SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended April 29, 1995 Commission file number 1-4626
THE HARVEY GROUP INC.
(Exact name of registrant as specified in its charter)
New York 13-1534671
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Secaucus Road, Secaucus, New Jersey 07094
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 201-865-3418
_________________________________________________________________________
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 requirements for the past 90 days.
Yes X No ____
Number of shares of common stock of the registrant outstanding as of June 10,
1995.
Common stock par value $1 per share -- 3,164,887 shares.
ITEM 1. FINANCIAL STATEMENTS
PART I QUARTERLY FINANCIAL INFORMATION
THE HARVEY GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands of dollars
except per share data)
Thirteen Weeks
Ended
__________________________
April 29, April 30,
1995 1994
__________________________
REVENUES
Net sales $ 5,160 $ 5,137
Interest and other income 26 27
__________________________
5,186 5,164
COST AND EXPENSES
Cost of sales 3,461 3,463
Selling, general and administrative expenses 2,074 1,917
Interest expense 126 101
__________________________
5,661 5,481
__________________________
(Loss) before income taxes $ (475) $ (317)
Income taxes - -
__________________________
Net (loss) $ (475) $ (317)
Net (loss) per common and common
equivalent share:
Net (loss) $ (.15) $ (.10)
Weighted averaged number of common shares
and common equivalent shares outstanding
during the period 3,164,887 3,164,887
__________________________
Dividends per common share None None
See accompanying notes.
The Harvey Group Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands of dollars)
April 29, January 28,
1995 1995
___________________________
(Unaudited) (Note)
Assets
Current assets:
Cash and cash equivalents $ 35 $ 75
Trade receivables, less allowance
of $25 and $25 677 608
Inventories 3,805 3,695
Amount due from Merkert Enterprises,
including interest receivable of
$3 and $1 90 88
Prepaid expenses and other current
assets 189 217
___________________________
Total current assets 4,796 4,683
Property, plant and equipment, at cost:
Leasehold improvements 1,945 1,941
Furniture, fixtures and equipment 1,946 1,927
___________________________
3,891 3,868
Less accumulated depreciation and
amortization 2,785 2,698
___________________________
1,106 1,170
___________________________
Certificate of deposit, including
interest receivable of $10 and $7 210 207
Equipment under capital leases, less
accumulated depreciation of $279 and
$272 102 123
Amount due from Merkert Enterprises 68 68
Other, less accumulated amortization
of $500 and $587 792 824
___________________________
Total assets $ 7,074 $ 7,075
See accompanying notes.
Note: The balance sheet as of January 28, 1995 has been derived from the
audited consolidated financial statements at that date.
The Harvey Group Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
(In thousands of dollars)
April 29, January 28,
1995 1995
___________________________
(Unaudited) (Note)
Liabilities and Shareholders' (Deficit)
Current liabilities:
Trade accounts payable $ 3,139 $ 2,536
Accrued expenses and other current
liabilities 805 811
Income taxes 11 11
Accrued costs related to discontinued
operations 136 136
Current portion of long-term liabilities 565 530
Current portion of capital lease
obligations 61 74
___________________________
Total current liabilities 4,717 4,098
Long-term liabilities:
Long-term debt 3,150 3,314
Accrued costs related to discontinued
operations 252 257
Other liabilities 609 581
___________________________
4,011 4,152
Capital lease obligations 39 43
Shareholders' (deficit):
Preferred stock, par value $20 per
share; authorized 100,000 shares;
none issued
Common stock, par value $1 per share;
authorized 5,000,000 shares; issued
3,498,968 shares 3,499 3,499
Capital in excess of par 5,899 5,899
Retained (deficit) (10,225) (9,750)
___________________________
(827) (352)
Less treasury stock, at cost
(334,081 and 334,081 shares) (866) (866)
___________________________
Total shareholders' (deficit) (1,693) (1,218)
___________________________
Total liabilities and shareholders'
(deficit) $ 7,074 $ 7,075
See accompanying notes
Note: The balance sheet as of January 28, 1995 has been derived from the
audited consolidated financial statements at that date.
The Harvey Group Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands of dollars)
Thirteen Weeks Ended
___________________________
April 29, April 30,
1995 1995
___________________________
Operating activities
Net (loss) $ (475) $ (317)
Adjustments to reconcile net (loss)
to net cash used in operating
activities:
Depreciation and amortization 160 124
Provision for sales tax and warranty
reserves 12 -
Provision for deferred compensation plans 3 3
Payments on covenant not to compete,
consulting and deferred compensation
arrangements - (18)
Net payments relating to discontinued
operations (5) (3)
Payments of restructured legal costs (20) (16)
Straight-line impact of rent escalations 21 -
Changes in operating assets and liabilities:
Accounts receivable (69) 240
Accrued interest receivable (5) (7)
Inventories (106) (364)
Prepaid expenses and other current assets 28 40
Accounts payable 603 400
Accrued expenses and other current
liabilities and income taxes payable (6) (198)
___________________________
Net cash provided by (used in) operating
activities 141 (116)
Investing activities
Purchase of other assets (24) (20)
Purchases of property, plant and equipment (23) (26)
___________________________
Net cash (used in) investing activities (47) (46)
Financing activities
Net borrowings from revolving line of credit 36 -
Principal payments on note payable to bank
and long-term debt (153) (7)
Principal payments on capital lease
obligations (17) (32)
___________________________
Net cash (used in) financing activities (134) (39)
___________________________
Decrease in cash and cash equivalents (40) (201)
Cash and cash equivalents at beginning
of period 75 226
___________________________
Cash and cash equivalents at end of
period $ 35 $ 25
___________________________
Tax payments for the thirteen weeks ended April 29, 1995 and April 30, 1994
were $0 and $4,000, respectively.
Interest payments for the thirteen weeks ended April 29, 1995 and April 30,
1994 were $132,000 and $123,000, respectively.
See accompanying notes.
THE HARVEY GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with the instructions
to Form 10-Q and, therefore, do not include all information and
footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with
generally accepted accounting principles. In the opinion of
management, adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included
(except adjustments that may result from the possible inability
of the Company to continue as a going concern - see below). The
results for such interim periods are not necessarily indicative
of results to be expected for the year, due to seasonal aspects
of operations of the Company.
In addition, the accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a
going concern. The Company has incurred recurring losses and
negative cash flows from operations for each of the three fiscal
years ending January 28, 1995, as well as the thirteen weeks
ended April 29, 1995, and anticipates that negative cash flows
from operations will continue. These conditions raise
substantial doubt about the Company's ability to continue as a
going concern. On June 16, 1995, the Company's shares of common
stock ceased trading on the American Stock Exchange ("AMEX") as
the Company did not meet AMEX's listing criteria. Management's
plans in regard to these matters principally include seeking to
raise additional equity through a private placement, which will
require converting or extending the maturity of certain
Debentures. Additionally, the Company will look to increase its
sales through merchandising and marketing changes and further
reduce expenses and lower inventory levels. If the Company is
unable to accomplish these objectives or otherwise generate
sufficient levels of cash flows from operations and/or
alternative financing sources, as necessary, the Company may not
be able to continue as a going concern and may be forced to
informally restructure its obligations with its creditors or
formally reorganize or liquidate under the United States
Bankruptcy Code. The financial statements do not include any
adjustments that may result from the possible inability of the
Company to continue as a going concern.
For further information, refer to the consolidated financial
statements and footnotes included in the Company's annual report
on Form 10-K for the fiscal year ended January 28, 1995 and
Management's Discussion and Analysis of Financial Condition and
Results of Operations in Item 2 below.
2. Inventories
Inventories have been valued based upon actual gross profit
percentages applied to sales.
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company reported a consolidated net loss for the thirteen
weeks ended April 29, 1995 of $475,000 ($.15 per share) as
compared to a consolidated net loss of $317,000 ($.10 per share)
for the same period last year.
Total store sales for the thirteen weeks ended April 29, 1995,
inclusive of sales from the Company's new retail store which was
opened in November 1994, increased 1.0% from the same period last
year. Comparable store sales for the quarter ended April 29,
1995 decreased 9.5% from the same period last year. The decrease
in comparable store sales is due from reduced lower margin
corporate sales coupled with soft market conditions experienced
throughout the industry. Additionally, sales have been negatively
impacted as the Company has experienced difficulty in stocking
certain inventory at desired levels.
Cost of sales remained consistent despite increased sales from
the Company's new retail store. Gross margins as a percentage of
sales increased to 32.9% for the first quarter ended April 29,
1995 as compared to 32.6% for the same quarter last year. The
gross profit margins increased as a result of reduced lower
margin corporate sales and increased sales from warranty
contracts which generate higher margins. Higher store margins
were offset by a reduction of purchase discounts received from
the Company's vendors, as a result of cash shortages.
Consolidated selling, general and administrative expenses ("S,G&A
expenses") for the thirteen weeks ended April 29, 1995 increased
8.2% from the same period last year, primarily from expenses
relating to the Company's new retail store. Comparable S,G&A
expenses decreased 2.1% as a result of the Company's ongoing and
effective expense reduction program implemented in fiscal 1994.
Consolidated interest expense increased 24.8% for the first
quarter ended April 29, 1995 as compared to the same period last
year. This increase is the result of a new term loan relating to
the opening of the retail store in November 1994, increased
interest rates and additional borrowings from the Company's
revolving line of credit facility.
Liquidity and Capital Resources
The Company's ratio of current assets to current liabilities was
1.02 at April 29, 1995 as compared to 1.14 at January 28, 1995.
The decrease in the current ratio is primarily due to the use of
cash to fund the Company's first quarter net loss.
The Company has incurred recurring losses and negative cash flows
from operations for each of the three fiscal years in the period
ending January 28, 1995, as well as the thirteen weeks ended
April 29, 1995, and anticipates that negative cash flows from
operations will continue. The loss of liquidity has caused the
Company to delay most of its payments to its suppliers of
inventory and other creditors. As a result, the Company is
experiencing difficulty in stocking inventory at desired levels,
resulting in an adverse effect on current sales.
These conditions raise substantial doubt about the Company's
ability to continue as a going concern. On June 16, 1995, the
Company's shares of common stock ceased trading on the American
Stock Exchange ("AMEX") as the Company did not meet AMEX's
listing criteria. Management's plans in regard to these matters
principally include seeking to raise additional equity through a
private placement, which will require converting or extending the
maturity of certain Debentures. Although the Company previously
announced that it had entered into agreements relating to a
private placement seeking to raise up to $4,200,000 of new equity
for the Company, in view of the Company's current financial
condition, the Company does not believe that such transaction can
be consummated as presently structured. However, the Company is
continuing its efforts to raise equity from the parties to such
previously announced transaction as well as from alternative
financing sources. Additionally, the Company will look to
increase its sales through merchandising and marketing changes
and further reduce expenses and lower inventory levels. If the
Company is unable to accomplish these objectives or otherwise
generate sufficient levels of cash flows from operations and/or
alternative financing sources, as necessary, the Company may not
be able to continue as a going concern and may be forced to
informally restructure its obligations with its creditors or
formally reorganize or liquidate under the United States
Bankruptcy Code. The financial statements do not include any
adjustments that may result from the possible inability of the
Company to continue as a going concern.
For further information, refer to the consolidated financial
statements and footnotes included in the Company's annual report
on Form 10-K for the fiscal year ended January 28, 1995.
During the period, the Company was not significantly impacted by
the effects of inflation.
Part II--OTHER INFORMATION
ITEMS 1 through 5 were not applicable in the quarter ended April
29, 1995.
ITEM 6--Exhibits and Reports on Form 8-K
A. Listing of Exhibits
None
B. On March 10, 1995, the Company filed Form 8-K relating
to the announcement of a proposed private placement
noting that the Company is seeking to raise up to
$4,200,000 in equity, with the issuance of 12,000,000
shares of common stock. See Management's Discussion and
Analysis of Financial Condition and Results of
Operations for further details.
SIGNATURE
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.
The Harvey Group Inc.
By: /s/ Joseph J. Calabrese, Jr.
_____________________________
Joseph J. Calabrese, Jr.
Vice President of Finance,
Secretary & Chief Financial
Officer
Date: June 19, 1995
_____________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> APR-29-1995
<CASH> $ 35,000
<SECURITIES> 0
<RECEIVABLES> $ 702,000
<ALLOWANCES> ($ 25,000)
<INVENTORY> $3,805,000
<CURRENT-ASSETS> $4,796,000
<PP&E> $3,891,000
<DEPRECIATION> ($2,785,000)
<TOTAL-ASSETS> $7,074,000
<CURRENT-LIABILITIES> $4,717,000
<BONDS> $4,050,000
<COMMON> $3,499,000
0
0
<OTHER-SE> ($5,192,000)
<TOTAL-LIABILITY-AND-EQUITY> $7,074,000
<SALES> $5,160,000
<TOTAL-REVENUES> $5,186,000
<CGS> $3,461,000
<TOTAL-COSTS> $2,074,000
<OTHER-EXPENSES> $ 126,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> ($ 475,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ($ 475,000)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> 0
</TABLE>
