SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 30, 1994
[ ] 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 1-6083
GREENMAN BROS. INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 11-1771705
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
105 PRICE PARKWAY, FARMINGDALE, NEW YORK 11735
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code (516) 293-5300
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 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days. YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date 5,205,462 Shares
Outstanding as of August 31,1994
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page
Condensed Consolidated Balance Sheets
July 30,1994, July 31,1993 and January 29,1994 . . . . . . . 3
Condensed Consolidated Statements of Income (Loss)
Thirteen and Twenty-Six Weeks Ended July 30,1994
and July 31,1993. . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Twenty-Six Weeks Ended July 30,1994 and July 31,1993. . . . . 5
Notes to Condensed Consolidated Unaudited
Financial Statements. . . . . . . . . . . . . . . . . . . . . 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . 7
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 10
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
<TABLE>
GREENMAN BROS. INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
<CAPTION>
July 30, July 31, January 29,
1994 1993 1994
(in thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,353 $ 10,258 $ 5,764
Short-term investments - 2,000 1,000
Trade receivables - net 16,431 17,193 14,737
Merchandise inventories 41,480 39,728 30,667
Prepaid expenses, prepaid taxes
and other 5,648 2,929 3,171
Total current assets 69,912 72,108 55,339
Property, plant and equipment - net 8,993 6,631 7,644
Other assets 280 828 804
Total assets $ 79,185 $ 79,567 $ 63,787
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<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities:
Trade accounts payable $ 30,460 $ 32,079 $ 14,182
Accrued expenses and taxes 7,233 3,690 4,418
Obligations under capital leases 60 56 60
Income taxes payable - - 137
Total current liabilities 37,753 35,825 18,797
Obligations under capital leases 606 668 636
Deferred income taxes 290 265 290
Stockholders' equity:
Preferred stock - authorized - 500
shares, par value $1.00 (none issued)
Preferred stock - Series A Junior
Participating - authorized - 440
shares, par value $1.00 (none issued)
Common stock - authorized - 10,000
shares, par value $.10 - issued 6,130
6,117 and 6,119 respectively 613 612 612
Capital in excess of par value 25,652 25,594 25,608
Retained earnings 18,063 20,395 21,636
Less: treasury stock, at cost - 924, 511,
and 511 shares respectively (3,792) (3,792) (3,792)
40,536 42,809 44,064
Total liabilities and stockholders'
equity $ 79,185 $ 79,567 $ 63,787
See accompanying notes to Condensed Consolidated Financial Statements.
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<TABLE>
GREENMAN BROS. INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands except per share amounts)
UNAUDITED
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
July 30, July 31, July 30, July 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $ 30,229 $ 30,838 $ 57,397 $ 61,792
Costs and expenses:
Cost of product sold 22,933 23,673 43,786 47,126
Selling and administrative expenses 8,116 7,592 15,731 15,287
Depreciation 260 220 511 430
Provision for store closings 3,500 - 3,500 -
34,809 31,485 63,528 62,843
Operating (loss) (4,580) (647) (6,131) (1,051)
Interest income 119 102 213 226
Interest expense (19) (29) (38) (60)
Loss before income taxes (4,480) (574) (5,956) (885)
Income taxes (benefit) (1,793) (232) (2,383) (354)
Net loss $ (2,687) $ (342) $ (3,573) $ (531)
Net loss per share $ (.52) $ (.06) $ (.69) $ (.10)
Average shares outstanding 5,202 5,353 5,201 5,317
See accompanying notes to Condensed Consolidated Financial Statements
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<TABLE>
GREENMAN BROS. INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
Twenty-Six Weeks Ended
July 30, July 31,
1994 1993
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,573) $ (531)
Adjustments to reconcile to net cash provided (used):
Depreciation 511 430
Provision for doubtful accounts 153 194
Provision for store closings 3,500 -
Decrease (increase) in non-cash working capital
accounts:
Merchandise inventories (10,813) (10,520)
Trade receivables, prepaid expenses and other
current assets (4,324) (3,515)
Trade accounts payable, accrued expenses, taxes
and other 15,593 14,948
Income taxes payable (137) (25)
Net cash provided by operating activities 910 981
Cash flows from investing activities:
Proceeds from sale of short term investments 1,000 987
Property additions (1,860) (457)
Other 524 112
Net cash provided by (used in)
investing activities (336) 642
Cash flows from financing activities:
Purchase of treasury stock - (1,872)
Reduction in obligations under capital leases (30) (28)
Proceeds from exercise of employee stock options 45 -
Net cash provided by (used in) financing
activities 15 (1,900)
Net increase in cash and cash equivalents 589 (277)
Cash and cash equivalents-beginning of year 5,764 10,535
Cash and cash equivalents-end of period $ 6,353 $ 10,258
See accompanying notes to Condensed Consolidated Financial Statements
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GREENMAN BROS. INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the instruction
to Form 10-Q and do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments for a fair statement of the results and financial
position for the interim periods presented have been included. All
such adjustments are of a normal recurring nature. This financial
information should be read in conjunction with the financial
statements and notes thereto included in the registrant's annual
report on Form 10-K for the year ended January 29, 1994.
It should be noted that amounts included in the Financial
Statements of the prior year have been reclassified to conform to
the current year's presentation.
Due to the seasonal nature of the Company's business, results for
the interim period are not necessarily indicative of the results
to be expected for the fiscal year.
NOTE 2.
All highly liquid investments with a maturity of three months or
less are considered to be cash equivalents; investments with
maturities between three and twelve months are considered to be
short-term investments. These investments are stated at cost which
approximates market.
NOTE 3.
Income tax provisions are based on estimated annual effective tax
rates. The effective income tax rates used for both the periods
ended July 30, 1994 and July 31, 1993 were approximately 40%.
NOTE 4.
On August 10, 1994 the Company announced the closing of seven
stores operating under the name Playworld Toy Stores and one leased
department operation. These operations generated revenues of $5.5
million for the first six months of the current year and $16.1
million for all of last year. During the second quarter the
Company took a pre-tax charge of $3.5 million to cover the unusual
costs of the decision to close the Playworld operation including
the writedown of fixed assets and inventories to net realizable
values, severance and certain lease related costs. The total
charge is included in the line captioned provision for store
closings in the operating expense portion of the Condensed
Consolidated Statements of Income (Loss). Operating results are
presented as they normally would have been.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Thirteen and Twenty-Six Weeks Ended July 30, 1994 Compared with
Thirteen and Twenty-Six Weeks Ended July 31, 1993
Results of Operations
Sales for the thirteen and twenty-six week periods ended July 30, 1994 were
$30.2 million and $57.4 million, respectively, reflecting a decrease of 2.0%
and 7.1% from the results of the prior year's comparable periods.
Wholesale sales decreased $1.3 million or 4.7% for the second quarter and
$5.7 million or 10.3% for the year to date versus the same periods of last
year. The decline in wholesale sales in both periods resulted from several
factors. For over a year, the volume and the customer base in the mass
merchandise retail channel has been declining. This trend is expected to
continue, reflecting a movement to direct purchases of major product lines
as well as bankruptcies and consolidation at many of our mass merchandise
customers. In addition, the twenty-six week period reflects a decline in
sales due to an extremely harsh winter in our primary trading area that
impacted shipping and retail sales at many of our customers. These declines
were partially offset by an increase in sales and customer base in the
supermarket and deep discount drug business in both the quarter and year to
date.
Retail sales of our Playworld Toy Stores, Toy Park operation and Noodle
Kidoodle TM operation represented 12.7% and 13.7% of total sales for the
thirteen and twenty-six week periods ended July 30, 1994 respectively,
compared to 10.2% and 10.6% for the same periods of last year. Overall
retail sales increase 22.0% to $3.8 million for the quarter and 19.7% to $7.8
million for the six month period versus last year. Comparable store sales
increased 6.5% to $3.2 million for the thirteen weeks and increased 5.1% to
$6.7 million for the year to date. The balance of the improvement in overall
sales in both the quarter and year to date came from the opening of one
Noodle Kidoodle store in the latter part of the prior year and a second in
the second quarter of this year offset by the closing of two leased
departments. The Company is expecting to open two additional Noodle Kidoodle
Stores this year and is making plans for approximately fifteen for fiscal
1996. On August 10, 1994 the Company has announced that it will be closing
all seven of it's retail stores operating under the name Playworld Toy Stores
and one leased department operation by the end of fiscal 1995. The stores to
be closed represented 11.3% of total annual sales for fiscal 1994.
Gross profit as a percent of sales increased .9% for the quarter and was flat
for the year to date versus the same periods of the prior year. The
improvement in the margin for the quarter reflects a change in sales mix of
higher margin retail sales to total sales. For the year to date period
declines in margin in wholesale were offset by changes in the mix of retail
sales to total sales. Wholesale segment gross profit as a percent of sales
was 21.9% versus 21.6% for the thirteen week period and 21.4% versus 22.2%
for the twenty-six week period. The improvement of .3% in the gross profit
percentage for the second quarter resulted from increased margins in the toy
and stationary product lines as a result of decreased sales to large mass
merchandisers that usually carry lower gross profit rates. The decrease in
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margins of .8% for the year to date period was primarily attributable to
lower sales levels in housewares and stationary product lines that have
traditionally carried higher margins. Margins for the retail segment
increased 2.0% to 39.3% for the thirteen week period and 1.1% to 38.1% for
the year to date, primarily due to volume in the Noodle Kidoodle stores which
operate with higher margins.
Operating expenses other than interest and provision for store closings
increased 7.2% and 3.3% for the quarter and year to date respectively, versus
the comparable periods of last year. The Company's operating expenses as a
percent of sales increased 2.4% for the three month period and 2.9% for the
six month period versus last year. Wholesale segment expenses declined 2.7%
for the thirteen week period and 7.4% for the twenty-six week period versus
the comparable periods of last year. As a percent of sales operating expenses
increased .5% and .8% for the quarter and year to date respectively, versus
the same periods of last year primarily due to lower sales levels. The
operating expenses as a percent of sales for the retail segment increased
6.8% for both the thirteen and twenty-six week periods versus the prior
year's comparable periods. The increase for both the second quarter and year
to date resulted primarily from the opening of Noodle Kidoodle stores.
Pre-tax interest income increased $17,000 for the quarter and decreased
$13,000 for the year to date versus the prior year's comparable periods. The
increase for the three month period was primarily attributable to vendor cash
discounts for early payment of dated invoices. Lower average cash levels and
interest rates decreased interest income in both the quarter and year to date
periods. Interest expense decreased $10,000 and $22,000 for the thirteen and
twenty-six week periods respectively, versus the prior year's comparable
periods.
Provision for store closings of $3.5 million reflects a one time charge to
cover the unusual costs of closing the Playworld Toy Stores and one leased
department operation. These costs include the writedown of fixed assets and
inventories to net realizable values, severance and certain lease related
costs. The Playworld operation incurred a small loss in fiscal 1994 and had
been only marginally profitable for the few years prior. The concept did not
have growth potential and its closing is expected to allow the Company to
better focus on its expansion plan for Noodle Kidoodle as well as providing
approximately $2.0 million of cash to fund that expansion.
The Company recorded an income tax benefit at an estimated effective tax rate
of approximately 40% for the quarter and year to date periods ended July 30,
1994 and July 31, 1993 respectively.
The net loss for the quarter ended July 30, 1994 was $2.7 million ($.52 per
share) versus $.3 million ($.06 per share) for the same period of last year.
For the six months of the current year the net loss was $3.6 million ($.69
per share) versus $.5 million ($.10 per share) for the same period of last
year.
Liquidity and Source of Capital
Cash flows provided from operating activities for the six months ended July
30, 1994, were $.9 million versus approximately $1.0 million for the period
ended July 31, 1993. Net earnings before non-cash expenditures of
depreciation, provision for doubtful accounts and provision for store
closings provided $.6 million and changes in working capital components
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provided $.3 million for the period ended July 30, 1994. For the twenty-six
weeks ended July 31, 1993, net earnings before non-cash expenditures
contributed $.1 million and the balance of the increase from operations
resulted from changes in working capital components.
Cash used in investing activities was $.3 million for the twenty-six week
period ended July 30,1994. Property additions utilized $1.8 million of cash
offset by cash provided from the redemption of U.S. Treasury bills of $1.0
million and proceeds from a life insurance policy of $.5 million. Cash
provided from investing activities for the six month period ended July 31,
1993 was $.6 million. Approximately $1.0 million was provided from the
redemption of U.S. Treasury bills offset by the use of $.4 million of cash
for property additions and other.
Cash utilized for financing activities of $1.9 million for the six months
ended July 31, 1993 was primarily due to the repurchase of 413,600 shares of
the Company's common stock.
The Company maintained an average cash and cash equivalent balance of
approximately $7.8 million during the twenty-six week period ended July 30,
1994. These funds were substantially invested in high grade commercial paper
and tax exempt money market funds.
The Company has an unsecured revolving credit facility from a bank which
currently provides for maximum borrowings of $10.0 million. The Company has
not and does not expect to require any borrowings under this agreement in
fiscal 1995 for its existing businesses.
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Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders held July 7, 1994 the
following persons were elected as directors of the Company.
Class 1 Directors: (until the 1995 meeting)
Lester Greenman
Barry W. Ridings
Class 3 Directors: (until the 1997 meeting)
Stanley Greenman
Joseph A. Madenberg
Robert Stokvis
The following Directors continue in office for the duration of
their terms
Class 1 Directors: (until the 1995 meeting)
Joshua Biblowitz
Class 2 Directors: (until the 1996 meeting)
Robin L. Farkas
Stewart Katz
Benjamin Zdatny
In addition, at the Annual Meeting, the shareholders approved the
Company's 1994 Stock Incentive Plan (the "1994 Plan"), as set forth
in the Proxy Statement dated May 27, 1994 ( the "Proxy Statement").
The holders of 2,638,933 shares voted in favor of the proposal; the
holders of 752,247 shares voted against the proposal; the holders
of 54,470 shares abstained from voting on the proposal; the broker
non-vote was 1,729,069 shares.
The shareholders approved the Company's Outside Directors' 1994
Stock Option Plan (the "Directors' Plan") as described in the Proxy
Statement. The holders of 2,858,639 shares voted in favor of the
proposal; the holders of 530,503 shares voted against the proposal;
the holders of 56,508 shares abstained from voting on the proposal;
the broker non-vote was 1,729,069 shares.
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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.
GREENMAN BROS. INC.
(Registrant)
Date: September 12, 1994 STANLEY GREENMAN
Stanley Greenman, Chairman of
the Board, Chief Executive
Officer, Director
Date: September 12, 1994 WILLIAM A. JOHNSON, JR.
William A. Johnson Jr., Vice
President, Chief Financial
Officer and Secretary
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