-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, GJQ8Vv9eMjF27ZCqQ4FLSE2zaLj5qk9FkRApJ5CO1gJz1mQrVaFC2I5fM2ppSQPs F4oMcC9QHvvzKSYvr5Pvig== 0000933096-95-000005.txt : 19950612 0000933096-95-000005.hdr.sgml : 19950612 ACCESSION NUMBER: 0000933096-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950213 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARROW AUTOMOTIVE INDUSTRIES INC CENTRAL INDEX KEY: 0000007533 STANDARD INDUSTRIAL CLASSIFICATION: 3690 IRS NUMBER: 041449115 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07737 FILM NUMBER: 95509621 BUSINESS ADDRESS: STREET 1: 3 SPEEN ST CITY: FRAMINGHAM STATE: MA ZIP: 01701 BUSINESS PHONE: 5088723711 MAIL ADDRESS: STREET 1: 3 SPEEN STREET CITY: FRAMINGHAM STATE: MA ZIP: 01701 10-Q 1 QUARTERLY REPORT UNDER SECTION 13 OF 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ________________________________________ (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended December 31, 1994 or ( ) Transition Report Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________ ___________________________________________ Commission file number 1-7737 I.R.S. Employer Identification Number 04-1449115 ARROW AUTOMOTIVE INDUSTRIES, INC. (a Massachusetts Corporation) 3 Speen Street Framingham, MA 01701 Telephone: (508) 872-3711 Indicate by check mark whether the registrant (1) has filed all reports 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 _____ Indicated the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 2,872,395 shares of the Company's Common Stock ($.10 par value) were outstanding as of December 31, 1994. Page 1 ARROW AUTOMOTIVE INDUSTRIES, INC. INDEX PAGE NUMBER PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (Unaudited): Condensed Balance Sheets - December 31, 1994 and June 25, 1994 3 Condensed Statements of Income - Three Months Ended December 31, 1994 and December 25, 1993 4 Six Months Ended December 31, 1994 and December 25, 1993 5 Condensed Statements of Cash Flows - Six Months Ended December 31, 1994 and December 25, 1993 6 Notes to Condensed Financial Statements 7-8 ITEM 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations 9-11 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 12 ITEM 2. Changes in Securities 12 ITEM 3. Default upon Senior Securities 12 ITEM 4. Submission of Matters to a Vote of Securities 12 Holders ITEM 5. Other Information 12 ITEM 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 Page 2 PART I. ITEM 1. FINANCIAL INFORMATION ARROW AUTOMOTIVE INDUSTRIES, INC. CONDENSED BALANCE SHEETS (Unaudited)
DECEMBER 31, JUNE 25, 1994 1994 ____________ ____________ ASSETS CURRENT ASSETS Cash and equivalents $ 360,709 $ 445,320 Accounts receivable, less allowances 16,800,121 15,661,427 Inventories - Note B 35,837,965 37,433,020 Prepaid expenses and other current assets 2,737,430 3,292,477 ____________ ____________ TOTAL CURRENT ASSETS 55,736,225 56,832,244 PROPERTY, PLANT AND EQUIPMENT 33,934,592 33,186,481 Less allowances for depreciation 21,800,167 21,134,125 ____________ ___________ 12,134,425 12,052,356 OTHER ASSETS 2,013,888 2,236,194 ____________ ____________ TOTAL ASSETS $ 69,884,538 $ 71,120,794 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of advances under revolving line of credit - Note C $ 12,108,917 $ 10,219,446 Accounts payable 1,572,055 3,951,308 Cash overdrafts 851,331 907,095 Other current liabilities 5,877,832 6,680,146 Current portion of long-term debt 1,372,132 1,372,538 ____________ ____________ TOTAL CURRENT LIABILITIES 21,782,267 23,130,533 LONG-TERM DEBT - Note C 11,051,592 11,732,234 DEFERRED INCOME TAXES 1,631,000 1,631,000 ACCRUED RETIREMENT BENEFITS 1,829,987 1,653,287 STOCKHOLDERS' EQUITY Common stock 296,817 296,767 Other stockholders' equity 33,742,123 33,126,221 Less cost of Common Stock in treasury 449,248 449,248 ____________ ____________ TOTAL STOCKHOLDERS' EQUITY 33,589,692 32,973,740 ____________ ____________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 69,884,538 $ 71,120,794 ============ ============ See accompanying notes to the condensed financial statements.
Page 3 ARROW AUTOMOTIVE INDUSTRIES, INC. CONDENSED STATEMENTS OF INCOME (Unaudited)
THREE MONTHS ENDED ____________________________ DECEMBER 31, DECEMBER 25, 1994 1993 (14 weeks) (13 weeks) _____________ _____________ Net Sales $ 29,162,915 $ 25,841,649 Interest income 8,329 7,865 ____________ ____________ 29,171,244 25,849,514 Cost and expenses: Cost of products sold 22,088,015 19,273,223 Selling, administrative and general operating expenses 6,459,094 5,363,576 Interest expense 511,909 417,230 ____________ ____________ 29,059,018 25,054,029 ____________ ____________ Income before income taxes and extraordinary item 112,226 795,485 Provision for income taxes 43,000 302,000 ____________ ____________ Income before extraordinary item 69,226 493,485 Extraordinary charge from refinancing of debt, net of income tax benefit of $169,000 - Note C 0 275,985 ____________ _____________ NET INCOME $ 69,226 $ 217,500 ============ ============= Weighted average number of shares 2,872,312 2,813,910 outstanding ============ ============= EARNINGS PER SHARE - - - - - ------------------ Income before extraordinary item $ 0.02 $ 0.18 Extraordinary charge from refinancing of debt, net of income tax benefit 0.00 0.10 of $.06 - Note C ______ ______ NET INCOME $ 0.02 $ 0.08 ====== ====== See accompanying notes to the condensed financial statements.
Page 4 ARROW AUTOMOTIVE INDUSTRIES, INC. CONDENSED STATEMENTS OF INCOME (Unaudited)
SIX MONTHS ENDED _________________________ DECEMBER 31, DECEMBER 25, 1994 1993 (27 weeks) (26 weeks) ____________ ____________ Net Sales $ 61,980,526 $ 54,684,882 Interest income 15,427 15,691 ____________ ____________ 61,995,953 54,700,573 Cost and expenses: Cost of products sold 47,205,359 41,301,148 Selling, administrative and general operating expenses 12,839,433 10,968,224 Interest expense 960,895 827,126 ____________ ____________ 61,005,687 53,096,498 ____________ ____________ Income before income taxes and extraordinary item 990,266 1,604,075 Provision for income taxes 377,000 609,000 ____________ ____________ Income before extraordinary item 613,266 995,075 Extraordinary charge from refinancing of debt, net of income tax benefit of $169,000 - Note C 0 275,985 ____________ ____________ NET INCOME $ 613,266 $ 719,090 ============ ============ Weighted average number of shares 2,872,104 2,813,885 outstanding ============ ============ EARNINGS PER SHARE - - - - - ------------------ Income before extraordinary item $ 0.21 $ 0.36 Extraordinary charge from refinancing of debt, net of income tax benefit 0.00 0.10 of $.06 - Note C ______ ______ NET INCOME $ 0.21 $ 0.26 ====== ====== See accompanying notes to the condensed financial statements.
Page 5 ARROW AUTOMOTIVE INDUSTRIES, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
SIX MONTHS ENDED _________________________ DECEMBER 31, DECEMBER 25, 1994 1993 (27 weeks) (26 weeks) _____________ ____________ OPERATING ACTIVITIES Net cash provided by (used in) operating activities $ (475,652) $ 10,450 ____________ ____________ INVESTING ACTIVITIES Net cash used in investing activities (820,070) (238,066) ____________ ____________ FINANCING ACTIVITIES Payments of long-term debt and capital lease obligations (681,048) (886,891) Increase in advances under revolving line of credit 1,889,471 1,140,413 Proceeds from exercise of stock option 2,688 412 ____________ ____________ Net cash provided by financing activities 1,211,111 253,934 ____________ ____________ Increase (decrease) in cash and equivalents (84,611) 26,318 ___________ ____________ Cash and equivalents at beginning of period 445,320 439,466 ____________ ____________ CASH AND EQUIVALENTS AT END OF PERIOD $ 360,709 $ 465,784 ============ ============ See accompanying notes to the condensed financial statements.
Page 6. ARROW AUTOMOTIVE INDUSTRIES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) NOTE A -- BASIS OF PRESENTATION - - - - - ------------------------------- The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they 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 six month period ended December 31, 1994 are not necessarily indicative of the results that may be expected for the year ending June 24, 1995. For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended June 25, 1994. The balance sheet at June 25, 1994 has been derived from the audited financial statements at that date. NOTE B -- INVENTORIES - - - - - --------------------- The components of inventory consist of the following:
DECEMBER 31, JUNE 25, 1994 1994 ------------ ------------ Stated at cost on first-in, first-out (FIFO) method: Finished Goods $ 8,788,257 $11,027,263 Work in process and materials 33,069,708 32,425,757 ____________ ____________ 41,857,965 43,453,020 Less reserve required to state inventory on the last-in, first-out (LIFO) method 6,020,000 6,020,000 ____________ ____________ $ 35,837,965 $ 37,433,020 ============ ============
Page 7 NOTE C -- LONG-TERM DEBT AND CREDIT ARRANGEMENTS - - - - - ------------------------------------------------ On December 29, 1993, the Company entered into an agreement with a commercial bank to provide replacement financing of its existing credit line and term loan. The replacement financing consists of a $20 million revolving line of credit and a $9 million term loan. The balance sheet as of December 25, 1993 has been adjusted to reflect the replacement financing. The difference between amounts paid to retire the existing indebtedness and the related carrying amounts, principally the unamortized balance of debt issue costs and early payment penalties which totalled $275,985, net of an income tax benefit of $169,000, has been reflected as an extraordinary charge in the accompanying statements of income. Page 8 PART I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net income for the second quarter of fiscal 1995 was $69,226, compared to net income for the second quarter of fiscal 1994 of $217,500. During the prior year's second quarter, the Company refinanced its existing debt obligations and recorded an extraordinary charge to income of $275,985 (net of a tax benefit of $169,000). This amount included the write-off of the unamortized portion of deferred financing costs and charges for the early termination of debt that was refinanced. Net income for the first six months of fiscal 1995 was $613,266, compared to net income for the comparable period in fiscal 1994 of $719,090. The decline in net income in the second quarter and the first six months of the current year is primarily due to a substantial increase in selling expenses, an increase in net interest expense and a slight decline in gross margin. Net sales for the second quarter of fiscal 1995 were $29,162,915, an increase of 12.8% over net sales generated in the second quarter of fiscal 1994. Net sales for the first six months of fiscal 1995 were $61,980,526, a 13.3% increase over the same period in the prior fiscal year. Unit sales increased 6.8% and 3.3%, respectively, in the second quarter and the first six months of fiscal 1995 over the comparable periods last fiscal year. These increases in unit sales are primarily attributable to the fact that the second quarter of the current fiscal year contains 14 weeks versus 13 weeks. The net sales increase in excess of the unit sales increase is primarily attributable to the mix of products sold, particularly, the demand for higher-priced, newer applications within the electrical product line. The demand for certain electrical products in the first quarter of both fiscal 1995 and fiscal 1994 was enhanced by higher failure rates due to warm weather conditions. Unit sales during the second quarter of fiscal 1995 were adversely impacted by the mild winter experienced throughout most of the country. Because automotive parts have lower failure rates in mild weather conditions, demand for many of the Company's products fell in the second quarter of the current fiscal year. The gross margin percentages reported in the current fiscal year, both for the second quarter and for the first six months, have declined from the prior fiscal year. The gross margin percentage for the second quarter of fiscal 1995 was 24.3%, compared to the gross margin percentage for the Page 9 second quarter of fiscal 1994 of 25.4%. Year to date, the gross margin percentage was 23.8%, compared to 24.5% for the comparable period last year. The declines in margin in the first and the second quarter of the current fiscal year are due primarily to a shift of sales to products that generate lower gross margins. It should be noted that the gross margin generated in the second quarter of the current fiscal year of 24.3% has improved from the gross margin percentage generated in the first quarter of fiscal 1995 of 23.5%. The first quarter of the current fiscal year was adversely affected by manufacturing inefficiencies related primarily to material sourcing in the production of certain products which experienced unusually heavy demand. During the second quarter, the Company focused on improving its purchasing and material sourcing practices. This resulted in reduced spending levels and a more balanced inventory, defined as having the proper proportions of component parts with which to make a completed product. These efforts were a contributing factor in the margin improvement over the first quarter and the reduced inventory levels from the end of the first quarter. The Company will continue to review its purchasing and sourcing practices on an ongoing basis. Selling, general and administrative expenses for the second quarter of fiscal 1995 of $6,459,094, or 22.1% of net sales, increased over similar expenses of $5,363,576, or 20.8% of net sales, in the comparable period in fiscal 1994. Similarly, for the six months ended December 31, 1994, selling, general and administrative expenses of $12,839,433, or 20.7% of net sales, increased from a spending level of $10,968,224, or 20.0% of net sales, in the prior fiscal year. During the first six months of the current fiscal year, the Company experienced increased customer acquisition costs of approximately $680,000, of which $245,000 was incurred in the second quarter. These expenses were incurred to obtain additional market penetration. It is anticipated that sales will be enhanced from these efforts. The Company anticipates that business acquisition costs will continue, but it is not expected that they will continue at the level that has been experienced in the first six months of the current fiscal year. Also during the current fiscal year, the Company invested in the development of a new marketing program which resulted in additional expenses of $216,000, of which $136,000 was incurred in the second quarter. The roll out of this program, which is expected to be met with enthusiasim in the marketplace, is scheduled for late April, 1995. Net interest expense in the second quarter of fiscal 1995 was $503,580, an increase of $94,215, or 18.7% over the same period in fiscal 1994. On a year to date basis, net interest expense increased $134,033, or 16.5%. The additional expense is due to the increase in the Company's borrowing rate that is tied to the prime lending rate which continues to rise, as well as increased borrowings on the Company's bank debt. Page 10 During the first six months of the fiscal year, cash provided by net income and by a reduction in inventory levels was supplemented by an increase in borrowings on the revolving line of credit. These additional borrowings were used to support an increase in accounts receivable, a decline in trade payables and accrued liabilities, the reduction of long-term debt and investment in capital equipment. The increase in accounts receivable is a reflection of increased sales. The decline in trade payables and accrued liabilities are the result of the Company's efforts to reduce purchasing of goods and expedite payment of trade payables to take advantage of cash discount opportunities. The investment in capital expenditures is primarily related to the successful implementation of a new degreasing system at our Spartanburg, South Carolina plant. As noted in management's discussion in the Company's 1994 Annual Report, the replacement cost of the Company's degreasing systems will approximate $1,900,000. Additional capital expenditures will be incurred in the next six months to complete the project. It is anticipated that cash generated from operations combined with existing financing will be adequate to provide for the Company's cash requirements for fiscal 1995. Page 11 ARROW AUTOMOTIVE INDUSTRIES, INC. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings. None. ITEM 2. Changes in Securities. None. ITEM 3. Default upon Senior Securities. None. ITEM 4. Submission of Matters to a Vote of Security Holders. None. ITEM 5. Other Information. None. ITEM 6. Exhibits and Reports on Form 8-K. A. Exhibits Exhibit 27. Financial Data Schedule B. Reports on Form 8-K No reports have been filed on Form 8-K during this quarter. Page 12 PART II. OTHER INFORMATION ARROW AUTOMOTIVE INDUSTRIES, INC. 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. ARROW AUTOMOTIVE INDUSTRIES, INC. (Registrant) February 13, 1995 /s/ Jim L. Osment Jim L. Osment President and Chief Executive Officer February 13, 1995 /s/ James F. Fagan James F. Fagan Executive Vice President and Chief Financial Officer Page 13 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND STATEMENT OF INCOME, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-24-1995 DEC-31-1994 361 0 16,800 0 35,838 55,736 33,935 21,800 69,885 21,782 11,052 297 0 0 33,293 69,885 61,981 61,996 47,205 61,006 0 0 961 990 377 613 0 0 0 613 0.21 0.21
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