<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 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 333-16453
SHOP VAC CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
NEW JERSEY 13-5609081
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
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2323 REACH ROAD, WILLIAMSPORT, PA 17701
(717) 326-0502
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes [x] No [ ]
Common Shares, No Par Value, Outstanding at March 31, 1997 -- 6,500 Class A
voting and 650,000 Class B non-voting.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SHOP VAC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(dollars in thousands)
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=============================================================================================
Assets December 31, 1996 March 31, 1997
(Unaudited)
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Current assets:
Cash and cash equivalents ........................ $ 21,141 $ 23,275
Receivables, less allowance for doubtful
accounts of $2,149 in 1997 and $1,853
in 1996 ....................................... 29,154 24,968
Inventories (note 2)............................. 25,314 24,930
Prepaid expenses and other current assets ....... 3,222 3,475
Net current assets of discontinued operations ... 5,556 1,210
- ---------------------------------------------------------------------------------------------
Total current assets ............................... 84,387 77,858
Property, plant, and equipment, net ............. 40,797 39,620
Other assets .................................... 6,452 6,338
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Total Assets ....................................... $131,636 $123,816
=============================================================================================
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(Continued)
1
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SHOP VAC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
(dollars in thousands)
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<CAPTION>
======================================================================================
Liabilities and Stockholders' Equity (Deficit) December 31, 1996 March 31, 1997
(Unaudited)
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Current liabilities:
Current portion of long-term debt ............ $ 4,297 $ 2,456
Accounts payable ............................. 20,688 18,466
Accrued expenses ............................. 26,278 21,269
- --------------------------------------------------------------------------------------
Total current liabilities ...................... 51,263 42,191
Long-term debt ............................... 106,100 105,512
Other liabilities ............................ 13,270 14,751
Stockholders' equity (deficit):
Common stock, Class A voting, no par,
20,000 shares authorized, 6,500 shares
issued. Class B non-voting, no par,
1,000,000 shares authorized, 650,000
shares issued ............................. 85 85
Paid in capital .............................. 110 110
Accumulated deficit .......................... (43,986) (42,775)
Foreign currency translation adjustment ...... 4,794 3,942
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Total stockholders' equity ..................... $ (38,997) $ (38,638)
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Total liabilities and stockholders' equity ..... $ 131,636 $ 123,816
======================================================================================
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See accompanying notes to condensed consolidated financial statements.
(Continued)
2
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SHOP VAC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(dollars in thousands)
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<CAPTION>
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Three months ended
March 31,
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1996 1997
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Net sales .......................................... $48,691 $ 49,938
Cost of sales ...................................... 36,635 36,708
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Gross profit ....................................... 12,056 13,230
Selling, general and administrative expense ........ 7,971 9,085
- --------------------------------------------------------------------------------
Income from operations ............................. 4,085 4,145
Interest expense, net .............................. 2,364 2,822
Other expense (income), net ........................ 157 (31)
- --------------------------------------------------------------------------------
Income before income taxes ......................... 1,564 1,354
Income tax expense ................................. 375 143
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Net income (loss) .................................. $ 1,189 $ 1,211
================================================================================
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See accompanying notes to condensed consolidated financial statements.
(Continued)
3
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SHOP VAC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows (Unaudited)
(dollars in thousands)
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<CAPTION>
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Three months ended
March 31,
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1996 1997
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Cash flows from operating activities:
Net income (loss) ...................................... $ 1,189 $ 1,211
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization .................... 1,629 1,469
Amortization included in interest expense ........ -- 146
Restructuring charges ............................ -- (672)
Changes in assets and liabilities:
Accounts and notes receivable ................. (4,716) 3,546
Inventories ................................... (1,777) (298)
Prepaid expenses and other current assets ..... (563) (493)
Other assets .................................. 233 (138)
Accounts payable and accrued expenses ......... 5,468 (2,782)
Other liabilities ............................. 85 1,653
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Net cash provided (used) by continuing operations ......... 1,548 3,642
Net cash provided (used) by discontinued operations ....... (3,753) 1,412
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Net cash provided (used) by operating activities .......... (2,205) 5,054
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Cash flows from investing activities:
Capital expenditures ............................. (139) (643)
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Net cash provided (used) by investing activities .......... (139) (643)
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Cash flows from financing activities:
Proceeds from revolving line-of-credit, net ............ 4,026 --
Long-term debt and capital lease payments .............. (520) (2,081)
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Net cash provided (used) by financing activities .......... 3,506 (2,081)
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Effect of exchange rate changes on cash ................... 11 (196)
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Net increase (decrease) in cash and cash equivalents ...... 1,173 2,134
Cash and cash equivalents, beginning of year .............. 2,682 21,141
- -----------------------------------------------------------------------------------
Cash and cash equivalents, end of quarter ................. 3,855 23,275
===================================================================================
Supplemental cash flow information:
Cash paid for interest ................................. 2,422 4,484
Cash paid for income taxes ............................. 19 13
- -----------------------------------------------------------------------------------
$ 2,441 $ 4,497
===================================================================================
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See accompanying notes to condensed consolidated financial statements.
4
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SHOP VAC CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
(dollars in thousands)
(1) The accompanying interim unaudited consolidated financial statements
include the accounts of Shop Vac Corporation and its wholly owned
subsidiaries (the "Company"). All intercompany accounts and transactions
are eliminated in consolidation.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, such interim
statements reflect all adjustments (consisting of normal recurring
accruals) necessary to present fairly the financial position and the
results of operations and cash flows for the interim periods presented.
The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year. These
financial statements should be read in conjunction with the audited
consolidated financial statements and footnotes included in the Company's
Annual Report on Form 10-K dated March 21, 1997 for the year ended
December 31, 1996.
(2) Inventories are classified as follows:
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December 31, 1996 March 31, 1997
(Unaudited)
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Raw materials .................... $11,778 $ 9,956
Work-in-process .................. 5,620 4,444
Finished goods ................... 7,916 10,530
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25,314 24,930
================================================================================
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5
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SHOP VAC CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net sales in the three months ended March 31, 1997 totalled $49.9 million, an
increase of $1.2 million or 2.6% compared to net sales of $48.7 million in the
three months ended March 31, 1996.
Gross profit in the three months ended March 31, 1997 totalled $13.2 million, an
increase of approximately $1.2 million or 9.7% when compared to gross profit of
$12.1 million in the three months ended March 31, 1996. Gross profit as a
percentage of sales increased from 24.8% in the three months ended March 31,
1996 to 26.5% in the three months ended March 31, 1997. This improvement was due
to favorable product mix, continued cost improvements and sales volume increase.
Selling, general and administrative ("SG&A") expense increased to $9.1 million
in the three months ended March 31, 1997 from $8.0 million in the three months
ended March 31, 1996, an increase of approximately $1.1 million. SG&A expense as
a percentage of net sales increased from 16.4% in the 1996 period to 18.2% in
the 1997 period. Increases in SG&A expenses were primarily due to increased
advertising and anticipated expenditures for performance-based executive
incentive programs.
Income from operations of $4.1 million was substantially unchanged in the 1997
period compared to the 1996 period.
Interest expense was $2.8 million in the three months ended March 31, 1997, an
increase of $500,000 or approximately 19.4% compared to $2.4 million in the
three months ended March 31, 1996. This increase was due to increases in average
borrowings and rates as a result of the issuance of the Senior Secured Notes in
the fourth quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1997 cash and cash equivalents increased
from $21.1 million to $23.3 million due to cash flow provided by operating
activities of $5.1 million (after payment of $4.4 million interest with respect
to the Senior Secured Notes), less capital expenditures of $600,000 and debt
reduction of $2.1 million.
Accounts receivable decreased substantially during the first quarter of 1997,
providing cash of $3.5 million. Accounts payable decreased during the first
quarter of 1997, consuming $1.5 million of cash. These reductions in accounts
receivable and accounts payable follow the typical seasonal pattern historically
experienced by the Company.
Cash provided by operating activities includes net cash provided by discontinued
operations of $1.4 million, representing cash generated from collection of
accounts receivable of the discontinued operations less the payment of accrued
expenses with respect to the closing of the discontinued operations.
The Company believes that it will be able to satisfy its debt service
requirements and its working capital and capital expenditure requirements from
operating cash flows.
6
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PART II - OTHER INFORMATION
ITEMS 1 - 3. NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In March of 1997 the holders of the voting common stock of the Company
unanimously elected Mr. Kenneth R. Benbassat and Mr. C. Stewart Gentsch as
Directors. Mr. Benbassat is an attorney and Partner with the firm of Loeb & Loeb
LLP. Mr. Gentsch recently retired as President and General Manager of Stanley
Tools Worldwide. Directors continuing in addition to these are Mr. Jonathan
Miller, Mr. Matthew Miller and Mr. W. Earl Stogner.
ITEM 5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
27.1 Financial Data Schedule
B. Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended March 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SHOP VAC CORPORATION
By /s/ W. Earl Stogner
----------------------------
W. EARL STOGNER
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date: May 12, 1997
7
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 23,275
<SECURITIES> 0
<RECEIVABLES> 27,117
<ALLOWANCES> 2,149
<INVENTORY> 24,930
<CURRENT-ASSETS> 77,858
<PP&E> 98,616
<DEPRECIATION> 58,996
<TOTAL-ASSETS> 123,816
<CURRENT-LIABILITIES> 42,191
<BONDS> 105,512
0
0
<COMMON> 85
<OTHER-SE> (38,723)
<TOTAL-LIABILITY-AND-EQUITY> 123,816
<SALES> 49,938
<TOTAL-REVENUES> 49,938
<CGS> 36,708
<TOTAL-COSTS> 36,708
<OTHER-EXPENSES> 9,085
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,822
<INCOME-PRETAX> 1,354
<INCOME-TAX> 143
<INCOME-CONTINUING> 1,211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,211
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
