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 March 31, 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.
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(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
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(Address of principal executive offices) (Zip Code)
(617) 321-2300
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(Registrant's telephone number, including area code)
N/A
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(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
April 30, 1996 is 2,459,749 shares.
ARMATRON INTERNATIONAL, INC.
File No. 1-4433
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PAGE(S)
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
-----------------------------
Consolidated Condensed Balance Sheets - March 31, 1996
and 1995, and September 30, 1995 3 - 4
Consolidated Condensed Statements of Operations for the
three and six months ended March 31, 1996 and 1995 5
Consolidated Condensed Statements of Cash Flows for the
six months ended March 31, 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 - 12
PART II - OTHER INFORMATION
Item 6(b) Reports on Form 8-K 13
SIGNATURES 14
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Balance Sheets
March 31, 1996 and 1995, and September 30, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 31, September 30,
------------------ -------------
1996 1995 1995
------ ------ ------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 106 $ 256 $ 1,322
Trade accounts receivable,net 2,687 2,419 2,189
Inventories (Note 2) 2,939 4,128 2,225
Deferred tax asset 165 165 165
Prepaids & other current assets 229 391 154
Total Current Assets 6,126 7,359 6,055
MACHINERY & EQUIPMENT, NET 785 752 952
OTHER ASSETS 108 107 249
Total Assets $ 7,019 $ 8,218 $ 7,256
===============================
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Balance Sheets
March 31, 1996 and 1995, and September 30, 1995
(Dollars in Thousands)
<TABLE>
(Unaudited) (Audited)
March 31, Sept. 30,
1996 1995 1995
-------- -------- ---------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 1,639 1,806 1,112
Accrued liabilities (Note 3) 1,027 743 705
-------------------------------
Total Current Liabilities 2,666 2,549 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 March 31, 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
Accumulated deficit (9,352) (8,036) (8,266)
-------------------------------
24 1,340 1,110
Less:
Treasury stock at cost - 146,732 at
March 31, 1996 and September 30, 1995
and 146,727 at March 31, 1995 386 386 386
-------------------------------
Total Stockholders'(Deficiency) Equity (362) 954 724
-------------------------------
Total Liabilities & Stockholders'
(Deficiency) Equity $ 7,019 $ 8,218 $ 7,256
===============================
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Statements of Operations
for the Three and Six Months Ended March 31, 1996 and 1995
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
1996 1995 1996 1995
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 3,051 $ 3,019 $ 4,192 $ 4,065
Cost of Products Sold 2,494 2,590 3,778 3,913
Selling, general and administrative expenses 728 715 1,284 1,276
Interest expense-related parties 120 122 240 256
Interest expense-third parties 7 - 9 -
Other (income) expense - net (3) (23) (33) (53)
Net Loss $ (295) $ (385) $ (1,086) $ (1,327)
==============================================
Per Share:
Net Loss $ (.12) $ (.16) $ (.44) $ (.54)
==============================================
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.
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Statements of Cash Flows
for the Six Months Ended March 31, 1996 and 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended
March 31,
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,086) $ (1,327)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation 199 227
Loss on disposal of equipment (1) -
Change in operating assets & liabilities (296) (846)
Net cash flow used for operating activities: (1,184) (1,946)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for machinery and equipment (32) (380)
Net cash flow used for investing activities: (32) (380)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt-related parties - (425)
Net cash flow used for financing activities: - (425)
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,216) (2,751)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,322 3,007
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 106 $ 256
=====================
SUPPLEMENTAL INFORMATION:
Interest paid - related parties $ 41 $ 244
Interest paid - third parties $ 9 $ -
Income taxes paid $ - $ -
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
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 March 31, 1996 and 1995, and
September 30, 1995, the consolidated statements of operations, for the
three and six months ended March 31, 1996 and 1995 and the consolidated
statement of cash flows for the six months ended March 31, 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)
March 31, September 30,
1996 1995 1995
------ ------ -------------
<S> <C> <C> <C>
Purchased Components $1,288 $2,637 $1,606
Work in Process 130 150 84
Finished Goods 1,521 1,341 535
$2,939 $4,128 $2,225
===============================
</TABLE>
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following as of:
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 31, September 30,
1996 1995 1995
------ ------ -------------
<S> <C> <C> <C>
Salaries, commissions and benefits. . . . $ 385 $ 375 $ 321
Professional fees . . . . . . . . . . . . 43 31 52
Warranty costs . . . . . . . . . . . . . 15 37 64
Advertising costs . . . . . . . . . . . . 224 171 135
Other . . . . . . . . . . . . . . . . . . 360 129 133
$1,027 $ 743 $ 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 March 31, 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 collateralize 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 March
31, 1996. As of March 31, 1996, the Company had outstanding letters of
credit amounting to approximately $497,000 under this credit agreement.
ARMATRON INTERNATIONAL, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the six months ended March 31, 1996, operating activities used
$1,184,000 in cash. An increase in accounts payable and other current
liabilities generated $527,000 and $322,000 respectively. These were offset
by increases to inventory of $714,000 and to accounts receivable of $498,000
and a net loss of $1,086,000. Investing activities were $32,000 for the
purchase of equipment. As a result primarily of these factors, cash and cash
equivalents decreased $1,216,000.
The Company has a revolving line of credit 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 April 30, 1996, the Company was contingently liable for
outstanding letters of credit of approximately $472,000 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 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 on
April 30, 1996.
The ratio of current assets to current liabilities was 2.3 at March 31, 1996
as compared to 3.3 at September 30, 1995 and 2.9 at March 31, 1995. The
ratio of consolidated debt to consolidated net worth was (20.4) at March 31,
1996, 9.0 at September 30, 1995, and 7.6 at March 31, 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, and the compost bin,
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 $32,000 in capital expenditures in the
first two quarters of fiscal year 1996. These expenditures were mainly for
tooling and dies used in production. The Company anticipates commitments of
$101,000 for capital expenditures during the remaining quarters 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.
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 March 31, 1996
resulted in net loss of $295,000, or $.12 per share, as compared with net
loss of $385,000 or $.16 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 $32,000
to $3,051,000 for the three months ended March 31, 1996, as compared to
$3,019,000 for the corresponding period in the previous year. The increase
in sales was primarily attributable to the increase in sales of the
ECHOVISION obstacle detection device.
The Company introduced its plastic Handy Hauler Yard Cart and Storemore
Storage Shed in fiscal 1995. We anticipate that these new products will be
subject to less seasonal fluctuations than the existing product lines. While
we expect the decrease in consumer product sales of our existing product
lines to continue, we also expect the increase in consumer product sales of
our new product lines to offset the decrease of the existing product lines.
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 income for
the Consumer Products segment in the second quarter were approximately
$2,848,000 and $67,000, respectively, as compared to $3,006,000 and operating
income of $28,000, respectively, in the previous year. The expense reduction
plan implemented last year was responsible for the positive operating income.
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 were
approximately $203,000 and $6,000, respectively, as compared to sales of
$13,000 and operating losses of $88,000 in the previous year.
Selling, general and administrative expenses increased 2%, or $13,000, to
$728,000 for the quarter ended March 31, 1996, when compared to the previous
year.
A tax benefit from the losses on operations for the three month period ended
March 31, 1996 was not reflected in the statement of consolidated operations
because the net operating losses could not be carried back to previous years,
and future recognition was not certain.
The results of consolidated operations for the six months ended March 31,
1996 resulted in a net loss of $1,086,000 or $.44 per share, as compared with
a net loss of $1,327,000, or $.54 per share in the same period of the
previous year. Sales increased $127,000 to $4,192,000 for the six months
ended March 31, 1996, as compared to $4,065,000 for the corresponding period
in the previous year.
Sales and operating losses for the Consumer Products segment for the six
months ended March 31, 1996 were approximately $3,975,000 and $352,000,
respectively, as compared to $4,035,000 and $548,000, respectively, in the
previous year.
Sales and operating losses for the Industrial Products segment during the six
months ended March 31, 1995 were approximately $217,000 and $74,000,
respectively, as compared to $30,000 and $179,000, respectively, in the
previous year.
Selling, general and administrative expenses increased 1%, or $8,000 to
$1,284,000.
A tax benefit from the losses on operations for the six month period ended
March 31, 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.
ARMATRON INTERNATIONAL, INC.
PART II
Item 6b.
Reports on Form 8-K
The Company filed no Form 8-K's for the quarter ended March 31, 1996.
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: /s/ Charles J. Housman
Charles J. Housman, President
and Treasurer
Date: /s/ Richard M. Housman
Richard M. Housman,
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 106
<SECURITIES> 0
<RECEIVABLES> 2,895
<ALLOWANCES> (208)
<INVENTORY> 2,939
<CURRENT-ASSETS> 6,126
<PP&E> 6,178
<DEPRECIATION> 5,393
<TOTAL-ASSETS> 7,019
<CURRENT-LIABILITIES> 2,666
<BONDS> 4,715
0
0
<COMMON> 2,606
<OTHER-SE> (2,968)
<TOTAL-LIABILITY-AND-EQUITY> 7,019
<SALES> 3,051
<TOTAL-REVENUES> 3,051
<CGS> 2,494
<TOTAL-COSTS> 728
<OTHER-EXPENSES> (3)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120
<INCOME-PRETAX> (295)
<INCOME-TAX> 0
<INCOME-CONTINUING> (295)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (295)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
