<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: November 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
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Commission file number: 0-19450
OAKHURST COMPANY, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 25-1655321
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(State of Incorporation) (I.R.S. Employer
Identification No.)
1001 SANTERRE DRIVE, GRAND PRAIRIE, TEXAS
75050
-----------------------------------------
(Address of principal executive offices)
(Zip Code)
(972) 660-4499
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(Registrant's telephone number, including area code)
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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
--- ---
As of January 1, 1997, 3,201,144 shares of the Registrant's Common
Stock, $0.01 par value per share, were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I - FINANCIAL INFORMATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OAKHURST COMPANY, INC. AND SUBSIDIARIES
<TABLE>
<S> <C>
Consolidated Balance Sheets at November 30, 1996 (unaudited)
and February 29, 1996....................................................... 3
Consolidated Statements of Operations for the three month periods ended
November 30, 1996 and November 30, 1995 (unaudited)......................... 4
Consolidated Statements of Operations for the nine month periods ended
November 30, 1996 and November 30, 1995 (unaudited)......................... 5
Consolidated Statement of Stockholders' Equity for the nine months
ended November 30, 1996 (unaudited) ........................................ 6
Consolidated Statements of Cash Flows for the nine month periods ended
November 30, 1996 and November 30, 1995 (unaudited)......................... 7
Notes to consolidated financial statements (unaudited)....................... 8
</TABLE>
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<PAGE> 3
OAKHURST COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS NOVEMBER 30, FEBRUARY 29,
1996 1996
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(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................................... $ 164 $ 318
Trade accounts receivable, less allowance of $505 and $558, respectively........ 4,487 4,027
Commissions receivable.......................................................... 113 230
Other receivables............................................................... 292 564
Inventories..................................................................... 7,214 8,080
Deferred tax asset.............................................................. 75 145
Other........................................................................... 600 467
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Total current assets.................................................... 12,945 13,831
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Property and equipment, at cost......................................................... 3,402 3,216
Less accumulated depreciation................................................... (1,474) (1,109)
----------- -----------
1,928 2,107
----------- -----------
Deferred tax asset, less valuation allowance of $46,800................................. 4,011 3,941
Excess of cost over net assets acquired, net............................................ 5,714 6,035
Other assets............................................................................ 458 203
----------- -----------
10,183 10,179
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$ 25,056 $ 26,117
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................ $ 5,516 $ 5,762
Note payable.................................................................... 105 -
Accrued compensation............................................................ 290 369
Current maturities of long-term obligations..................................... 393 284
Current maturities of long-term obligations, related parties.................... 88 169
Net obligation of discontinued business segment-current portion................. 530 465
Other........................................................................... 486 600
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Total current liabilities............................................... 7,408 7,649
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Long-term obligations:
Net obligation of discontinued business segment................................. 349 678
Long-term debt.................................................................. 6,275 5,179
Long-term debt, related parties................................................. 1,497 1,574
Other long-term obligations..................................................... 109 138
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8,230 7,569
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Commitments and contingencies...........................................................
Stockholders' equity:
Preferred stock, par value $0.01; authorized 1,000,000 shares, none issued...... - -
Common stock, par value $0.01 per share; authorized 14,000,000
shares; issued 3,201,144 and 3,195,235 shares, respectively.................. 32 32
Additional paid-in capital...................................................... 46,529 46,522
Deficit (Reorganized on August 26, 1989)........................................ (37,142) (35,654)
Treasury stock, at cost, 207 common shares...................................... (1) (1)
----------- -----------
Total stockholders' equity.............................................. 9,418 10,899
----------- -----------
$ 25,056 $ 26,117
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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<PAGE> 4
OAKHURST COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995
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<S> <C> <C>
Sales ................................................... $ 10,247 $ 11,580
Other income ............................................ 32 59
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10,279 11,639
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Cost of goods sold, including occupancy and
buying expenses ....................................... 8,026 9,100
Operating, selling and administrative expenses .......... 2,494 2,684
Provision for doubtful accounts ......................... 28 21
Amortization of excess of cost over net assets acquired . 111 119
Interest expense ........................................ 225 181
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10,884 12,105
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Net loss before income taxes ............................ (605) (466)
Income tax benefit (expense) ............................ 18 (1,954)
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Net loss ................................................ $ (587) $ (2,420)
=========== =============
Net loss per share ...................................... $ (0.18) $ (0.76)
=========== =============
Weighted average number of shares outstanding
used in computing per share amount .................... 3,201,144 3,195,235
=========== =============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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<PAGE> 5
OAKHURST COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995
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<S> <C> <C>
Sales..................................................... $ 32,594 $ 38,122
Other income.............................................. 166 256
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32,760 38,378
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Cost of goods sold, including occupancy and
buying expenses......................................... 25,383 29,929
Operating, selling and administrative expenses............ 7,809 8,336
Provision for doubtful accounts........................... 78 288
Amortization of excess of cost over net assets acquired... 335 379
Interest expense.......................................... 646 567
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34,251 39,499
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Net loss before income taxes.............................. (1,491) (1,121)
Income tax benefit (expense).............................. 3 (1,963)
------------ -----------
Net loss.................................................. $ (1,488) $ (3,084)
============ ===========
Net loss per share........................................ $ (0.47) $ (0.97)
============ ===========
Weighted average number of shares outstanding
used in computing per share amount...................... 3,199,164 3,193,633
============ ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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OAKHURST COMPANY, INC. AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED NOVEMBER 30, 1996
(DOLLARS IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TREASURY STOCK
------------------- PAID-IN EARNINGS ---------------
SHARES PAR VALUE CAPITAL (DEFICIT) SHARES COST
------ --------- ------- --------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Balances, February 29, 1996... 3,195,235 $32 $46,522 ($35,654) 207 ($1)
Net loss for the period....... (1,488)
Stock award................... 5,909 * 7
--------- --- ------- -------- --- ---
Balances, November 30, 1996. 3,201,144 $32 $46,529 ($37,142) 207 ($1)
========= === ======= ======== === ===
</TABLE>
*Rounds to less than one thousand
The accompanying notes are an integral part of
these consolidated financial statements.
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OAKHURST COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss....................................................$ (1,488) $ (3,084)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization............................. 899 676
Deferred tax expense...................................... - 2,000
Loss on retirement of assets.............................. 5 28
Stock awards.............................................. 7 19
Other..................................................... 23
Other changes in operating assets and liabilities:
Accounts receivable....................................... (410) 1,176
Inventories............................................... 1,029 2,020
Accounts payable.......................................... (281) (2,080)
Other..................................................... 190 (55)
---------- ---------
Net cash (used in) provided by operating activities of:
Continuing operations....................................... (49) 723
Discontinued operations..................................... (264) (295)
---------- ---------
Net cash (used in) provided by operating activities........... (313) 428
---------- ---------
Cash flows from investing activities:
Additions to property and equipment......................... (167) (330)
Acquisition of a subsidiary, net of cash acquired........... (79) -
Net change in the excess of cost over net assets acquired... - (154)
Other....................................................... (25) -
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Net cash used in investing activities......................... (271) (484)
---------- ---------
Cash flows from financing activities:
Net borrowings under revolving credit agreement............. 1,319 975
Proceeds from issuance of long-term debt.................... 1,500 -
Repayment of note payable................................... - (458)
Principal payments on long-term obligations................. (2,159) (464)
Deferred loan costs......................................... (230) -
---------- ---------
Net cash provided by financing activities..................... 430 53
---------- ---------
Net decrease in cash and cash equivalents..................... (154) (3)
Cash and cash equivalents at beginning of period.............. 318 314
---------- ---------
Cash and cash equivalents at end of period....................$ 164 $ 311
========== =========
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
Nine months ended November 30, 1995:
Capital lease obligations of $76 were incurred when the Company entered
into three leases for computer and warehouse equipment.
Additional long-term debt of $100 was issued with a reduction of $13 to
a current note payable upon finalization of an acquisition in the prior
year.
The accompanying notes are an integral part of
these consolidated financial statements.
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<PAGE> 8
OAKHURST COMPANY, INC. AND SUBSIDIARIES
NINE MONTHS ENDED NOVEMBER 30, 1996
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
Oakhurst Company, Inc. ("Oakhurst" or the "Company") was formed as a
result of a merger transaction (the "merger") in fiscal 1992 between Steel City
Products, Inc. ("SCPI") and an Oakhurst subsidiary. The merger resulted in a
restructuring of SCPI such that it became a majority-owned subsidiary of
Oakhurst. In accordance with the merger, Oakhurst owns 10% of the outstanding
common stock of SCPI and all of SCPI's Series A Preferred Stock. The merger was
structured such that the aggregate fair market value of SCPI's common stock and
Series A Preferred Stock owned by Oakhurst would be approximately 90% of the
aggregate fair market value of SCPI. Accordingly, Oakhurst controls
approximately 90% of the voting power of SCPI. The accompanying financial
statements reflect this control and include the accounts of SCPI.
Oakhurst owns all of the outstanding capital stock of H&H
Distributors, Inc., d/b/a Harry Survis Auto Centers, ("H&H"), of Dowling's
Fleet Service Co., Inc. ("Dowling's") and of Puma Products, Inc. ("Puma"). In
March 1995, Oakhurst formed Oakhurst Management Corporation ("OMC"), a
wholly-owned subsidiary, to coordinate the provision of certain corporate
administrative, legal, and accounting services to the Company and its
subsidiaries. In March 1996, Dowling's acquired the outstanding capital stock
of G&O Sales Company ("G&O") (see Note 2). The accompanying consolidated
financial statements include the accounts of these subsidiaries, and all
significant intercompany accounts and transactions have been eliminated in
consolidation.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position, results of operations and cash flows for the interim
periods presented. All adjustments made are of a normal, recurring nature.
While the Company believes that the disclosures presented herein are
adequate to make the information not misleading, it is suggested that these
unaudited consolidated financial statements be read in conjunction with the
audited consolidated financial statements for the fiscal year ended February
29, 1996 ("fiscal 1996") as filed in the Company's Annual Report on Form 10-K.
2. DOWLING'S ACQUISITION OF A SUBSIDIARY
On March 28, 1996, Dowling's acquired all of the outstanding capital
stock of G&O, a radiator distributor based in Philadelphia, Pennsylvania. The
purchase price of approximately $210,000 consisted of $105,000 in cash, with
the balance in the form of a note payable to the seller. The note bears
interest at 7%, and is due on the first anniversary of the acquisition date,
together with interest thereon. The seller continues with G&O under a four year
employment agreement.
In connection with the acquisition, Dowling's entered into a
non-competition agreement with the seller that provides for payments of
$315,000 over a three year period, and for payments of 7.5% of the defined
profits of G&O for the next four years. The value of the non-competition
agreement has been discounted using an imputed interest rate of 9.75%, and the
related asset is being amortized over the life of the agreement, which is ten
years.
The acquisition did not have an impact on Oakhurst's earnings per
share, and accordingly, pro forma information has not been presented.
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<PAGE> 9
In connection with the acquisition, assets were acquired and
liabilities were assumed as follows (in thousands):
Fair value of assets acquired...... $279
Liabilities assumed................ 67
----
Net assets acquired............. $212
====
3. RECENTLY ISSUED ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation". This statement is effective beginning in the
Company's current fiscal year. The new standard defines a fair value method of
accounting for stock options and similar equity instruments. Pursuant to the
new standard, companies are encouraged, but not required, to adopt the fair
value method of accounting for employee stock-based transactions. Companies are
also permitted to continue to account for such transactions under Accounting
Principles Board Opinion ("APBO") No. 25, "Accounting for Stock Issued to
Employees", but would be required to disclose in a note to the financial
statements pro forma net income and earnings per share as if the company had
applied the new method of accounting.
In the first quarter, the Company elected not to adopt the fair value
method of accounting for employee stock-based transactions and will continue to
account for such transactions under the provisions of APBO No. 25.
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<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Oakhurst Company, Inc. ("Oakhurst" or "the Company"), a holding
company, was formed as part of a merger transaction in July 1991, in which
Steel City Products, Inc. ("SCPI") became a special, limited purpose,
majority-owned subsidiary of Oakhurst. Management believes that the corporate
structure resulting from the merger transaction will facilitate capital
formation by Oakhurst while permitting Oakhurst and its subsidiaries to file
consolidated tax returns so that both may utilize the tax benefits (including
approximately $149 million of net operating loss carryforwards) attributable
principally to SCPI. Through Oakhurst's ownership of SCPI, primarily in the
form of preferred stock, Oakhurst retains the value of SCPI and receives
substantially all of the benefit of SCPI's operations through dividends on such
preferred stock. Oakhurst's ownership of SCPI facilitates the preservation and
utilization of SCPI's net operating loss carryforwards.
Oakhurst, through SCPI and three wholly-owned subsidiaries, is
primarily a distributor of products to the automotive after-market. Its largest
business, which is conducted by SCPI under the trade name "Steel City
Products", is mainly the distribution of automotive parts and accessories to
independent retailers from a facility in Pittsburgh, Pennsylvania. Dowling's
Fleet Service Co., Inc. ("Dowling's") is a New York-headquartered distributor
of automotive radiators and related products. Puma Products, Inc. ("Puma") is a
Texas-based distributor of after-market products to the light truck and van
conversion industry. H&H Distributors, Inc., d/b/a Harry Survis Auto Centers
("H&H") is a Pittsburgh-based company that distributes, sells and installs
automotive accessories, including stereos, alarms and cellular phones.
On March 28, 1996, Dowling's acquired all of the outstanding capital
stock of G&O Sales Company, Inc. ("G&O"), a distributor of radiators that is
based in Philadelphia, Pennsylvania, in order to expand into the greater
Philadelphia market. The purchase price of approximately $210,000 consisted of
$105,000 in cash, with the balance in the form of a note payable to the seller.
The note bears interest at 7% per annum, and is due on the first anniversary of
the acquisition date, together with interest thereon. In connection with the
acquisition, Dowling's entered into a non-competition agreement with the seller
that provides for payments of $315,000 over a three year period, and for
payments of 7.5% of certain defined profits of G&O for the next four years. The
value of the non-competition agreement has been discounted using an imputed
discount rate of 9.75%, and the related asset is being amortized over the life
of the agreement, which is ten years. The G&O acquisition did not have a
material impact on Oakhurst's financial position.
During the three months ended August 31, 1996, SCPI began distributing
non-food pet supply products to certain of its customers, and during the three
months ended November 30, 1996, SCPI opened a new Wing-Tech division
("Wing-Tech") to import and distribute automotive "spoilers", also referred to
as "wings". SCPI plans to distribute spoilers throughout North America using
independent sales representatives, and is also supplying spoilers to Puma.
During 1996, H&H opened four additional retail facilities, and in
November 1996 expanded its traditional offering of automotive electronic
equipment to include the sale and installation of satellite TV dishes.
From time to time the information provided by the Company or
statements made by its employees may contain so-called "forward looking"
information that involves risks and uncertainties. In particular, statements
contained in this Item 2 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations," which are not historical facts
(including, but not limited to statements concerning anticipated sales, profit
levels, customers, cash flows and liquidity) are forward looking statements.
The
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<PAGE> 11
Company's actual future results may differ significantly from those stated in
any forward looking statements. Factors that may cause such differences
include, but are not limited to the factors discussed above as well as the
accuracy of the Company's internal estimates of revenue and operating expense
levels. Each of these factors and others are discussed from time to time in the
Company's Securities and Exchange Commission filings.
MATERIAL CHANGES IN FINANCIAL CONDITION
In addition to cash derived from the operations of four subsidiaries,
Oakhurst's liquidity and financing requirements are determined principally by
the working capital needed to support each subsidiary's level of business,
together with the need for capital expenditures and the cash required to repay
debt. Each subsidiary's level of working capital needs varies primarily with
the amount of inventory carried, which can change seasonally; the size and
timeliness of payment of receivables from customers, especially at SCPI, which
from time to time grants extended payment terms for the build-up of seasonal
inventory; and by the amount of credit extended by suppliers.
At November 30, 1996, Oakhurst's debt primarily consisted of (i) a two
year credit facility with an institutional lender (the "Credit Facility"),
which included an SCPI term loan with a balance of approximately $1.3 million,
and borrowings of approximately $5.1 million under a revolving credit facility
(the "Revolver"), (ii) debt in connection with the acquisitions of Puma,
Dowling's and G&O, and (iii) notes payable with outstanding principal balances
aggregating approximately $810,000 that were issued in 1992 in connection with
the settlement of certain contingent liabilities related to SCPI's former
retail division.
Oakhurst and its subsidiaries obtained the Credit Facility on March
28, 1996. The initial aggregate amount borrowed under the Revolver was
approximately $4.2 million, and was used primarily to repay existing revolving
debt. In connection with this financing, Oakhurst and its subsidiaries incurred
loan costs and fees of approximately $255,000.
Oakhurst and its subsidiaries have available financing under the
Revolver of up to a maximum of $8 million, subject to defined levels of the
subsidiaries' accounts receivable and inventories. During the nine months ended
November 30, 1996, borrowings under Oakhurst's revolving credit increased by
approximately $1.3 million, principally reflecting cash operating losses of
$577,000, loan costs of $230,000 and net repayments of long-term debt and notes
payable of $923,000, offset by reductions in net working capital of $528,000.
Management believes that the Revolver will provide adequate funding for the
Company's foreseeable working capital requirements, including seasonal
fluctuations, assuming that there is no material deterioration in current sales
levels.
At November 30, 1996, there had been no other material changes in the
Company's financial condition since the February 29, 1996 fiscal year end, as
described in Item 7 of the Company's Annual Report on Form 10-K for fiscal
1996.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
In the current year, management expects SCPI's sales to be lower than
in fiscal 1996. As part of a strategic evaluation of the business, SCPI has
reduced expenses so as to mitigate negative cash flow from operations while new
customers and product lines are sought. SCPI has also reduced inventories to
improve turns and to decrease borrowing levels. In the nine months ended
November 30, 1996, SCPI's cash flow from continuing operations was positive,
despite the lower sales levels. During the second quarter, sales to
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<PAGE> 12
a significant new automotive customer began, and during the third quarter sales
to an existing customer increased significantly. In December 1996, SCPI added a
large supermarket chain to its automotive products customer base, but this is
expected to be offset in part by the loss of Rich's Department Stores, Inc., a
customer operating in Chapter 11 that announced in December 1996 that it will
cease operations.
During the second quarter, SCPI began to ship non-food pet supplies,
principally to existing small customers. Efforts continue to add larger pet
supply customers. During the three months ended November 30, 1996, SCPI began
operations of the Wing-Tech Division; sales for the quarter were about $50,000,
excluding those to Puma.
Although management is encouraged by the addition of new customers and
product categories, there can be no assurance that SCPI can obtain enough new
customers or sufficient levels of new business to return sales and profits to
historical levels, or that other customers may not be lost in the future.
During 1996, H&H opened several new retail facilities: mall kiosks
were opened in March and November, and mall stores were opened in March 1996
and December. During the current fiscal year, H&H enlarged its auto accessories
product line to include truck accessories, and in November, H&H expanded its
traditional offering of electronic equipment to include the sale and
installation of satellite TV dishes. Despite these changes, H&H sales levels
were lower than in the prior year, due principally to the highly competitive
cellular phone environment in the Pittsburgh market, and H&H has incurred an
operating loss in each quarter of the current fiscal year.
Sales by Puma were below prior year levels throughout the current
fiscal year, principally due to depressed sales of wood products. Although a
large new customer was added by Puma in the first quarter, and its categories
of wood products expanded to include vans (in addition to its traditional
pick-up truck and sport-utility lines), wood sales have not returned to
acceptable levels. During the third quarter of the current fiscal year, Puma
changed its primary source of automotive wood to be less dependent on foreign
manufacturers while reducing manufacturing costs. Changes in product mix and
better sources of supply have led to a significant improvement in Puma's gross
margins, but these have been insufficient to overcome the poor sales levels,
with the result that Puma incurred operating losses in the second and third
quarters of the current fiscal year.
During the current fiscal year, Dowling's sales increased strongly
compared with the prior year, reflecting a very competitive environment in the
prior year and an increase in market share achieved this year. The sales
improvement facilitated an increase in Dowling's gross margins.
Although management is encouraged by the strong performance by
Dowling's and by the stabilization of sales at SCPI, the Company's long-term
success depends on its ability to produce sufficient operating profits to cover
overhead expenses and debt service. An important component of this requirement
is the return to profitability of H&H and Puma; efforts continue in an attempt
to achieve improvements in the performance of these two subsidiaries.
THREE MONTHS ENDED NOVEMBER 30, 1996 COMPARED WITH THREE MONTHS ENDED NOVEMBER
30, 1995
Consolidated sales for the current year third quarter decreased by
approximately $1.3 million, or by 11.5% when compared with the prior year third
quarter. The decrease was primarily caused by the loss of two of SCPI's largest
customers during the prior year. One customer was lost in October 1995 due to
its bankruptcy, while the other changed its source of supply in January 1996.
The decrease in sales in the current year third quarter attributable to these
two customers aggregated $1.9 million. Sales to SCPI's
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<PAGE> 13
existing customers also decreased by $450,000. Sales of car alarms, stereo
accessories and cruise control equipment decreased by $70,000 due to the lower
retail and wholesale demand, and cellular phone revenues also decreased by
$185,000 because of fewer activations due to increased competition in this
market. Sales of light truck and van aftermarket accessories decreased by
$160,000, due primarily to the loss by Puma of two large converter customers in
the prior year.
Certain increases in sales partially offset the decreases described
above. Sales of radiators and related products by Dowling's increased over the
third quarter of the prior year by $750,000, representing an increase of
approximately 24%, which is attributed to an improved competitive situation
this year in Dowling's markets, an increase in market share, and the addition
of the G&O facility in Philadelphia. The addition of new customers by SCPI and
of new product lines by SCPI and H&H together accounted for $700,000 in new
sales.
Gross profits were $2.2 million, or 21.7% of sales, in the current
year third quarter compared with $2.5 million, or 21.4% of sales, in the prior
year period. Lower levels of sales by most of the subsidiaries contributed to
profits being lower by approximately $460,000, but this was partially offset by
improved gross margins earned by most of the subsidiaries, most particularly
Puma and Dowling's, and by an increase in sales by Dowling's. The increased
gross margin performance by the two subsidiaries was due to lower costs on
certain product lines, and to the improved competitive situation in certain of
Dowling's markets.
Operating, selling and administrative expenses decreased by $190,000
when compared to the prior year, which primarily reflected management's efforts
to reduce SCPI's expenses and work force in reaction to lower levels of sales.
Income tax expense decreased by approximately $2 million in the
current year third quarter compared to the third quarter of the prior year, due
to a charge to deferred tax expense in the prior year that resulted from an
increase in the valuation allowance of the deferred tax asset.
NINE MONTHS ENDED NOVEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED NOVEMBER
30, 1995
Consolidated sales for the current year decreased by approximately
$5.5 million, or by 14.5% when compared with the prior year. The decrease was
primarily caused by the loss of two of SCPI's largest customers during the
prior year, as described above. These two customers accounted for a decrease in
sales in the current year of approximately $8.1 million. Sales to SCPI's
existing customers also decreased by approximately $600,000. Sales of car
alarms, stereo accessories and cruise control equipment decreased by
approximately $225,000 due to the lower retail and wholesale demand, and
cellular phone revenues also decreased by approximately $470,000 because of a
lower average commission rate this year combined with fewer activations due to
increased competition in this market. Sales of light truck and van aftermarket
accessories decreased by $555,000, due primarily to the loss by Puma of two
large converter customers in the prior year.
The addition of new customers by SCPI and of new product lines by it
and by H&H together accounted for $2.2 million in new sales, partially
offsetting the sales decreases. Sales of radiators and related products by
Dowling's increased over the prior year by $2.3 million, representing an
increase of almost 27%, which is attributed to an improved competitive
situation this year in Dowling's markets, combined with favorable weather in
the first quarter, an increase in market share, and the addition of the
Philadelphia G&O facility.
Gross profits were approximately $7.2 million, or 22.1% of sales, in
the current year compared with
- 13 -
<PAGE> 14
$8.2 million, or 21.5% of sales, in the prior year period. Lower levels of
sales by most of the subsidiaries contributed to lower profits of approximately
$1.8 million, but this was partially offset by improved gross margins earned by
all of the subsidiaries except SCPI, and by an increase in sales attributable
to Dowling's. The increased gross margin performance by the three subsidiaries
was due to lower costs on certain product lines, and to the improved
competitive situation in certain of Dowling's markets.
Operating, selling and administrative expenses decreased by $527,000
when compared to the prior year, which primarily reflected management's efforts
to reduce expenses and its work force in reaction to lower levels of sales.
There was a decrease of $210,000 in the provision for doubtful
accounts compared with the prior year, when the Company recorded provisions for
the bankruptcies of several customers, including one of SCPI's largest
customers.
Income tax expense decreased by approximately $2 million in the
current year period compared to the prior year period, due primarily to a
charge to deferred tax expense in the prior year that resulted from an increase
in the valuation allowance of the deferred tax asset.
- 14 -
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule (EDGAR transmission only)
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
- 15 -
<PAGE> 16
SIGNATURES
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 thereunto duly authorized.
OAKHURST COMPANY, INC.
Date: January 10, 1997 By: /s/ Mark Auerbach
-----------------------
Mr. Mark Auerbach
Chief Executive Officer
Chief Financial Officer
- 16 -
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 164
<SECURITIES> 0
<RECEIVABLES> 4,992
<ALLOWANCES> 505
<INVENTORY> 7,214
<CURRENT-ASSETS> 12,945
<PP&E> 3,402
<DEPRECIATION> 1,474
<TOTAL-ASSETS> 25,056
<CURRENT-LIABILITIES> 7,408
<BONDS> 8,230
0
0
<COMMON> 32
<OTHER-SE> 9,386
<TOTAL-LIABILITY-AND-EQUITY> 25,056
<SALES> 32,594
<TOTAL-REVENUES> 32,760
<CGS> 25,383
<TOTAL-COSTS> 25,383
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 78
<INTEREST-EXPENSE> 646
<INCOME-PRETAX> (1,491)
<INCOME-TAX> (3)
<INCOME-CONTINUING> (1,488)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,488)
<EPS-PRIMARY> (0.47)
<EPS-DILUTED> (0.47)
</TABLE>
