Arden Industrial Products Inc · 10-K405 · For 6/30/96

Filed On 9/27/96   ·   SEC File 0-23308   ·   Accession Number 897101-96-834

Annual Report -- [X] Reg. S-K Item 405   ·   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405     Annual Report -- [X] Reg. S-K Item 405                11±    58K 
 2: EX-10.4     Revolving Credit Agreement                             3±    15K 
 3: EX-13       Annual Report to Shareholders                         24±   102K 
 4: EX-23.1     Consent of Independent Auditors                        1      5K 

10-K405   ·   Annual Report -- [X] Reg. S-K Item 405
Document Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 FORM 10-K

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

For the fiscal year ended June 30, 1996           Commission File Number 0-23308

 ARDEN INDUSTRIAL PRODUCTS, INC.
(Exact name of registrant as specified in its charter)

Minnesota                                       41-0980556    
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)                                                  

560 Oak Grove Parkway, Vadnais Heights, Minnesota          55127                
(Address of principal executive offices)                 (Zip Code)             

Registrant's telephone number, including area code (612) 490-6800               

Securities registered pursuant to Section 12(b) of the Act: None                

Securities registered pursuant to Section 12(g) of the Act: Common Stock,       
                                                        par value $.01 per share

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                                

The aggregate market value of the voting stock held by non-affiliates of the    
registrant (3,055,938 shares) at September 11, 1996 was $13,751,721 based on the
closing price of the stock as of that date on the NASDAQ National Market System.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405  
of Regulation S-K is not contained herein, and will not be contained, to the    
best of the registrant's knowledge, in definitive proxy or information          
statements incorporated by reference in Part III of this Form 10-K or any       
amendment to this Form 10-K. [X]                                                

 APPLICABLE ONLY TO CORPORATE ISSUERS:

At September 11, 1996 there were 6,989,456 common shares outstanding.           

DOCUMENTS INCORPORATED BY REFERENCE:

The Registrant's Definitive Proxy Statement of Arden Industrial Products, Inc.  
dated September 26, 1996 ("1996 Proxy Statement"), related to Annual Meeting of 
Shareholders to be held on October 28, 1996 and pages 8 through 20 of the 1996  
Annual Report to Shareholders of Arden Industrial Products, Inc. ("1996 Annual  
Report") are incorporated into Part II and III, respectively.                   

PART I
ITEM 1.   BUSINESS                                                              

INTRODUCTION                                                                    

Arden Industrial Products, Inc. ("Arden" or the "Company") is a national        
distributor of specialty and standard fasteners to the industrial market,       
offering one of the broadest fastener lines in the industry and providing its   
customers with a wide range of value-added services. These services include     
innovative inventory management programs, engineering and design support and    
continuous quality assurance programs, which enable the Company's customers to  
lower their overall costs of purchasing, handling and designing fasteners, and  
assembling their products. Arden distributes fasteners to approximately 7,500   
original equipment manufacturers and other industrial manufacturers, assemblers 
and subassemblies (collectively referred to as "OEMs") that operate in a broad  
range of industries, as well as to other distributors. The Company currently    
operates eight distribution centers in the Midwest and Southeast. The Company   
continues to pursue its objective of increasing its market share in the         
industrial fastener industry through growth in existing markets and expansion   
into new geographic areas.                                                      

COMPANY DEVELOPMENT                                                             

The Company was founded in 1972 under the laws of the State of Minnesota and had
its initial public offering ("IPO") in March 1994. The proceeds from the IPO    
were used to enhance the Company's information system and corporate             
infrastructure to support anticipated sales growth, and expand geographically by
opening three distribution centers in Raleigh, North Carolina, Columbus, Ohio,  
and Davenport, Iowa. In the fourth quarter of fiscal 1996, the Company decided  
to close its Raleigh distribution center in early fiscal 1997, as a means to    
reduce costs and effectively use excess capacity in its Atlanta facility.       

THE INDUSTRIAL FASTENER INDUSTRY                                                

The United States industrial fastener market is estimated to be over $6 billion 
in annual sales at the wholesale level, with fasteners used extensively by OEMs 
in the consumer, commercial, automotive, aerospace and defense industries. The  
market for industrial fasteners generally is related to the state of the economy
and the overall level of manufacturing activity.                                

The industrial fastener industry is highly fragmented, with approximately 800   
full-line industrial fastener distributors and approximately 3,500 other        
distributors that offer fasteners in addition to other products. The market is  
served by large distributors, such as Arden, and a number of smaller competitors
that offer value-added services and compete on the basis of the best value for  
the price for the end user. Additionally, there are many small, regional        
distributors which compete primarily on the basis of price rather than product  
selection and value-added services. In addition, fastener manufacturers may sell
their products directly to OEMs.                                                

In recent years, OEMs have increasingly emphasized lowering their total cost of 
purchasing and handling fasteners. Because fasteners generally have low unit    
prices and OEMs may use hundreds of different fasteners to manufacture or       
assemble a single product, administrative and overhead costs comprise a         
substantial portion of an OEM's fastener related operating costs. As a result,  
the Company believes the number of industrial fastener distributors is          
consolidating as OEMs rely on fewer suppliers to provide a wider array of       
services. These services enable OEMs to lower their costs associated with       
purchasing, receiving, inspecting, storing and managing their fastener supplies 
and their investment in fastener inventories, and improve the quality and       
reliability of their fastener supplies. In addition, OEMs increasingly are      
relying on their distributors for fastener design and application support,      
allowing the OEMs to use their internal engineering resources more efficiently. 

PRODUCTS                                                                        

Arden maintains an extensive inventory of over 40,000 different specialty and   
standard fasteners. Because of its relationships with most leading fastener     
manufacturers, the Company has access to substantially all fasteners its        
customers may require. This comprehensive product line enables the Company to   
provide a complete and reliable supply of fasteners to its customers.           

Specialty fasteners are designed for a specific function and include plastic and
metal clips, clamps, cable ties, inserts, caps, plugs, passive electrical       
connectors and specialized lock, speed and threaded nuts. In general, specialty 
fasteners replace standard fasteners to improve manufacturing productivity by   
speeding the assembly process, or enhancing the appearance, performance or      
durability of the end product.                                                  

The Company's standard fastener products are used for general purposes in a wide
range of applications and include nuts, bolts, screws, washers and rivets.      

SERVICES                                                                        

The Company provides a variety of services designed to add value for its        
customers and to enhance the marketing of the Company's products. The Company   
does not receive a specific fee for any of the value-added services.            

Inventory Management Programs                                                   

The Company provides a range of value-added services for OEM customers,         
including inventory sourcing and purchasing, quality inspection, electronic data
interchange, custom packaging, bin stocking and just-in-time delivery of        
fasteners to the assembly line. These services allow customers to focus on their
assembly operations and reallocate plant and administrative resources, while the
Company manages the customers' fastener needs. Fastener sales under inventory   
management programs have grown from approximately 21% of sales for fiscal 1994, 
to approximately 37% of sales for fiscal 1995 and approximately 44% of sales for
fiscal 1996.                                                                    

Engineering and Design Support                                                  

The Company provides a range of engineering and design services to its          
customers. The Company's product application specialists and direct sales force 
work closely with the engineering staff of OEM customers to recommend the       
appropriate fastener for a new product or to suggest alternative fasteners that 
reduce overall production costs, streamline assembly, or enhance the appearance 
or performance of the end product. In addition, the Company maintains an        
extensive inventory of sample fasteners to aid customers in their design        
decisions.                                                                      

QUALITY ASSURANCE                                                               

The Company has an established continuous quality assurance program. The        
Company's St. Paul distribution center was originally awarded an ISO 9002 -     
Certificate of Compliance in April 1995 and was re-certified in May 1996. The   
ISO 9002 standard, recognized world wide, is a quality assurance program which  
ensures process consistency. The standard independently verifies that the       
Company has developed detailed, written procedures for achieving and maintaining
quality systems throughout the organization, and that the Company consistently  
follows these procedures. Management believes that, in the future, OEM customers
will increasingly require that their suppliers be ISO 9002 certified.           

MARKETING AND SALES                                                             

The Company markets its products and services using a team approach of personnel
responsible for marketing the Company's inventory management programs to OEM    
customers, and maintaining and building relationships with the Company's large  
OEM accounts. The sales force also coordinates engineering and design support   
for OEMs from the Company's product application specialists and the design      
engineers of fastener manufacturers. Customer service representatives receive   
orders, assist in sourcing of products, answer customer questions and arrange   
for fastener samples. Furthermore, the Company advertises in trade journals,    
attends major trade shows and publishes product catalogs.                       

CUSTOMERS                                                                       

The Company has approximately 7,500 OEM and distribution customers. The         
Company's principal customers include Carrier Corporation, Deere & Company,     
Frigidaire Company, Motor Coach Industries, Navistar International              
Transportation Corp., PACCAR, Inc., Polaris Industries Incorporated, Raytheon   
Appliances, Simplicity Manufacturing, Inc., Thermo King Corporation and         
Whirlpool Corporation. Sales to Polaris Industries represented 18%, 13% and 9%  
of the Company's sales for the years ended June 30, 1996, 1995 and 1994,        
respectively. Loss of business with Polaris Industries would have a material    
adverse effect on the Company's operating results.                              

Although the Company focuses on sales to OEM customers, it also sells to other  
fastener distributors. Sales to other distributors enable the Company to        
indirectly serve geographic areas, niche markets and OEM customers not currently
targeted or served by the Company.                                              

SOURCES OF SUPPLY                                                               

The Company strives to develop close working relationships with leading fastener
manufacturers. Arden works closely with many fastener manufacturers to carry an 
extensive selection of specialty and standard fasteners, to be responsive to    
customer requests, and to design customized fasteners. Arden purchases fasteners
from over 900 different suppliers.                                              

Although some specialty fasteners are available from several different          
suppliers, many of these fasteners are available only from a single source. To  
maintain its source of specialty products, the Company has established master or
authorized distributor relationships with many leading specialty fastener       
suppliers. Over 36% of the Company sales were from these suppliers during fiscal
1996. Management believes these supplier relationships are a competitive        
advantage for the Company. The Company has not experienced any material         
shortages in product availability and believes that it enjoys good working      
relationships with its suppliers of specialty fasteners.                        

Standard fastener products are available from a variety of manufacturers. The   
Company purchases such products from several different suppliers of quality     
fasteners from time to time depending on price and availability.                

COMPETITION                                                                     
The industrial fastener industry is highly competitive and fragmented, with     
approximately 800 full-line, industrial fastener distributors and approximately 
3,500 other distributors that offer fasteners, value-added services and other   
products. The Company believes that no distributor supplies more than 5% of the 
market. Because the industrial fastener market is generally mature, sales gains 
will be achieved through increased market share rather than through industry    
expansion.                                                                      

The Company considers C-Tech, a division of ITW Fastex, General Fasteners Co.,  
Purchased Parts Group, and RB&W Corporation to be its principal competitors     
nationally for inventory management programs with OEM customers. The Company    
also competes against local and regional distributors and fastener manufacturers
who sell directly to OEM customers. Some of the Company's competitors are large 
and have significantly greater financial resources than Arden.                  

The Company competes primarily based on its extensive product selection,        
value-added services such as inventory management programs, electronic data     
interchange, engineering and design support, warehouse locations and price. The 
Company believes that OEM customers will continue the trend to reduce the number
of suppliers as a means to decrease their costs.                                

GOVERNMENT REGULATION                                                           

The Fastener Quality Act (the "Fastener Act") regulates the manufacture and     
distribution of certain high grade industrial fasteners in the United States.   
The Fastener Act imposes testing, certification and recordkeeping requirements  
on manufacturers and distributors of these fasteners, including requirements    
that manufacturers certify that the fasteners conform with the relevant         
specifications, and that this conformity has been certified by an accredited    
laboratory. Under the Fastener Act, these fasteners must also be traceable by   
lot to the manufacturer, and distributors are required to maintain lot          
traceability. As a result of the Fastener Act, the Company and other            
distributors of these types of fasteners will be required to enhance their      
recordkeeping and product tracking systems. Final regulations under the Fastener
Act are expected to be implemented in fiscal 1997. As part of the Company's ISO 
9002 certification, the Company continues to enhance its tracking and           
traceability systems. The Company does not anticipate that compliance with the  
Fastener Act will materially increase its costs.                                

EXECUTIVE OFFICERS OF THE COMPANY                                               

The following sets forth biographical information of the executive officers of  
the Company who are not directors. Biographical information of the executive    
officers of the Company who are also directors of the Company can be found in   
the Company's 1996 Proxy Statement, incorporated herein by reference.           

Kim B. Erickson, age 40, is the Vice President, Finance and has been the Chief  
Financial Officer of the Company since he joined the Company in 1990. From 1986 
to 1990, Mr. Erickson served in various capacities with Knutson Mortgage        
Corporation, most recently as First Vice President of Finance. Mr. Erickson is a
certified public accountant.                                                    

The Company's Vice President, Sales and Marketing resigned effective January    
1996 and its Vice President, Operations resigned effective August 1996. The     
Company is conducting an executive search to fill the vacancies.                

EMPLOYEES                                                                       

As of August 31, 1996, the Company had 399 full and part time employees. None of
the Company's employees are covered by collective bargaining agreements. The    
Company believes it has a good working relationship with its employees.         

ITEM 2.   PROPERTIES                                                            

The Company leases nine distribution centers listed below.                      

  LOCATION                 SQUARE FEET   YEAR OPENED
St. Paul, Minnesota               77,750         1971       
Nashville, Tennessee              34,300         1981       
Atlanta, Georgia                  40,000         1987       
Chicago, Illinois                 33,000         1989       
Milwaukee, Wisconsin              14,500         1993       
Raleigh, North Carolina           19,500         1994       
Memphis, Tennessee                11,900         1994       
Columbus, Ohio                    11,600         1994       
Davenport, Iowa                   10,400         1994       

The St. Paul and Nashville facilities are owned by and leased from two          
partnerships controlled by Larry A. Carlson and Brian P. Carlson. Larry A.      
Carlson is the Chairman of the Board and Chief Executive Officer of the Company.
Brian P. Carlson is a director of the Company and the brother of Larry A.       
Carlson. The Company also leases its corporate offices located in Vadnais       
Heights, Minnesota (13,300 square feet, opened 1995) and has a storage facility 
in Roseau, Minnesota (3,200 square feet, opened 1996) to facilitate service to  
the Company's major customer. In the fourth quarter of fiscal 1996, the Company 
decided to close its Raleigh distribution center in early fiscal 1997, as a     
means to reduce costs and effectively use excess capacity in its Atlanta        
facility.                                                                       

ITEM 3.   LEGAL PROCEEDINGS                                                     

As of the date hereof, the Company was not involved in any material legal       
proceedings.                                                                    

ITEM 4.   SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS                  

No matters were submitted during the fourth quarter of the Company's 1996 fiscal
year to a vote of security holders, through the solicitation of proxies or      
otherwise.                                                                      

 PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND                             
RELATED STOCKHOLDER MATTERS                                 

The information contained under the caption "Arden Common Stock" in the 1996    
Annual Report is incorporated herein by reference.                              

ITEM 6.   SELECTED FINANCIAL DATA                                               

The information contained under the caption "Selected Financial Data" in the    
1996 Annual Report is incorporated herein by reference.                         

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS                                  
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS            

The information contained under the caption "Financial and Operations Review" in
the 1996 Annual Report is incorporated herein by reference.                     

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                           

The information contained under the captions "Statements of Income," "Balance   
Sheets," "Statements of Shareholders' Equity," "Statements of Cash Flows,"      
"Notes to Financial Statements," and "Independent Auditor's Report" in the 1996 
Annual Report is incorporated herein by reference.                              

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS                         
ON ACCOUNTING AND FINANCIAL DISCLOSURE                      

None.                                                                           

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                    

The information contained under the captions "Election of Directors" and        
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the   
1996 Proxy Statement is incorporated herein by reference.                       

Information concerning executive officers of the Company who are not directors  
can be found under the caption "Executive Officers of the Company" in Part I    
hereof.                                                                         

ITEM 11.  EXECUTIVE COMPENSATION                                                

The information contained under the captions "Executive Compensation,"          
"Compensation Committee Report on Executive Compensation," "Performance of the  
Company's Stock," and "Election of Directors -- Board of Directors and          
Committees -- Remuneration of Directors" in the 1996 Proxy Statement is         
incorporated herein by reference.                                               

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL                              
OWNERS AND MANAGEMENT                                       

The information contained under the caption "Principal Shareholders" in the 1996
Proxy Statement is incorporated herein by reference.                            

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                        

The information contained under the caption "Certain Relationships and          
Transactions" in the 1996 Proxy Statement is incorporated herein by reference.  

 PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES,                              
AND REPORTS ON FORM 8-K                                     

     (a)      The following documents are filed as a part of the report:

        1.       FINANCIAL STATEMENTS. Audited financial statements as of June
            30, 1996 and 1995 and for each of the three years in the
              period ended June 30, 1996, are filed as part of this Form
               10-K and are incorporated by reference from the 1996 Annual
Report.                                     

2.       FINANCIAL STATEMENT SCHEDULES.                       

                                                                    Page
Independent Auditor's Report on             
                  Financial Statement Schedule                        II-1

Schedule II -- Valuation and                
                  Qualifying Accounts                                 II-2

        3.       EXHIBITS.   The following exhibits are being filed as part of
this Form 10-K:                             

                                                                · Download Table

Exhibit                                                   Method of     
Number     Title                                           Filing       
-------    -----                                          ---------     

                                                                        
3.1        Amended and Restated Articles                     *          
           of Incorporation of the Company                              
3.2        Restated Bylaws of the Company                    *          
4.1        Form of Common Stock Certificate                  *          
4.4        1986 Restated Employee Stock Ownership                       
             Plan and Trust                                  **         
10.1       1993 Stock Option Plan                            *          
10.2       Employee Stock Award Plan                         *          
10.3       Revolving Credit and Term Loan Agreement          *          
10.4       Amended and Restated Revolving                               
             Credit Agreement                             Filed herewith
13         Arden Fasteners 1996 Annual Report             Filed herewith
23.1       Consent of McGladrey & Pullen, LLP             Filed herewith


-------------------------------                                                 

*  Incorporated by reference to the Company's Registration Statement on Form    
S-1, Reg. No. 33-73722                                                    
** Incorporated by reference to the Company's Registration Statement on Form    
S-8, Reg. No. 33-88026                                                    

        (b)      REPORTS ON FORM 8-K. No reports on Form 8-K were filed during
          the last quarter of the period covered by this report.

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange 
Act of 1934, the registrant has duly caused this report to be signed on its     
behalf by the undersigned there unto duly authorized.                           

                           ARDEN INDUSTRIAL PRODUCTS, INC.

Date:  September 26, 1996                                                       
                        By:     /s/ Larry A. Carlson
                                       -----------------------------------
                                   Larry A. Carlson, President and
                           Chief Executive Officer

                       By:     /s/ Kim B. Erickson
                                       -----------------------------------
                                    Kim B. Erickson, Vice President-
                                       Finance and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and  
in the capacities and on the dated indicated.                                   

                       /s/ Larry A. Carlson                    9/26/96
                  ---------------------------------------      -------
               Larry A. Carlson, Chairman of the Board,     Date
   President and Chief Executive Officer

                       /s/ Brian P. Carlson                    9/26/96
                  ---------------------------------------      -------
               Brian P. Carlson, Director                   Date

                       /s/ Joseph C. Levesque                  9/26/96
                  ---------------------------------------      -------
               Joseph C. Levesque, Director                 Date

                       /s/ David D. Koentopf                   9/26/96
                  ---------------------------------------      -------
               David D. Koentopf, Director                  Date

                       /s/ Ann Rockler Jackson                 9/26/96
                  ---------------------------------------      -------
               Ann Rockler Jackson, Director                Date

INDEPENDENT AUDITOR'S REPORT
 ON THE FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Shareholders                                      
Arden Industrial Products, Inc.                                                 
St. Paul, Minnesota                                                             

Our audit of the financial statements of Arden Industrial Products, Inc., d/b/a/
Arden Fasteners, included Schedule II, contained herein, for each the three     
years in the period ended June 30, 1996.                                        

In our opinion, such schedule presents fairly the information required to be set
forth therein in conformity with generally accepted accounting principles.      

                         /s/ McGLADREY & PULLEN, LLP
                     McGLADREY & PULLEN, LLP

Minneapolis, Minnesota                                                          
July 29, 1996                                                                   

 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

                                                        · Enlarge/Download Table

                                                     Additions                             
                                                    (Reductions)                           
                                        Balance at   Charged to                    Balance 
                                        Beginning    Costs and     Recoveries       at end 
Description                              of Year      Expenses    (Deductions)     of Year 
--------------------------------------  ----------   -----------  ------------     --------

                                                                                           
For the year ended June 30, 1994:                                                          
     Allowance for doubtful accounts     $   135     $      0      $      6   (a)  $    141
     Obsolescence reserve                  1,075          650          (904)  (b)       821

For the year ended June 30, 1995:                                                          
     Allowance for doubtful accounts         141          (98)          156   (a)       199
     Obsolescence reserve                    821        1,100          (593)  (b)     1,328
     Warranty reserve                          0          370             0             370

For the year ended June 30, 1996:                                                          
     Allowance for doubtful accounts         199          126             1   (a)       326
     Obsolescence reserve                  1,328        1,877        (1,203)  (b)     2,002
     Warranty reserve                        370          240             0             610


(a)  Uncollected receivables written off, net of recoveries                     
(b)  Obsolete inventory scrapped, net of recoveries                             

Dates Referenced Herein   and   Documents Incorporated By Reference

This 10-K405 Filing		Date		Other Filings
		6/30/94
		6/30/95
For The Period Ended		6/30/96
		7/29/96
		8/31/96
		9/11/96
		9/26/96
Filed On / Filed As Of		9/27/96		DEF 14A
		10/28/96		DEF 14A
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