<PAGE>
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 March 31, 1996
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[ ] 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 0-23308
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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
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(Address of Principal Executive Office) (Zip Code)
(612) 490-6800
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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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
At May 1, 1996, there were 6,989,456 common shares outstanding.
<PAGE>
ARDEN INDUSTRIAL PRODUCTS, INC.
INDEX
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Page #
Condensed Balance Sheets
March 31, 1996 and June 30, 1995 3
Condensed Statements of Income
For the Three and Nine Months Ended March 31, 1996 and 1995 4
Condensed Statements of Cash Flows
For the Nine Months Ended March 31, 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
2
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
ARDEN INDUSTRIAL PRODUCTS, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
UNAUDITED
--------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 20 $ 602
Trade receivables 12,544 10,498
Inventories 21,192 21,893
Prepaid expenses 408 280
Deferred income taxes 1,950 1,345
--------- ---------
Total Current Assets 36,114 34,618
--------- ---------
Property and Equipment, Net 5,829 5,789
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$ 41,943 $ 40,407
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade payables $ 7,355 $ 7,504
Accrued expenses 3,617 2,142
--------- ---------
Total Current Liabilities 10,972 9,646
--------- ---------
Commitments and Contingencies --- ---
Shareholders' Equity
Common stock - par value $.01; authorized 25,000 shares;
issued and outstanding 6,989 and 6,989 shares, respectively 70 70
Additional paid-in capital 16,138 16,138
Retained earnings 14,763 14,553
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Total Shareholders' Equity 30,971 30,761
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$ 41,943 $ 40,407
--------- ---------
--------- ---------
</TABLE>
THE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF
THESE FINANCIAL STATEMENTS.
3
<PAGE>
ARDEN INDUSTRIAL PRODUCTS, INC.
CONDENSED STATEMENTS OF INCOME - UNAUDITED
FOR THE PERIODS ENDED MARCH 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales $ 25,223 $ 23,185 $ 66,090 $ 63,278
Cost of goods sold 17,845 15,896 46,945 43,477
-------- -------- -------- --------
Gross Profit 7,378 7,289 19,145 19,801
Operating expenses 7,022 5,631 18,863 15,732
-------- -------- -------- --------
Operating Income 356 1,658 282 4,069
Other income, net 5 98 60 326
-------- -------- -------- --------
Income Before Income Taxes 361 1,756 342 4,395
Federal and state income tax expense 135 672 132 1,732
-------- -------- -------- --------
Net Income $ 226 $ 1,084 $ 210 $ 2,663
-------- -------- -------- --------
-------- -------- -------- --------
Net Income Per Common and Common
Equivalent Shares Outstanding $ .03 $ .16 $ .03 $ .38
-------- -------- -------- --------
-------- -------- -------- --------
Weighted Average Number of Common and
Common Equivalent Shares Outstanding 6,989 6,989 6,989 6,986
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
THE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF
THESE FINANCIAL STATEMENTS.
4
<PAGE>
ARDEN INDUSTRIAL PRODUCTS, INC.
CONDENSED STATEMENTS OF CASH FLOWS - UNAUDITED
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Operating Activities
Net income $ 210 $ 2,663
Adjustments to reconcile net income to cash
used in operating activities:
Depreciation 1,098 813
Provision for inventory obsolescence 1,447 776
Deferred income taxes (605) (200)
Changes in operating assets and liabilities
Trade receivables (2,076) (1,795)
Inventories (746) (5,468)
Current liabilities 1,326 1,401
Other (98) (30)
-------- --------
Net Cash Provided by (Used for) Operating Activities 556 (1,840)
-------- --------
Investing Activities
Purchases of property and equipment (1,138) (2,631)
-------- --------
Net Decrease in Cash and Cash Equivalents (582) (4,471)
Cash and Cash Equivalents at Beginning of Period 602 6,300
-------- --------
Cash and Cash Equivalents at End of Period $ 20 $ 1,829
-------- --------
-------- --------
</TABLE>
THE ACCOMPANYING NOTES TO CONDENSED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF
THESE FINANCIAL STATEMENTS.
5
<PAGE>
ARDEN INDUSTRIAL PRODUCTS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS - UNAUDITED
1. Basis of Financial Statement Presentation
The accompanying unaudited condensed balance sheet as of March 31, 1996, the
condensed statements of income for the three and nine months ended March 31,
1996 and 1995, and the condensed statements of cash flows for the nine months
ended March 31, 1996 and 1995, reflect all adjustments, consisting of only
normal recurring adjustments which, in the opinion of Arden Industrial Products,
Inc.'s (the "Company") management, 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 Company's
fiscal year ended June 30, 1995 audited financial statements and notes thereto.
The operating results for the interim periods are not necessarily indicative of
the operating results to be expected for a full fiscal year.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales for the three months and nine months ended March 31, 1996 were $25,223,000
and $66,090,000, respectively, with net income of $226,000, or 3 cents per
share, and $210,000, or 3 cents per share, respectively. Sales for the three
and nine months ended March 31, 1995 were $23,185,000 and $63,278,000,
respectively, with net income of $1,084,000, or 16 cents per share, and
$2,663,000, or 38 cents per share, respectively.
Sales increased 8.8% for the three months and 4.4% for the nine months ended
March 31, 1996 from the comparable periods last fiscal year due to increased
sales to the Company's major customer and to a number of existing accounts where
the Company gained additional business. The Company's major customer represents
18.0% of sales for the nine months ended March 31, 1996 up from 12.5% for the
same period last year. Inventory management accounts represented 36.3% of sales
for the nine months ended March 31, 1996 compared to 27.8% for the same period
last year. Revenues from the Company's traditional customer base, customers in
which minimal inventory management services were provided, decreased 7.8%
compared to the same nine-month period last year. Sales growth was hampered by
soft fastener demand from industry segments in which the Company had a large
concentration of customers, including appliance and trucking; and flattening
sales from larger more mature customers.
Gross margin for the third quarter of fiscal 1996 was 29.3% of sales compared to
31.4% in the prior comparable period. For the nine months ended March 31, 1996,
gross margin was 29.0% of sales and 31.3% for the same period last year. The
decrease in gross margin for the nine-month periods was primarily due to
increased inventory obsolescence representing an additional 1.0% of sales
largely due to the sharp cut in production by several customers and a large
number of engineering changes implementated by inventory management customers.
Gross margin was further reduced due to higher costs with the implementation of
certain new inventory management programs representing an additional .4% of
sales, and the balance was related to other costs.
Operating expenses were $7,022,000, or 27.8% of sales, for the third quarter of
fiscal 1996 compared to $5,631,000, or 24.3% of sales, for the same period last
year. For the nine months ended March 31, 1996 and 1995, operating expenses
were $18,863,000, or 28.5% of sales, and $15,732,000, or 24.9% of sales,
respectively. The increases in operating expenses as a percentage of sales
mainly reflect the Company's intensive efforts to build new information and
operating systems, and an enhanced corporate infrastructure to both generate and
accommodate long-term sales growth. In addition, the increase in operating
expenses reflects costs for nine months compared to three months of costs in the
prior fiscal period for two new distribution centers and a corporate office that
were opened mid fiscal 1995. Employee related expenses, which are the Company's
largest operating expense component, amounted to 15.8% and 15.5% of sales for
the three months ended March 31, 1996 and 1995, respectively, and 17.4% and
16.2% of sales for the nine months ended March 31, 1996 and 1995, respectively.
Other income was $60,000 for the nine months ended March 31, 1996 compared to
$326,000 for the same period last year. The decrease reflects interest expense
incurred from the Company's borrowings against its revolving line of credit.
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended March 31, 1996, the Company has funded operations with
cash borrowed from the Company's revolving credit facility and with cash
generated from operations. The Company generated cash for the nine months ended
March 31, 1996 of $556,000 compared with net cash used of $1,840,000 in the same
period last year. In the prior nine-month period, operations were funded with
the proceeds received in the Company's initial public offering in March 1994.
The increase in receivables was a result of a 20.4%, or $4,272,000, sales
increase over second quarter of fiscal 1996. The increase in current
liablilities was due to timing of purchases and payments in the nine months
ended March 31, 1996, and increased accrued expenses primarily as a result of
the new information and operating systems and enhanced corporate infrastructure.
On November 30, 1995, the Company renewed its unsecured revolving credit
agreement with a bank increasing and extending the commitment to $10,000,000 and
the maturing date to November 30, 1997. The commitment fee is one-fourth of one
percent per annum on the unused portion of the commitment. Interest on
borrowings is accrued and due monthly at the LIBOR plus one and eight-tenths of
one percent. The Company utilized up to $2,603,000 of the line of credit in the
third quarter of fiscal 1996 and has fully paid the balance during the third
quarter.
Management considers its cash needs to fund operations and capital requirements
for the current fiscal year and fiscal 1997 to be adequately covered by its
operations and available borrowing under the revolving credit agreement.
8
<PAGE>
PART II: OTHER INFORMATION
Item 5. Other Information
(a) Press release dated May 2, 1996 regarding the three months ended
March 31, 1996 financial results.
Item 6. Exhibits and Reports on Form 8-K
(a) Press release dated May 2, 1996 regarding the three months ended
March 31, 1996 financial results.
(b) There were no reports on Form 8-K filed during the quarter ended
March 31, 1996.
9
<PAGE>
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 /Larry A. Carlson/ Date: May 15, 1996
-----------------------------------
Larry A. Carlson
Chairman of the Board, President and Chief Executive Officer
By /Kim B. Erickson/ Date: May 15, 1996
-----------------------------------
Kim B. Erickson
Vice President, Finance and Chief Financial Officer
10
<PAGE>
From: For:
Swenson/Falker Associates Inc. Arden Fasteners
1111 TCF Tower 560 Oak Grove Pkwy.
Minneapolis, Minn 55402 Vadnais Heights, Minn. 55127
Contact: Doug Ewing (612) 371-0000 Contact: Kim Erickson, CFO
(612) 490-6800
FOR IMMEDIATE RELEASE
ARDEN REPORTS THIRD QUARTER RESULTS
ST. PAUL, MINN., MAY 2 -- Arden Fasteners (Arden Industrial Products, Inc.,
Nasdaq:AFAS), said today that sales for its third quarter ended March 31, 1996,
were $25,223,000, an increase of 8.8 percent over sales of $23,185,000 in last
year's third quarter. Net income for the quarter was $226,000, or 3 cents per
share, compared with net income of $1,084,000, or 16 cents per share in the
third quarter of last year.
Gross margin in the third quarter was 29.3 percent, an improvement over the
28.3 percent in this year's second quarter, but lower than last year's third
quarter gross margin of 31.4 percent. Operating expense was 27.8 percent of
sales in the third quarter, an improvement over 28.3 percent in the second
quarter, but higher than the 24.3 percent recorded in the third quarter of last
year.
Larry A. Carlson, chairman and CEO, said, "We are pleased with our third
quarter sales results. Our sales growth came from our largest customer and from
a number of accounts where we have been successful at gaining market share. Our
sales growth was hampered by soft fastener demand from a handful of industry
segments where we have a heavy concentration of customers, and flattening sales
growth from a few of our larger, more mature customers. The higher year-to-year
expense ratio reflected implementation costs associated with our new information
systems."
For the nine-month period ended March 31, 1996, sales were $66,090,000,
compared with net sales of $63,278,000 in the nine months ended March 31, 1995.
Net income for the nine months ended March 31, 1996, was $210,000, or 3 cents
per share, compared with net income of $2,663,000, or 38 cents per share in the
nine-month period of last year.
Arden Fasteners is a leading national distributor of specialty and standard
fasteners to the industrial market. The company combines the most extensive
product line in the fastener industry with specialized value-added services,
such as inventory management (JIT) programs, to minimize fastener-related costs
for its customers.
- more -
11
<PAGE>
ARDEN FASTENERS
Statements of Income
(In thousands except per share data)
UNAUDITED
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
March 31, March 31,
1996 1995 1996 1995
---------------------- ----------------------
<S> <C> <C> <C> <C>
Sales $25,223 $23,185 $66,090 $63,278
Cost of goods sold 17,845 15,896 46,945 43,477
Gross profit 7,378 7,289 19,145 19,801
Operating expenses 7,022 5,631 18,863 15,732
Operating income 356 1,658 282 4,069
Net interest income 5 98 60 326
Income before income taxes 361 1,756 342 4,395
Income taxes 135 672 132 1,732
Net income $226 $1,084 $210 $2,663
Net income per common share $0.03 $0.16 $0.03 $0.38
Weighted average number of
common shares outstanding 6,989 6,989 6,989 6,986
<CAPTION>
Condensed Balance Sheets
(In thousands) March 31,
1996 June 30,
(Unaudited) 1995
<S> <C> <C>
ASSETS
Cash $20 $602
Receivables 12,544 10,498
Inventory 21,192 21,893
Other 2,358 1,625
Total Current Assets 36,114 34,618
Property & equipment, net 5,829 5,789
Total Assets $41,943 $40,407
LIABILITIES & SHAREHOLDERS' EQUITY
Accounts payable $7,355 $7,504
Accrued expenses 3,617 2,142
Total Current Liabilities 10,972 9,646
Shareholders' equity 30,971 30,761
Total Liabilities and Shareholders' Equity $41,943 $40,407
</TABLE>
# # # #
05/02/96
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEETS AND CONDENSED STATEMENTS OF INCOME FOUND ON PAGES 3
AND 4 OF THE COMPANY'S FORM 10Q FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 20
<SECURITIES> 0
<RECEIVABLES> 12,544
<ALLOWANCES> 0
<INVENTORY> 21,192
<CURRENT-ASSETS> 36,114
<PP&E> 5,829
<DEPRECIATION> 0
<TOTAL-ASSETS> 41,943
<CURRENT-LIABILITIES> 10,972
<BONDS> 0
0
0
<COMMON> 70
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 30,971
<SALES> 66,090
<TOTAL-REVENUES> 66,090
<CGS> 46,945
<TOTAL-COSTS> 46,945
<OTHER-EXPENSES> 18,863
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 342
<INCOME-CONTINUING> 342
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 210
<EPS-PRIMARY> .03
<EPS-DILUTED> 0
</TABLE>
