-----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, MyM6a5k1mNO9oQEiK4icw0FWaclieFKiH5tyhjNJpKuiAHod8WF5C3mCL+Ammg5C eY3OCu9OgQxrp8ETFkbo9w== 0000950109-00-002225.txt : 20000517 0000950109-00-002225.hdr.sgml : 20000517 ACCESSION NUMBER: 0000950109-00-002225 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000402 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACORN PRODUCTS INC CENTRAL INDEX KEY: 0001036713 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 223265462 STATE OF INCORPORATION: DE FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22717 FILM NUMBER: 636778 BUSINESS ADDRESS: STREET 1: 390 DUBLIN AVENUE CITY: COLUMBUS STATE: OH ZIP: 43215*1930 BUSINESS PHONE: 6142224400 MAIL ADDRESS: STREET 1: 390 DUBLIN AVENUE CITY: COLUMBUS STATE: OH ZIP: 43215*1930 10-Q 1 ACORN PRODUCTS, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 2, 2000 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission file number: 0-22717 ACORN PRODUCTS, INC. (Exact name of registrant as specified in its charter) Delaware 22-3265462 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 390 Dublin Avenue, Columbus, Ohio 43215 (Address of principal executive offices, including zip code) (614) 222-4400 (Registrant's telephone number, including area code) (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 the filing requirements for at least the past 90 days. YES X NO_____ --- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 6,062,159 shares of Common Stock, $.001 par value, were outstanding at May 1, 2000. FORM 10-Q ACORN PRODUCTS, INC. Table of Contents -----------------
Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets 3 December 31, 1999 and April 2, 2000 Consolidated Statements of Operations for the Three Months 4 Ended April 4, 1999 and April 2, 2000 Consolidated Statements of Cash Flows for the Three Months 5 Ended April 4, 1999 and April 2, 2000 Interim Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial 7 Condition and Results of Operations PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 9 Item 6. Exhibits and Reports on Form 8-K 9 Signatures 10
-2- PART I. FINANCIAL INFORMATION Item 1. Financial Statements ACORN PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
December April 2, 31, 1999 2000 -------------- -------------- (Unaudited) (Unaudited) ASSETS Current assets: Cash............................................................ $ 1,326 $ 548 Accounts receivable, less allowance for doubtful accounts and sales allowances ($2,140 and $2,400, respectively)............ 18,021 34,825 Inventories..................................................... 33,168 30,888 Prepaids and other current assets............................... 1,012 1,063 -------------- -------------- Total current assets.......................................... 53,527 67,324 Property, plant and equipment, net of accumulated depreciation.. 17,571 16,631 Goodwill, net of accumulated amortization....................... 32,544 32,276 Other intangible assets......................................... 1,431 1,199 -------------- -------------- Total assets.................................................. $ 105,073 $ 117,430 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Revolving credit facility....................................... $ 27,228 $ 36,224 Accounts payable................................................ 9,004 11,570 Accrued expenses................................................ 5,694 6,473 Income taxes payable............................................ 206 214 Other current liabilities....................................... 843 309 -------------- -------------- Total current liabilities..................................... 42,975 54,790 Long-term debt.................................................. 22,009 22,009 Other long-term liabilities..................................... 3,125 3,014 -------------- -------------- Total liabilities............................................. 68,109 79,813 Stockholders' equity: Common stock, par value of $.001 per share, 20,000,000 shares authorized, 6,464,105 shares issued, and 6,046,680 shares outstanding at December 31, 1999 and April 2, 2000............ 78,262 78,262 Contributed capital-stock options............................... 460 460 Accumulated other comprehensive loss............................ (778) (778) Retained earnings (deficit)..................................... (38,632) (37,979) -------------- -------------- 39,312 39,965 Common stock in treasury, 417,425 shares at December 31, 1999 and April 2, 2000........................... (2,348) (2,348) -------------- -------------- Total stockholders' equity...................................... 36,964 37,617 -------------- -------------- Total liabilities and stockholders' equity...................... $ 105,073 $ 117,430 ============== ==============
See accompanying notes. -3- ACORN PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
For the Three Months Ended --------------------------------------- April 4, April 2, 1999 2000 ------------- --------------- (Unaudited) (Unaudited) Net sales......................................................... $ 36,877 $ 38,614 Cost of goods sold................................................ 27,164 29,753 ------------- --------------- Gross profit...................................................... 9,713 8,861 Selling, general and administrative expenses...................... 5,675 5,989 Interest expense.................................................. 990 1,827 Amortization of goodwill.......................................... 261 269 Other expenses, net............................................... 479 103 ------------- --------------- Income before income taxes........................................ 2,308 673 Income taxes...................................................... 462 20 ------------- --------------- Net income........................................................ $ 1,846 $ 653 ============= =============== Comprehensive income.............................................. $ 1,846 $ 653 ============= =============== Per Share Data (Basic and Diluted): Net income........................................................ $ 0.29 $ 0.11 ============= =============== Weighted average shares outstanding - basic....................... 6,410,594 6,046,680 ============= =============== Weighted average shares outstanding - diluted..................... 6,443,852 6,062,586 ============= ===============
See accompanying notes. -4- ACORN PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
For the Three Months Ended --------------------------------------- April 4, April 2, 1999 2000 ------------- ------------ (Unaudited) (Unaudited) Cash Flows From Operating Activities: Net cash used in operating activities......................... $ (8,478) $ (9,479) Cash Flows From Investing Activities: Purchases of property, plant and equipment, net............... (1,064) (295) ------------ ----------- Net cash used in investing activities......................... (1,064) (295) Cash Flows From Financing Activities: Net activity on revolving loan................................ 10,569 8,996 Purchase of treasury stock.................................... (1,502) 0 ------------ ----------- Net cash provided by financing activities..................... 9,067 8,996 ------------ ----------- Net decrease in cash.......................................... (475) (778) Cash at beginning of period................................... 1,548 1,326 ------------ ----------- Cash at end of period......................................... $ 1,073 $ 548 ============ =========== Interest paid................................................. $ 734 $ 1,516 ============ ===========
See accompanying notes. -5- ACORN PRODUCTS, INC. AND SUBSIDIARIES INTERIM NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Footnote disclosure which would substantially duplicate the disclosure contained in the Annual Report to Stockholders for the year ended July 30, 1999 has not been included. The unaudited interim consolidated financial statements reflect all adjustments, that in the opinion of management, are necessary to a fair statement of results for the periods presented and to present fairly the consolidated financial position of Acorn Products, Inc. (the "Company") as of April 2, 2000. All such adjustments are of a normal recurring nature. 2. Inventories of Acorn Products, Inc. are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. Inventories consist of the following: December 31, April 2, 1999 2000 ------------ ------------ (in thousands) Finished goods..................... $ 18,272 $16,034 Work in process.................... 3,836 4,107 Raw materials and supplies......... 11,060 10,747 ------------ ------------ Total inventories.................. $ 33,168 $30,888 ============ ============ 3. Certain prior year amounts have been reclassified to conform to the presentation for the three month period ended April 2, 2000. -6- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our consolidated financial statements and the other financial information included elsewhere in this Quarterly Report on Form 10-Q, as well as the factors set forth under the caption "Forward-Looking Information" below. Forward-Looking Information Statements in the following discussion that indicate the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. It is important to note that our actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those suggested in the forward-looking statements is contained under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended July 30, 1999 as well as in our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 18, 1997, as amended on October 29, 1998 and November 12, 1999, and as the same may be amended from time to time. Three Months Ended April 2, 2000 Compared to Three Months Ended April 4, 1999 Net Sales. Net sales increased 4.7%, or $1.7 million, to $38.6 million in the first quarter of fiscal 2000, compared to $36.9 million in the first three months of calendar year 1999. The increase in net sales was primarily caused by three factors: (1) strong customer demand, (2) improved service levels, consistently exceeding 95% complete and on-time for key customers, and (3) dissolution of our wheelbarrow joint venture, resulting in wheelbarrow sales being included in our results. Sales allowances and deductions in long handled tool sales, up slightly versus the prior year, have improved dramatically from the last six months of calendar 1999 due to logistical efficiencies, strong product availability, and adherence to formalized customer programs. Gross Profit. Gross profit decreased 8.8%, or $0.8 million, to $8.9 million in the first quarter of fiscal 2000, compared to $9.7 million in the comparable period of 1999. Gross margin decreased to 22.9% for the first quarter, from 26.3% for the comparable period of fiscal 1999. The declines in gross profit and margin were driven primarily by manufacturing inefficiencies related to continuing effects of the consolidation of our manufacturing operations, including scrap levels, machine down-time and related costs, and due to costs incurred with overtime and other expediting costs to keep up with demand during the peak season for long handled tools. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 5.5%, or $0.3 million, to $6.0 in the first quarter of fiscal 2000, compared to $5.7 million in the comparable period of 1999. As a percentage of net sales, selling, general and administrative expenses increased to 15.5% in the first quarter of fiscal 2000, as compared to 15.4% in the comparable period of 1999. Incremental investments in technology and other key infrastructure areas were partially offset by cost reductions and productivity gains. Operating Income. Operating income decreased $1.1 million, to a profit of $2.9 million for the first quarter of fiscal 2000, compared to a profit of $4.0 million in the comparable period of 1999. The decrease in operating profit for the first quarter was primarily due to the items discussed above. Interest Expense. Interest expense increased $0.8 million, to $1.8 million for the first quarter of fiscal 2000, compared to $1.0 million in the comparable period of 1999. The increase in interest expense was primarily due to higher market rates (LIBOR) and borrowing costs, as a result of the most current amendment to our loan agreement, and higher borrowing levels. The Company is actively pursuing the refinancing of its business needs on a more cost-effective basis. Amortization of Goodwill and Other Expenses, Net. Other expenses, net, including special charges and amortization of goodwill, decreased to $0.4 million in the first quarter of fiscal 2000, compared to $0.7 million in the comparable period of 1999. The decrease in other expenses is primarily due to the absence of acquisition activity related costs and the charges associated with the consolidation of manufacturing facilities for our watering product line, incurred in the prior year. -7- Income Before Income Taxes. Income before income taxes decreased to $0.7 million for the first quarter of fiscal 2000, compared to $2.3 million in the comparable period of 1999. The decreased profit was attributed primarily to the items discussed above. Assets related to our commercial watering product line were determined to be non-strategic and were sold in April 2000. The operating loss related to this product line was $370,000, or $.06 per share, for the first quarter of fiscal 2000, and an expected loss of approximately $100,000 in the second quarter of fiscal 2000. Net Income. Net income was $0.7 million for the first quarter of fiscal 2000, compared to $1.8 million in the comparable period of 1999. Net income per share (basic and diluted) was $0.11 for the first quarter of fiscal 2000 based on a weighted average number of shares outstanding of approximately 6.0 million, compared to net income per share of $0.29 for the comparable period of fiscal 1999, based on a weighted average number of shares outstanding of approximately 6.4 million. Seasonal and Quarterly Fluctuations; Impact of Weather The lawn and garden industry is seasonal in nature, with a high proportion of sales and operating income generated in January through June. Accordingly, our sales tend to be greater during those months. As a result, our operating results depend significantly on the spring selling season. To support this sales peak, we must anticipate demand and build inventories of finished goods throughout the fall and winter. Accordingly, our levels of raw materials and finished goods inventories tend to be at their highest, relative to sales, during the last six months of the year. These factors increase variations in our quarterly results of operations and potentially expose us to greater adverse effects of changes in economic and industry trends. Moreover, actual demand for our products may vary substantially from the anticipated demand, leaving us with excess inventory or insufficient inventory to satisfy customer orders. Weather is the single most important factor in determining market demand for our products and also is the least predictable. For example, while floods in the Midwest adversely affected the sale of most types of lawn and garden equipment in 1992, the severe winter of 1994 resulted in a surge in demand for snow shovels. In addition, bad weather during the spring gardening season, such as that experienced throughout most of the U.S. in the spring of 1995 and 1998, can adversely affect overall annual sales. Liquidity and Capital Resources There have been no significant changes in our liquidity and capital resources as of April 2, 2000 from those discussed in our Annual Report on Form 10-K for the fiscal year ended July 30, 1999. Effects of Inflation We are adversely affected by inflation primarily through the purchase of raw materials, increased operating costs and expenses and higher interest rates. We believe that the effects of inflation on our operations have not been material between the first quarter of fiscal 2000 and the comparable period of 1999. -8- PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders was held on Tuesday, April 11, 2000, for the following purposes: (1) To elect six (6) directors to the Board of Directors, each to serve for terms expiring at the next Annual Meeting of Stockholders, or until their successor is elected and qualified. (2) To ratify the appointment of Ernst & Young LLP as independent certified public accountants for calendar 2000. (3) To approve an amendment increasing the number of shares available for issuance under the 1997 Non-Employee Directors Stock Option Plan. (4) To approve an amendment increasing the number of shares available for issuance under the 1997 Stock Incentive Plan. Management's proposals, as presented in the proxy statement, were approved with the following votes: For Withhold Authority --- ------------------ Proposal (1): William W. Abbott 5,787,776 170,019 Matthew S. Barrett 5,789,476 168,319 John J. Kahl 5,764,803 192,992 Stephen A. Kaplan 5,789,676 168,119 John L. Mariotti 5,787,776 170,019 A. Corydon Meyer 5,789,676 168,119 For Against Abstain --- ------- ------- Proposal (2) 5,866,423 76,618 14,754 Proposal (3) 4,692,111 809,600 23,644 Proposal (4) 4,546,080 956,421 22,854 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. Exhibit Exhibit Number Description 27 Financial Data Schedule. (b) Reports on Form 8-K. None. -9- 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. ACORN PRODUCTS, INC. Date: May 15, 2000 By: /s/ A. Corydon Meyer ------------------------------------- A. Corydon Meyer, President and Chief Executive Officer (Principal Executive Officer) Date: May 15, 2000 By: /s/ John G. Jacob --------------------------------------- John G. Jacob, Vice President and Chief Financial Officer (Principal Financial Officer) -10- ACORN PRODUCTS, INC. AND SUBSIDIARIES FORM 10-Q EXHIBIT INDEX Exhibit Exhibit Number Description 27 Financial Data Schedule. EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-2000 JAN-01-2000 APR-02-2000 548 0 36,852 2,027 30,888 67,324 17,696 1,065 117,430 54,790 0 0 0 78,262 (40,645) 117,430 38,614 38,614 29,753 29,753 103 0 1,827 673 20 653 0 0 0 653 0.11 0.11
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