-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ETVVUTNGFRNxMBKUY8VRvP40aSFEQ3JkbgoCmuB7Tjv6yJF3xZWLCcPdp9K1Y0A1 LHgfHqPELWP4vyIvcxZ9eg== 0000352956-99-000013.txt : 19990510 0000352956-99-000013.hdr.sgml : 19990510 ACCESSION NUMBER: 0000352956-99-000013 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAFCO INC CENTRAL INDEX KEY: 0000352956 STANDARD INDUSTRIAL CLASSIFICATION: HEATING EQUIPMENT, EXCEPT ELECTRIC & WARM AIR FURNACES [3433] IRS NUMBER: 942159547 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-10120 FILM NUMBER: 99614378 BUSINESS ADDRESS: STREET 1: 2690 MIDDLEFIELD RD CITY: REDWOOD CITY STATE: CA ZIP: 94063 BUSINESS PHONE: 6503632690 MAIL ADDRESS: STREET 1: 2690 MIDDLEFIELD ROAD CITY: REDWOOD CITY STATE: CA ZIP: 94063 10-Q/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1999 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 0-10120 FAFCO, Inc. (Exact name of Registrant as specified in its charter) California 94-2159547 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 2690 Middlefield Road, Redwood City, California 94063 (Address, including zip code, of Registrant's principal executive offices) (650) 363-2690 (Company's telephone number, including area code) Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No At May 8, 1999, 3,303,311 shares of the Company's Common Stock, $.125 par value were issued and outstanding. Part 1 - FINANCIAL INFORMATION Item 1 - Financial Statements FAFCO, Inc. CONSOLIDATED BALANCE SHEET March 31, 1999 December 31, 1998 (unaudited) Assets Current assets: Cash and cash equivalents $ 249,900 $ 477,500 Accounts receivable, less allowance for doubtful accounts of $550,300 in 1999 and $536,300 in 1998 2,607,500 1,876,600 Current portion of long-term notes receivable (net) 87,600 87,600 Inventories 1,067,200 1,265,400 Prepaid expenses and other current assets 168,600 183,500 Other accounts receivable, net of allowance 800 7,300 Deferred tax asset, net of allowance 273,000 273,000 Total current assets 4,454,600 4,170,900 Plant and equipment, at cost 2,925,100 2,901,900 Less accumulated depreciation and amortization (2,274,000) (2,318,500) 651,100 583,400 Notes receivable and other assets (net) 43,700 58,200 Deferred tax asset, net of allowance 564,500 564,500 Total assets $ 5,713,900 $ 5,377,000 Liabilities and shareholders' equity Current Liabilities: Bank line of credit Accounts payable and other accrued expenses $ 1,126,000 $ 1,065,600 Accrued compensation and benefits 232,800 217,300 Accrued warranty expense 279,200 232,200 Income Taxes payable 58,600 18,600 Total current liabilities 1,696,600 1,533,700 Convertible subordinated notes ($600,000 was owed to related parties in 1999 and 1998) 925,000 925,000 Other non-current liabilities 26,200 31,900 Total liabilities $ 2,647,800 $ 2,490,600 Shareholders' equity: Preferred Stock-authorized 1,000,000 shares of $1.00 par value, none of which has been issued Common Stock-authorized 10,000,000 shares of $0.125 par value: 3,303,311 issued and outstanding in 1999 and in 1998. 412,800 412,800 Capital in excess of par value 5,107,100 5,107,100 Notes receivable secured by Common Stock (75,100) (75,100) Accumulated deficit (2,378,700) (2,558,400) Total shareholders' equity $ 3,066,100 $ 2,886,400 Commitments and contingent liabilities Total liabilities and shareholders' equity $ 5,713,900 $ 5,377,000
The accompanying notes are an integral part of this statement. Part I - FINANCIAL INFORMATION (continued) FAFCO, Inc. CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) Three Months Ended March 31, 1999 1998 Net sales $ 3,039,900 $ 2,699,500 Other income (net) (400) (2,900) Total revenues 3,039,500 2,696,600 Cost of goods sold 1,772,200 1,763,400 Marketing & selling expense 529,100 505,600 General & administrative expense 368,300 344,800 Research & development expense 101,700 45,500 Net interest expense 24,500 35,100 Total costs and expenses 2,795,800 2,694,400 Income before income taxes 243,700 2,200 Provision for income taxes 64,000 0 Net income $ 179,700 $ 2,200 Basic earnings net income per share $ 0.05 $ 0.00 Diluted net income per share $ 0.04 $ 0.00
The accompanying notes are an integral part of this statement Part I - FINANCIAL INFORMATION (continued) FAFCO, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Three Months Ended March 31, 1999 1998 Cash flow from operating activities: Net income $ 179,700 $ 2,200 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 35,500 28,100 Allowance for doubtful accounts 13,900 (127,500) Provision for inventory reserve (2,200) Change in assets and liabilities: Change in accounts receivable (738,400) (772,600) Change in inventories 198,200 (39,900) Change in prepaid expenses 14,900 (115,200) Change in other assets 14,600 145,500 Change in payables and accrued expenses 162,900 330,300 Change in other non-current liabilities (5,700) (5,900) Net cash (used in) provided by operating activities (124,400) (557,200) Cash flow from investing activities: Purchase of fixed assets (103,200) (58,500) Net cash used in investing activities (103,200) (58,500) Cash flow from financing activities: Proceeds from sale of common stock 2,500 Borrowings on line of credit 576,000 Net cash provided by (used in) financing activities Net decrease in cash and cash equivalents (227,600) (37,200) Cash and cash equivalents, beginning of period 477,500 46,300 Cash and cash equivalents, end of period $ 249,900 $ 9,100 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 26,400 $ 42,400 Cash paid during the period for income taxes $ 24,000 $ 32,000
The accompanying notes are an integral part of this statement Part I - FINANCIAL INFORMATION (continued) FAFCO, Inc. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. This information is unaudited; however, in the opinion of the Company's management, all adjustments necessary for a fair statement of results for the periods presented have been included. The results for the period ended March 31, 1999 are not necessarily indicative of results to be expected for the entire year. These financial statements, notes and analyses should be read in conjunction with the Company's audited annual financial statements for the year ended December 31, 1998, included in its 1998 Annual Report to Shareholders. 2. Net income (loss) per share is calculated using the weighted average number of common and common equivalent shares outstanding during the periods presented. (See Note 5) 3. Inventories are valued at the lower of cost or market, determined on a first in, first out (FIFO) basis, and consist of the following. March 31, 1999 December 31, 1998 Raw materials $664,900 $661,800 Work in process 234,200 211,500 Finished goods 168,100 392,100 $1,067,200 $1,265,400
4. The Company has a line of credit agreement with Silicon Valley Bank, which line of credit allows the Company to borrow the lesser of $1,000,000 or an amount determined by a formula applied to accounts receivable. Unused borrowing capacity was $1,000,000 at March 31, 1999. Amounts borrowed bear interest at prime rate plus 1.5% per annum and are secured by substantially all the assets of the Company. This line of credit expires on March 30, 2000. 5. Net Income Per Share Basic earnings per share were calculated as follows: Quarter Ended March 31, 1999 1998 Net income $ 179,700 $ 2,200 Average common shares outstanding 3,303,311 3,303,311 Earnings per share $ 0.05 $ 0.00
Basic earnings per share are calculated by dividing net income by the weighted average number of shares issued and outstanding. Part I - FINANCIAL INFORMATION (continued) Diluted earnings per share were calculated as follows: Quarter Ended March 31, 1999 1998 Adjusted net income $ 179,700 $ 2,200 Average common shares outstanding 3,303,311 3,303,311 Add: Exercise of options reduced by the number of shares purchased with proceeds 306,375 N/A Add: Exercise of warrants reduced by the number of shares purchased with proceeds 107,056 N/A Add: Expense of warrants attached to debt reduced by the number of shares purchased with proceeds 485,625 N/A Adjusted weighted average shares outstanding 4,202,367 3,303,311 Earnings per common share assuming dilution $ 0.04 $ 0.00
Part I - FINANCIAL INFORMATION (continued) Item 2 FAFCO, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Unaudited) Results of Operations Net sales for the quarter ended March 31, 1999 increased by 12.6% to $3,039,900 in 1999 from $2,699,500 in 1998. These increases were primarily the result of increased unit sales of the Company's pool panel products along with increased unit sales of the Company's IceStorT products. Cost of goods sold was relatively stable in absolute dollars at $1,772,200 in the first quarter of 1999 compared with $1,763,400 in the first quarter of 1998 while decreasing from 65.3% of net sales to 58.3% of net sales from the first quarter of 1998 to the first quarter of 1999. This decrease in cost of goods sold as a percentage of net sales were due primarily to increased efficiencies in the production process which allowed the Company to produce more product with fewer employees. Marketing and selling expenses were increased slightly in absolute dollars at $529,100 in the first quarter of 1999 compared with $505,600 in the first quarter of 1998 while decreasing from 18.7% of net sales to 17.4% of net sales in the first quarter of 1999. General and administrative expenses were relatively stable at $368,300 in the first quarter of 1999 compared with $344,800 in the same quarter in 1998 while decreasing from 12.8% of net sales in the first quarter of 1998 to 12.1% of net sales in the first quarter of 1999. Research and development expenses increased to $101,700 (3.3% of net sales) in 1999 from $45,500 (1.7% of net sales) in the first quarter of 1998 due mainly to an increase in the number of engineering projects which are targeted on introducing new and improved products in the next few years. Net interest expense decreased to $24,500 (0.8% of net sales) in the first quarter of 1999 from $35,100 (1.3% of net sales) in the first quarter of 1998. This decrease was due primarily to lower average daily borrowing in 1999 than in 1998. Liquidity and Capital Resources The Company's cash position decreased from $477,500 at 1998 fiscal year end to $249,900 at March 31, 1999 principally due to increased accounts receivable partially offset by decreased inventories and increased accounts payable. At March 31, 1999, the Company's accounts payable and other accrued expenses had increased to $1,126,000 from $1,065,600 at December 31, 1998. This increase is primarily due to decreased cash flow during the first quarter of 1999 as a result of the Company's "Early Buy" program for Above Ground Pool systems. At March 31, 1999, the Company's net accounts receivable had increased to $2,607,500 from $1,876,600 at December 31, 1998 due mainly to the Company's "Early Buy" program for Above Ground Pool systems. At March 31, 1999, the Company's net inventories had decreased to $1,067,200 from $1,265,400 at December 31, 1998 due mainly to sales being higher than planned during the first quarter of 1999. Part I - FINANCIAL INFORMATION (continued) At March 31, 1999 the Company's current ratio was 2.62 to 1 compared with 2.72 to 1 at December 31, 1998. The Company had working capital of $2,758,000 at March 31, 1999 compared with $2,637,200 at December 31, 1998. Total assets exceeded total liabilities by $3,066,100 at March 31, 1999 compared with $2,886,400 at December 31, 1998. The Company believes that its cash flow from operations along with its available line of credit will be sufficient to support operations during the next twelve months. Part II - OTHER INFORMATION Item 5 - Other Information The following table summarizes the outstanding securities during the quarter ended March 31, 1999. Shares Common Stock: authorized 10,000,000 shares of $.125 par value; issued and outstanding at December 31, 1998, as reported in the Registrant's Annual report on Form 10-K filed for the fiscal year ended December 31, 1998. 3,303,311 Issued during the quarter 0 Outstanding at March 31, 1999 3,303,311
Item 6 - Exhibits and Reports on Form 8-K a. The following exhibits are filed as part, to the extent indicated herein, in the Form 10-Q. Exhibit No. Description 27 Financial Data Schedule b. Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended March 31, 1999. SIGNATURE 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. FAFCO, Inc. (Registrant) DATE: May 5, 1999 BY:/s/Alex N. Watt Alex N. Watt, Vice President - Finance and Administration and Chief Financial Officer (Principal Financial and Accounting Officer) Subsequently ITEMS Numbered Page Exhibit No. Description 27 Financial Data Schedule Page 12 EX-27 2
5 0000352956 FAFCO, INC. 3-MOS DEC-31-1999 MAR-31-1999 249,0001999 0 3,285,300 579,600 1,067200 4,454,600 2,925,100 (2,274,000) 5,713,900 1,696,600 951,200 0 0 412,800 2,653,300 5,713,900 3,039,900 3,040,400 1,772,200 1,772,200 0 15,600 26,700 243,700 64,000 179,700 0 0 0 179,700 .05 .04
-----END PRIVACY-ENHANCED MESSAGE-----