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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For The Quarter Ended SEPTEMBER 30, 1995
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Commission file number 0-7024
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THE FIRST YEARS INC.
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(Exact name of registrant as specified in its charter)
Massachusetts 04-2149581
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Kiddie Drive, Avon, Massachusetts 02322-1171
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(Address of principal executive offices)
(Zip Code)
(508) 588-1220
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(Registrant's telephone number, including area code)
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(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 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 .
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The number of shares of Registrant's common stock outstanding on October 31,
1995 was 2,256,405.
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<TABLE>
THE FIRST YEARS INC.
INDEX
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PART I - FINANCIAL INFORMATION:
<S> <C> <C>
Condensed Balance Sheets Page 1
Condensed Statements of Income 2
Condensed Statements of Cash Flows 3
Notes to Condensed Financial Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II - OTHER INFORMATION
Other information 6
SIGNATURES 6
</TABLE>
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<TABLE>
THE FIRST YEARS INC.
Condensed Balance Sheets
ASSETS
<CAPTION>
September 30, December 31,
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $629,714 $2,329,041
Accounts receivable, net 14,530,108 9,266,235
Inventories 15,127,500 10,413,835
Prepaid insurance, taxes, etc. 533,874 295,921
Current deferred taxes 624,500 624,500
---------- ----------
Total current assets 31,445,696 22,929,532
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PROPERTY, PLANT, AND EQUIPMENT:
Land 167,266 167,266
Building 3,737,861 3,737,861
Machinery and molds 6,103,732 5,413,075
Furniture and equipment 3,117,860 2,986,905
---------- ----------
Total 13,126,719 12,305,107
Less accumulated depreciation 7,129,055 6,381,854
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Property, plant, and equipment-net 5,997,664 5,923,253
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TOTAL ASSETS $37,443,360 $28,852,785
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $133,333 $133,333
Short-term borrowings 3,400,000 0
Accounts payable and accrued expenses 7,875,459 5,332,871
Federal and state income taxes payable 124,700 218,500
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Total current liabilities 11,533,492 5,684,704
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LONG-TERM DEBT-Less portion due currently 133,334 233,334
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DEFERRED INCOME TAXES 584,800 584,800
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STOCKHOLDERS' EQUITY:
Common stock 225,641 225,043
Paid-In capital 157,629 98,194
Retained earnings 24,808,464 22,026,710
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Total stockholders' equity 25,191,734 22,349,947
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $37,443,360 $28,852,785
========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
Page 1
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<TABLE>
THE FIRST YEARS INC.
Condensed Statements of Income
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- -----------------------
1995 1994 1995 1994
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<S> <C> <C> <C> <C>
INCOME:
Net sales $19,628,352 $13,593,810 $55,506,878 $40,663,171
Interest 1,922 22,124 13,488 39,701
---------- ---------- ---------- ----------
Total income 19,630,274 13,615,934 55,520,366 40,702,872
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of products sold 11,757,707 7,266,623 32,731,171 22,475,067
Selling, general, and
administrative expenses 6,078,890 4,794,866 17,414,767 14,039,385
Interest expense 51,879 5,457 100,122 19,050
---------- ---------- ---------- ----------
Total costs and expenses 17,888,476 12,066,946 50,246,060 36,533,502
---------- ---------- ---------- ----------
INCOME BEFORE TAXES ON
INCOME 1,741,798 1,548,988 5,274,306 4,169,370
PROVISION FOR TAXES ON
INCOME 696,700 644,500 2,109,700 1,640,300
--------- ---------- --------- ---------
NET INCOME $1,045,098 $ 904,488 $3,164,606 $2,529,070
========= ========= ========= =========
EARNINGS PER SHARE $0.45 $0.40 $1.36 $1.12
==== ==== ==== ====
AVERAGE NUMBER OF SHARES
OUTSTANDING 2,344,142 2,248,260 2,335,153 2,248,260
========= ========= ========= =========
CASH DIVIDENDS PAID PER SHARE $0.00 $0.00 $0.17 $0.17
==== ==== ==== ====
</TABLE>
See accompanying notes to condensed financial statements.
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<TABLE>
THE FIRST YEARS INC.
Condensed Statements of Cash Flows for the
Nine Months Ended September 30,
(Unaudited)
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,164,606 $2,529,070
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Depreciation 747,201 630,869
Provision for doubtful accounts 73,009 61,051
Gain on disposal of equipment (200) (9,926)
Increase (decrease) arising from working
capital items:
Accounts receivable (5,336,882) (2,652,030)
Inventories (4,713,665) (720,850)
Prepaid insurance, taxes, etc. (237,953) (228,746)
Accounts payable and accrued expenses 2,542,588 840,672
Federal and state income taxes - net (93,800) 432,500
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Net cash provided by (used for)
operating activities (3,855,096) 882,610
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CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant,
and equiment (821,412) (967,342)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends (382,852) (382,204)
Common stock issued under stock
option plans 60,033 0
Net proceeds from short-term borrowings 3,400,000 0
Repayment of industrial revenue bonds (100,000) (100,000)
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Net cash provided by (used for)
financing activities 2,977,181 (482,204)
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INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,699,327) (566,936)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 2,329,041 2,712,267
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CASH AND CASH EQUIVALENTS, END OF PERIOD $629,714 $2,145,331
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $100,122 $19,050
========== ==========
Income taxes $2,203,500 $1,207,800
========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
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THE FIRST YEARS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Amounts in the accompanying balance sheet as of
December 31, 1994 are condensed from the Company's audited
balance sheet as of that date. All other condensed
financial statements are unaudited but, in the opinion of
the Company, contain all normal and recurring adjustments
necessary to present fairly the financial position as of
September 30, 1995, and the results of operations and cash
flows for the periods ended September 30, 1995 and 1994.
2. The Company has 15,000,000 and 7,500,000 shares of $.10 par
value common stock with 2,256,405 and 2,250,430 shares
issued and outstanding as of September 30, 1995 and December
31, 1994, respectively.
On May 3, 1995 the Board of Directors authorized a $.17
per share annual cash dividend payable on June 1, 1995
to holders of record at the close of business on May 15,1995.
3. Earnings per share of common stock are computed on the
basis of the average number of shares and common share
equivalents outstanding during each quarter. Equivalents
had no material effect on the computation for the three and
nine months ended September 30, 1994. Fully diluted and
primary earnings per share were the same for the three and
nine months ended September 30, 1995.
4. The results of operations for the three and nine month
periods ended September 30, 1995 and 1994 are not necessarily
indicative of the results to be expected for the full year.
5. During 1995, the Company borrowed various amounts
up to $3,400,000 under unsecured lines of credit totaling
$15,000,000 available from banks. As of September 30, 1995 a
balance of $3,400,000 remains outstanding which bears
interest at 8.7%. No other short-term borrowings were
incurred by the Company during 1994 or the first nine months
of 1995.
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
Net sales for the first nine months of 1995 were $55,507,000, an increase of
$14,844,000 or 36.5% as compared to $40,663,000 for the comparable period last
year. The increase was due to new product introductions and expanded retail
distribution in domestic and foreign markets. Net sales particularly benefited
from the introduction of newly licensed "Winnie the Pooh" products and the
introduction of new products that have a higher average selling prices than
products previously offered by the Company.
Cost of products sold for the first nine month of 1995 was $32,731,000, an
increase of $10,256,000 or 45.6% , as compared to $22,475,000 for the
comparable period last year. As a percentage of net sales, cost of products
sold for the first nine months of 1995 increased to 59.0% from 55.3% in the
comparable period of 1994. The increase was due to increased sales of
higher-priced, lower margin items, licensing fees, and air freight shipments
from overseas production facilities incurred primarily in the first three
months of the period. The continued effect of these factors, along with
increased cost of products due to raw material price increases, is expected to
result in some further decline in gross profit margins for the balance of 1995.
Selling, general, and administrative expenses for the first nine months of 1995
were $17,415,000, an increase of $3,376,000 or 24.0% as compared to $14,039,000
over such expenses for the first nine months of 1994. The increase resulted
primarily from costs related to increased sales volume. As a percentage of net
sales, selling, general, and administrative expenses for the first nine months
of 1995 decreased to 31.4% from 34.5% for the comparable period in 1994. The
decrease reflects the economies of scale provided by higher volume of business.
Income tax expense as a percentage of pretax income increased to 40.0% from
39.3% in the comparable period in 1994.
Liquidity and Capital Resources
Net working capital increased by $2,667,000 in the first nine months primarily
due to profitable operations. Net accounts receivable increased by $5,264,000
primarily as a result of increased sales and inventories increased by
$4,714,000 to meet continued demand for the Company's product. Cash decreased
by $1,699,000 primarily resulting from increases in accounts receivable and
inventories which were partially offset by increases in accounts payable,
accrued expenses, and short-term borrowings.
Unsecured lines of credit of $15,000,000, which are subject to annual renewal,
are available from banks. Amounts outstanding under these lines are payable
upon demand by the banks. During 1995, the Company borrowed various
amounts up to $3,400,000 of which $3,400,000 remained outstanding as of
September 30, 1995. The Company did not incur any other short-term borrowings
during 1994 or during the first nine months of 1995.
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PART II - OTHER INFORMATION
Items 1 through 5 - Not Applicable
Item 6: Exhibits and Reports on Form 8-K
(a) Not Applicable
(b) No reports on Form 8-K have been filed during
the past quarter covered by this report.
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.
THE FIRST YEARS INC.
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Registrant
Date 11/13/95 /s/ Benjamin Peltz
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Benjamin Peltz, Senior Vice
President and Treasurer,
Duly Authorized Officer and
Principal Financial Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF THE FIRST YEARS, INC. FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 629,714
<SECURITIES> 0
<RECEIVABLES> 14,715,108
<ALLOWANCES> 185,000
<INVENTORY> 15,127,500
<CURRENT-ASSETS> 31,445,696
<PP&E> 13,126,719
<DEPRECIATION> 7,129,055
<TOTAL-ASSETS> 37,443,360
<CURRENT-LIABILITIES> 11,533,492
<BONDS> 133,334
<COMMON> 225,641
0
0
<OTHER-SE> 24,966,093
<TOTAL-LIABILITY-AND-EQUITY> 37,443,360
<SALES> 55,506,878
<TOTAL-REVENUES> 55,520,366
<CGS> 32,731,171
<TOTAL-COSTS> 50,145,938
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100,122
<INCOME-PRETAX> 5,274,306
<INCOME-TAX> 2,109,700
<INCOME-CONTINUING> 3,164,606
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,164,606
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
</TABLE>
