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 29, 1995
[ ] 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 5,349,015 Shares Outstanding
as of September 1, 1995.
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page
Condensed Consolidated Balance Sheets
July 29,1995, July 30,1994 and January 28,1995 . . . . . . . 3
Condensed Consolidated Statements of Income (Loss)
Thirteen and Twenty-Six Weeks Ended July 29,1995
and July 30,1994. . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Twenty-Six Weeks Ended July 29,1995 and July 30,1994. . . . . 5
Notes to Condensed Consolidated Unaudited
Financial Statements. . . . . . . . . . . . . . . . . . . . . 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . 9
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 12
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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GREENMAN BROS. INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
July 29, July 30, January 28,
1995 1994 1995
(In thousands)
<CAPTION>
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,952 $ 6,353 $ 10,908
Merchandise inventories 7,207 9,907 4,330
Prepaid expenses, taxes and other 2,674 3,782 2,980
Net assets of discontinued operations 12,469 26,918 24,618
Total current assets 34,302 46,960 42,836
Property, plant and equipment - net 8,049 4,581 5,163
Other assets 48 45 43
Total assets $ 42,399 $ 51,586 $ 48,042
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<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
<S> <C> <C> <C>
Current liabilities:
Trade accounts payable $ 3,929 $ 5,000 $ 2,262
Accrued expenses and taxes 9,150 6,050 4,777
Income taxes payable - - 133
Total current liabilities 13,079 11,050 7,172
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 6,270
6,130 and 6,185 respectively 627 613 619
Capital in excess of par value 26,202 25,652 25,801
Retained earnings 6,283 18,063 18,242
Less: treasury stock, at cost - 924 shares (3,792) (3,792) (3,792)
29,320 40,536 40,870
Total liabilities and stockholders'
equity $ 42,399 $ 51,586 $ 48,042
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
Thirteen Weeks Ended Twenty-Six Weeks Ended
July 29, July 30, July 29, July 30,
1995 1994 1995 1994
<CAPTION>
<S> <C> <C> <C> <C>
Net sales $ 3,939 $ 3,835 $ 7,220 $ 7,843
Costs and expenses:
Cost of product sold including buying
and warehousing costs 2,543 2,575 4,662 5,382
Selling and administrative expenses 3,001 2,189 5,347 4,272
Depreciation 195 137 361 273
Provision for store closings - 3,500 - 3,500
5,739 8,401 10,370 13,427
Operating (loss) (1,800) (4,566) (3,150) (5,584)
Interest income 137 119 272 213
Interest expense (11) (19) (22) (38)
Loss from continuing operations
before income taxes (1,674) (4,466) (2,900) (5,409)
Income taxes (benefit) - (1,787) - (2,164)
Net loss from continuing operations (1,674) (2,679) (2,900) (3,245)
Discontinued operations:
(Loss) from discontinued operations,
net of income tax benefit of $ -0-,
$6, $-0- and $219 respectively (1,074) (8) (1,914) (328)
(Loss) on disposal of discontinued
operations including operating (loss)
of $8,907 during disposal period
(including income taxes of $1,602) (7,145) - (7,145) -
Net loss from discontinued operations (8,219) (8) (9,059) (328)
Net loss $ (9,893) $ (2,687) $ (11,959) $ (3,573)
Net loss per share:
Continuing operations $ (.32) $ (.51) $ (.55) $ (.62)
Discontinued operations (1.55) (.01) (1.72) (.07)
Net loss per share $ (1.87) $ (.52) $ (2.27) $ (.69)
Average shares outstanding 5,287 5,202 5,275 5,201
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
Twenty-Six Weeks Ended
July 29, July 30,
1995 1994
(In thousands)
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net loss from continuing operations $ (2,900) $ (3,245)
Adjustments to reconcile to net cash provided (used):
Depreciation 361 273
Provision for store closings - 3,500
Decrease (increase) in non-cash working capital
accounts:
Merchandise inventories (2,877) (3,589)
Prepaid expenses, taxes and other current assets 306 (2,651)
Trade accounts payable, accrued expenses and taxes 497 2,328
Income taxes (133) (137)
Net cash (used in) continuing operations (4,746) (3,521)
Net loss from discontinued operations (9,059) (328)
Adjustments to reconcile to net cash provided (used):
Depreciation 240 238
Provision for doubtful accounts 186 153
Deferred income taxes 1,602 -
Decrease (increase) in non-cash working capital accounts
and other assets and liabilities 15,757 4,400
Net cash provided by discontinued operations 8,726 4,463
Net cash provided by operating activities 3,980 942
Cash flows from investing activities:
Proceeds from sale of marketable securities - 1,000
Property additions - continuing operations (3,247) (1,105)
Property additions - discontinued operations (93) (755)
Other ( 5) 462
Net cash (used in) investing activities (3,345) (398)
Cash flow from financing activities:
Proceeds from exercise of employees stock options 409 45
Net cash provided by financing activities 409 45
Net increase in cash and cash equivalents 1,044 589
Cash and cash equivalents - beginning of year 10,908 5,764
Cash and cash equivalents - end of period $ 11,952 $ 6,353
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 except for those
associated with the discontinued operations. 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 28, 1995. The
January 28, 1995 Statements of Income (Loss) and Balance Sheet are
restated in this 10Q to reflect the discontinued operation.
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 loss from continuing operations for the periods ended
July 29, 1995 provides no current tax benefit. The effective
income tax rate used for the periods ended July 30, 1994 was
approximately 40%. Income tax expense provided in discontinued
operations for the periods ended July 29, 1995 represents the
Company's requirement for a 100% valuation allowance for the net
deferred tax assets pursuant to SFAS 109.
NOTE 4. On August 31, 1995 the Company adopted a formal plan to discontinue
its wholesale business segment. The plan provides for the sale of
two of the Company's distribution centers and the disposition
through sale or liquidation of substantially all of the operating
assets. The Company is not aware of any material relationship
between prospective purchasers and the Company or any of its
affiliates, any director or officer of the Company, or any
associate of such director or officer.
The operations and net assets of the wholesale business segment are
being accounted for as a discontinued operation, and accordingly,
its operating results and net assets are reported in this manner
in all periods presented in the accompanying consolidated financial
statements. Revenues from such operations were $ 20.8 million and
$ 26.4 million for the thirteen weeks ended July 29, 1995 and July
30, 1994, respectively and $ 41.9 million and $ 49.6 million for
the corresponding twenty-six week periods, respectively.
-6-
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NOTE 5. The following proforma condensed consolidated Statement of Income
(Loss) for the fifty-two weeks ended January 28, 1995 illustrates
the estimated effect of the Company's disposition of its wholesale
distribution industry segment, Greenman Merchandise Services, as
if this transaction had occurred for Statement of Income (Loss)
purposes as of the beginning of the period presented. The pro
forma statement does not purport to represent the results of
operations had such transactions occurred on or at the beginning
of the period indicated or to project the results of operations for
any future date or period.
The pro forma adjustments are based upon available information and
upon certain assumptions that the Company believes are reasonable.
The pro forma statements and accompanying notes should be read in
conjunction with the historical consolidated financial statements
of the Company including the notes thereto.
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Greenman Bros. Inc and Subsidiaries
Pro Forma Condensed Consolidated Statement of Income (Loss)
(Unaudited)
For the Fifty-Two Weeks Ended January 28, 1995
Consolidated Wholesale
As Originally Distribution Pro Forma Pro Forma
Filed Segment Adjustments Consolidated
(in thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Net sales $ 136,502 $ 113,194 $ $ 23,308
Costs and expenses:
Cost of product sold including buying
and warehousing costs 104,782 88,590 16,192
Selling and administrative expenses 32,262 21,998 1,000 11,264
Depreciation 1,101 575 526
Provision for doubtful accounts 250 250 -
Provision for store closings 3,900 - 3,900
142,295 111,413 1,000 31,882
Operating income (loss) (5,793) 1,781 (1,000) (8,574)
Interest income 372 - 372
Interest expense (75) - (75)
Income (loss) before income taxes (5,496) 1,781 (1,000) (8,277)
Income taxes (benefit) (2,102) 685 2,787 -
Net income (loss) $ (3,394) $ 1,096 $ (3,787) $ (8,277)
Net (loss) per share $ (.65) $ (1.59)
Average shares outstanding 5,220 5,220
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Pro forma adjustments to consolidated statement of income (loss) for the
fifty-two weeks ended January 28, 1995 were:
Amount of corporate overhead allocated to
the wholesale distribution segment estimated to
continue. $ 1,000
Income taxes - adjustment related to valuation
allowance required (100%) for net deferred tax
assets. 2,787
$ 3,787
- 8 -
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Thirteen and Twenty-Six Weeks Ended July 29,1995 Compared with
Thirteen and Twenty-Six Weeks Ended July 30, 1994
Results of Operations
The net loss from continuing operations was $1.7 million ($.32 per share) and
$2.9 million ($.55 per share) for the second quarter and six months of the
current year versus $2.7 million ($.51 per share) and $3.2 million ($.62 per
share) for the comparable periods of the prior year.
Sales from continuing operations for the thirteen and twenty-six week periods
ended July 29, 1995 were $3.9 million and $7.2 million respectively,
reflecting an increase of 2.7% for the quarter and 7.9% decrease for the
year-to-date period versus the results of the prior year's comparable
periods. The increase for the second quarter resulted primarily from the
opening of three Noodle Kidoodle stores in the second half of last year and
five stores during the first half of fiscal 1996 partially offset by the
closing of the majority of the Playworld Toy Stores and one leased
department operation during the second half of last year and lower sales in
the remaining Playworld stores. The decrease for the six months was primarily
attributable to the closing of the majority of the Playworld Toy Stores and
one leased department in the second half of last year and lower sales in the
remaining Playworld stores, partially offset by increased Noodle Kidoodle
sales.
Noodle Kidoodle sales are above plan in both periods. Sales of the remaining
Playworld stores decreased 37.2% for the thirteen week period and 37.0% for
the twenty-six week period versus last year as a result of lower inventory
levels including a change of mix to less television promoted current
merchandise.
Cost of goods sold including buying and warehousing costs from continuing
operations decreased as a percent of sales 2.6% and 4.1% for the quarter and
year-to-date periods respectively, versus the results of the prior year's
comparable periods. The decrease for both the thirteen and twenty-six week
periods was primarily due to increased sales in the Noodle Kidoodle stores
which operate with higher margins as well as higher margins in the Playworld
stores.
Operating expenses other than interest and provision for store closings from
continuing operations increased 37.4% and 25.6% for the three and six months
period ended July 29, 1995 respectively, versus the comparable periods of
last year. As a percent of sales expenses increased 20.4% and 21.2% for the
thirteen and twenty-six week periods respectively, versus the prior year.
The increase resulted primarily from the combination of certain opening costs
and a higher cost structure in the Noodle Kidoodle stores than the Playworld
stores. Noodle Kidoodle had eight more stores operating during portions of
this period versus last year.
Provision for store closings of $3.5 million recorded for the thirteen and
twenty-six week periods ended July 30, 1994 represents a one time charge to
cover unusual cost of closing the majority of the Playworld Toy Stores and
one leased department operation.
- 9 -
<PAGE>
Pre-tax interest income increased for both the quarter and year-to-date by
$18,000 and $59,000 respectively, versus last year. Pre-tax interest expense
decreased by $8,000 and $16,000 for the thirteen and twenty-six week periods
respectively, versus last year.
For the thirteen and twenty-six week periods ended July 30, 1994 the Company
recorded an income tax benefit from continuing and discontinued operations
based on an estimated effective tax rate of approximately 40%. There were no
tax benefits provided in the current year periods.
The Company announced on May 31, 1995 that it was seeking a buyer for its
wholesale business. After discussions with numerous interested parties, the
Company determined that it would not receive any offers for significant
portions of the business. A decision was made to close down the business as
of August 31, 1995 and liquidate the remaining assets of that business.
Discontinued operations include the wholesale distribution industry segment
operating as Greenman Merchandise Services. The $9.1 million ($1.72 per
share) year-to-date loss from discontinued operations includes a $7.1 million
charge related to the disposal of the wholesale segment including estimated
losses through the disposal period, the anticipated sale of two of the
Company's distribution centers and income tax expense of $1.6 million.
Liquidity and Sources of Capital
Cash flows provided from operating activities for the six months ended July
29, 1995, were $4.0 million versus $.9 million for the period ended July 30,
1994. Cash flows used in operating activities from continuing operations for
the twenty-six week period ended July 29, 1995 were $4.7 million versus $3.5
million for the period ended July 30, 1994. Net earning before non-cash
expenditures of depreciation utilized $2.5 million and changes in working
capital components used $2.2 million of cash for the period ended July 29,
1995. For the year-to-date period ended July 30, 1994, net earnings before
non-cash expenditures of depreciation and provision for store closing
provided $.5 million and changes in working capital components used $4.0
million of cash.
Operating activities from discontinued operations provided $8.7 million for
the six months ended July 29, 1995 versus $4.5 million for the period ended
July 30, 1994. Net earnings before non-cash expenditures of depreciation,
provision for doubtful accounts and deferred income taxes used $7.0 million
of cash and changes in working capital components provided $15.7 million for
the period ended July 29, 1995. For the period ended July 30, 1994 net
earnings before non-cash expenditures of depreciation and provision for
doubtful accounts provided $.1 million of cash and changes in working capital
components provided $4.4 million.
Cash used in investing activities was $3.3 million for the six months ended
July 29, 1995. Property additions from continuing operations utilized $3.2
million and from discontinued operations $.1 million. Cash used in investing
activities for the twenty-six week period ended July 30, 1994 was $.4
million. Property additions from continuing operations used $1.1 million and
from discontinued operations $.8 million 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.
- 10 -
<PAGE>
Cash provided from financing activities of $.4 million for the six months
ended July 29, 1995 was from the exercise of employees stock options.
The Company maintained an average cash and cash equivalent balance of
approximately $9.1 million during the twenty-six week period ended July 29,
1995. These funds were substantially invested in high grade commercial paper.
The Company plans to use the net proceeds of the wholesale liquidation to
help fund the growth of its Noodle Kidoodle retail concept. A total of
approximately $16 million in cash will have been generated from the
dissolution of the wholesale business with approximately $8 million already
realized.
The Company has a line of credit with its primary bank allowing for maximum
borrowing of $12.5 million. Borrowings would be secured by wholesale
inventory and receivables and the availability of the line is subject to
formulas relating to the eligible amount of those assets. The Company has
not required any borrowings for several years. While the Company does not
expect to borrow in this fiscal year, the timing of receipts from the
wholesale liquidation could be such that a small portion of the line may be
utilized temporarily.
The Company also announced that it will change its name to Noodle Kidoodle,
Inc. subject to stockholders approval with the vote expected to take place
in the fourth quarter of this fiscal year.
- 11 -
<PAGE>
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders held July 11, 1995 the
following persons were elected as directors of the Company.
Class 1 Directors: (until the 1998 meeting)
Lester Greenman
Barry W. Ridings
Irwin Tantleff
The following Directors continue in office for the duration of
their terms:
Class 2 Directors: (until the 1996 meeting)
Robin Farkas
Stewart Katz
Class 3 Directors: (until the 1997 meeting)
Stanley Greenman
Joseph A. Madenberg
Robert Stokvis
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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, 1995 STANLEY GREENMAN
Stanley Greenman, Chairman of
the Board, Chief Executive
Officer, Director
(Principal Executive Officer)
Date: September 12, 1995 WILLIAM A. JOHNSON, JR.
William A. Johnson Jr., Vice
President, Chief Financial
Officer and Secretary
(Principal Financial Accounting
Officer)
- 13 -
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-START> JAN-29-1995
<PERIOD-END> JUL-29-1995
<CASH> 11,952
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 7,207
<CURRENT-ASSETS> 34,302
<PP&E> 10,999
<DEPRECIATION> 2,950
<TOTAL-ASSETS> 42,399
<CURRENT-LIABILITIES> 13,079
<BONDS> 0
<COMMON> 627
0
0
<OTHER-SE> 28,693
<TOTAL-LIABILITY-AND-EQUITY> 42,399
<SALES> 7,220
<TOTAL-REVENUES> 7,220
<CGS> 4,662
<TOTAL-COSTS> 4,662
<OTHER-EXPENSES> 5,708
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> (2,900)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,900)
<DISCONTINUED> (9,059)
<EXTRAORDINARY> 0
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<NET-INCOME> (11,959)
<EPS-PRIMARY> (2.27)
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