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 October 29, 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 of 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 5,261,040 Shares
Outstanding as of November 14, 1994
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TABLE OF CONTENTS
Page
Condensed Consolidated Balance Sheets
October 29, 1994, October 30, 1993 and January 29, 1994 . . . . . . . . 3
Condensed Consolidated Statements of Income
Thirteen and Thirty-Nine Weeks Ended October 29, 1994
and October 30, 1993. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Thirty-Nine Weeks Ended October 29, 1994 and October 30, 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 . . . . . . . . . . . . . . . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
<PAGE>
<TABLE>
GREENMAN BROS. INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
<CAPTION>
October 29, October 30, January 29,
1994 1993 1994
(in thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,620 $ 3,523 $ 5,764
Short-term investments - 1,000 1,000
Trade receivables - net 19,471 22,397 14,737
Merchandise inventories 36,751 41,499 30,667
Prepaid expenses, prepaid taxes
and other 6,288 3,177 3,171
Total current assets 68,130 71,596 55,339
Property, plant and equipment - net 9,669 7,343 7,644
Other assets 227 797 804
Total assets $ 78,026 $ 79,736 $ 63,787
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities:
Trade accounts payable $ 29,656 $ 31,986 $ 14,182
Accrued expenses and taxes 7,083 3,642 4,418
Obligations under capital leases 60 56 60
Income taxes payable - - 137
Total current liabilities 36,799 35,684 18,797
Obligations under capital leases 591 654 636
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 6,185
6,117 and 6,119 respectively 619 612 612
Capital in excess of par value 25,680 25,594 25,608
Retained earnings 17,839 20,719 21,636
Less: treasury stock, at cost - 924 shares (3,792) (3,792) (3,792)
40,346 43,133 44,064
Total liabilities and stockholders'
equity $ 78,026 $ 79,736 $ 63,787
See accompanying notes to Condensed Consolidated Financial Statements.
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GREENMAN BROS. INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands except per share amounts)
UNAUDITED
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net Sales $ 35,374 $ 38,175 $ 92,771 $ 99,967
Cost and expenses:
Cost of product sold 27,221 29,678 71,007 76,804
Selling and administrative expenses 8,309 7,830 24,040 23,117
Depreciation 285 223 796 653
Provision for store closings - - 3,500 -
35,815 37,731 99,343 100,574
Operating income (loss) (441) 444 (6,572) (607)
Interest income 86 125 299 351
Interest expense (18) (29) (56) (89)
Income (loss) before income taxes (373) 540 (6,329) (345)
Income taxes (benefit) (149) 216 (2,532) (138)
Net income (loss) $ (224) $ 324 $ (3,797) $ (207)
Net income (loss) per share $ (.04) $ .06 $ (.73) $ (.04)
Average shares outstanding 5,218 5,193 5,207 5,385
See accompanying notes to Condensed Consolidated Financial Statements.
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GREENMAN BROS. INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
Thirty-Nine Weeks Ended
October 29, October 30,
1994 1993
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (3,797) $ (207)
Adjustments to reconcile to net cash provided (used):
Depreciation 796 653
Provision for bad debts 296 353
Provision for store closings 3,500 -
Decrease (increase) in non-cash working capital
accounts:
Merchandise inventories (6,084) (12,291)
Trade receivables, prepaid taxes and other
current assets (8,147) (9,126)
Trade accounts payable, accrued expenses, taxes
and other 14,639 14,807
Income taxes payable (137) (25)
Net cash provided by (used in) operating activities 1,066 (5,836)
Cash flows from investing activities:
Proceeds from sale of short-term investments 1,000 1,989
Property additions (2,827) (1,411)
Other 583 160
Net cash provided by (used in) investing activities
(1,244) 738
Cash flows from financing activities:
Purchase of treasury stock - (1,872)
Reduction in obligations under capital leases (45) (42)
Proceeds from exercise of employee stock options 79 -
Net cash provided by (used in) financing activities 34 (1,914)
Net (decrease) in cash and cash equivalents (144) (7,012)
Cash and cash equivalents-beginning of the year 5,764 10,535
Cash and cash equivalents-end of the period $ 5,620 $ 3,523
See accompanying notes to Condensed Consolidated Financial Statements
</TABLE>
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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 instructions
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 except for the
provision described in Note 4. 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 the periods ended
October 29, 1994 and October 30, 1993 were 40%. The Balance Sheet
caption for prepaid expenses, prepaid taxes and other current
assets includes $1.9 million of recoverable income taxes in the
current year.
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 $7.7
million for the nine 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 Thirty-Nine Weeks Ended October 29, 1994 Compared with
Thirteen and Thirty-Nine Weeks Ended October 30, 1993
Results of Operations
Sales for the thirteen and thirty-nine week periods ended October 29,1994
were $35.4 million and $92.8 million, respectively, reflecting decreases of
7.3% and 7.2% from the results of the prior year's comparable periods.
Wholesale sales decreased $3.8 million or 10.8% for the third quarter and
$9.4 million or 10.5% 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. These declines were partially offset by an increase in sales and
customer base in the supermarket, chain drug 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 (trademark) operation represented 11.9% and 13.0% of total sales for
the thirteen and thirty-nine week periods ended October 29, 1994
respectively, compared to 8.5% and 9.8% for the same periods of last year.
Overall retail sales increased 29.5% to $4.2 million for the quarter which
reflects increases in sales of $1.4 million and $.3 million for Noodle
Kidoodle and Toy Park, respectively, offset by decreases of $.7 million in
sales for Playworld Toy Stores versus last year. For the nine-months sales
increased 22.9% to $12.0 million reflecting increases of $2.5 million and $.5
million for Noodle Kidoodle and Toy Park, respectively, offset by a decrease
in Playworld Toy Stores sales of $.8 million compared to last year.
Comparable store sales decreased 8.8% to $2.8 million for the thirteen weeks
and increased .9% to $9.5 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 fourth quarter of the prior
year and two this year, offset by the closing of two leased departments. The
retail sales decreases were all in the Playworld operation where the decision
to close stores has impacted the operation. On August 10, 1994 the Company
announced that it will be closing it's retail stores operating under the name
Playworld Toy Stores and one leased department operation by the end of fiscal
1995. Due to leasing issues it is now expected that two of these stores will
remain open indefinitely and consideration is being given to changes in their
format. The Playworld Stores and leased department operation represented
11.3% of total annual sales for fiscal 1994. The Company opened one Noodle
Kidoodle store during the third quarter and one additional store in November
of this year. There are currently four Noodle stores operating and the
Company is making plans for approximately fifteen for fiscal 1996.
Gross profit as a percent of sales increased .7% for the quarter and .3% for
the year to date versus the same periods of the prior year. The improvement
in the margin for both the quarter and year to date reflects the change in
sales mix of higher margin retail sales to total sales. For the thirteen and
thirty-nine week periods declines in margin in wholesale were offset by
changes in the mix of retail sales to total sales. Wholesale segment gross
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profit as a percent of sales was 20.7% versus 21.0% for the thirteen week
period and 21.1% versus 21.7% for the thirty-nine week period. The decline
of .3% and .6% in the gross profit for the third quarter and year to date was
primarily attributable to lower sales levels in housewares and stationery
product lines that have traditionally carried higher margins. Those declines
were partially offset by increased margins in the toy product line as a
result of decreased sales to large mass merchandisers that carry lower gross
profit rates. Margins for the retail segment increased 4.3% to 40.6% for the
thirteen week period and 2.3% to 39.0% for the year to date, primarily due
to volume in the Noodle Kidoodle and Toy Park stores which operate with
higher margins.
Operating expenses other than interest and provision for store closings
increased 6.7% and 4.5% 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 3.2% for the three month period and 3.0% for
the nine month period versus last year. Wholesale segment expenses increased
.8% for the thirteen week period and declined 4.7% for the thirty-nine week
period versus the comparable periods of last year. As a percent of sales
operating expenses in the wholesale segment increased 2.3% and 1.3% for the
quarter and year to date respectively, versus the same periods of last year.
The increase in expenses as a percent of sales reflects the impact of the
revenue decreases which were only partially offset by expense reductions. The
operating expenses as a percent of sales for the retail segment decreased .4%
for the thirteen week period and increased 4.4% for the thirty-nine weeks
period versus the prior year's comparable periods. The decrease for the
quarter resulted from higher overall retail sales levels and lower expenses
in the Playworld operation partially offset by an increase in Noodle Kidoodle
expenses. For the year to date period the increase was primarily
attributable to the opening of Noodle Kidoodle stores and increases in office
personnel required to plan and implement the expansion of that concept.
Pre-tax interest income decreased $39,000 for the quarter and $52,000 for the
year to date. The decline in both the third quarter and year to date was
primarily attributable to lower average cash levels partially offset by
higher average rates. Interest expense decreased $11,000 and $33,000 for the
thirteen and thirty-nine 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 or provision at an estimated
effective tax rate of approximately 40% for the quarter and year to date
periods ended October 29, 1994 and October 30, 1993 respectively.
The net loss for the quarter ended October 29, 1994 was $.2 million ($.04 per
share) versus net income of $.3 million ($.06 per share) for the same period
of last year. For the nine months of the current year the net loss was $3.8
million ($.73 per share) versus $.2 million ($.04 per share) for the same
period of last year.
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<PAGE>
Liquidity and Source of Capital
Cash flows provided from operating activities for the nine months ended
October 29, 1994, were $1.1 million versus cash used of $5.8 million for the
period ended October 30, 1993. Net earnings before non-cash expenditures of
depreciation, provision for doubtful accounts and provision for store closing
provided $.8 million and changes in working capital components provided $.3
million for the period ended October 29, 1994. For the thirty-nine weeks
ended October 30, 1993, net earnings before non-cash expenditures contributed
$.8 million and changes in working capital components required $6.6 million
of cash. The improvement in working capital components for the nine-months
ended October 29, 1994, resulted primarily from decreases in inventory levels
and trade receivables offset by increases in prepaid taxes and decreases in
trade accounts payable.
Cash used in investing activities was $1.2 million for the thirty-nine week
period ended October 29, 1994. Property additions utilized $2.8 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 nine month period ended October
30, 1993 was $.7 million with approximately $2.0 million provided from the
redemption of certain U.S. Treasury securities offset by the use of $1.4
million for property additions and other.
Cash utilized for financing activities of $1.9 million for the nine months
nended October 30, 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 $6.9 million during the thirty-nine week period ended October
29, 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 borrowing of $10.0 million. The Company has
not and does not expect to require any borrowing under this agreement in
fiscal 1995 for its existing businesses.
PART II - OTHER INFORMATION
Item 6. Exhibits
(a) Exhibit 27
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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: December 12, 1994 STANLEY GREENMAN
Stanley Greenman, Chairman of the Board,
Chief Executive Officer, Director
Date: December 12, 1994 WILLIAM A. JOHNSON, JR.
William A. Johnson Jr., Vice President,
Chief Financial Officer and Secretary
<PAGE> - 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-1994
<PERIOD-START> JAN-30-1994
<PERIOD-END> OCT-29-1994
<CASH> 5,620
<SECURITIES> 0
<RECEIVABLES> 20,641
<ALLOWANCES> 1,170
<INVENTORY> 36,751
<CURRENT-ASSETS> 68,130
<PP&E> 17,767
<DEPRECIATION> 8,098
<TOTAL-ASSETS> 78,026
<CURRENT-LIABILITIES> 36,799
<BONDS> 591
<COMMON> 619
0
0
<OTHER-SE> 39,727
<TOTAL-LIABILITY-AND-EQUITY> 78,026
<SALES> 92,771
<TOTAL-REVENUES> 92,771
<CGS> 71,007
<TOTAL-COSTS> 71,007
<OTHER-EXPENSES> 28,040
<LOSS-PROVISION> 296
<INTEREST-EXPENSE> 56
<INCOME-PRETAX> (6,329)
<INCOME-TAX> (2,532)
<INCOME-CONTINUING> (3,797)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,797)
<EPS-PRIMARY> (.73)
<EPS-DILUTED> (.73)
</TABLE>
