-----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, PuHFhmSEX9PYrleHojc7v6qeR36Xgwiwtzh+1q46qhERP2qhMVm3WIw8iln2Sn2D 14eznl7eeZd1A4s5SUJiig== 0000950123-96-003733.txt : 19960724 0000950123-96-003733.hdr.sgml : 19960724 ACCESSION NUMBER: 0000950123-96-003733 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960722 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARLEN CORP CENTRAL INDEX KEY: 0000007346 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 132668657 STATE OF INCORPORATION: NY FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06675 FILM NUMBER: 96597435 BUSINESS ADDRESS: STREET 1: 505 EIGHTH AVE CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2127368100 MAIL ADDRESS: STREET 1: 505 EIGHTH AVE CITY: NEW YORK STATE: NY ZIP: 10018 FORMER COMPANY: FORMER CONFORMED NAME: ARLEN REALTY & DEVELOPMENT CORP DATE OF NAME CHANGE: 19860121 10-Q 1 FORM 10-Q FOR ARLEN CORP-PERIOD END-5/31/96 1 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 May 31, 1996 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 1-6675 THE ARLEN CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 13-2668657 ------------------------ ------------------------------ State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 505 Eighth Avenue, New York, New York 10018 - --------------------------------------- --------------- Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 736-8100 Not Applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5(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 / / Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $1 par value - 30,770,241 shares outstanding as of July 11, 1996 1 2 THE ARLEN CORPORATION AND SUBSIDIARIES INDEX ================================================================================
PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated balance sheets -- May 31, 1996 and 1995 (unaudited) 4 Consolidated balance sheet -- February 29, 1996 (unaudited) 5 Consolidated statements of operations -- Three months ended May 31, 1996 and 1995 (unaudited) 6 Consolidated statements of cash flows -- Three months ended May 31, 1996 and 1995 (unaudited) 7-8 Notes to consolidated financial statements 9-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-12 PART II. OTHER INFORMATION 13 SIGNATURES 14
2 3 PART I - FINANCIAL INFORMATION Item 1 Financial Statements 3 4
THE ARLEN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ($000s Omitted) (UNAUDITED) - --------------------------------------------------------------------------------------------------------------- May 31, ASSETS 1996 1995 ---- ---- CURRENT ASSETS: Cash and cash equivalents $ 53 $ 117 Note receivable - current portion, net of unamortized discount of $95 911 - Current assets of discontinued operations - 20,148 --------- --------- TOTAL CURRENT ASSETS 964 20,265 PROPERTY AND EQUIPMENT, net 66 84 OTHER ASSETS, including amounts due from former subsidiaries (Note 3) 469 698 NOTE RECEIVABLE, less current portion, net of unamortized discount of $19 484 - OTHER ASSETS OF DISCONTINUED OPERATIONS (Note 2) - 1,966 --------- --------- TOTAL ASSETS $1,983 $23,013 ========= ======== LIABILITIES AND CAPITAL DEFICIT CURRENT LIABILITIES: Notes payable (including $2,878 due to related parties in 1995) $ 137 $ 2,878 Accrued interest payable (including $3 and $687 due to related parties in 1996 and 1995) 186 838 Accrued state income taxes - 946 Accrued expenses, fees and other (Note 4) 7,078 7,773 Current portion of long-term obligations due to related parties 299 655 Current liabilities of discontinued operations - 10,646 --------- --------- TOTAL CURRENT LIABILITIES 7,700 23,736 LONG-TERM OBLIGATIONS DUE TO RELATED PARTIES 554 1,235 LONG-TERM OBLIGATIONS FROM DISCONTINUED OPERATIONS (NOTE 2) - 251 AMOUNTS DUE TO RELATED PARTIES 126,898 120,748 --------- --------- TOTAL LIABILITIES 135,152 145,970 COMMITMENTS AND CONTINGENCIES (Note 4) CAPITAL DEFICIT (133,169) (122,957) --------- --------- TOTAL LIABILITIES AND CAPITAL DEFICIT $1,983 $23,013 ========= ========
See notes to consolidated financial statments. 4 5
THE ARLEN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET February 29, 1996 ($000s Omitted) (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 10 Note receivable - current portion, net of unamortized discount of $117 883 --------- TOTAL CURRENT ASSETS 893 PROPERTY AND EQUIPMENT, net 72 OTHER ASSETS, including amounts due from former subsidiaries (Note 3) 469 NOTE RECEIVABLE, less current portion, net of unamortized discount of $33 717 --------- TOTAL ASSETS $ 2,151 ========= LIABILITIES AND CAPITAL DEFICIT CURRENT LIABILITIES: Notes payable $ 137 Accrued interest payable (including $4 due to related parties) 179 Accrued expenses, fees and other (Note 4) 7,019 Current portion of long-term obligations due to related parties 299 --------- TOTAL CURRENT LIABILITIES 7,634 LONG-TERM OBLIGATIONS DUE TO RELATED PARTIES 575 AMOUNTS DUE TO RELATED PARTIES 124,389 --------- TOTAL LIABILITIES 132,598 COMMITMENTS AND CONTINGENCIES (Note 4) CAPITAL DEFICIT (130,447) --------- TOTAL LIABILITIES AND CAPITAL DEFICIT $2,151 =========
5 6
THE ARLEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS ($000s Omitted) (UNAUDITED) - -------------------------------------------------------------------------------- Three months ended May 31, 1996 1995 ---- ---- GENERAL & ADMINISTRATIVE EXPENSES (280) (260) OTHER (EXPENSES) INCOME: Interest expense, net (including amounts due to related parties of $2,509 in 1996 and $2,449 in 1995) (2,586) (2,550) Other income, net 144 595 --------- ---------- Loss from continuing operations before discontinued operations (2,722) (2,215) DISCONTINUED OPERATIONS: Income from discontinued operations (Note 2) - 749 --------- ---------- Net loss ($2,722) ($1,466) ========= ========== LOSS PER COMMON SHARE FROM CONTINUED OPERATIONS ($0.08) ($0.08) INCOME PER COMMON SHARE FROM DISCONTINUED OPERATIONS (Note 2) - 0.03 --------- ---------- LOSS PER COMMON SHARE ($0.08) ($0.05) ========= ==========
See notes to consolidated financial statements 6 7
THE ARLEN CORPORATION AND SUBSIDIARIES STATEMENTS OF CASH FLOWS ($000s Omitted) (UNAUDITED) - -------------------------------------------------------------------------------- Three months ended May 31, 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ($2,722) ($1,466) --------- --------- Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization 6 130 Amortization on note discount (36) Provisions for losses on accounts receivable - (198) Increase in amounts due related parties in exchange for interest 2,509 2,324 Changes in assets and liabilities (Increase) decrease in assets: Accounts receivable - (886) Inventories - 367 Other current assets - (141) Other assets - 4 Increase (decrease) in liabilities: Accounts payable - (94) Accrued interest payable 7 116 Accrued state income taxes - 90 Accrued other liabilities 59 188 --------- --------- Total adjustments 2,545 1,900 --------- --------- Net cash (used) provided by operating activities (177) 434 --------- ---------
See notes to consolidated financial statements 7 8
THE ARLEN CORPORATION AND SUBSIDIARIES STATEMENTS OF CASH FLOWS ($000's Omitted) (UNAUDITED) (Continued) - -------------------------------------------------------------------------------- Three months ended May 31, 1996 1995 ---- ---- CASH FLOWS FROM INVESTING ACTIVITIES: Investment in certificates of deposit - (4) Investment in capital assets - (75) Acquisition of new automotive aftermarket business, net of cash acquired - (54) -------- --------- Net cash used in investing activities - (133) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds on notes receivable 241 - Payments on revolving credit line - (8,821) Proceeds from revolving credit line - 9,702 Principal payments on short-term borrowings - (192) Principal payments on long-term borrowings (21) (121) -------- --------- Net cash provided by financing activities 220 568 -------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 43 869 CASH AND CASH EQUIVALENTS, at February 29, 1996 and 1995 10 1,192 LESS CASH INCLUDED IN CURRENT ASSETS OF DISCONTINUED OPERATIONS - (1,944) -------- --------- CASH AND CASH EQUIVALENTS, at May 31, 1996 and 1995 $ 53 $ 117 ======== ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the three months ended May 31, 1996 and 1995 for interest $ 4 $ 110 ======= =========
See notes to consolidated financial statements 8 9 THE ARLEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (May 31, 1996) ================================================================================ NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of The Arlen Corporation (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the financial statements 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 months ended May 31, 1996 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 1997. For further information, reference is made to the Company's Consolidated Financial Statements and Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended February 29, 1996. In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying unaudited consolidated financial statements of the Company have been prepared on the basis that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. At May 31, 1996, the Company had a working capital deficiency of $6,736,000 and a capital deficit of $133,169,000. Currently, the Company has no operations (see Note 2) but intends to seek new business opportunities, though there can be no assurance that it will be successful in achieving this objective. NOTE 2 - DISCONTINUED OPERATIONS The operations of the Company's former operating subsidiaries, which ceased to be owned by the Company on February 6, 1996, have been reclassified as discontinued operations. 9 10 THE ARLEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (May 31, 1996) ================================================================================ NOTE 3 - OTHER ASSETS Other assets include amounts due from former subsidiaries (see Note 2) and certain non-negotiable promissory notes (the "Mortgage Notes") assumed by related parties. Due to the uncertainty of the timing of the collection of interest on the Mortgage Notes, for financial statement purposes the Company will record interest income from the Mortgage Notes when received. NOTE 4 - COMMITMENTS AND CONTINGENCIES The Company is the sponsor of a defined benefit pension plan (the "Plan") which was frozen in 1981. The actuarial valuation of the Plan as of March 1, 1991 (the latest Plan valuation) indicates the unfunded actuarial accrued liability was approximately $850,000. In July 1995, the Company received from the District Director of the United States Internal Revenue Service (the "IRS") an examination report with respect to the Plan. In such report, the IRS asserted that a payment of $6,726,613 is required in order to cure the Plan's accumulated funding deficiency for prior years and pay excise taxes and penalties arising therefrom. Based upon discussions with the IRS following receipt of the examination report, the Company believes that it will be able to obtain a waiver of a substantial portion of the taxes and penalties claimed to be due and to settle the remaining deficiency, through installment payments over a number of years, for an aggregate amount approximating the $850,000 provision already reflected in the Company's balance sheet (included in accrued expenses, fees and other). Accordingly, management believes that it has adequately provided for this liability. NOTE 5 - LOSS PER COMMON SHARE Loss per common share is computed by dividing the net loss, after giving effect to dividends on preferred stock, by the weighted average number of common shares and common share equivalents outstanding during each period. Convertible securities that are deemed to be common share equivalents are assumed to have been converted at the beginning of each period. The Company's common share equivalents and convertible issues were anti-dilutive at May 31, 1996 and 1995 and, therefore, were not included in the loss per share computations for these periods. The weighted average number of shares used to compute per share amounts was 32,690,000 for the three-month period ended May 31, 1996 and 31,690,000 for the three-month period ended May 31, 1995, inclusive of Class B shares. 10 11 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 12 THE ARLEN CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (May 31, 1996) ================================================================================ The following discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Item 1 of Part I of this Report: LIQUIDITY AND CAPITAL RESOURCES Prior to the disposition of the Company's former subsidiaries on February 6, 1996, the ability of the Company to continue as a going concern was threatened by the liquidity crises facing the Company from an unsatisfied judgment, additional pending litigation and the rapidly-approaching July 31, 1997 maturity date of the amounts due to related parties (the "Arlen Notes"). These near-term threats to the Company's continued existence have been virtually eliminated through the discharge of the unsatisfied judgment, the termination of the pending litigation and the extension of the maturity date of the Arlen Notes to December 28, 2033. Moreover, the cash flow which the Company expects to receive from the note receivable (the "Note Receivable") reflected on the Company's balance sheet at May 31, 1996 included in Item 1 of Part I of this Report should enable the Company to meet its anticipated cash requirements through the current fiscal year and into fiscal 1998. Although the Company's balance sheet at May 31, 1996 continues to include the Arlen Notes as substantial liabilities (accounting for $126,898,000 of the Company's total liabilities of $135,152,000) and although the Arlen Notes will continue to accrue substantial interest expense which, in the absence of significant income from new operations, will produce continuing net losses and add to the increasing shareholders' deficit (such deficit at May 31, 1996 being $133,169,000), the extension to December 28, 2033 in the maturity date of the Arlen Notes and the virtual elimination of the default provisions relating thereto create the practical reality that the Arlen Notes should not pose a threat to the continued existence of the Company for many years. Assuming that the Company is able to (a) satisfy or settle an outstanding judgment for $172,000 (plus interest from 1988) which is the subject of pending execution proceedings and (b) settle or otherwise resolve the claim asserted by the IRS (see Note 4 of the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Report), management believes that the most serious threat to the Company's continued existence would be its inability to acquire new business operations or to otherwise generate cash flow prior to its receipt of the final payments due under the Note Receivable. RESULTS OF OPERATIONS The Company's net loss for the first three months of its fiscal year ending February 28, 1997, representing an increase of 86% over the net loss for the comparable period of the prior fiscal year, reflects primarily the absence in the current quarter of any income from the Company's discontinued operations. 12 13 PART II - OTHER INFORMATION Not Applicable 13 14 SIGNATURES 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. THE ARLEN CORPORATION (Registrant) By: /s/ Allan J. Marrus ------------------------------------- Allan J. Marrus, President Date: July 19, 1996 By: /s/ David S. Chaiken ------------------------------------- David S. Chaiken, Treasurer Date: July 19, 1996 14 15 EXHIBIT INDEX Exhibit No. Description 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 0000007346 ARLEN CORPORATION 1,000 3-MOS FEB-28-1997 MAR-01-1996 MAY-31-1996 53 0 0 0 0 964 66 0 1,983 7,700 127,452 0 1,992 30,804 (165,965) 1,983 0 0 0 0 280 0 2,586 (2,722) 0 (2,722) 0 0 0 (2,722) (.08) (.08)
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