1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995.
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 1-4433.
ARMATRON INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-1052250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Main Street
Melrose, Massachusetts 02176
(Address of principal executive offices) (Zip Code)
(617) 321-2300
(Registrant's telephone number, including area code)
N/A
(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 ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ______ No ______
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of Common Stock (par value $1) outstanding at July 31,
1995 is 2,459,754 shares.
2
ARMATRON INTERNATIONAL, INC.
File No. 1-4433
____________________________
PAGE(S)
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Condensed Balance Sheets -
June 30, 1995 and 1994, and September 30, 1994 3 - 4
Consolidated Condensed Statements of
Operations for the three and nine months
ended June 30, 1995 and 1994 5
Consolidated Condensed Statements of
Cash Flows for the nine months ended
June 30, 1995 and 1994 6
Notes to Consolidated Condensed Financial
Statements 7 - 8
Item 2
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9 - 11
PART II - OTHER INFORMATION
Item 6(b) Reports on Form 8-K 12
SIGNATURE 13
3
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Balance Sheets
June 30, 1995 and 1994, and September 30, 1994
(Dollars in Thousands)
(Unaudited) (Audited)
June 30, September 30.
1995 1994 1994
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 340 $1,195 $3,006
Trade accounts receivable,net 2,712 4,151 2,414
Inventories (Note 2) 3,218 3,004 2,937
Deferred tax asset 165 - 165
Prepaids & other current assets 405 220 371
______ ______ ______
Total Current Assets 6,840 8,570 8,893
MACHINERY & EQUIPMENT, NET 742 719 599
OTHER ASSETS 107 100 107
Total Assets $7,689 $9,389 $9,599
====== ====== ======
The accompanying notes are an integral part
of the consolidated condensed financial statements.
4
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Balance Sheets
June 30, 1995 and 1994, and September 30, 1994
(Dollars in Thousands)
(Unaudited) (Audited)
June 30, Sept. 30,
1995 1994 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ - $ 5 $ 1
Accounts payable 790 887 1,387
Accrued liabilities (Note 3) 770 1,166 790
Notes Payable (Note 5) 192 - -
Total Current Liabilities 1,752 2,058 2,178
LONG-TERM DEBT (NOTE 4) 4,715 5,250 5,140
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per
share, 6,000,000 shares authorized;
shares issued at June 30, 1995 and 1994,
and September 30, 1994, 2,606,481 shares 2,606 2,606 2,606
Paid-in capital 6,770 6,770 6,770
Retained earnings (deficit) (7,768) (6,909) (6,709)
1,608 2,467 2,667
Less:
Treasury stock at cost - 146,727
at June 30, 1995 and 1994, and
September 30, 1994 386 386 386
Total Stockholders' Equity 1,222 2,081 2,667
Total Liabilities &
Stockholders' Equity $ 7,689 $ 9,389 $ 9,599
======= ======= =======
The accompanying notes are an integral part
of the consolidated condensed financial statements.
5
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Statements of Operations
for the Three and Nine Month Periods Ended June 30, 1995 and 1994
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Three Months Nine Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
Net Sales $ 4,666 $ 5,829 $ 8,731 $ 9,912
Cost of Products Sold 3,500 4,240 7,413 8,356
Selling, general and
administrative expenses 771 887 2,047 2,635
Interest expense-related parties 119 135 367 387
Interest expense-third parties 23 - 31 5
Other (income) expense - net (14) (12) (68) (59)
Net Income (Loss) $ 267 $ 579 $ (1,059) $ (1,412)
========= ========= ========= =========
Per Share:
Net Income (Loss) $ .11 $ .24 $ (.43) $ (.57)
========= ========= ========= =========
Weighted average number of
common shares outstanding 2,459,754 2,459,754 2,459,754 2,459,754
The accompanying notes are an integral part
of the consolidated condensed financial statements.
6
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Statements of Cash Flows
for the Nine Months Ended June 30, 1995 and 1994
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,059) $(1,412)
Adjustments to reconcile net loss
to net cash flows from operating
activities:
Depreciation 329 506
Change in operating assets
& liabilities (1,232) (1,352)
Net cash flow from (used for)
operating activities: (1,962) (2,258)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for machinery and equipment (472) (113)
Net cash flow used for
investing activities: (472) (113)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) on third party
line of credit 192 -
Payments on long-term debt-related parties (425) -
Payments on long-term debt-third parties (1)
Net cash flow used for
financing activities: (233) (1)
NET DECREASE IN CASH
AND CASH EQUIVALENTS (2,667) (2,372)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,007 3,567
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 340 $ 1,195
======= =======
SUPPLEMENTAL INFORMATION:
Interest paid - related parties $ 367 $ 387
Interest paid - third parties $ 31 $ 5
Income taxes paid $ - $ -
The accompanying notes are an integral part
of the consolidated condensed financial statements.
7
ARMATRON INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
1. OPINION OF MANAGEMENT
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (including normal
recurring adjustments) necessary to present fairly the consolidated
financial position as of June 30, 1995 and 1994, and September 30, 1994,
and the consolidated statements of operations and cash flows for the
three and nine months ended June 30, 1995 and 1994. These financial
statements should be read in conjunction with the financial statements
and notes thereto in-cluded in the Company's Annual Report on Form 10-K
and, as amended, Form 10-K/A1 for the year ended September 30, 1994.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The year-end
balance sheet data was derived from audited financial statements, but
does not include disclosures required by generally accepted accounting
principles. The accompanying unaudited, consolidated condensed financial
statements are not necessarily indicative of future trends or the
Company's operations for the entire year.
2. INVENTORIES
Inventories are stated on a first-in, first-out (FIFO) method at the
lower of cost or market.
Inventories consisted of the following:
(In Thousands)
(Unaudited) (Audited)
June 30, September 30,
1995 1994 1994
Purchased Components $1,330 $2,026 $1,959
Work in Process 100 49 160
Finished Goods 1,788 929 818
$3,218 $3,004 $2,937
====== ====== ======
8
ARMATRON INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following as of:
(In thousands)
(Unaudited) (Audited)
June September
1995 1994 1994
Salaries, commissions
and benefits . . . . . . . . . . $ 382 $ 316 $ 355
Professional fees . . . . . . . . 45 95 119
Warranty costs . . . . . . . . . 30 86 40
Advertising costs . . . . . . . . 192 334 177
Other . . . . . . . . . . . . . . 121 335 90
$ 770 $1,166 $ 790
====== ====== ======
4. LONG-TERM DEBT
The Company has a $7,000,000 line of credit from a realty trust operated
for the benefit of the Company's principal shareholders. This line of
credit, with interest at 10%, requires monthly payments of interest
only, is payable in full in October 1997, and is collateralized by all
assets of the Company. The Company had $4,715,000 outstanding under this
line of credit at June 30, 1995.
5. NOTE PAYABLE
The Company has a $3,500,000 revolving line of credit from a commercial
finance company which expires in December 1996. This line of credit is
collateralized by all assets of the Company. The terms of this agreement
include a borrowing limit which fluctuates depending on the levels of
accounts receivable and inventory which collaterlize the borrowings.
Interest on amounts outstanding is payable at 2 1/4% over the commercial
base rate. The commercial base rate was 9% at June 30, 1995. The Company
had $192,000 outstanding under this line of credit at June 30, 1995.
9
ARMATRON INTERNATIONAL, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended June 30, 1995, operating activities used
$1,962,000 in cash. Trade accounts receivable and inventory increased $298,000
and $281,000 respectively. Accounts Payable decreased $597,000 and the net
loss was $1,059,000. Investing activities used $472,000 for the purchase of
equipment. Financing activities used $233,000 of which $425,000 was used for
the payment of long-term debt and $192,000 was generated from net borrowings
under the line of credit. As a result, primarily of these factor, cash and
cash equivalents decreased $2,667,000.
The Company obtained from a commercial finance company a revolving line of
credit which provides aggregate borrowings of $3,500,000 and which expires in
December 1996. Borrowings made against this line of credit are collateralized
by all assets of the Company. As of June 30, 1995, the Company had $192,000
outstanding under this line of credit and was contingently liable for
outstanding letters of credit of approximately $279,000 under this credit
agreement.
The Company has a $7,000,000 line of credit from a realty trust operated for
the benefit of the Company's principal shareholders. This line of credit, with
interest payable at 10%, requires monthly payment of interest only, is payable
in full in October 1997, and is collateralized by all assets of the Company.
The Company had $4,715,000 outstanding under this line of credit on June 30,
1995.
The ratio of current assets to current liabilities was 3.9 at June 30, 1995 as
compared to 4.1 at September 30, 1994 and 4.2 at June 30, 1994. The ratio of
consolidated debt to consolidated net worth was 5.3 at June 30, 1995, 3.2 at
September 30, 1994, and 3.5 at June 30, 1994.
Sales terms for the Industrial Products segment are 30 days net, and following
industry trade practice, the Consumer Products segment offers extended payment
terms for delivery of existing seasonal product items such as the Flowtron
leaf eater, bugkiller, chipper/shredder, biomister, compost bin and yard
carts, resulting in fluctuating requirements for working capital.
The Company made an investment of $472,000 in capital expenditures in the
first three quarters of fiscal year 1995. These expenditures were mainly for
tooling and dies used in production. The Company anticipates commitments of
$100,000 for capital expenditures during the remaining quarter of fiscal 1995.
The Company believes that its present working capital, lines of credit from a
commercial finance company and related party, and other sources of financing
will be sufficient to finance its seasonal borrowing needs, operations and
investment in capital expenditures in fiscal 1995.
10
RESULTS OF OPERATIONS
The results of consolidated operations for the quarter ended June 30, 1995
resulted in net income of $267,000, or $.11 per share, as compared with net
income of $579,000, or $.24 per share in the same period of the previous year.
The Company distributes its products primarily to major retailers throughout
the United States, with some products distributed under customer labels.
Substantially all of the Company's sales, as well as accounts receivable,
relate to business activities with such retailers. Sales decreased $1,163,000
to $4,666,000 for the three months ended June 30, 1995, as compared to
$5,829,000 for the corresponding period in the previous year. The decrease in
sales was primarily attributable to the current economic conditions and
unfavorable spring weather.
Operating profit is the result of deducting operating expenses excluding
interest expense, general corporate expenses, and income taxes from total
revenue. Operations within the Consumer Products segment consist of the
manufacture and distribution of Flowtron leaf-eaters, bugkillers,
chipper/shredders, biomisters, compost bins and yard carts. Sales and
operating profits for the Consumer Products segment in the third quarter were
approximately $4,656,000 and $692,000, respectively, as compared to $5,816,000
and $1,057,000, respectively, in the previous year. Sales decreased $1,160,000
due to the economic conditions and unfavorable weather discussed previously.
Product lines within the Consumer Products segment are subject to seasonal
fluctuations, with most shipments occurring in the third and fourth quarters
of the Company's fiscal year.
The Industrial Products segment has introduced electronic obstacle avoidance
systems for automotive applications. Sales and operating losses for the
Industrial Products segment in the third quarter of 1995 were $10,000 and
$75,000, respectively, as compared to $13,000 and $79,000, respectively, in
the previous year.
Selling, general and administrative expenses decreased $116,000 to $771,000
for the quarter ended June 30, 1995, when compared to the previous year.
The results of consolidated operations for the nine months ended June 30, 1995
resulted in a net loss of $1,059,000 or $.43 per share, as compared with a net
loss of $1,412,000, or $.57 per share in the same period of the previous year.
Sales decreased $1,181,000 to $8,731,000 for the nine months ended June 30,
1995, as compared to $9,912,000 for the corresponding period in the previous
year.
Sales and operating profits for the Consumer Products segment for the nine
months ended June 30, 1995 were approximately $8,691,000, and $144,000,
respectively, as compared to $9,865,000 and $232,000, respectively, in the
previous year. The reduction in sales, as well as the underutilization of the
Company's production facility, were responsible for the decrease in operating
profit.
Sales and operating losses for the Industrial Products segment during the nine
months ended June 30, 1995 were approximately $40,000 and $254,000,
respectively, as compared to $47,000 and $254,000, respectively, in the
previous year.
11
Selling, general and administrative expenses decreased $588,000 to $2,047,000.
A tax benefit from the losses on operations for the nine month periods ended
June 30, 1995 was not reflected in the statement of consolidated operations
because the net operating losses could neither be carried back to previous
year, nor offset against deferred taxes.
ARMATRON INTERNATIONAL, INC.
PART II
Item 6b.
Reports on Form 8-K
The Company did not file any reports on Form
8-K for the quarter ended June 30, 1995.
ARMATRON INTERNATIONAL, INC.
File No. 1-4433
______________________________
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 thereto duly authorized.
ARMATRON INTERNATIONAL, INC.
(Registrant)
Date: August 1995 /s/ Charles J. Housman
Charles J. Housman, President
and Treasurer
Date: August 1995 /s/ Richard M. Housman
Richard M. Housman,
Controller
12