CATALINA LIGHTING INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

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 0-49881

Catalina Lighting, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Florida
(State or Other Jurisdiction of Incorporation or Organization)

59-1548266
(I.R.S. Employer Identification No.)

18191 N.W. 68th Avenue
Miami, Florida
(Address of Principal Executive Offices)

33015
(Zip Code)

Registrant’s Telephone Number, Including Area Code: (305) 558-4777

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 by checkmark whether the registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange Act). Yes o No x.

The number of shares of the registrant’s common stock, $.01 par value, outstanding as of the close of business on May 2, 2003 was 4,289,873.

CATALINA LIGHTING, INC. AND SUBSIDIARIES

INDEX

			PAGE NO.

PART I	FINANCIAL STATEMENTS

	ITEM 1	Financial Statements:

		Condensed Consolidated Balance Sheets – March 31, 2003 and September 30, 2002	1

		Condensed Consolidated Statements of Earnings – Three and six months ended March 31, 2003 and 2002	3

		Condensed Consolidated Statements of Cash Flows – Six months ended March 31, 2003 and 2002	4

		Notes to Condensed Consolidated Financial Statements	6

	ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

	ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	34

	ITEM 4	Controls and Procedures	34

PART II	OTHER INFORMATION

	ITEM 1	Legal Proceedings	35

	ITEM 4	Submission of Matters to a Vote of Security Holders	35

	ITEM 6	Exhibits and Reports on Form 8-K	36

SIGNATURES

CATALINA LIGHTING, INC. AND SUBSIDIARIES

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

CATALINA LIGHTING, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)

	March 31, 2003		September 30, 2002

	(Unaudited)		(Audited)

Assets
Current assets
Cash and cash equivalents	$	362	$	2,657
Restricted cash equivalents and short-term investments		235		—
Accounts receivable, net of allowance for doubtful accounts of $634 and $446, respectively		28,182		33,814
Inventories		35,865		34,511
Other current assets		5,111		5,660

Total current assets		69,755		76,642
Property and equipment, net		17,211		18,102
Goodwill, net		28,282		28,282
Other intangible assets, net		1,837		2,634
Other assets, net		6,635		5,554

Total assets	$	123,720	$	131,214

(Continued on Page 2)

CATALINA LIGHTING, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (continued)
(In thousands, except share data)

	March 31, 2003			September 30, 2002

	(Unaudited)			(Audited)

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	24,944		$	29,498
Revolving credit facilities		8,550			1,477
Term loans		19,198			3,154
Current maturities of other long-term debt		794			340
Other current liabilities		12,997			13,700

Total current liabilities		66,483			48,169
Revolving credit facilities		408			11,315
Term loans		—			17,574
Subordinated notes		2,921			2,804
Other long-term debt		25			721
Accrued pension and other liabilities		4,605			4,959

Total liabilities		74,442			85,542

Minority interest		1,151			1,144
Stockholders’ equity
Preferred stock, $.01 par value; authorized 1,000,000 shares; none issued		—			—
Common stock, $.01 par value; authorized 20,000,000 shares; issued 4,414,510 shares and 4,414,260, respectively; outstanding 4,286,123 and 4,285,873, respectively		44			44
Additional paid-in capital		38,570			38,119
Retained earnings		11,110			7,623
Deferred compensation		(351	)		—
Accumulated other comprehensive income		1,215			1,203
Treasury stock, at cost, 128,387 shares		(2,461	)		(2,461	)

		48,127			44,528

	$	123,720		$	131,214

See accompanying notes to condensed consolidated financial statements.

CATALINA LIGHTING, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
(In thousands, except per share data)

	Three Months Ended March 31,						Six Months Ended March 31,

	2003			2002			2003			2002

Net sales	$	49,942		$	53,958		$	106,112		$	110,112
Cost of sales		38,872			42,183			83,463			88,419

Gross profit		11,070			11,775			22,649			21,693
Selling, general and administrative expenses		7,941			8,508			15,208			16,732

Operating income		3,129			3,267			7,441			4,961

Other expenses:
Interest expense		(1,039	)		(1,969	)		(2,072	)		(3,962	)
Gain (loss) on disposal of property and equipment, net		19			(963	)		19			(963	)
Other income (expenses)		(48	)		162			(23	)		173

Total other income (expenses)		(1,068	)		(2,770	)		(2,076	)		(4,752	)

Income before income taxes		2,061			497			5,365			209
Income tax expense		721			161			1,878			69

Net income	$	1,340		$	336		$	3,487		$	140

Weighted average number of shares outstanding
Basic		5,555			4,405			5,555			4,382
Diluted		5,787			4,496			5,799			4,418
Earnings per share
Basic	$	0.24		$	0.08		$	0.63		$	0.03
Diluted	$	0.23		$	0.07		$	0.60		$	0.03

See accompanying notes to condensed consolidated financial statements.

CATALINA LIGHTING, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

	Six Months Ended March 31,

	2003		2002

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,487	$	140
Adjustments for non-cash items:

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