-----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, HfKJzeWXb7vztGB5Ev/t5ee60u1hD/SbfnwCW95U+Y8s1Tm6220NNXvwd1JCh8qh KpA/ziGZXnkxwx1yMCm9yg== 0000003753-01-500021.txt : 20020410 0000003753-01-500021.hdr.sgml : 20020410 ACCESSION NUMBER: 0000003753-01-500021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLEN ORGAN CO CENTRAL INDEX KEY: 0000003753 STANDARD INDUSTRIAL CLASSIFICATION: MUSICAL INSTRUMENTS [3931] IRS NUMBER: 231263194 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00275 FILM NUMBER: 1780454 BUSINESS ADDRESS: STREET 1: 150 LOCUST ST STREET 2: PO BOX 36 CITY: MACUNGIE STATE: PA ZIP: 18062 BUSINESS PHONE: 2159662200 MAIL ADDRESS: STREET 1: 150 LOCUST STREET STREET 2: PO BOX 36 CITY: MACUNGIE STATE: PA ZIP: 18062-0036 10-Q 1 n10q092001.txt 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 Quarter Ended September 30, 2001 OR ( ) Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Commission File Number 0-275 Allen Organ Company (Exact name of registrant as specified in its charter) Pennsylvania 23-1263194 (State of Incorporation) (I.R.S. Employer Identification No.) 150 Locust Street, P. O. Box 36, Macungie, Pennsylvania 18062-0036 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 610-966-2200 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 such filing requirements for the past 90 days. Yes X No _____ Number of shares outstanding of each of the issuer's classes of common stock, as of November 8, 2001: Class A - Voting 84,002 shares Class B - Non-voting 1,086,457 shares ALLEN ORGAN COMPANY INDEX Part I Financial Information Item 1.Financial Statements Consolidated Condensed Statements of Income for the nine months ended September 30, 2001 and 2000 Consolidated Condensed Balance Sheets at September 30, 2001 and December 31, 2000 Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 2001 and 2000 Notes to Consolidated Condensed Financial Statements Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3.Quantitative and Qualitative Disclosures About Market Risk. Part II Other Information Item 6.Exhibits and Reports on Form 8-K Signatures PART I FINANCIAL INFORMATION ITEM 1.FINANCIAL STATEMENTS ALLEN ORGAN COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) For the 3 Months Ended: For the 9 Months Ended: 9/30/2001 9/30/2000 9/30/2001 9/30/2000 Net Sales $15,385,870 $17,850,297 $43,764,562 $53,590,064 Cost and Expenses Costs of sales 10,212,368 10,958,677 31,319,047 31,993,121 Selling, general and administrative 3,628,693 4,393,068 11,850,598 12,836,701 Research and development 1,919,752 1,883,479 6,274,846 5,348,287 Costs to close Southampton plant -- -- 530,000 -- Impairment of VIR, Inc. goodwill -- -- 1,400,000 -- Total Costs and Expenses 15,760,813 17,235,224 51,374,491 50,178,109 (Loss) Income from Operations (374,943) 615,073 (7,609,929) 3,411,955 Other Income (Expense) Interest and other income 201,876 522,804 911,448 1,040,218 Interest expense -- (153,261) (315,084) (153,261) (Loss) Gain on sale of property, plant and equipment (175,358) (562) (175,358) 7,686 Minority interests in consolidated subsidiaries -- 8,474 (33,275) 42,977 Total Other Income and Expense 26,518 377,455 387,731 937,620 (Loss) Income Before Taxes (348,425) 992,528 (7,222,198) 4,349,575 Income Tax (Benefit) Provision (85,000) 334,000 (2,768,000) 1,465,000 Net (Loss) Income $ (263,425) $ 658,528 $(4,454,198) $ 2,884,575 Basic and Diluted (Loss) Earnings Per Share $(0.23) $0.56 $(3.81) $2.46 Weighted Average Shares Used in Per Share Calculation 1,170,505 1,170,619 1,170,505 1,170,619 Dividends Per Share-Cash $ 0.14 $0.14 $ 0.42 $0.42 Total Comprehensive (Loss) Income $ (190,231) $ 558,461 $(4,578,269) $ 2,761,997 See accompanying notes. ALLEN ORGAN COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS ASSETS September 30, 2001 Dec 31, 2000 (Unaudited) (Audited) Current Assets Cash $ 712,378 $ 2,712,368 Investments Including Accrued Interest 11,837,373 24,694,377 Accounts Receivable, net of reserves of $372,548 and $428,791, respectively 10,790,221 10,285,659 Inventories: Raw Materials 6,081,871 7,684,892 Work in Process 6,386,605 6,172,954 Finished Goods 4,831,272 5,950,327 Total Inventories 17,299,748 19,808,173 Income Taxes Prepaid and Receivable 3,159,477 13,972 Prepaid Expenses 547,137 304,342 Deferred Income Tax Benefits 1,169,554 1,094,701 Total Current Assets 45,515,888 58,913,592 Property, Plant and Equipment 26,391,481 25,861,781 Less Accumulated Depreciation (14,564,020) (13,338,648) Total Property, Plant and Equipment 11,827,461 12,523,133 Other Assets Prepaid Pension Costs 499,622 506,702 Inventory Held for Future Service 809,689 690,657 Note Receivable 1,955,779 1,556,721 Cash Value of Life Insurance 2,082,650 2,034,867 Deferred Income Tax Benefits 254,476 398,476 Goodwill, net 2,574,831 4,165,002 Other Assets 18,592 18,592 Total Other Assets 8,195,639 9,371,017 Total Assets $65,538,988 $80,807,742 LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Current Liabilities Notes Payable - Bank $ -- $ 8,700,000 Accounts Payable 2,585,357 3,448,119 Other Accrued Expenses 2,163,045 2,816,102 Customer Deposits 3,017,885 2,991,628 Total Current Liabilities 7,766,287 17,955,849 Noncurrent Liabilities Deferred and Other Noncurrent Liabilities 414,575 310,016 Total Liabilities 8,180,862 18,265,865 Minority Interests -- 106,976 STOCKHOLDERS' EQUITY Common Stock 2001 2000 Class A 127,232 shares; 127,232 shares 127,232 127,232 Class B 1,410,761 shares; 1,410,761 shares 1,410,761 1,410,761 Capital in Excess of Par Value 12,758,610 12,758,610 Retained Earnings Balance, Beginning 59,977,002 56,677,650 Net (Loss) Income (4,454,198) 3,954,896 Dividends - Cash 2001 and 2000 (491,615) (655,544) Balance, End 55,031,189 59,977,002 Accumulated Other Comprehensive Income: Unrealized Gain on Investments 15,919 139,990 Sub-Total 69,343,711 74,413,595 Treasury Stock 2001-43,230 Class A shares;324,304 Class B shares (11,985,585) -- 2000-43,230 Class A shares;324,148 Class B shares -- (11,978,694) Total Stockholders' Equity 57,358,126 62,434,901 Total Liabilities and Stockholders' Equity $65,538,988 $80,807,742 See accompanying notes. ALLEN ORGAN COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) For the 3 Months Ended: For the 9 Months Ended: 9/30/2001 9/30/2000 9/30/2001 9/30/2000 CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) income $ (263,425) $ 658,528 $(4,454,198) $2,884,575 Adjustments to reconcile net (loss) income to net cash provided by operating activities Depreciation and amortization 655,515 701,991 2,257,931 1,710,801 Loss from impairment of VIR, Inc. goodwill, Included in operating expenses -- -- 1,400,000 -- Minority interest in consolidated subsidiaries -- (8,474) 33,275 (42,977) Loss (Gain) on sale of property, plant and equipment 175,358 562 175,358 (7,686) Change in assets and liabilities Accounts receivable (2,787,901) (279,737) (504,562) 2,628,951 Inventories 1,329,979 (183,408) 2,389,393 (3,083,536) Income taxes prepaid and receivable (161,762) -- (3,145,505) -- Prepaid expenses 157,945 116,849 (242,795) (106,479) Prepaid pension costs 38,047 (7,851) 7,080 44,399 Other assets -- 22,548 -- 22,548 Deferred income tax benefits 39,246 -- 69,147 -- Accounts payable 706,004 (403,826) (862,762) (737,850) Accrued taxes on income -- (176,530) -- (521,231) Accrued expenses 11,094 212,829 (653,057) 490,461 Customer deposits 24,982 (90,500) 26,257 42,177 Deferred and other noncurrent liabilities 34,853 96,550 104,559 97,576 Net Cash (Used In) Provided by Operating Activities (40,065) 659,531 (3,399,879) 3,421,729 CASH FLOW FROM INVESTING ACTIVITIES Proceeds from the sale of property, plant and equipment 11,250 7,800 11,250 26,706 Additions to goodwill -- (286,788) (156,243) (838,216) Increase in note receivable -- -- (399,058) (405,612) Purchases of plant and equipment (250,087) (870,745) (1,238,984) (2,482,176) Increase in cash value of life insurance (47,783) (346,850) (47,783) (346,850) Net sale (or purchase) of short-term investments 208,801 (6,932,102) 12,732,933 (5,567,100) Net Cash Provided by (Used in) Investing Activities (77,819) (8,428,685) 10,902,115 (9,613,248) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from bank loans -- 8,000,000 3,300,000 8,000,000 Repayment of bank loans -- -- (12,000,000) -- Proceeds from sale of subsidiary stock -- -- 96,333 -- Reacquired Class B common shares -- -- (6,891) (3,732) Dividends paid in cash (163,865) (163,886) (491,615) (491,659) Subsidiary company stock reacquired from minority shareholders (350,603) -- (400,053) -- Net Cash (Used in) Provided By Financing Activities (514,468) 7,836,114 (9,502,226) 7,504,609 NET (DECREASE) INCREASE IN CASH (632,352) 66,960 (1,999,990) 1,313,090 CASH, BEGINNING 1,344,730 1,455,407 2,712,368 209,277 CASH, ENDING $ 712,378 $1,522,367 $ 712,378 $1,522,367 SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Cash paid for: Income Taxes $ 77,777 $ 510,811 $ 319,777 $2,003,311 Interest $ -- $ 153,261 $ 315,084 $ 153,261 See accompanying notes. ALLEN ORGAN COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.Interim Financial Statements The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management, the information contained herein reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal recurring nature. Certain notes and other information have been condensed or omitted from the interim financial statements presented in the Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the company's 2000 Annual Report on Form 10-K. 2.Impairment of Goodwill During March 2001 the Company recorded a charge to operating expenses of $1,400,000 related to the impairment in the value of goodwill which arose in connection with the acquisition of VIR, Inc. This write down of goodwill is attributable to the downturn in the data communications industry, the combination of VIR into the Company's subsidiary Eastern Research, Inc. and closure of the VIR facility discussed in more detail below, all of which reduced expectations of future cash flows from VIR's operations. 3.Combination of Subsidiaries During April 2001 the Company began combining its Data Communications subsidiaries VIR Linear Switch (VIR) of Southampton, PA into Eastern Research, Inc. (ERI), which is also a subsidiary of the Company. VIR designs, manufactures and markets a number of test access and tech control products for use in customer networks. The combination was completed during the third quarter of 2001 and the Southampton, PA facility has been closed. The combined operations are headquartered at ERI's facility in Moorestown, New Jersey. Manufacturing of some of VIR's products has been moved to ERI's supplier with other manufacturing being transferred to the Macungie, PA plant. The Company has estimated the restructuring charges (including employee severance, benefits and other exit costs) related to this combination and plant closure to be approximately $530,000 of which $360,000 has been paid as of September 30, 2001. The Company believes that the remaining $170,000 of accrued termination costs is adequate to cover the estimated remaining expenditures. 4.Financing During June 2001 Eastern Research, Inc. repaid all outstanding bank loans totaling $12,000,000 with funds provided by Allen Organ Company. The Company originally obtained these loans to give ERI financial autonomy as it explored strategic alternatives. As a result of the changes in the financial markets, the Company decided to repay the outstanding loans to eliminate the costs related to this financing. 5.New Accounting Standards Effective January 1, 2001, the Company adopted Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. This standard requires that all derivative instruments be reported on the balance sheet at fair value and establishes criteria for designation and effectiveness of hedging relationships. The Company has no derivative instruments or hedging activities and therefore this standard will not have an affect on its financial statements. During 2001 the Financial Accounting Standards Board issued the following new Statements that are applicable to the Company. While the Company has not conducted an extensive study to determine the effect of these new pronouncements, it does not feel that they will have a significant affect on its financial statements. SFAS 141, "Business Combinations" - requires the use of the purchase method for all business combinations initiated after June 30, 2001. SFAS 142, "Goodwill and Other Intangible Assets" - replaces the requirement to amortize intangible assets with indefinite lives and goodwill with a requirement for an impairment test. The statement will be adopted beginning 2002. SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" - Establishes one accounting model, used for long-lived assets to be held and used, disposed of by sale or otherwise disposed. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS. Liquidity and Capital Resources: Cash flows from operating activities decreased during the three and nine months ended September 30, 2001 when compared to the same period in 2000, primarily due to operating losses incurred in the Data Communications segment. These decreases were partially offset by reductions in inventory levels in the Musical Instruments, Electronic Assemblies and Data Communications segments. Cash flows from investing activities were used to purchase property and equipment during the nine months ended September 30, 2001 including approximately $478,000 in the Musical Instruments segment, $138,000 in the Electronic Assemblies segment and $618,000 in the Data Communications segment. During June 2001 the Company sold more than $12,000,000 in short term investments to fund the repayment of bank loans discussed in Footnote 4 above. Results of Operations: Sales and Operating Income For the 3 Months Ended For the 9 Months Ended 9/30/2001 9/30/2000 9/30/2001 9/30/2000 Net Sales to Unaffiliated Customers Musical Instruments $ 5,976,634 $ 6,786,023 $18,208,419 $21,295,085 Data Communications 7,960,398 8,280,161 16,770,366 24,110,559 Electronic Assemblies 1,134,936 2,335,438 7,401,992 6,248,354 Audio Equipment 313,902 448,675 1,383,785 1,936,066 Total $15,385,870 $17,850,297 $43,764,562 $53,590,064 Intersegment Sales Musical Instruments $ 10,260 $ 68,022 $ 51,087 $ 248,012 Data Communications 136 57,330 193,574 57,330 Electronic Assemblies -- -- -- 15,577 Audio Equipment 22,081 10,224 41,482 17,156 Total $ 32,477 $ 135,576 $ 286,143 $ 338,075 Income (Loss) from Operations Musical Instruments $ 1,170,937 $ 1,090,758 $ 1,846,125 $ 4,020,315 Data Communications (972,644) (786,980) (9,006,780) (1,290,409) Electronic Assemblies (175,962) 376,931 257,670 976,389 Audio Equipment (397,274) (65,636) (706,944) (294,340) Total $ (374,943) $ 615,073 $(7,609,929) $ 3,411,955 Musical Instruments Segment Sales decreased $809,389 and $3,086,666 respectively, for the three and nine months ended September 30, 2001 when compared to the same periods in 2000. While the order rate for the first nine months of 2001 was approximately equal to 2000. The 2000 sales were higher for the period due to shipments made against a higher order backlog. The gross profit percentage increase to 40% during the three months ended September 30, 2001 from 34% in the same period of 2000. This increase is due to a $450,000 increase in inventory related to an update of the Company's standard product costs to reflect the current level of cost for materials, wages and overhead. The gross profit margin decreased to 31% for the nine months ended September 30, 2001 as compared to 37% in the same period in 2000 due to lower sales over which to absorb fixed costs and changes in product mix. Selling, general and administrative, research and development expenses decreased slightly during the three and nine months ended September 30, 2001 when compared to the same periods in 2000. Data Communications Segment Sales decreased $319,763 and $7,340,193 respectively, for the three and nine months ended September 30, 2001 when compared to the same periods in 2000, resulting in a significant operating loss for the first nine months of 2001. This segment's order rate in the first nine months of 2001 was significantly lower than the same period in 2000. The sales decrease is attributable to a general slowdown in the national economy and a more significant industry-wide slowdown in the Data Communications markets. Some of this segment's products had been sold to Competitive Local Exchange Carriers (CLEC) that were hit hard by the economic down-turn, with many having difficulty raising capital required to continue to build out their networks and deliver services. As a result, many CLEC's have become insolvent. This segment has since redirected its sales and marketing efforts away from CLEC's and has focused on healthier markets for which its product line is well suited, including the wireless and certain international markets. This segment has been successful in increasing its order rate during the third quarter of 2001 to near the sales level of the third quarter of 2000. ERI's current order rate remains at or above the levels of the fourth quarter of 2000. Cost of goods sold for the three and nine months ended September 30, 2001 includes $819,000 and $1,539,000 respectively, of additional non-cash inventory valuation adjustments recorded at VIR, Inc. for slow moving and obsolete inventory associated with discontinued product lines. The result of these adjustments was to decrease gross profit margins by 10% from 47% to 37% in the third quarter and by 9% from 43% to 34% for the nine months ended September 30, 2001. Gross profit margins during the three and nine months ended September 30, 2000 were 46% and 47% respectively. The decrease in the gross profit margins for the nine months ended September 30, 2001 (excluding the inventory valuation adjustments) was due to lower sales volume over which to absorb fixed costs and competitive pressures to lower selling prices of products. Sales and marketing expenditures decreased $569,007 (24%) and $672,703 (11%) during the three and nine months ended September 30, 2001 respectively, when compared to the same periods in 2000. General and administrative expenses decreased $183,313 (24%) and $42,172 (2%) during the three and nine months ended September 30, 2001 respectively, when compared to the same periods in 2000. Research and development expenditures increased $26,124 (2%) and $912,716 (21%) respectively for the three and nine months ended September 30, 2001 when compared to the same periods in 2000. As discussed in Note 2 above, the first quarter of 2001 and nine months ended September 30, 2001 operating expenses includes a charge of $1,400,000 related to the write down of the value of VIR's goodwill. In April 2001 the Company announced plans for restructuring its Data Communications segment. The Company has combined the VIR operations, located in Southampton, PA into ERI with the combined operations being headquartered in Moorestown, NJ. The Southampton, PA facility has be been closed. Manufacture of some of VIR's products has been moved to ERI's supplier with other manufacturing being transferred to the Macungie, PA plant. VIR employed about 30 people with some being transferred to the Moorestown facility. See Note 3 above for additional information on this plant closing. Because of the economic downturn that resulted in this segment's significant reduction in sales volume during the first six months of 2001, the Company took additional steps to reduce its expenditures for this segment. ERI reduced its workforce by 10 positions during the first quarter of 2001 resulting in severance and related costs of approximately $100,000. In April of 2001 ERI reduced its workforce by an additional 11 positions. These additional terminations along with the VIR plant closure costs discussed above resulted in a total restructuring charge for the Data Communications segment of $640,000 which was included in the operating results of the second quarter of 2001. In addition this segment has reduced its planned operating and capital expenditures for the balance of the year. ERI has introduced significant new products during 2001 including the DNX- 88 and an OC3/STM1 interface card for the DNX line, its first optical product. The DNX-88 system scales from 8 to 688 T1/E1 interfaces. It leverages all narrowband and broadband interfaces within the current DNX portfolio, including T1/E1, T3, STS1 and OC3/STM1, while retaining its ability to groom multi-service traffic by performing non-blocking 3-1-0 cross connections. Initial orders for the new products are in line with Company. With the cost reductions and new markets focus listed above the Company previously announced that it plans for the Data Communications segment to approach breakeven from operations in the last quarter of 2001. The Company remains on track to achieve this goal. However, the current economic and market conditions make future sales visibility problematic, which could jeopardize achievement of this goal. Electronic Assemblies Segment Sales decreased $1,200,502 during the third quarter and increased $1,153,638 during the nine months ended September 30, 2001 when compared to the same periods in 2000. The decrease in sales for the third quarter is the result that the severe economic slowdown has had on the Company's contract manufacturing customers. The current order rate is significantly lower than the prior year and is expected to continue at this lower level in future quarters. Because of this decrease the Company has taken actions to reduce its costs at its Macungie, PA plant including reductions in personnel related to this segment of the business. Gross margin for the third quarter was a loss of $(60,076) (5%). The gross profit margin percentage for the nine months ended September 30, 2001 was 8%. Gross profit margins were 20% for the three and nine months ended September 30, 2000. Selling, general and administrative expenses for the three and nine months ended September 30, 2001 increased slightly when compared to the same periods in 2000. Audio Equipment Segment Sales decreased $134,776 and $552,281 for the three and nine months ended September 30, 2001 when compared to the same periods in 2000. Gross profit margins decreased to 20% for the nine months September 30, 2001 as compared to 42% in the same period of 2000 due to lower sales over which to absorb fixed costs. Selling, general and administrative costs decreased slightly during nine months ended September 30, 2001 when compared to the same period in 2000. Legacy Audio has historically sold its products through a direct marketing program. The Company believes that this method of distribution has limited its ability to penetrate the broader market. Legacy has begun implementing plans to distribute its products through a more traditional dealer network. The Company has added independent retail dealers and will continue to do so in a conservative manner to build a quality dealer network. During this period Legacy has been shifting marketing resources to the new method of distribution. In addition, the general economic slowdown has slowed the sales of consumer goods. This has resulted in a sales decrease in direct sales that has not been offset by dealer sales. Other Income and Expense Investment income decreased during the three and nine months ended September 30, 2001 when compared to the same period in 2000 due to lower invested balances. (Loss) Gain on Sale of Property, Plant & Equipment for the three and nine months ended September 30, 2001 includes approximately $158,000 of losses related to the sale or abandonment of property at VIR's Southampton, PA facility that was closed in September 2001. Factors that May Affect Operating Results The statements contained in this report on Form 10-Q that are not purely historical are forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding the Company's expectations, hopes, intentions or strategies regarding the future. Forward looking statements include: statements regarding future products or product development; statements regarding future research and development spending and the Company's marketing and product development strategy, statements regarding future production capacity. All forward looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward looking statements. Readers are cautioned not to place undue reliance on these forward looking statements, which reflect management's opinions only as of the date hereof. Readers should carefully review the risk factors described in other documents the Company files from time to time with the Securities and Exchange Commission, including the Annual Report on Form 10- K. It is important to note that the Company's actual results could differ materially from those in such forward looking statements. Some of the factors that could cause actual results to differ materially are set forth below. The Company has experienced and expects to continue to experience fluctuations in its results of operations. Factors that affect the Company's results of operations include the volume and timing of orders received, changes in global economics and financial markets, changes in the mix of products sold, market acceptance of the Company's and its customer's products, competitive pricing pressures, global currency valuations, the availability of electronic components that the Company purchases from suppliers, the Company's ability to meet increasing demand, the Company's ability to introduce new products on a timely basis, the timing of new product announcements and introductions by the Company or its competitors, changing customer requirements, delays in new product qualifications, the timing and extent of research and development expenses and fluctuations in manufacturing yields. As a result of the foregoing or other factors, there can be no assurance that the Company will not experience material fluctuations in future operating results on a quarterly or annual basis, which would materially and adversely affect the Company's business, financial condition and results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. No change from information disclosed in the Company's 2000 annual report on form 10-K. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (b) Forms 8-K 1.The Company filed a Form 8-K dated July 24, 2001 announcing that its subsidiary Eastern Research, Inc. had been chosen by Telstra Corp. Ltd as a supplier of Time Division Multiplexer equipment for Telstra's Business Data Access Network. 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. Allen Organ Company (Registrant) Date: November 9, 2001 /s/ STEVEN MARKOWITZ Steven Markowitz, President and Chief Executive Officer Date: November 9, 2001 /s/ NATHAN S. ECKHART Nathan S. Eckhart, Vice President-Finance, Chief Financial and Principal Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----