-----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, JNpwc5ZJ3lD1MviCsKQchVeIGd0NlXEvigRa2S9sO717D7PYOE2ktBNMxzs5pFzx /7EVqps0Ry5kiBpuqIUASQ== 0000912057-97-004157.txt : 19970221 0000912057-97-004157.hdr.sgml : 19970221 ACCESSION NUMBER: 0000912057-97-004157 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970211 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIREPLACE MANUFACTURERS INC CENTRAL INDEX KEY: 0000738992 STANDARD INDUSTRIAL CLASSIFICATION: HEATING EQUIPMENT, EXCEPT ELECTRIC & WARM AIR FURNACES [3433] IRS NUMBER: 953244946 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13746 FILM NUMBER: 97524549 BUSINESS ADDRESS: STREET 1: 2701 S HARBOR BLVD CITY: SANTA ANA STATE: CA ZIP: 92704 BUSINESS PHONE: 7145497782 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED DECEMBER 31, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-13746 FIREPLACE MANUFACTURERS, INCORPORATED (Exact Name of Registrant as specified in its charter) California 95-3244946 - ------------------------------ ------------------------- (State or other jurisdiction) (I.R.S. Employer I.D. No.) 2701 South Harbor Boulevard Santa Ana, California 92704 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (714) 549-7782 ---------------- 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 proceeding 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 / / The number of shares outstanding of each of the Registrant's classes of Common Stock on January 31, 1997, was as follows: Common Stock, $0.01 Par Value per share - 3,257,198 Part I FINANCIAL INFORMATION The following comparative financial statements for the three and nine month periods ended December 31, 1996, have not been audited by independent public accountants; but, in the opinion of management, all adjustments necessary to present fairly the results of operations for the period have been included. The statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations. Operating results for the three and nine month periods ended December 31, 1996 are not necessarily indicative of the results that may be expected for the year ending March 31, 1997. It is suggested that the condensed financial statements be read in conjunction with the financial statements and accompanying notes included in the Company's 1996 Annual Report on Form 10-KSB. 2 FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31 MARCH 31 1996 1996 ------------- ----------- ASSETS Current Assets: Cash and Cash Equivalents $182,000 $136,000 Trade accounts and notes receivable, less allowance for doubtful accounts of $255,000, at December 31, 1996, and $239,000 at March 31, 1996 3,137,000 3,273,000 Inventories (Note 2) 2,087,000 2,735,000 Prepaid expenses and other assets 116,000 101,000 Deferred Income Taxes 314,000 314,000 ------------- ----------- TOTAL CURRENT ASSETS 5,836,000 6,559,000 Property and Equipment at cost, Net (Note 3) 1,821,000 2,104,000 Other Assets 50,000 120,000 ------------- ----------- $7,707,000 $8,783,000 ------------- ----------- ------------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Lines of Credit $1,233,000 $2,263,000 Accounts Payable 1,582,000 2,647,000 Current portion of long-term debt (Note 4) 235,000 235,000 Accrued Liabilities 1,515,000 717,000 ------------- ----------- TOTAL CURRENT LIABILITIES 4,565,000 5,862,000 ------------- ----------- Long-Term Debt, less current portion (Note 4) 514,000 904,000 Deferred Income Taxes 369,000 369,000 ------------- ----------- TOTAL LONG TERM LIABILITIES 883,000 1,273,000 ------------- ----------- Preferred Stock: $1.00 par value, authorized 1,000,000 shares; none issued or outstanding Common Stock: $.01 par value, authorized 10,000,000 shares; issued and outstanding 3,257,198 shares at December 31, 1996 and 3,475,450 at March 31, 1996 33,000 35,000 Additional Paid in Capital 108,000 309,000 Retained Earnings 2,157,000 1,436,000 Notes Receivable From Officers/Stockholders (Note 5) (39,000) (132,000) ------------- ----------- TOTAL STOCKHOLDERS' EQUITY 2,259,000 1,648,000 ------------- ----------- $7,707,000 $8,783,000 ------------- ----------- ------------- ----------- "Unaudited" The accompanying notes are an integral part of these financial statements. 3 FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31 DECEMBER 31 1996 1995 ------------- ----------- Net Sales $8,215,000 $8,854,000 Cost of Sales 6,039,000 7,279,000 ------------- ----------- Gross Margin 2,176,000 1, 575,000 Selling, General, and Administrative Expenses 1,602,000 1,253,000 ------------- ----------- Operating income 574,000 322,000 Interest and Other Expense 47,000 102,000 ------------- ----------- Earnings before income taxes 527,000 220,000 Provision for Income Taxes 211,000 89,000 ------------- ----------- NET EARNINGS 316,000 131,000 ------------- ----------- ------------- ----------- Earnings (loss) per common share $0.10 $0.04 ------------- ----------- ------------- ----------- Weighted average number of common shares and common share equivalents outstanding 3,299,507 3,540,439 ------------- ----------- ------------- ----------- "Unaudited" The accompanying notes are an integral part of these financial statements. 4 FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS NINE MONTHS ENDED DECEMBER 31 DECEMBER 31 1996 1995 ------------- ----------- Net Sales $25,293,000 $22,352,000 Cost of Sales 19,293,000 18,628,000 ------------- ----------- Gross Margin 6,000,000 3,724,000 Selling, General, and Administrative Expenses 4,576,000 3,321,000 ------------- ----------- Operating Income 1,424,000 403,000 Interest and Other Expense 222,000 274,000 ------------- ----------- Earnings (loss) before income taxes 1,202,000 129,000 Provision for Income Taxes 481,000 52,000 ------------- ----------- NET EARNINGS (LOSS) 721,000 77,000 ------------- ----------- ------------- ----------- Earnings (loss) per common share $0.22 $0.02 ------------- ----------- ------------- ----------- Weighted average number of common shares and common share equivalents outstanding 3,345,731 3,548,480 ------------- ----------- ------------- ----------- "Unaudited" The accompanying notes are an integral part of these financial statements. 5 FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOW NINE MONTHS ENDED DECEMBER 31 DECEMBER 31 1996 1995 ------------- ----------- CASH FLOW (LOSS) FROM OPERATING ACTIVITIES Net earnings $721,000 $77,000 Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 525,000 386,000 Deferred income taxes 0 0 Compensation to reduce notes receivable from Officers and Stockholders 93,000 29,000 Loss (gain) on sale of property and equipment (7,000) 30,000 Changes in operating assets and liabilities: Trade accounts and notes receivable 136,000 (1,712,000) Inventories 648,000 233,000 Prepaid expenses and other assets 55,000 (118,000) Accounts payable and accrued liabilities (267,000) 524,000 ------------- ----------- Net cash provided by (used in) operating activities 1,904,000 (551,000) ------------- ----------- CASH FLOW (LOSS) FROM INVESTING ACTIVITIES Purchases of property and equipment (242,000) (430,000) Reduction in notes receivable from officers/stockholders 0 14,000 Proceeds from sale of property and equipment 7,000 7,000 ------------- ----------- Net cash provided by (used in) investing activities (235,000) (409,000) ------------- ----------- CASH FLOW (LOSS) FROM FINANCING ACTIVITIES Proceeds from (payments on) long-term debt (390,000) 24,000 Net proceeds from (payments on) revolving credit line (1,030,000) 988,000 Repurchase of common stock (203,000) (14,000) ------------- ----------- Net cash provided by (used in) financing activities (1,623,000) 998,000 ------------- ----------- Net increase (decrease) in cash and cash equivalents 46,000 38,000 Cash and cash equivalents at beginning of period 136,000 117,000 ------------- ----------- Cash and cash equivalents at end of period $182,000 $155,000 ------------- ----------- ------------- ----------- "Unaudited" The accompanying notes are an integral part of these financial statements. 6 FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SELECTED FINANCIAL DATA 1. BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company and its presently inactive, wholly-owned subsidiary (Fireplace Industries of California, Inc.). All material inter-company transactions have been eliminated. All adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations have been included. 2. INVENTORIES Inventories are comprised of: DECEMBER 31 MARCH 31 1996 1996 ------------ ----------- Raw Materials $1,181,750 $1,643,000 Work in Progress 316,000 316,000 Finished Goods 589,250 776,000 ------------ ----------- TOTAL $2,087,000 2,735,000 ------------ ----------- ------------ ----------- 3. PROPERTY AND EQUIPMENT The Company's investment in property and equipment, at cost, less related accumulated depreciation and amortization is summarized below: DECEMBER 31 MARCH 31 1996 1996 ------------ ----------- Machinery and Equipment $2,946,000 $3,528,000 Tools, Dies and Molds 1,275,000 2,761,000 Furniture, Fixtures, and Vehicles 622,000 637,000 Buildings and Leasehold Improvements 54,000 92,000 Research and Development Equipment 279,000 282,000 ------------ ----------- $5,176,000 $7,300,000 Accumulated Depreciation and Amortization 3,355,000 5,196,000 ------------ ----------- $1,821,000 $2,104,000 ------------ ----------- ------------ ----------- 7 FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SELECTED FINANCIAL DATA 4. LONG-TERM DEBT Long-Term debt is summarized as follows: DECEMBER 31 MARCH 31 1996 1996 -------------- ------------ Equipment term loans payable to bank, bearing interest at the bank's prime rate plus 1% due in monthly principal amounts from $7,000 to $8,000 plus interest, through March 1999. $413,000 $555,000 Notes payable to a finance company, bearing interest at 8.75% due in monthly principal and interest payments of $2,500 through March 2000. $86,000 $104,000 Unsecured subordinated note payable, bearing interest at 14%, principal payments due quarterly increasing from $10,000 to $35,000 through September 1999. $250,000 $480,000 ----------- ----------- $749,000 $1,139,000 Less current portion $235,000 $235,000 ----------- ----------- $514,000 $904,000 ----------- ----------- ----------- ----------- 5. RELATED PARTY TRANSACTIONS On December 31, 1996, advances to officers/stockholders totaling $39,000 are outstanding, this represents a decrease of $93,000 from the period ended March 31, 1996. The decrease was a result of compensation used by officers/stockholders to repay the loans. Principal payments on these advances will be due in semiannual installments over the next year, with interest on the notes ranging from 8% to 10%. In the event that the amounts are not repaid, the principal and interest due will be charged to these individuals as compensation expense over the remaining repayment period. The Company has entered into two monthly operating leases of equipment with H&H Equities Incorporated. H&H Equities Incorporated is wholly owned by Willard P. Harris and John D. Hornsby, members of the Company's Board of Directors. The monthly lease payments are $7,119 and totaled $79,566 for the nine months ended December 1996. 8 FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (1) LIQUIDITY AND CAPITAL RESOURCES The Company has lines of credit with a bank for an aggregate $4,500,000 with an interest rate of .5 percent above prime, payable monthly. At December 31, 1996 $1,233,000 was owed under the lines of credit compared to $2,263,000 at March 31, 1996. The line of credit agreements contain restrictive covenants which require maintenance of working capital and other financial ratios, prohibit the payment of dividends and have certain other limitations. The Company was in compliance with all of these restrictive covenants as of December 31, 1996. The line of credit is renegotiated annually on August first, the Company does not anticipate any problems with its ability to continue with its current financing. Accounts receivable (before allowance for doubtful accounts) at December 31, 1996 were $3,392,000 compared to $3,512,000 at March 31, 1996. This 3.4% decrease is primarily due to improved credit collections for the three months ended December 31, 1996 from the three months ended March 31, 1996. The current ratio has increased 13.4% as of December 31, 1996 to 1.27:1 from 1.12:1 at March 31, 1996. The Company was able to use the higher selling price per unit, discussed in "Results of Operations" below, to payoff its line of credit resulting in this lower ratio. The Company has made capital additions of $242,000 during the nine months ended December 31, 1996. The Company anticipates total purchases of approximately $500,000 during the fiscal year ending March 31, 1997. The Company has, and may continue to, repurchase its common stock. Between March 31, 1996 and December 31, 1996 the Company has repurchased 218,252 shares of common stock for $203,000. These shares are retired as required by California law. (2) RESULTS OF OPERATION Sales for the nine months ended December 31, 1996 increased by 13.2% from the same nine month period in 1995. This increase is explained in part by a surge in the manufactured housing industry which resulted in a 6.0% increase in the number of fireplaces sold to 81,819 from 77,176. Additionally there was a 6.7% or $19.51 increase in selling price per fireplace unit for the nine months ended December 31, 1996 compared to the nine months ended December 31, 1995. A number of factors affected the selling price, the Company decreased the number of special discounts available to customers, raised the price of the product and increased sales of non fireplace items such as pipe, accessories and logsets. Sales for the three months ended December 31, 1996 decreased by 7.2% from the same three month period in 1995. The decrease is due to a decrease in the number of fireplaces sold for the three months ended December 31, 1996 compared to the three months ended December 31, 1995 of 3,929 or 13.4%, offset by a 7% increase in the average selling price of a fireplace unit. Cost of sales as a percent of sales decreased for the nine months ended December 31, 1996 to 76.3% from 83.3% for the same period in 1995. Cost of sales as a percent of sales decreased for the three months ended December 31, 1996 to 73.5% from 82.2% for the same period in 1995. These decreases are due to higher selling prices coupled with an improved steel purchasing program. Selling, general, and administrative expenses were 18.1% of sales for the nine months ended December 31, 1996 compared to 14.9% for the same period in 1995. Selling, general, and administrative expenses were 19.5% of sales for the three months ended December 31, 1996 compared to 14.2% for the same period in 1995. These increases are due to higher insurance costs, and higher bonus expense related to the higher pre tax net profit. Interest and other expense as a percent of sales decreased .3% for the nine months ended December 31, 1996 and .6% for the three months ended December 31, 1996 from the same periods in 1995. This decrease is due to interest calculated on lower borrowings. Net income increased by 2.6% of sales for the nine months ended December 31, 1996 and 2.3% for the three months ended December 31, 1996 compared to the same periods in 1995. This increase is due to the increased sales price per unit, offset against the higher insurance costs and bonus expense. 9 FIREPLACE MANUFACTURERS, INC., AND SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (3) NEW ACCOUNTING PRONOUNCEMENTS In 1996, the Company adopted SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. The adoption of this Statement did not have a material effect on the Company's financial statements. The Financial Accounting Standards Board (FASB) has issued Statement No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, and Statement No. 127, Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125 (an amendment of FASB Statement No. 125) which becomes effective for transactions occurring after December 31, 1996 and certain transactions after December 31, 1997. These Statements do not permit earlier or retroactive application. The Company does not believe the adoption of these two statements will have a material effect on the financial statements. PART II - OTHER INFORMATION (a) Exhibits (27) Financial Data Schedule: Incorporated by reference from the Electronic filing of this report. (b) Reports on Form 8-K No Form 8-K was filed during this quarter. 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. Date: February 10, 1997 FIREPLACE MANUFACTURERS, INC. BY: WILLARD P. HARRIS ------------------------- Willard P. Harris Chief Executive Officer JANE ANN IOVINE ------------------------- Jane Ann Iovine Vice President of Finance 10 EX-27 2 EXHIBIT 27
5 9-MOS MAR-31-1997 DEC-31-1996 182,000 0 3,392,000 255,000 2,087,000 5,836,000 5,176,000 3,355,000 7,707,000 4,565,000 0 0 0 33,000 2,226,000 7,707,000 8,215,000 8,215,000 6,039,000 7,641,000 47,000 0 0 527,000 211,000 316,000 0 0 0 316,000 .10 .10
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