SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 September 30, 1996
[ ] 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 0-23308
ARDEN INDUSTRIAL PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0980556
(State or other jurisdiction of (IRS Employer Identification
No.) incorporation or organization)
560 Oak Grove Parkway, Vadnais Heights, Minnesota 55127
(Address of Principal Executive Office) (Zip Code)
(612) 490-6800
(Registrant's telephone number, including area code)
(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 CORPORATE ISSUERS:
At November 8, 1996, there were 6,989,456 common shares outstanding.
ARDEN INDUSTRIAL PRODUCTS, INC.
INDEX
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Page #
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Condensed Balance Sheets
September 30, 1996 and June 30, 1996 3
Condensed Statements of Income
For the Three Months Ended September 30, 1996 and 1995 4
Condensed Statements of Cash Flows
For the Three Months Ended September 30, 1996 and 1995 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
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ARDEN INDUSTRIAL PRODUCTS, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
September 30, June 30,
1996 1996
UNAUDITED
------- -------
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 43 $ 544
Trade receivables 11,803 11,852
Inventories 25,778 22,655
Prepaid expenses 209 321
Deferred tax assets 2,190 2,150
------- -------
Total Current Assets 40,023 37,522
------- -------
Property and Equipment, Net 5,636 5,778
------- -------
$45,659 $43,300
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank line of credit $ 3,273 $ 811
Accounts payable 8,074 7,275
Accrued expenses 3,248 4,049
------- -------
Total Current Liabilities 14,595 12,135
------- -------
Commitments and Contingencies -- --
Shareholders' Equity
Common stock - par value $.01; authorized 25,000 shares;
issued 6,989 shares 70 70
Additional paid-in capital 16,138 16,138
Retained earnings 14,856 14,957
------- -------
Total Shareholders' Equity 31,064 31,165
------- -------
$45,659 $43,300
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THE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF
THESE FINANCIAL STATEMENTS.
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ARDEN INDUSTRIAL PRODUCTS, INC.
CONDENSED STATEMENTS OF INCOME - UNAUDITED
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
For the Three Months Ended
September 30,
1996 1995
-------- --------
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Sales $ 23,691 $ 19,916
Cost of goods sold 17,196 14,083
-------- --------
Gross Profit 6,495 5,833
Operating expenses 6,685 5,920
-------- --------
Operating Loss (190) (87)
Other income, net 24 45
-------- --------
Income Before Income Taxes (166) (42)
Federal and state income tax benefit 65 6
-------- --------
Net Loss $ (101) $ (36)
======== ========
Net Loss Per Common and Common
Equivalent Shares Outstanding $ (.01) $ (.01)
======== ========
Weighted Average Number of Common and
Common Equivalent Shares Outstanding 6,989 6,989
======== ========
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THE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF
THESE FINANCIAL STATEMENTS.
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ARDEN INDUSTRIAL PRODUCTS, INC.
CONDENSED STATEMENTS OF CASH FLOWS - UNAUDITED
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(IN THOUSANDS)
1996 1995
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Operating Activities
Net loss $ (101) $ (36)
Adjustments to reconcile net income to cash
used in operating activities:
Depreciation 462 351
Provision for inventory obsolescence 501 354
Deferred income taxes (40) (150)
Changes in operating assets and liabilities
Trade receivables 49 689
Inventories (3,624) (2,627)
Current liabilities (2) (2,140)
Other 112 5
------- -------
Net Cash Used in Operating Activities (2,643) (3,554)
------- -------
Cash Flows Used in Investing Activities
Purchases of property and equipment (320) (331)
------- -------
Cash Flows from Financing Activities
Net borrowings on revolving credit line 2,462 3,308
------- -------
Net Decrease in Cash and Cash Equivalents (501) (577)
Cash and Cash Equivalents at Beginning of Period 544 602
------- -------
Cash and Cash Equivalents at End of Period $ 43 $ 25
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THE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF
THESE FINANCIAL STATEMENTS.
ARDEN INDUSTRIAL PRODUCTS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS - UNAUDITED
1. Basis of Financial Statement Presentation
The accompanying unaudited condensed balance sheet as of September 30, 1996, the
condensed statements of income for the three months ended September 30, 1996 and
1995, and the condensed statements of cash flows for the three months ended
September 30, 1996 and 1995, reflect all adjustments, consisting of only normal
recurring adjustments which, in the opinion of the management of Arden
Industrial Products, Inc. (the "Company"), are necessary for a fair statement of
financial position, results of operations and cash flows for the periods
presented. These financial statements are condensed and do not include all
information required by generally accepted accounting principles. These
condensed financial statements should be read in conjunction with the audited
financial statements and notes thereto for the Company's fiscal year ended June
30, 1996. The operating results for the interim periods are not necessarily
indicative of the operating results to be expected for a full fiscal year.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion contains forward looking statements. Future operating
results are subject to fluctuations not within the control of the Company.
RESULTS OF OPERATIONS
Sales for the three months ended September 30, 1996 were $23,691,000 with a net
loss of $101,000, or $.01 per share compared to sales of $19,916,000 and a net
loss of $36,000, or $.01 per share for the same period last year. Increased
revenues were offset primarily by a decrease in gross margin and increased costs
due to service and operating issues associated with the Company's information
system.
Sales for the three months ended September 30, 1996 increased 19% compared to
the same period last year due to increased revenues from the Company's inventory
management accounts. The Company's major customer represented 18% of sales for
the three months ended September 30, 1996, up from 14% for the same period last
year. Sales to inventory management accounts, excluding sales to the Company's
major customer, represented 30% of sales for the three months ended September
30, 1996 compared to 22% for the same period last year. Traditional customer
sales represented 52% of sales for the three months ended September 30, 1996
compared to 64% for the same period last year.
The growth in sales for the first quarter of fiscal 1997 is not necessarily
indicative of the Company's future sales growth. The Company anticipates that
second quarter sales will approximate sales for the comparable period of fiscal
1996. This flattening of sales is caused by the seasonality in demand by our
larger customers which were historically offset by new account growth.
Inventory management accounts differ from the Company's traditional customer
base in that they generate greater sales volumes and include value-added
services in the cost of the product. Value-added services reduce the customers'
overall fastener-related procurement, handling, assembly and administrative
costs. The traditional customer generally purchases fasteners based on product
availability and price.
Gross margin for the three months ended September 30, 1996 and 1995 was 27.4%
and 29.3% of sales, respectively. The primary reason for the decrease in gross
margin was inventory shrinkage from the Company shipping product for which the
information system did not automatically generate an invoice. The Company is
pursuing collection of these shipments, but is uncertain as to its
recoverability at this time. Management is currently implementing corrective
procedures to address this issue.
Operating expenses were $6,685,000, or 28.2% of sales for the three months ended
September 30, 1996 compared to $5,920,000, or 29.7% of sales, for the same
period last year. The $765,000 increase in operating expenses were primarily the
result of the information system issues, depreciation and software licensing
fees. The costs related to the information system issues are anticipated to
continue at the same level during the second quarter and at reduced levels
during the second half of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended September 30, 1996, the Company funded operations
with cash borrowed from the Company's revolving credit facility. The Company
used $2,643,000 of net cash for operations in the first three months compared
with net cash used of $3,554,000 in the same period last year.
There was no change in accounts receivable in the three months ended September
30, 1996. The 19% increase in revenues was offset by improved collection
efforts.
Inventory increased $3,624,000 in the three months ended September 30, 1996.
Because of information system errors, the Company overpurchased inventory in
order to assure adequate service to its customers. By addressing the information
system issues, Management believes that the Company will be able to reduce its
future inventory levels.
The Company has a $10 million unsecured revolving credit line for working
capital needs, maturing November 30, 1997. Advances are due on demand. Amounts
outstanding under this agreement bear interest at 1.8% over the LIBOR. The
Company utilized up to $3,273,000 of the line of credit in the first quarter of
fiscal 1997.
Management considers its cash needs to fund operations and capital requirements
for the current fiscal year to be adequately covered by its operations and
available borrowing under the revolving credit agreement.
PART II: OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) There were no reports on Form 8-K filed during the quarter ended
September 30, 1996.
(b) Exhibit 27 - Financial Data Schedule for SEC use
SIGNATURES
In accordance with 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.
ARDEN INDUSTRIAL PRODUCTS, INC.
By /s/ Michael J. Lindseth Date: November 19, 1996
Michael J. Lindseth
Chief Executive Officer and President
By /s/ Kim B. Erickson Date: November 19, 1996
Kim B. Erickson
Vice President, Finance and Chief Financial Officer
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEET AND STATEMENT OF INCOME FOUND ON PAGES 3 AND 4 OF THE
COMPANY'S FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 43,000
<SECURITIES> 0
<RECEIVABLES> 12,130,000
<ALLOWANCES> 327,000
<INVENTORY> 25,778,000
<CURRENT-ASSETS> 40,023,000
<PP&E> 12,192,000
<DEPRECIATION> 6,556,000
<TOTAL-ASSETS> 45,659,000
<CURRENT-LIABILITIES> 14,595,000
<BONDS> 0
0
0
<COMMON> 70,000
<OTHER-SE> 30,994,000
<TOTAL-LIABILITY-AND-EQUITY> 45,659,000
<SALES> 23,691,000
<TOTAL-REVENUES> 23,691,000
<CGS> 17,196,000
<TOTAL-COSTS> 17,196,000
<OTHER-EXPENSES> 6,685,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,000
<INCOME-PRETAX> (166,000)
<INCOME-TAX> 65,000
<INCOME-CONTINUING> (166,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (101,000)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
