products segment in the third
quarter of 1996 were $373,000 and $83,000 respectively, as compare to sales
of $10,000 and operating losses of $75,000, in the previous year.
Selling, general and administrative expenses increased $284,000 to
$1,055,000 for the quarter ended June 30, 1996, when compared to the
previous year.
Page 10
The results of consolidated operations for the nine months ended June 30,
1996 resulted in a net loss of $352,000 or $.14 per share, as compared with
a net loss of $1,059,000, or $.43 per share in the same period of the
previous year. Sales increased $2,178,000 to $10,909,000 for the nine
months ended June 30, 1996, as compared to $8,731,000 for the corresponding
period in the previous year.
Sales and operating profits for the Consumer Products segment for the nine
months ended June 30, 1996 were approximately $10,319,000, and $644,000,
respectively, as compared to $8,691,000 and $144,000, respectively, in the
previous year. The increase in sales was responsible for the increase in
operating profit.
Sales and operating profits for the Industrial Products segment during the
nine months ended June 30, 1996 were approximately $590,000 and $9,000,
respectively, as compared to sales of $40,000 and operating losses of
$254,000, in the previous year.
Selling, general and administrative expenses increased $292,000 to
$2,339,000.
A tax benefit from the losses on operations for the nine month periods ended
June 30, 1996 was not reflected in the statement of consolidated operations
because the net operating losses could neither be carried back to previous
years and future recognition was not certain.
Page 11
ARMATRON INTERNATIONAL, INC.
PART II
Item 6b.
Reports on Form 8-K
The Company did not file any reports on Form
8-K for the quarter ended June 30, 1996.
Page 12
ARMATRON INTERNATIONAL, INC.
File No. 1-4433
-------------------
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 thereto duly authorized.
ARMATRON INTERNATIONAL, INC.
(Registrant)
Date: August 1996 /s/ Charles J. Housman
Charles J. Housman, President
and Treasurer
Date: August 1996 /s/ Richard M. Housman
Richard M. Housman,
Controller
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 230
<SECURITIES> 0
<RECEIVABLES> 5,039
<ALLOWANCES> (421)
<INVENTORY> 2,196
<CURRENT-ASSETS> 7,412
<PP&E> 6,190
<DEPRECIATION> 5,479
<TOTAL-ASSETS> 8,231
<CURRENT-LIABILITIES> 3,146
<BONDS> 4,715
0
0
<COMMON> 2,606
<OTHER-SE> (2,236)
<TOTAL-LIABILITY-AND-EQUITY> 8,231
<SALES> 6,717
<TOTAL-REVENUES> 6,717
<CGS> 4,785
<TOTAL-COSTS> 1,055
<OTHER-EXPENSES> (4)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119
<INCOME-PRETAX> 734
<INCOME-TAX> 0
<INCOME-CONTINUING> 734
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 734
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
