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 quarterly period ended June 30, 2002 | |||
| OR | |||
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For the Transition period from ____________ to ____________ |
Commission file number 0-20328
AMTROL Inc.
(Exact Name of Registrant as Specified in its Charter)
| Rhode Island | 05-0246955 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
1400 Division Road, West Warwick, RI 02893-1008
Registrant’s telephone number, including area code: (401) 884-6300
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 o .
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: $.01 Par Value: 100 shares of Common stock as of August 14, 2002.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2002
INDEX
| PAGE | ||||||
| PART I. | Financial Information | |||||
| Item 1. |
Consolidated Balance Sheets —
June 30, 2002 and December 31, 2001 |
3 | ||||
Consolidated Statements of Operations —
For the Quarter and Six Months Ended June 30, 2002
and June 30, 2001 |
4 | |||||
Consolidated Statements of Shareholders’ Equity —
For the Six Months Ended June 30, 2002 and June 30, 2001 |
5 | |||||
Consolidated Statements of Cash Flows —
For the Six Months Ended June 30, 2002 and June 30, 2001 |
6 | |||||
Notes to Consolidated Financial Statements |
7 | |||||
| Item 2. |
Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
14 | ||||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
19 | ||||
| PART II. | Other Information | |||||
| Item 1. |
Legal Proceedings |
20 | ||||
| Item 2. |
Changes in Securities and Use of Proceeds |
20 | ||||
| Item 3. |
Defaults Upon Senior Securities |
20 | ||||
| Item 4. |
Submission of Matters to a Vote of Security Holders |
20 | ||||
| Item 5. |
Other Information |
20 | ||||
| Item 6. |
Exhibits and Reports on Form 8-K |
20 | ||||
Signatures |
21 | |||||
2
AMTROL INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
| Unaudited | Audited | ||||||||||
| June 30, 2002 | December 31, 2001 | ||||||||||
ASSETS |
|||||||||||
Current Assets: |
|||||||||||
Cash and cash equivalents |
$ | 1,021 | $ | 983 | |||||||
Accounts receivable, less allowance for doubtful accounts |
33,705 | 28,456 | |||||||||
Inventories |
21,856 | 19,785 | |||||||||
Deferred income taxes — short-term |
1,739 | 1,739 | |||||||||
Prepaid expenses and other |
3,132 | 2,303 | |||||||||
Total current assets |
61,453 | 53,266 | |||||||||
Property, Plant and Equipment, Net |
39,528 | 41,192 | |||||||||
Other Assets: |
|||||||||||
Goodwill |
157,673 | 157,292 | |||||||||
Deferred financing costs |
4,399 | 4,233 | |||||||||
Deferred income taxes — long-term |
7,209 | 7,209 | |||||||||
Other |
1,697 | 1,263 | |||||||||
Total other assets |
170,978 | 169,997 | |||||||||
| $ | 271,959 | $ | 264,455 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|||||||||||
Current Liabilities: |
|||||||||||
Current maturities of long-term debt |
$ | 2,985 | $ | 2,218 | |||||||
Notes payable to banks |
10,568 | 7,930 | |||||||||
Accounts payable |
24,541 | 20,949 | |||||||||
Accrued expenses |
10,316 | 10,856 | |||||||||
Accrued interest |
112 | 752 | |||||||||
Accrued income taxes |
1,584 | 1,959 | |||||||||
Total current liabilities |
50,106 | 44,664 | |||||||||
Other Noncurrent Liabilities |
3,458 | 4,061 | |||||||||
Long Term Debt, Less Current Maturities |
161,330 | 157,511 | |||||||||
Shareholders’ Equity: |
|||||||||||
Capital stock $.01 par value — authorized 1,000 shares,
100 shares issued |
— | — | |||||||||
Additional paid-in capital |
99,273 | 99,273 | |||||||||
Retained deficit |
(39,858 | ) | (36,064 | ) | |||||||
Accumulated other comprehensive loss |
(2,350 | ) | (4,990 | ) | |||||||
Total shareholders’ equity |
57,065 | 58,219 | |||||||||
| $ | 271,959 | $ | 264,455 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
AMTROL INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited — in thousands)
| QUARTER ENDED | SIX MONTHS ENDED | ||||||||||||||||
| June 30, 2002 | June 30, 2001 | June 30, 2002 | June 30, 2001 | ||||||||||||||
Net sales |
$ | 51,123 | $ | 48,785 | $ | 93,665 | $ | 95,219 | |||||||||
Cost of goods sold |
39,464 | 37,512 | 72,086 | 74,352 | |||||||||||||
Gross profit |
11,659 | 11,273 | 21,579 | 20,867 | |||||||||||||
Operating expenses: |
|||||||||||||||||
Selling, general and
administrative |
7,309 | 6,745 | 14,034 | 13,676 | |||||||||||||
Amortization of goodwill |
0 | 1,113 | 0 | 2,226 | |||||||||||||
Income from operations |
4,350 | 3,415 | 7,545 | 4,965 | |||||||||||||
Other income (expense): |
|||||||||||||||||
Interest expense |
(5,115 | ) | (4,944 | ) | (9,923 | ) | (9,826 | ) | |||||||||
Interest income |
8 | 41 | 29 | 74 | |||||||||||||
License and distributorship fees |
15 | 73 | 40 | 146 | |||||||||||||
Other, net |
(664 | ) | 293 | (676 | ) | 607 | |||||||||||
Loss before provision |
|||||||||||||||||
(benefit) for income taxes |
(1,406 | ) | (1,122 | ) | (2,985 | ) | (4,034 | ) | |||||||||
Provision (benefit) for income
taxes |
348 | 173 | 809 | (284 | ) | ||||||||||||
Net loss |
($1,754 | ) | ($1,295 | ) | ($3,794 | ) | ($3,750 | ) | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
AMTROL INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
(Unaudited — in thousands)
Six Months Ended June 30, 2002
| Accumulated Other | |||||||||||||||||||||
| Additional Paid- | Comprehensive | Comprehensive | |||||||||||||||||||
| Common Stock | in Capital | Retained Deficit | Income (Loss) | Income (Loss) | |||||||||||||||||
Balance, December 31, 2001 |
$ | — | $ | 99,273 | $ | (36,064 | ) | $ | (4,990 | ) | $ | — | |||||||||
Net loss |
— | — | (2,040 | ) | — | (2,040 | ) | ||||||||||||||
Derivative instrument valuation adjustment |
— | — | — | 304 | 304 | ||||||||||||||||
Currency translation adjustment |
— | — | — | (262 | ) | (262 | ) | ||||||||||||||
Balance, March 31, 2002 |
— | 99,273 | (38,104 | ) | (4,948 | ) | (1,998 | ) | |||||||||||||
Net loss |
— | — | (1,754 | ) | — | (1,754 | ) | ||||||||||||||
Derivative instrument valuation adjustment |
— | — | — | 204 | 204 | ||||||||||||||||
Currency translation adjustment |
— | — | — | 2,394 | 2,394 | ||||||||||||||||
Balance, June 30, 2002 |
$ | — | $ | 99,273 | $ | (39,858 | ) | $ | (2,350 | ) | $ | (1,154 | ) | ||||||||
Six Months Ended June 30, 2001
| Accumulated Other | |||||||||||||||||||||
| Additional Paid- | Comprehensive | Comprehensive | |||||||||||||||||||
| Common Stock | in Capital | Retained Deficit | Income (Loss) | Income (Loss) | |||||||||||||||||
Balance, December 31, 2000 |
$ | — | $ | 89,903 | $ | (26,649 | ) | $ | (3,382 | ) | $ | — | |||||||||
Net loss |
— | — | (2,455 | ) | — | (2,455 | ) | ||||||||||||||
Repurchase of options and common stock |
— | (141 | ) | — | — | — | |||||||||||||||
Derivative instrument valuation |
— | — | — | (372 | ) | (372 | ) | ||||||||||||||
Currency translation adjustment |
— | — | — | (1,194 | ) | (1,194 | ) | ||||||||||||||
Balance, March 31, 2001 |
— | 89,762 | (29,104 | ) | (4,948 | ) | (4,021 | ) | |||||||||||||
Net loss |
— | — | (1,295 | ) | — | (1,295 | ) | ||||||||||||||
Repurchase of common stock |
— | (100 | ) | — | — | — | |||||||||||||||
Derivative instrument valuation adjustment |
— | — | — | 31 | 31 | ||||||||||||||||
Currency translation adjustment |
— | — | — | (440 | ) | (440 | ) | ||||||||||||||
Balance, June 30, 2001 |
$ | — | $ | 89,662 | $ | (30,399 | ) | $ | (5,357 | ) | $ | (5,725 | ) | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
AMTROL INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited — in thousands)
| SIX MONTHS ENDED | |||||||||||
| June 30, 2002 | June 30, 2001 | ||||||||||
Cash Flows Provided by (Used in) Operating Activities: |
|||||||||||
Net loss |
$ | (3,794 | ) | $ | (3,750 | ) | |||||
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities — |
|||||||||||
Depreciation and amortization |
4,450 | 6,915 | |||||||||
Provision for losses on accounts receivable |
32 | 69 | |||||||||
Changes in operating assets and liabilities |
(5,597 | ) | (7,690 | ) | |||||||
Net cash (used in) operating activities |
(4,909 | ) | (4,456 | ) | |||||||
Cash Flows Provided by (Used in) Investing Activities: |
|||||||||||
Capital expenditures |
(1,006 | ) | (1,543 | ) | |||||||
Net cash (used in) investing activities |
(1,006 | ) | (1,543 | ) | |||||||
Cash Flows Provided by (Used in) Financing Activities: |
|||||||||||
Repayment of debt |
(72,218 | ) | (30,550 | ) | |||||||
Issuance of debt |
78,064 | 36,460 | |||||||||
Repurchase of options and common stock |
— | (241 | ) | ||||||||
Net cash provided by financing activities |
5,846 | 5,669 | |||||||||
Net Decrease in Cash and Cash Equivalents |
(69 | ) | (330 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents |
107 | (22 | ) | ||||||||
Cash and Cash Equivalents, beginning of period |
983 | 704 | |||||||||
Cash and Cash Equivalents, end of period |
$ | 1,021 | $ | 352 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
AMTROL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| 1. | Basis of Presentation | |
| In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly, in accordance with generally accepted accounting principles, the financial position, results of operations and cash flows of AMTROL Inc. and its subsidiaries (“the Company”) for the interim periods presented. Such adjustments consisted of only normal recurring items. The results of operations for the interim periods shown in this report are not necessarily indicative of results for any future interim period or for the entire year. These condensed consolidated financial statements do not include all disclosures associated with annual consolidated financial statements and accordingly should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. | ||
| 2. | Use of Estimates | |
| The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | ||