UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997.
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 April 30, 1997 is 2,459,749 shares.
ARMATRON INTERNATIONAL, INC.
File No. 1-4433
--------------------
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PAGE(S)
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Condensed Balance Sheets - March 31, 1997 and 1996,
and September 30, 1996 3 - 4
Consolidated Condensed Statements of Operations for the three and
six months ended March 31, 1997 and 1996 5
Consolidated Condensed Statements of Cash Flows for the six months
ended March 31, 1997 and 1996 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
</TABLE>
Page 2
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Balance Sheets
March 31, 1997 and 1996, and September 30, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 31, September 30,
1997 1996 1996
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 80 $ 106 $ 1,849
Trade accounts receivable, net 3,769 2,687 2,121
Inventories (Note 2) 2,970 2,939 2,349
Deferred tax asset 130 165 130
Prepaids & other current assets 277 229 187
Total Current Assets 7,226 6,126 6,636
MACHINERY & EQUIPMENT, NET 670 785 637
OTHER ASSETS 107 108 202
Total Assets $ 8,003 $ 7,019 $ 7,475
=================================
</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
Page 3
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Balance Sheets
March 31, 1997 and 1996, and September 30, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
March 31, Sept. 30,
1997 1996 1996
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES:
Accounts payable 1,540 1,639 1,171
Accrued liabilities (Note 3) 1,564 1,027 1,285
Notes Payable (Note 5) 625 -0-
Total Current Liabilities 3,729 2,666 2,456
---------------------------------
LONG-TERM DEBT (NOTE 4) 4,754 4,715 4,715
---------------------------------
DEFERRED RENT 66 -0- 75
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share,
6,000,000 shares authorized; shares
issued at March 31, 1997 and 1996, and
September 30, 1996, 2,606,481 shares 2,606 2,606 2,606
Paid-in capital 6,770 6,770 6,770
Accumulated deficit (9,536) (9,352) (8,761)
---------------------------------
(160) 24 615
Less:
Treasury stock at cost - 146,732 at
March 31, 1997 and 1996 and
September 30, 1996 386 386 386
---------------------------------
Total Stockholders'(Deficiency) Equity (546) 362 229
---------------------------------
Total Liabilities & Stockholders'
(Deficiency) Equity $ 8,003 $ 7,019 $ 7,475
=================================
</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 Six Months Ended March 31, 1997 and 1996
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales $ 3,868 $ 3,051 $ 5,083 $ 4,192
Cost of Products Sold 3,074 2,494 4,459 3,778
Selling, general and administrative
expenses 668 728 1,177 1,284
Interest expense-related parties 118 120 238 240
Interest expense-third parties 12 7 19 9
Other (income) expense - net (7) (3) (35) (33)
Net Income/(Loss) $ 3 $ (295) $ (775) $ (1,086)
================================================
Per Share:
Net Income/(Loss) $ (.00) $ (.12) $ (.31) $ (.44)
================================================
Weighted average number of common shares
outstanding 2,459,749 2,459,749 2,459,749 2,459,749
</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 Six Months Ended March 31, 1997 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended
March 31,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (775) $ (1,086)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation 147 199
Loss on disposal of equipment 1 (1)
Change in operating assets & liabilities (1,633) (296)
Net cash flow used for operating activities: (2,260) (1,184)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for machinery and equipment (190) (32)
Net cash flow used for investing activities: (190) (32)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payment) under commercial finance
company line of credit 625 -
Borrowings on long-term debt - third parties 56 -
Net cash flow used for financing activities: 681 -
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,769) (1,216)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,848 1,322
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 80 $ 106
=====================
SUPPLEMENTAL INFORMATION:
Interest paid - related parties $ - $ 41
Interest paid - third parties $ 19 $ 9
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 March 31, 1997 and 1996, and September 30, 1996,
the consolidated statements of operations, for the three and six months
ended March 31, 1997 and 1996 and September 30, 1996 and the consolidated
statement of cash flows for the six months ended March 31, 1997 and 1996.
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, 1996. 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,
1997 1996 1996
<S> <C> <C> <C>
Purchased Components $ 2,144 $ 1,288 $ 1,632
Work in Process 120 130 65
Finished Goods 706 1,521 652
$ 2,970 $ 2,939 $ 2,349
================================
</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>
(Unaudited) (Audited)
March 31, September 30,
1997 1996 1996
<S> <C> <C> <C>
Salaries, commissions and benefits . . . $ 401 $ 385 $ 365
Warranty costs . . . . . . . . . . . . . 66 15 40
Advertising costs. . . . . . . . . . . . 144 224 145
Interest . . . . . . . . . . . . . . . . 677 199 439
Other. . . . . . . . . . . . . . . . . . 276 204 296
$ 1,564 $ 1,027 $ 1,285
===============================
</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, 1997. Repayment of this line of credit is subordinate
to the repayment of any and all balances outstanding on the revolving
line of credit described below. At March 31, 1997 interest payments
totalling $677,000 were in arrears for the period November 1, 1995 to
March 31, 1997.
5. NOTE PAYABLE
The Company has a $3,500,000 revolving line of credit from a commercial
finance company which expires in December 1999. 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 1 3/4% over the commercial
base rate. The commercial base rate was 8 1/2% at March 31, 1997. As of
March 31, 1997 the Company had $625,000 in working capital loans
outstanding and had outstanding letters of credit amounting to
approximately $697,000 under this credit agreement.
Page 8
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, 1997, operating activities used
$2,260,000 of cash. An increase in accounts payable and other current
liabilities generated $369,000 and $262,000 respectively. These were offset by
increase to inventory of $621,000 and to accounts receivable of $1,648,000 and
a net loss of $775,000. Investing activities used $190,000 for the purchase of
equipment. Financing activities provided $681,000, $625,000 from net borrowings
under our revolving line of credit from a commercial finance company and
$56,000 from leasing activities. As a result primarily of these factors, cash
and cash equivalents decreased $1,769,000.
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
1999. Borrowings made against this line of credit are collateralized by all
assets of the Company. As of April 30, 1997, direct borrowings under this line
of credit amount to approximately $858,000. In addition the Company was
contingently liable for outstanding letters of credit of approximately $789,000
under this credit agreement on April 30, 1997.
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.
Interest payments for the period November 1, 1995 through March 31, 1997 are in
arrears. The Company had $4,715,000 outstanding under this line of credit on
April 30, 1997. The Company plans to renew its line of credit with the Realty
Trust under terms and conditions similar to existing terms and conditions prior
to October 1997 and does not anticipate any problems or delays.
The ratio of current assets to current liabilities was 1.94 at March 31, 1997
as compared to 2.7 at September 30, 1996 and 2.3 at March 31, 1996. The ratio
of consolidated debt to consolidated net worth was (15.7) at March 31, 1997,
31.6 at September 30, 1996 and (20.4) at March 31, 1996.
Sales terms for the Industrial Products segment are 30 days net and following
industry trade practice, the Consumer Product segment offers extended payment
terms for delivery of existing seasonal products such as the Flowtron
bugkiller, electric leaf-eater, bio-mister, compost bin, plastic Handy Hauler
Yard Cart and plastic Storemore storage shed.
The Company made investments of $190,000 in capital expenditures in the first
two quarters of fiscal 1997. These expenditures were mainly for tooling and
dies used in production of the Company's Consumer Products. The Company
anticipates commitments of $277,000 for capital expenditures during the
remaining quarters of fiscal 1997.
Page 9
The Company believes that is present working capital, lines of credit from a
commercial finance company and from the Realty Trust will be sufficient to
finance its seasonal borrowing needs, operations and investment in capital
expenditures in fiscal 1997.
Page 10
RESULTS OF OPERATIONS
The results of consolidated operations for the quarter ended March 31, 1997
resulted in net profit of $3,000, or $.00 per share, as compared with net loss
of $295,000 or $.12 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 $817,000 to
$3,868,000 for the three months ended March 31, 1997, as compared to $3,051,000
for the corresponding period in the previous year. The increase in sales was
primarily attributable to the increase in sales of the Flowtron products.
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 $3,852,000
and $406,000, respectively, as compared to $2,848,000 and operating income of
$67,000, respectively, in the previous year. Sales increases were 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 losses for the Industrial Products segment were approximately
$16,000 and $95,000, respectively, as compared to sales of $203,000 and
operating income of $6,000 in the previous year.
Gross margins were $794,000 and $557,000 for 1997 and 1996, respectively.
Selling, general and administrative expenses decreased 8%, or $60,000, to
$668,000 for the quarter ended March 31, 1997, when compared to the previous
year.
A tax benefit from the losses on operations for the three month period ended
March 31, 1997 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.
Page 11
The results of consolidated operations for the six months ended March 31, 1997
resulted in a net loss of $775,000 or $.31 per share, as compared with a net
loss of $1,086,000, or $.44 per share in the same period of the previous year.
Sales increased $891,000 to $5,083,000 for the six months ended March 31, 1997,
as compared to $4,192,000 for the corresponding period in the previous year.
Sales and operating income for the Consumer Products segment for the six months
ended March 31, 1997 were approximately $5,034,000 and $31,000, respectively,
as compared to sales of $3,975,000 and operating losses of $352,000 in the
previous year.
Sales and operating losses for the Industrial Products segment during the six
months ended March 31, 1997 were approximately $49,000 and $179,000,
respectively, as compared to $217,000 and $74,000, respectively, in the
previous year.
Selling, general and administrative expenses decreased 8%, or $108,000 to
$1,176,000.
A tax benefit from the losses on operations for the six month period ended
March 31, 1997 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 12
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, 1997.
Page 13
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: May 7, 1997 /s/ Charles J. Housman
Charles J. Housman, President and Treasurer
Date: May 7, 1997 /s/ Richard M. Housman
Richard M. Housman, Controller
Page 14
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 80
<SECURITIES> 0
<RECEIVABLES> 3,973
<ALLOWANCES> (204)
<INVENTORY> 2,970
<CURRENT-ASSETS> 7,226
<PP&E> 6,264
<DEPRECIATION> 5,594
<TOTAL-ASSETS> 8,003
<CURRENT-LIABILITIES> 3,729
<BONDS> 4,754
0
0
<COMMON> 2,606
<OTHER-SE> (3,152)
<TOTAL-LIABILITY-AND-EQUITY> 8,003
<SALES> 3,868
<TOTAL-REVENUES> 3,868
<CGS> 3,074
<TOTAL-COSTS> 668
<OTHER-EXPENSES> (7)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 118
<INCOME-PRETAX> 3
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