-----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, P0Hus3iLFq22xXEGdpP0BopnmXCKfLyW4McMxQEQB4q//FSFS+V6x0siOFkvLb3s vAK3C5U58zeSiD/WGppTIg== 0000950152-97-008632.txt : 19971216 0000950152-97-008632.hdr.sgml : 19971216 ACCESSION NUMBER: 0000950152-97-008632 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971031 FILED AS OF DATE: 19971215 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACORN PRODUCTS INC CENTRAL INDEX KEY: 0001036713 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 223265462 FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22717 FILM NUMBER: 97738419 BUSINESS ADDRESS: STREET 1: 500 DUBLIN AVENUE CITY: COLUMBUS STATE: OH ZIP: 43216-1930 BUSINESS PHONE: 6142224400 MAIL ADDRESS: STREET 1: 500 DUBLIN AVENUE CITY: COLUMBUS STATE: OH ZIP: 43216-1930 10-Q 1 ACORN PRODUCTS, INC. QUARTERLY REPORT FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For Quarter Ended Commission File Number: OCTOBER 31, 1997 0-22717 ---------------- ------- ACORN PRODUCTS, INC. -------------------- (Exact name of registrant as specified in its charter) DELAWARE 22-3265462 -------- ---------- (State of Incorporation) (IRS Employer Identification Number) 500 DUBLIN AVENUE COLUMBUS, OHIO 43215 -------------------- (Address of principal executive offices) (614) 222-4400 -------------- (Registrant's telephone number, including area code) NOT APPLICABLE (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 twelve (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 ninety (90) days. Yes X No --- --- Indicate the number of shares outstanding for each of the issuer's classes of common stock, as of the latest practicable date. 6,464,105 shares of common stock, $.001 par value, outstanding at December 5, 1997. 2 PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ACORN PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
AUGUST 1, OCTOBER 31, 1997 1997 --------- ----------- (Unaudited) ASSETS Current assets: Cash ................................................. $ 1,509 $ 1,359 Accounts receivable, less allowance for doubtful accounts ($713 and $782 at August 1, 1997 and October 31, 1997, respectively) .............. 18,462 17,406 Inventories .......................................... 27,642 29,518 Prepaids and other current assets .................... $ 3,773 $ 2,449 -------- -------- Total current assets ............................... 51,386 50,732 Property, plant and equipment, net of accumulated depreciation ........................... 15,650 16,238 Goodwill, net of accumulated amortization .............. 29,374 29,173 Other intangible assets ................................ $ 2,480 $ 3,032 -------- -------- Total assets ....................................... $ 98,890 $ 99,175 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Revolving credit facility ............................ $ 12,837 $ 12,830 Accounts payable ..................................... 5,872 7,160 Accrued expenses ..................................... 4,707 4,492 Income taxes payable ................................. 350 16 Other current liabilities ............................ 711 714 -------- -------- Total current liabilities .......................... 24,477 25,212 Long-term debt ......................................... 6,098 6,098 Other long-term liabilities ............................ 4,496 4,419 Net liabilities of discontinued operations ............. 595 546 -------- -------- Total liabilities ................................. 35,666 36,275 Stockholders' equity: Common stock, par value $.001 per share, 20,000,000 shares authorized, 6,464,105 shares issued and outstanding at August 1, 1997 and October 31,1997, respectively ............. 78,391 78,391 Contributed capital-stock options .................... 460 460 Minimum pension liability ............................ (133) (133) Retained earnings (deficit) .......................... (15,494) (15,818) -------- -------- Total stockholders' equity ......................... 63,224 62,900 -------- -------- Total liabilities and stockholders' equity ......... $ 98,890 $ 99,175 ======== ========
See accompanying notes. 2 3 ACORN PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATE)
FOR THE QUARTER ENDED ---------------------------- NOVEMBER 1, OCTOBER 31, 1996 1997 ----------- ----------- (Unaudited) Net sales ..................................... $ 19,679 $ 20,416 Cost of goods sold ............................ 14,507 15,277 ---------- ---------- Gross profit .................................. 5,172 5,139 Selling, general and administrative expenses .. 4,403 4,819 Interest expense .............................. 1,807 519 Amortization of intangibles ................... 201 218 Other expenses, net ........................... 51 41 ---------- ---------- Income (loss) from continuing operations before income taxes ................................ (1,290) (458) Income taxes .................................. -- (134) ---------- ---------- Income (loss) from continuing operations ...... (1,290) (324) Loss from discontinued operations ............. (985) -- ---------- ---------- Net income (loss) ............................. $ (2,275) $ (324) ========== ========== Per Share Data: Income (loss) from continuing operations ...... $ (0.87) $ (0.05) Loss from discontinued operations per share ... (0.66) -- ---------- ---------- Net Income (loss) per share ................... $ (1.53) $ (0.05) ========== ========== Weighted average shares outstanding ........... 1,490,826 6,464,105
See accompanying notes. 3 4 ACORN PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FOR THE THREE MONTHS ENDED -------------------------- NOVEMBER 1, OCTOBER 31, 1996 1997 ----------- ----------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) .................................................. $(2,275) $ (324) Adjustments to reconcile net income (loss) to net cash provided by (used in) continuing operations: Loss from discontinued operations ................................ 985 -- Depreciation and amortization .................................... 740 894 Issuance of stock options ........................................ 120 -- Changes in operating assets and liabilities: Accounts receivable ............................................ (3,222) 1,056 Inventories .................................................... (3,528) (1,876) Other assets ................................................... (2,745) 772 Accounts payable and accrued expenses .......................... 3,071 1,073 Income taxes payable ........................................... (1,218) (334) Other liabilities .............................................. 1,555 (73) ------- ------- Net cash provided by (used in) continuing operations ............... (6,517) 1,188 Net cash provided by (used in) discontinued operations ............. 2,443 (49) ------- ------- Net cash provided by (used in) operating activities ................ (4,074) 1,139 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment, net .................... (437) (1,281) ------- ------- Net cash provided by (used in) investing activities ................ (437) (1,281) CASH FLOWS FROM FINANCING ACTIVITIES: Net activity on revolving loan ..................................... 4,278 (8) Issuance of stock .................................................. 77 -- ------- ------- Net cash provided by (used in) financing activities ................ 4,355 (8) ------- ------- Net increase (decrease) in cash .................................... (156) (150) Cash at beginning of period ........................................ 502 1,509 ------- ------- Cash at end of period .............................................. $ 346 $ 1,359 ======= ======= Interest paid ...................................................... $ 311 $ 362 ======= =======
See accompanying notes 4 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 on Form 10-K for the fiscal year ended August 1, 1997 has not been included. The unaudited interim consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the results of operations of Acorn Products, Inc. and its consolidated subsidiaries (the "Company") for the periods presented and to present fairly the consolidated financial position of the Company as of October 31, 1997. All such adjustments are of a normal recurring nature. 5 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements of the Company and the notes thereto 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 the Company's 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 the Company's Annual Report on Form 10-K for the year ended August 1, 1997, as well as in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on September 18, 1997, as the same may be amended from time to time. THREE MONTHS ENDED OCTOBER 31, 1997 COMPARED TO THREE MONTHS ENDED NOVEMBER 1, 1996 Net Sales. Net sales increased 3.7%, or $737,000, to $20.4 million in the first quarter of fiscal 1998 compared to $19.7 million in the first quarter of fiscal 1997. The increase in net sales reflected $1.6 million of net sales by the Company's injection molding division, which was acquired in February 1997, partially offset by a decline in net sales of snow tools and leaf rakes of approximately $1 million. Gross Profit. Gross profit remained flat at approximately $5.1 million for the first quarter of fiscal 1998 compared to the comparable period in fiscal 1997. Gross margin decreased to 25.2% in the first quarter of fiscal 1998 compared to 26.3% in the first quarter of fiscal 1997. The decrease in gross margin primarily was due to lower overhead absorption rates realized as the Company decreased production to prevent inventory build-up. Gross margin also was adversely affected by lower gross margins on sales by the Company's injection molding division. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 9.4%, or $416,000, to $4.8 million in the first quarter of fiscal 1998 compared to $4.4 million in the first quarter of fiscal 1997. As a percentage of net sales, selling, general and administrative expenses increased to 23.6% in the first quarter of fiscal 1998 from 22.4% in the first quarter of fiscal 1997. The increase primarily resulted from increased sales to commissioned, rather than non-commissioned, accounts, as well as increased trade-show and convention costs. 6 7 Other Expenses, Net. Other expenses decreased $10,000 to $41,000 in the first quarter of fiscal 1998 compared to $51,000 in the first quarter of fiscal 1997. Loss From Continuing Operations. Loss from continuing operations before income taxes decreased $832,000 to $458,000 in the first quarter of fiscal 1998 compared to $1.3 million in the same period of fiscal 1997. The Company recognized a tax benefit of $134,000 in the first quarter of fiscal 1998, bringing the loss from continuing operations to $324,000 for the first quarter of fiscal 1998 compared to a loss from continuing operations of $1.3 million in the first quarter of fiscal 1997. The decrease in loss from continuing operations primarily was due to a $1.3 million reduction in interest expense as a result of the retirement of indebtedness in connection with the Company's initial public offering in July 1997. Net Loss. Net loss decreased $2.0 million to $324,000 in the first quarter of fiscal 1998 compared to $2.3 million in the first quarter of fiscal 1997. The Company incurred a loss from discontinued operations of $985,000 in the first quarter of fiscal 1997. DISPOSITION OF NON-LAWN AND GARDEN BUSINESS OPERATIONS In December 1996, the Company sold substantially all of the assets of VSI Fasteners, Inc. ("VSI"), a distributor of packaged fasteners, for approximately $6.9 million, plus the assumption of approximately $2.3 million of related liabilities. In August 1997, the Company sold substantially all of the assets of McGuire-Nicholas Company, Inc. ("McGuire-Nicholas"), a manufacturer and distributor of leather, canvas and synthetic fabric tool holders and work aprons, for approximately $4.7 million, plus the assumption of approximately $4 million of related liabilities. Final determination of the Company's proceeds from the disposition of McGuire-Nicholas remains subject to certain closing balance sheet adjustments. VSI's and McGuire-Nicholas' results of operations are shown as "Loss from Discontinued Operations" in the consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. Net liabilities of the discontinued VSI and McGuire-Nicholas operations are shown as "net liabilities of discontinued operations" on the consolidated balance sheets appearing elsewhere in this Quarterly Report on Form 10-Q. LIQUIDITY AND CAPITAL RESOURCES There have been no significant changes in the Company's liquidity and capital resources as of October 31, 1997 from those discussed in the Company's Annual Report on Form 10-K for the year ended August 1, 1997. In July 1997, the Company used approximately $9.6 million of the net proceeds from its initial public offering to redeem outstanding preferred stock and pay accumulated dividends thereon, approximately $11.0 million of the net proceeds from its initial public offering to repay a portion of certain subordinated notes and accrued interest thereon and approximately $20.6 million of the net proceeds from its initial public offering to repay a portion of the indebtedness outstanding under its bank credit facility and accrued interest thereon. The Company also exchanged the remaining $24 7 8 million aggregate principal amount of its outstanding subordinated notes for 1,716,049 shares of Common Stock. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS. None. ITEM 2 - CHANGES IN SECURITIES. None. ITEM 3 - DEFAULTS 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 EXHIBIT NUMBER DESCRIPTION 10 Amendment No. 1 to Credit Agreement, dated as of November 24, 1997, between UnionTools, Inc. and Heller Financial, Inc. 27 Financial Data Schedule. 8 9 (b) Reports on Form 8-K. (1) Form 8-K (Item 5) filed September 18, 1997 reporting the cautionary statement for purposes of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. (2) Form 8-K (Item 2) filed August 22, 1997 reporting the completed the sale of substantially all of the assets of Acorn's subsidiary McGuire-Nicholas Company, Inc. 9 10 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: 12/15/97 By: /s/ Gabe Mihaly --------------------------------------------- Gabe Mihaly, President and Chief Executive Officer (Duly Authorized Officer) Date: 12/15/97 By: /s/ Stephen M. Kasprisin --------------------------------------------- Stephen M. Kasprisin, Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 10 11 ACORN PRODUCTS, INC. AND SUBSIDIARIES FORM 10-Q EXHIBIT INDEX EXHIBIT EXHIBIT NUMBER DESCRIPTION 10 Amendment No. 1 to Credit Agreement, dated as of November 24, 1997, between UnionTools, Inc. and Heller Financial, Inc. 27 Financial Data Schedule. EX-10 2 EXHIBIT 10 1 Exhibit 10 AMENDMENT NO. 1 --------------- TO CREDIT AGREEMENT ------------------- This Amendment dated as of November 24, 1997 (this "Amendment"), is entered into by and among UnionTools, Inc., a Delaware corporation ("Borrower"), Heller Financial, Inc., a Delaware corporation, in its capacity as Agent ("Agent"), and each of the Lenders under the Credit Agreement (as defined below), with reference to the following facts: RECITALS -------- A. Lenders are extending various secured financial accommodations to Borrower upon the terms of that certain Amended and Restated Credit Agreement dated as of May 20, 1997 among Borrower, Agent and Lenders (the "Credit Agreement"). B. Borrower, Agent and Lenders desire to amend the Credit Agreement upon the terms and conditions set forth herein. AGREEMENT --------- NOW THEREFORE, in consideration of the foregoing and for the other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by each party hereto, Borrower, Agent and Lenders hereby agree as follows: 1. Defined Terms. Unless otherwise specified herein, any capitalized terms defined in the Credit Agreement shall have the same respective meanings as used herein. 2. Interest Rate Adjustment Date. With respect to the definitions of "Base Rate Margin" and "LIBOR Margin" in subsection 1.2 of the Credit Agreement, the Base Rate Margin and the LIBOR Margin shall be adjusted based upon the pricing table set forth therein on December 1, 1997 and on each subsequent first Business Day of a calendar quarter after Agent has received a new Compliance Certificate delivered by Borrower pursuant to subsection 4.10(c) thereof. Accordingly, December 1, 1997 and each such first Business Day shall be deemed an "Adjustment Date". 3. Restricted Junior Payments. With respect to clause (ii) of subsection 3.5(C) of the Credit Agreement, and without affecting the other restrictions and requirements of such subsection, up to $750,000 in the aggregate of the payments and distributions made by Borrower to Holdings pursuant to such subsection may be used for the expenditures relating to the sale of McGuire - Nichols Company, Inc. and VSI Fasteners, Inc. 4. Total Interest Coverage. With respect to subsection 4.5 of the Credit Agreement, Borrower shall not permit Total Interest Coverage to be less than 3.0:1 during the ten (10) months ended October 31, 1997, and during each twelve (12) month period ending on the last day of any 2 fiscal quarter thereafter. In calculating Total Interest Coverage, the Operating Cash Flow of any acquired Target during the subject period shall be included. 5. Financial Statements. With respect to subsection 4.10(A) of the Credit Agreement, Borrower shall deliver the financial statements and schedules set forth therein on a fiscal quarter basis, as soon as available and in any event within thirty (30) days after the end of each fiscal quarter. 6. Representations and Warranties. Borrower reaffirms that the representations and warranties made to Agent or Lenders in the Credit Agreement and other Loan Documents are true and correct in all material respects as of the date of this Amendment as though made as of such date and after giving effect to this Amendment. In addition, Borrower makes the following representations and warranties to Agent and Lenders, which shall survive the execution of this Amendment: a. The execution, delivery and performance of this Amendment are within Borrower's powers, have been duly authorized by all necessary actions, have received all necessary governmental approvals, if any, and do not contravene any law or any contractual restrictions binding on Borrower. b. This Amendment is the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting the rights of creditors generally. c. No event has occurred and is continuing, or would result from the execution, delivery and/or performance of this Amendment, which constitutes a Default or Event of Default under the Credit Agreement or any other of the Loan Documents, or would constitute such a Default or Event of Default but for the requirement that notice be given or time elapse or both, after giving effect to this Amendment. 7. Continuing Effect of Loan Documents. To the extent of any inconsistencies between the terms of this Amendment and the Credit Agreement, this Amendment shall govern. In all other respects, the Credit Agreement and other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. 8. References. Upon the effectiveness of this Amendment, each reference in any Loan Document to "the Agreement", "hereunder," "herein," "hereof," or of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended hereby. 9. Governing Laws. This Amendment, upon becoming effective, shall be deemed to be a contract made under, governed by, and subject to, and shall be construed in accordance with, the internal laws of the State of Illinois. 2 3 10. Effectiveness. This Amendment shall become effective upon its due execution and delivery by the parties hereto and the due execution and delivery of the following Consent of Guarantor to Agent. 11. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have executed this Amendment as of the date first set forth above, to become effective in the manner set forth above. UNIONTOOLS, INC. By: /s/ Steve Kasprisin -------------------------------- Name: Steve Kasprisin ------------------------------ Title: Vice President ----------------------------- HELLER FINANCIAL, INC., as Agent By: /s/ Joseph F. Romic -------------------------------- Name: Joseph F. Romic ------------------------------ Title: Vice President ----------------------------- HELLER FINANCIAL, INC., as a Lender By: /s/ Joseph F. Romic -------------------------------- Name: Joseph F. Romic ------------------------------ Title: Vice President ----------------------------- SANWA BUSINESS CREDIT CORPORATION, as a Lender By: /s/ Lawrence J. Placek -------------------------------- Name: Lawrence J. Placek ------------------------------ Title: Vice President ----------------------------- 3 4 FLEET CAPITAL CORPORATION, as a Lender By: /s/ Lisa Frederick -------------------------------- Name: Lisa Frederick ------------------------------ Title: Vice President ----------------------------- PNC BANK, OHIO, NATIONAL ASSOCIATION, as a Lender By: /s/ Warren F. Webber -------------------------------- Name: Warren F. Webber ------------------------------ Title: Vice President ----------------------------- BANKBOSTON, N.A., as a Lender By: /s/ Gregory R. D. Clark -------------------------------- Name: Gregory R. D. Clark ------------------------------ Title: Managing Director ----------------------------- STAR BANK, N.A., as a Lender By: /s/ Derek S. Rovdebush -------------------------------- Name: Derek S. Rovdebush ------------------------------ Title: Asst. Vice President ----------------------------- 4 5 CONSENT OF GUARANTOR -------------------- The undersigned, as guarantor of the Obligations of Borrower to Agent and Lenders pursuant to that certain Guaranty dated as of December 27, 1996 (the "Guaranty") hereby acknowledges receipt of a copy of the foregoing Amendment No. 1 and acknowledges, consents and agrees that (i) the Guaranty remains in full force and effect and is hereby reaffirmed, and (ii) the execution and delivery of the foregoing Amendment No. 1 and any and all documents executed in connection therewith shall not alter, amend, reduce or modify its obligations and liability under the Guaranty. Dated: As of November 24, 1997 ACORN PRODUCTS, INC., a Delaware corporation formerly known as Vision Hardware Group, Inc. By: /s/ J. Mitchell Dolloff -------------------------------- Name: J. Mitchell Dolloff ------------------------------ Title: Vice President ----------------------------- 5 EX-27 3 EXHIBIT 27
5 1,000 U.S. 3-MOS JUL-31-1998 AUG-02-1997 OCT-31-1997 1 1,359 0 18,188 (782) 29,518 50,732 24,642 (8,404) 99,175 25,212 0 0 0 78,391 (15,491) 99,175 20,416 20,416 15,277 15,277 5,078 0 519 (458) (134) (324) 0 0 0 (324) (0.05) (0.05)
-----END PRIVACY-ENHANCED MESSAGE-----