FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1995 Commission File No. 1-4290
ANTHONY INDUSTRIES, INC.
(exact name of registrant as specified in its charter)
DELAWARE 95-2077125
(State of Incorporation) (I.R.S. Employer Identification No.)
4900 South Eastern Avenue
Los Angeles, California 90040
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (213) 724-2800
Former name, former address and former fiscal year, if changed since last
report:
Not applicable
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
---
Indicate the number of shares outstanding of each of the issuer's class of
common stock as of April 26, 1995.
Common Stock, par value $1 11,874,128 Shares
FORM 10-Q QUARTERLY REPORT
PART - 1 FINANCIAL INFORMATION
Item 1. Financial Statements
STATEMENTS OF CONSOLIDATED INCOME (condensed)
(In thousands except for per share figures)
(Unaudited)
Three months
ended March 31
----------------------
1995 1994(b)
----------------------
Net Sales $145,018 $109,735
318 368
-------- --------
145,336 110,103
Costs and expenses
Cost of products sold 109,712 83,053
Selling, general and
Administrative expenses 30,065 24,766
Interest expense 2,832 1,574
------- -------
142,609 109,393
Income before income taxes 2,727 710
Provision for income taxes 640(a) 250
------- -------
NET INCOME $2,087 $460
======= =======
PER SHARE
Net Income $.17 $.04
Cash dividend $.11 $.105
Average shares outstanding 11,957 11,909
(a) Reduced by a $.03 million, or $.02 per share, foreign tax settlement.
(b) Shares and per share figures have been retroactively adjusted for the 5%
stock dividend paid in December 1994.
See notes to consolidated condensed financial statements.
2
CONSOLIDATED BALANCE SHEETS (condensed)
(dollars in thousands)
March 31, 1995 December 31, 1994*
-------------- -----------------
(Unaudited)
Assets
------
Current Assets
Cash and cash equivalents $5,813 $7,700
Accounts receivable, less
allowances of $7,091 in
1995 and $8,425 in 1994 125,640 111,154
Inventories:
Finished goods 70,261 66,900
Work in progress 11,827 8,788
Raw materials 31,488 32,216
-------- --------
113,576 107,904
LIFO reserve 6,295 6,162
-------- --------
107,281 101,742
Deferred taxes 7,465 7,928
Prepaid expenses and
other current assets 5,807 4,324
-------- --------
Total current assets 252,006 232,848
Property, Plant and
Equipment 136,858 131,459
Less allowance for
depreciation 81,986 79,095
-------- --------
54,872 52,364
Intangibles, principally
goodwill, net 17,405 15,825
Other 3,710 3,377
-------- --------
Total Assets $327,993 $304,414
======== ========
See notes to consolidated condensed financial statements.
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CONSOLIDATED BALANCE SHEETS (condensed--continued)
(dollars in thousands)
March 31, 1995 December 31, 1994*
--------------- -----------------
(Unaudited)
Liabilities and
Shareholders' Equity
Current Liabilities
Bank loans $35,432 $18,341
Accounts payable 29,016 26,858
Accrued payroll and
related 15,959 18,697
Other accruals 19,042 15,788
Current portion of
long-term debt 2,902 2,918
-------- --------
Total current liabilities 102,351 82,602
Long-Term Debt 110,822 109,921
Deferred Taxes 12,925 12,895
Shareholders' Equity
Preferred Stock $1 par value,
authorized 12,500,000 shares,
none issued
Common Stock, $1 par value,
authorized $40,000,000 shares,
issued shares - 12,355,187 in
1995 and 12,322,851 in 1994 12,355 12,323
Additional paid-in capital 67,229 66,973
Retained earnings 29,775 28,994
Employee Stock Ownership Plan
and stock option loans (3,908) (3,937)
Treasury shares at cost, 481,059
shares (4,189) (4,189)
Cumulative translation
adjustments 633 (1,168)
======== ========
Total Shareholders' Equity 101,895 98,996
-------- --------
Total Liabilities and
Shareholders' Equity $327,993 $304,414
======== ========
See notes to consolidated condensed financial statements.
* Derived from the audited consolidated financial statements at December 31,
1994.
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STATEMENTS OF CONSOLIDATED CASH FLOWS (condensed)
(dollars in thousands)
Three months
ended March 31
------------------------
1995 1994
------------------------
(Unaudited)
Operating Activities
Net Income $ 2,087 $ 460
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,368 2,296
Deferred taxes 466 (576)
Changes in operating assets and liabilities:
Increase in accounts receivable (13,948) (5,449)
Increase in inventories (4,143) (2,156)
Increase in prepaid expense and other current
assets (1,388) (804)
Increase in accounts payable 1,478 1,851
Increase in payroll, taxes and other accruals 155 2,083
--------- -------
Net cash used in operating activities (12,925) (2,295)
Investing Activities
Property, plant & equipment expenditures (4,468) (1,880)
Disposals of property, plant & equipment 495 37
Acquisition of business, net of cash acquired (2,159) -
Other items, net 1,034 959
------- ------
Net cash used in investing activities (5,098) (884)
Financing Activities
Borrowings under long-term debt 1,000 5,328
Payments of long-term debt (771) (3,646)
Net increase in short-term bank loans 17,095 399
Exercise of stock options 118 165
Dividends paid (1,306) (1,235)
------- -------
Net cash provided by financing activities 16,136 1,011
------- -------
Net decrease in cash and cash equivalents (1,887) (2,168)
Cash and cash equivalents at beginning of period 7,700 5,860
------- -------
Cash and cash equivalents at end of period $ 5,813 $ 3,692
======= =======
Supplemental disclosure of cash flow information:
Interest paid $ 1,920 $ 818
Income taxes paid 147 826
------- -------
$ 2,067 $ 1,644
======= =======
See notes to consolidated condensed financial statements.
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ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENT
MARCH 31, 1995
NOTE 1 - Basis of Presentation
The accompanying unaudited condensed consolidated 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, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1995
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1995. For further information, refer to the Consolidated
Financial Statements and Notes to Financial Statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
NOTE 2 - Summary of Significant Accounting Policies
The Company maintains its books using a 52/53 week year ending on the last
Sunday of December. For purposes of the consolidated financial statements, the
year-end is stated as December 31. The year ended 1994 consisted of 52 weeks and
each of the quarters consisted of 13 weeks. The year ending December 31, 1995
will consist of 53 weeks with the additional week included in the first quarter
ended March 31, 1995.
NOTE 3 - Acquisition of Businesses
On February 4, 1995, the Company purchased the stock of Dana Design Ltd., a
manufacturer and distributor of backpacks primarily in the United States. In
addition, the Company acquired the assets of two businesses.
NOTE 4 - Long-Term Debt
The $70 million revolving credit line is a component of an $85 million credit
facility which provides for a $15 million sub-limit that may only be used for
standby letters of credit. This facility is subject to an agreement which, among
other things, restricts amounts available for payment of cash dividends by the
Company. As of March 31, 1995, retained earnings of $7.7 million were free of
such restrictions.
On April 21, 1995, the Company amended its $85 million credit facility such
that the $15 million available for standby letters of credit can also be used
for operating purposes.
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ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1995
Additionally, on April 27, 1995, the Company signed an agreement for an
additional $40 million 364-day unsecured revolving short-term facility with the
same lenders, and providing for substantially the same covenants, interest rate
options and commitment fees as under the Company's $85 million credit facility
discussed above.
NOTE 5 - Subsequent Events
The Company plans to file on or about April 27, 1995, a registration statement
and prospectus in connection with an underwritten public offering of 4 million
primary shares of its common stock. Management expects that the proceeds of the
proposed offering will be used to reduce borrowings under the Company's $85
million three-year revolving credit line.
ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
A. Comparative First Quarter Results of Operations
Net sales for the three months ended March 31, 1995 advanced 32.2% to a
record $145.0 million, compared to $109.7 million in the comparable period of
1994. Net income for the first quarter of 1995, boosted by a $0.3 million
foreign tax settlement, rose to $2.1 million, or $.17 per share, from $0.5
million, or $.04 per share, for the first quarter of 1994. Earnings in the prior
year quarter were adversely impacted by costs incurred in converting the U.S.
ski manufacturing plant to the production of cap skis and the resulting higher
manufacturing costs.
Net sales. In the sporting goods and other recreational products group, net
sales increased 35.5% to $94.7 million in the 1995 quarter compared to $69.9
million in 1994. This record first quarter is attributable in part to sharply
increased domestic sales of Shakespeare fishing rods and reels resulting from
increased demand for Ugly Stik fishing rods and for several new rods, reels,
kits and combos. Sales of K2 Exotech in-line skates, which were introduced late
in the first quarter of 1994, increased in the corresponding 1995 quarter.
Shipments of Stearns active water sports products were up significantly and
benefited from strong growth in demand for personal flotation devices, wetsuits
and related neoprene products. Sales of active apparel to the promotional or
"advertising specialty" market, shipments of ProFlex mountain bikes and sales of
backpacks by the recently acquired Dana Design business also contributed to the
growth of the group, although to a lesser extent. Partially offsetting this
sales growth was a decline in swimming pool completions, primarily caused by
heavy rains throughout much of California during the first quarter.
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ANTHONY INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1995
Net sales of the industrial products group increased 26.4% to $50.3 million
in the first three months of 1995 compared to $39.8 million in the comparable
period of 1994. The increase in sales was due mainly to gains in shipments of
building products, paperweaving monofilaments and fiberglass light poles.
Gross Profit. Gross profit increased 32.3% to $35.3 million in the first
quarter of 1995 compared to $26.7 million in the first quarter 1994, although as
a percentage of net sales it was comparable to the 1994 period. The 1994 period
included the costs of the cap ski conversion. Gross profit in 1995 was impacted
by higher costs of recycled corrugated scrap paper, which is a raw material used
in the production of the Company's insulative sheathing, and by higher
manufacturing costs in the fiberglass light pole business.
Costs and Expenses. Selling expenses increased 23.5% to $17.5 million in
the first three months of 1995 compared to $14.2 million in the comparable
period of 1994, although as a percentage of net sales they declined to 12.1% for
the 1995 period compared to 12.9% in the 1994 period. The percentage decline was
primarily volume related.
General and administrative expenses increased $2.0 million in the quarter
to $12.6 million from $10.6 million in 1994, although as a percentage of net
sales they declined to 8.7% from 9.7%. The dollar increase was caused mainly by
higher spending on product development, other expenditures to support growth and
inclusion of Dana Design and other smaller acquisitions.
Operating Income. Operating income increased to $5.2 million, or 3.6% of
net sales, in the three months ended March 31, 1995 compared to $1.9 million,
or 1.7% of net sales, in the comparable 1994 period. The percentage increase is
due to reductions in selling expenses and general and administrative expenses as
a percentage of net sales. The volume-related earnings increases of several of
the Company's businesses in 1995 were primarily offset by the normal seasonal
negative results of the ski and pool businesses. The seasonal loss of the K2
business declined as compared with the prior year's quarter whereas the decline
in pool sales discussed above widened that business' seasonal loss. The Company
believes that the impact on operating income of the additional week in 1995's
first quarter as compared to the 1994 period was not significant.
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Interest Expense. Interest expense increased $1.3 million in the first
quarter of 1995 compared to the first quarter of 1994. Higher interest rates
accounted for $0.5 million of the increase, and a $39.6 million higher level of
average borrowings, incurred to support the recent growth in sales, accounted
for the remainder.
Income Taxes. The provision for income taxes for the 1995 first quarter has
been reduced as a result of a $0.3 million foreign tax settlement.
B. Financial Condition
The Company's operating activities used $12.9 million of cash during the
three months ended March 31, 1995 as compared with $2.3 million of cash used
during the three months ended March 31, 1994. The recent increased use of cash
has been primarily due to financing higher levels of accounts receivable and
inventories arising from the growth in sales of in-line skates, wetsuits,
fishing rods and reels and full-suspension mountain bikes and from the recent
acquisitions of Dana Design and Wilderness Experience.
Net cash used for investment activities increased to $5.1 million in the
three months ended March 31, 1995 from $0.9 million used in the three months
ended March 31, 1994. The increase in cash used in the current year's quarter
was the result of expenditures made to increase manufacturing capacity and
improve manufacturing efficiencies, primarily at the monofilament, ski and
fiberglass light pole plants. No material commitments for capital expenditures
existed at March 31, 1995.
The Company's principal long-term borrowing facility is the $85 million
credit line which becomes due on June 28, 1997. At March 31, 1995, $69.0 million
was outstanding under this line. The Company has recently entered into the
additional $40 million 364-day unsecured revolving short-term facility with
the same lenders and providing for substantially the same covenants, interest
rate options and commitment fees as under the credit line. The Company also has
several foreign and domestic short-term lines of credit, of which $35.4 million
was outstanding at March 31, 1995.
The Company anticipates its cash needs in 1995 will be provided from
operations and from borrowings under its Credit Line and Short-Term Facility and
other existing credit lines.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Exhibit
------- -------
10.01 Second Amendment to Credit Agreement, dated April 21, 1995.
10.02 Third Amendment to Credit Agreement, dated April 27, 1995.
10.03 Credit Agreement (364-Day Facility), dated April 27, 1995.
27 Financial Data Schedule, Article 5
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended March 31, 1995.
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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.
ANTHONY INDUSTRIES, INC.
(registrant)
/s/ B.I. Forester
Date: April 27, 1995 ____________________________________
B.I. Forester
Chairman and Chief Executive
/s/ John J. Rangel
Date: April 27, 1995 ____________________________________
John J. Rangel
Senior Vice President - Finance
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