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 December 31, 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.
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(Exact name of registrant as specified in its charter)
Massachusetts 04-1052250
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Main Street
Melrose, Massachusetts 02176
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(Address of principal executive offices) (Zip Code)
(617) 321-2300
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(Registrant's telephone number, including area code)
N/A
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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 [ ]
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
January 31, 1996 is 2,459,749 shares.
ARMATRON INTERNATIONAL, INC.
File No. 1-4433
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PAGE(S)
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
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December 31, 1995 and 1994, September 30, 1995 3 - 4
Consolidated Condensed Statements of Operations for the
three months ended December 31, 1995 and 1994 5
Consolidated Condensed Statements of Cash Flows for the
three months ended December 31, 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 4
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Results of Votes of Security Holders 12
Item 6b
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Reports on Form 8-K 12
SIGNATURES 13
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Balance Sheets
December 31, 1995 and 1994, and September 30, 1995
(Dollars in Thousands)
(Unaudited) (Audited)
December 31, September 30,
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1995 1994 1995
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,180 $ 1,986 $ 1,322
Trade accounts receivable,net 809 782 2,189
Inventories (Note 2) 2,483 3,677 2,225
Deferred Tax Asset 165 165 165
Prepaids & other current assets 228 449 154
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Total Current Assets 4,865 7,059 6,055
MACHINERY & EQUIPMENT, NET 865 643 952
OTHER ASSETS 108 107 249
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Total Assets $ 5,838 $ 7,809 $ 7,256
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The accompanying notes are an integral part
of the consolidated condensed financial statements.
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Balance Sheets
December 31, 1995 and 1994, and September 30, 1995
(Dollars in Thousands)
(Unaudited) (Audited)
December 31 September 30,
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1995 1994 1995
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 459 $ 995 $ 1,112
Accrued liabilities (Note 3) 731 760 705
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Total Current Liabilities 1,190 1,755 1,817
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LONG-TERM DEBT (NOTE 4) 4,715 4,715 4,715
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STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share,
6,000,000 shares authorized; shares
issued at December 31, 1995 and 1994,
and September 30, 1995, 2,606,481 shares 2,606 2,606 2,606
Paid-in capital 6,770 6,770 6,770
Accumulated deficit (9,057) (7,651) (8,266)
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319 1,725 1,110
Less:
Treasury stock at cost - 146,732 at
December 31, 1995 and September 30,
1995 and 146,727 at December 31, 1994 386 386 386
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Total Stockholders' Equity (Deficiency) (67) 1,339 724
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Total Liabilities & Stockholders' Equity $ 5,838 $ 7,809 $ 7,256
==============================
The accompanying notes are an integral part
of the consolidated condensed financial statements.
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Statements of Operations
for the Three Months ended December 31, 1995 and 1994
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Three Months Ended
December 31
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1995 1994
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Net Sales $ 1,141 $ 1,046
Cost of Products Sold 1,284 1,323
Selling, general and administrative expenses 556 561
Interest expense-related parties 120 134
Interest expense-third parties 2 -
Other (income) expense - net (30) (30)
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Net Loss $ 791 $ 942
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Per Share:
Net Loss $ .32 $ .38
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Weighted average number of common shares
outstanding 2,459,749 2,459,754
=======================
The accompanying notes are an integral part
of the consolidated condensed financial statements.
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Statements of Cash Flows
for the Three Months ended December 31, 1995 and 1994
(Dollars in Thousands)
(Unaudited)
Three Months Ended
December 31,
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1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $( 791) $( 942)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization 105 120
Loss on disposal of equipment (1) -
Changes in operating assets & liabilities 563 390
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Net cash flow used for operating activities: (124) (432)
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CASH FLOWS FROM INVESTING ACTIVITIES
Payments for machinery and equipment (18) (164)
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Net cash flow used for investing activities: (18) (164)
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CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt-related parties - (425)
Net cash flow used for financing activities: - (425)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (142) (1,021)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,322 3,007
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,180 $ 1,986
====================
SUPPLEMENTAL INFORMATION:
Interest paid - related parties $ 41 $ -
Interest paid - third parties $ 2 $ 45
The accompanying notes are an integral part of the
consolidated condensed financial statements.
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 December 31, 1995 and 1994, and September 30,
1995, and the consolidated statements of operations and cash flows for
the three months ended December 31, 1995 and 1994. These financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-K
for the year ended September 30, 1995. 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)
December 31, September 30,
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1995 1994 1995
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Raw Materials $ 1,549 $ 2,542 $ 1,606
Work in Process 100 111 84
Finished Goods 834 1,024 535
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$ 2,483 $ 3,677 $ 2,225
==============================
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following as of:
(In thousands)
(Unaudited) (Audited)
December 31, September 30,
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1995 1994 1995
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Salaries, commissions and benefits $ 296 $ 303 $ 321
Professional fees 68 98 52
Warranty costs 35 39 64
Advertising costs 170 189 135
Other 162 131 133
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$ 731 $ 760 $ 705
==============================
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 December 31, 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 collateralize the borrowings.
Interest on amounts outstanding is payable at 2 1/4% over the commercial
base rate. The commercial base rate was 8 1/2% at December 31, 1995.
As of December 31, 1995, the Company had outstanding letters of credit
amounting to approximately $297,000 under this credit agreement.
ITEM 2:
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
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During the three month period ended December 31, 1995, operating activities
consumed $124,000 in cash. The collection of trade accounts receivable
generated $1,380,000 and the decrease in trade accounts payable used
$653,000. These were offset by an increase in inventories of $257,000.
Also, cash was consumed by a net loss of $791,000.
The Company has a revolving line of credit from a commercial finance company
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 January 31, 1996, the
Company was contingently liable for outstanding letters of credit of
approximately $407,000 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 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 on
January 31, 1996.
The ratio of current assets to current liabilities was 4.1 at December 31,
1995, as compared to 3.3 at September 30, 1995 and 4.0 at December 31, 1994.
The ratio of consolidated debt to consolidated net worth was (88.1) at
December 31, 1995, 9.0 at September 30, 1995, and 4.8 at December 31, 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 electric leaf-eater, bugkiller, biomister, and compost bin,
resulting in fluctuating requirements for working capital.
The Company anticipates it will have less fluctuating requirements for
working capital for its new product items, the plastic Handy Hauler Yard Cart
and plastic Storemore Storage Shed, as these items are subject to less
seasonal fluctuations than the existing product lines.
The Company made an investment of $18,000 in capital expenditures in the
first quarter of fiscal year 1996. These expenditures were mainly for
tooling and dies used in production of the Company's Consumer Products. The
Company anticipates commitments of $115,000 for capital expenditures during
the remaining quarters of fiscal 1996.
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 1996. Other sources of
financing, provided by the Company's principal stockholder, are available to
finance any working capital deficiencies.
RESULTS OF OPERATIONS
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The results of consolidated operations for the quarter ended December 31,
1995 resulted in net loss of $791,000, or $.32 per share, as compared with a
net loss of $942,000, or $.38 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
increased $95,000 to $1,141,000 for the three months ended December 31, 1995,
as compared to $1,046,000 for the corresponding period in the previous year.
Increase in sales for the first quarter of fiscal 1996 was primarily
attributable to the contribution of the Company's new products.
The Company introduced its plastic Handy Hauler Yard Cart and Storemore
Storage Shed in fiscal 1995. We anticipate that these new products will be
subject to less seasonal fluctuations than the existing product lines. While
we expect the decrease in consumer product sales of our existing product
lines to continue, we also expect the increase in consumer product sales of
our new product lines to offset the decrease of the existing product lines.
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, biomisters,
compost bins, yard carts and storage sheds. Sales and operating losses for
the Consumer Products segment in the first quarter were approximately
$1,127,000 and $419,000, respectively, as compared to $1,029,000 and
$576,000, respectively, in the previous year. Increased margins were
responsible for the decrease in the operating loss.
The gross margins were ($143,000) and ($277,000) for 1995 and 1994,
respectively. The increase of $134,000 for 1995 as compares with 1994 was
primarily due to increased sales.
The Company has experienced negative gross margins in the first quarter for
the past three years as 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. Sales during the
first quarter for the past three years have not exceeded 10 percent of the
annual sales volume. The Company does not defer any period costs for
absorption in subsequent quarters.
The Industrial Products segment has introduced electronic obstacle avoidance
systems for automotive applications. Production began in January 1996. Sales
and operating losses for the Industrial Products segment in the first quarter
were approximately $14,000 and $80,000, respectively, as compared to $17,000
and $91,000, respectively, in the previous year.
Selling, general and administrative expenses decreased $5,000 to $556,000 for
the quarter ended December 1995, when compared to the previous year.
Interest expense for the first quarter was $122,000 as compared to $134,000
in the prior year.
A tax benefit from the losses on operations for the three month periods ended
December 31, 1995 and 1994, was not reflected in the statement of
consolidated operations because the net operating losses could not be carried
back to previous years and future recognition was not certain.
ARMATRON INTERNATIONAL, INC.
PART II
Item 4. Results of Votes of Security Holders
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The annual meeting of shareholders was held on January 25, 1996 in Melrose,
Massachusetts. Two proposals were submitted by shareholders as described in
the Company's Proxy Statement dated January 10, 1996 and were voted upon and
approved by shareholders at the meeting. The table below briefly describes
the proposals and results of the shareholder votes.
Votes Votes
In Favor Opposed Abstain
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Shareholder proposal to elect
two directors, Charles Housman
and Edward Housman 1,646,312 1,002
Shareholder proposal to ratify
the selection of independent
auditors for the 1996
fiscal year 1,646,799 204 311
Messrs. Elliot J. Englander, William Welsh and Craig Spangenberg are
Directors of the Company who continue to hold office.
Item 6b. Reports on Form 8-K
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The Company did not file any reports on Form 8-K for the quarter ended
December 31, 1995.
ARMATRON INTERNATIONAL, INC.
File No. 1-4433
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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: /s/ Charles J. Housman
Charles J. Housman, President
and Treasurer
Date: /s/ Richard M. Housman
Richard M. Housman,
Controller