<PAGE> 1
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 June 30, 1995
Commission file number 0-7024
THE FIRST YEARS INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2149581
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE KIDDIE DRIVE, AVON, MASSACHUSETTS 02322-1171
(Address of principal executive offices)
(Zip Code)
(508) 588-1220
(Registrant's telephone number, including area code)
KIDDIE PRODUCTS, INC.
(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 .
----- -----
The number of shares of Registrant's common stock outstanding on July 31, 1995
was 2,252,286.
<PAGE> 2
THE FIRST YEARS INC.
INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION:
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 6-8
SIGNATURES 8
</TABLE>
<PAGE> 3
THE FIRST YEARS INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,166,032 $ 2,329,041
Accounts receivable, net 13,634,471 9,266,235
Inventories 13,810,500 10,413,835
Prepaid insurance, taxes, etc 234,832 295,921
Current deferred taxes 624,500 624,500
----------- -----------
Total current assets 29,470,335 22,929,532
----------- -----------
PROPERTY, PLANT, AND EQUIPMENT:
Land 167,266 167,266
Building 3,737,861 3,737,861
Machinery and molds 5,778,628 5,413,075
Furniture and equipment 3,079,047 2,986,905
----------- -----------
Total 12,762,802 12,305,107
Less accumulated depreciation 6,847,009 6,381,854
----------- -----------
Property, plant, and equipment-net 5,915,793 5,923,253
----------- -----------
TOTAL ASSETS $35,386,128 $28,852,785
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 133,333 $ 133,333
Short-term borrowings 3,300,000 0
Accounts payable and accrued expenses 6,381,858 5,332,871
Federal and state income taxes payable 713,923 218,500
----------- -----------
Total current liabilities 10,529,114 5,684,704
----------- -----------
LONG-TERM DEBT-Less portion due currently 166,667 233,334
----------- -----------
DEFERRED INCOME TAXES 584,800 584,800
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock 225,229 225,043
Paid-In capital 116,951 98,194
Retained earnings 23,763,367 22,026,710
----------- -----------
Total stockholders' equity 24,105,547 22,349,947
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $35,386,128 $28,852,785
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
Page 1
<PAGE> 4
THE FIRST YEARS INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
--------------------------- ---------------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INCOME:
Net sales $20,076,749 $13,574,151 $35,878,526 $27,069,361
Interest 2,869 7,082 11,566 17,577
----------- ----------- ----------- -----------
Total income 20,079,618 13,581,233 35,890,092 27,086,938
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of products sold 11,717,221 7,628,324 20,973,464 15,208,444
Selling, general, and
adminstrative expenses 6,178,087 4,608,944 11,335,877 9,244,519
Interest expense 34,810 5,739 48,243 13,593
----------- ----------- ----------- -----------
Total costs and expenses 17,930,118 12,243,007 32,357,584 24,466,556
----------- ----------- ----------- -----------
INCOME BEFORE TAXES ON INCOME 2,149,500 1,338,226 3,532,508 2,620,382
PROVISION FOR TAXES ON INCOME 859,800 508,500 1,413,000 995,800
----------- ----------- ----------- -----------
NET INCOME $ 1,289,700 $ 829,726 $ 2,119,508 $ 1,624,582
=========== =========== =========== ===========
EARNINGS PER SHARE $ 0.55 $ 0.37 $ 0.91 $ 0.72
=========== =========== =========== ===========
AVERAGE NUMBER OF SHARES
OUTSTANDING 2,330,399 2,248,260 2,330,656 2,248,260
=========== =========== =========== ===========
CASH DIVIDENDS PAID PER SHARE $ 0.17 $ 0.17 $ 0.17 $ 0.17
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
Page 2
<PAGE> 5
THE FIRST YEARS INC.
Condensed Statements of Cash Flows for the
Six Months Ended June 30,
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,119,508 $ 1,624,582
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Depreciation 465,155 404,042
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 (4,441,245) (2,895,096)
Inventories (3,396,665) (274,950)
Prepaid insurance, taxes, etc. 61,089 (155,603)
Accounts payable and accrued expenses 1,048,987 506,418
Federal and state income taxes - net 495,423 261,600
---------- ----------
Net cash provided by (used for)
operating activites (3,574,939) (477,882)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant, and
equiptment (457,495) (599,993)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends (382,851) (382,204)
Common stock issued under stock
option plans 18,943 0
Net proceeds from short-term borrowings 3,300,000 0
Repayment of industrial revenue bonds (66,667) (66,667)
---------- ----------
Net cash provided by (used for)
financing activities 2,869,425 (448,871)
---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,163,009) (1,526,746)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 2,329,041 2,712,267
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $1,166,032 $1,185,521
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $ 48,243 $ 13,593
========== ==========
Income taxes $ 917,577 $ 734,200
========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
Page 3
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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 June 30, 1995, and the results of
operations and cash flows for the periods ended June 30, 1995 and June 30,
1994.
2. The Company has 15,000,000 and 7,500,000 shares of $.10 par value common
stock with 2,252,286 and 2,250,430 shares issued and outstanding as of June
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 six months ended June 30, 1994. Fully diluted and primary earnings per
share were the same for the three and six months ended June 30, 1995 and
1994.
4. The results of operations for the three and six month periods ended June 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 $3,300,000 under
unsecured lines of credit totaling $9,000,000 available from banks. As of
June 30, 1995 a balance of $3,300,000 remains outstanding which bears
interest at 8.8%. No other short-term borrowings were incurred by the Company
during 1994 or the first six months of 1995.
Page 4
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net sales for the first six months of 1995 increased 32.5% over the similar
period last year due to increased sales from 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 many new bulk items which are higher priced but
lower margined products than products previously offered by the Company.
Gross profit margins for the first six months of 1995 decreased by 2.3% from the
similar period of last year. The decrease was due to air freight shipments from
overseas production facilities incurred primarily in the first three months of
the period, licensing fees, and increased sales of bulk items. Increased cost of
goods due to raw material increases may result in further declines in gross
profit margins for the rest of 1995.
Selling, general, and administrative expenses for the first six months of 1995
increased by $2,091,000 or 22.6% over such expenses for the first six months of
1994. The increase resulted mainly from costs related to increased sales volume.
Selling, general and administrative expenses for the first six months of 1995 as
a percent of sales decreased to 31.6% from 34.2% for the similar period in 1994.
The decrease reflects the economies of scale provided by higher volume of
business.
Net working capital increased by $1,696,000 in the first six months primarily
due to profitable operations. Accounts receivable increased by $4,369,000
primarily as a result of increased sales and inventories increased by $3,397,000
to meet continued demand for the Company's products. Cash decreased by
$1,163,000 primarily resulting from increases in accounts receivable and
inventories which were partially offset by increases in accounts payable and
accrued expenses as well as short-term borrowings.
Unsecured lines of credit of $9,000,000, 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
$3,300,000 of which $3,300,000 remained outstanding as of June 30, 1995. The
Company did not incur any other short-term borrowings during 1994 or during the
first six months of 1995.
Management beleives sufficient liquidity exists and should continue to exist to
enable the Company to respond aggressively to continuing competition in its
major markets.
Page 5
<PAGE> 8
PART II - OTHER INFORMATION
Items 1 through 3 - Not Applicable
Item 4: Submission of Matters to a vote of security-
holders.
(a) An Annual Meeting of the Stockholders of The First
Years Inc. was held on May 18, 1995.
(c) The following matters were voted upon at such Annual Meeting and the
following votes were cast as to each such matter:
i. Election of Class III Directors
<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------------
Withheld
For Authority
--- ---------
<S> <C> <C>
Ronald J Sidman 1,957,509 7,355
Benjamin Peltz 1,957,609 7,255
</TABLE>
ii. Proposal to amend the Company's Articles of
Organization to change the Company's name to
The First Years Inc.
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
For 1,949,764
Against 11,900
Abstentions 3,200
</TABLE>
iii. Proposal to amend the Company's Articles of Organization to increase
the number of authorized shares of the Company's Common Stock from
7,500,000 to 15,000,000, $.10 par value per share.
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
For 1,942,019
Against 16,245
Abstentions 6,600
</TABLE>
Page 6
<PAGE> 9
PART II - OTHER INFORMATION (cont)
iv. Proposal to approve an Amendment to Company's 1993
Equity Incentive Plan (i) increasing the number of
shares of the Company's Common Stock authorized
for issuance under the plan from 205,000 to
305,000; and (ii) limiting the number of stock
options and stock appreciation rights that can be
awarded to any single participant during the life
of the Plan.
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
For 1,472,877
Against 227,671
Abstentions 2,650
Broker Non-Votes 261,366
</TABLE>
v. Proposal to approve an Amendment to Company's 1993
Stock Option Plan for Non-Employee Directors (i)
increasing the number of share of the Company's
Common Stock authorized for issuance under the
Plan from 15,000 to 30,000; and (ii) providing for
an additional one-time award of an option for
5,000 shares to each non-employee member of the
Board of Directors who has been in office for at
least three years.
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
For 1,517,947
Against 182,251
Abstentions 3,300
Broker Non-Votes 261,366
</TABLE>
vi. Proposal to ratify the selection of Deloitte &
Touche LLP as auditors for the Company for the
fiscal year 1995.
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
For 1,962,364
Against 2,500
Abstentions 0
</TABLE>
Page 7
<PAGE> 10
PART II - OTHER INFORMATION (cont)
Item 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.
Registrant
Date 8/9/95 /s/ Benjamin Peltz
---------------------------
Benjamin Peltz, Senior Vice
President and Treasurer,
Duly Authorized Officer and
Principal Financial Officer
Page 8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,166,032
<SECURITIES> 0
<RECEIVABLES> 13,819,471
<ALLOWANCES> 185,000
<INVENTORY> 13,810,500
<CURRENT-ASSETS> 29,470,335
<PP&E> 12,762,802
<DEPRECIATION> 6,847,009
<TOTAL-ASSETS> 35,386,128
<CURRENT-LIABILITIES> 10,529,116
<BONDS> 166,667
<COMMON> 225,229
0
0
<OTHER-SE> 23,880,318
<TOTAL-LIABILITY-AND-EQUITY> 35,386,128
<SALES> 35,878,526
<TOTAL-REVENUES> 35,890,092
<CGS> 20,973,464
<TOTAL-COSTS> 32,309,341
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,243
<INCOME-PRETAX> 3,532,508
<INCOME-TAX> 1,413,000
<INCOME-CONTINUING> 2,119,508
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,119,508
<EPS-PRIMARY> .91
<EPS-DILUTED> .91
</TABLE>
