<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 March 31, 1996
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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___.
The number of shares of Registrant's common stock
outstanding on April 30, 1996 was 4,517,742.
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THE FIRST YEARS INC.
INDEX
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
SIGNATURES 6
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<TABLE>
THE FIRST YEARS INC.
Condensed Balance Sheets
ASSETS
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 59,306 $ 552,568
Accounts receivable, net 16,243,208 14,191,630
Inventories 19,637,900 19,009,784
Prepaid insurance, taxes, etc. 429,148 778,074
Current deferred taxes 872,300 872,300
----------- -----------
Total current assets 37,241,862 35,404,356
----------- -----------
PROPERTY, PLANT, AND EQUIPMENT:
Land 167,266 167,266
Building 3,741,291 3,737,861
Machinery and molds 7,002,819 6,481,504
Furniture and equipment 3,350,811 3,183,379
----------- -----------
Total 14,262,187 13,570,010
Less accumulated depreciation 7,554,413 7,262,286
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Property, plant, and equipment-net 6,707,774 6,307,724
----------- -----------
TOTAL ASSETS $43,949,636 $41,712,080
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 133,333 $ 133,333
Short-term borrowings 8,500,000 6,200,000
Accounts payable and accrued expenses 7,355,542 8,868,187
Federal and state income taxes payable 283,600 0
----------- -----------
Total current liabilities 16,272,475 15,201,520
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LONG-TERM DEBT-Less portion due currently 66,667 100,001
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DEFERRED INCOME TAXES 647,300 647,300
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STOCKHOLDERS' EQUITY:
Common stock 451,774 451,514
Paid-In capital 13,102 0
Retained earnings 26,498,318 25,311,745
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Total stockholders' equity 26,963,194 25,763,259
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TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $43,949,636 $41,712,080
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
Page 1
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<TABLE>
THE FIRST YEARS INC.
Condensed Statements of Income for the
Three Months Ended March 31, 1996 and 1995
(Unaudited)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
NET SALES $23,009,281 $15,801,777
COST OF PRODUCTS SOLD 13,947,171 9,256,243
----------- -----------
GROSS PROFIT 9,062,110 6,545,534
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES 6,925,847 5,157,790
----------- -----------
OPERATING INCOME 2,136,263 1,387,744
OTHER INCOME (EXPENSES):
Interest Expense (165,373) (13,433)
Interest Income 1,183 8,697
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INCOME BEFORE INCOME TAXES 1,972,073 1,383,008
PROVISION FOR INCOME TAXES 785,500 553,200
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NET INCOME $ 1,186,573 $ 829,808
=========== ===========
EARNINGS PER SHARE $0.25 $0.18
=========== ===========
AVERAGE NUMBER OF SHARES OUTSTANDING 4,689,426 4,661,846
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
Page 2
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<TABLE>
THE FIRST YEARS INC.
Condensed Statements of Cash Flows for the
Three Months Ended March 31, 1996 and 1995
(Unaudited)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,186,573 $ 829,808
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Depreciation 292,127 253,750
Provision for doubtful accounts 53,746 25,147
Increase (decrease) arising from working
capital items:
Accounts receivable (2,105,324) (2,264,138)
Inventories (628,116) (2,098,165)
Prepaid insurance, taxes, etc. 348,926 (40,978)
Accounts payable and accrued expenses (1,512,645) 242,653
Federal and state income taxes - net 283,600 430,100
----------- -----------
Net cash used for operating activities (2,081,113) (2,621,823)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant,
and equiment (692,177) (209,992)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued under stock
option plans 13,362 10,667
Net proceeds from short-term borrowings 2,300,000 1,200,000
Repayment of industrial revenue bonds (33,334) (33,333)
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Net cash provided by
financing activities 2,280,028 1,177,334
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DECREASE IN CASH AND CASH EQUIVALENTS (493,262) (1,654,481)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 552,568 2,329,041
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 59,306 $ 674,560
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for:
Interest $ 165,373 $ 13,433
=========== ===========
Income taxes $ 119,600 $ 123,100
=========== ===========
</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, 1995 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 March 31, 1996, and the results
of operations and cash flows for the periods ended March 31, 1996 and 1995.
2. The Company has 15,000,000 shares of $.10 par value common stock with
4,517,742 and 4,515,142 shares issued and outstanding as of March 31, 1996
and December 31, 1995, respectively.
On May 2, 1996 the Board of Directors authorized a $0.10 per share annual
cash dividend payable on June 3, 1996 to holders of record at the close of
business on May 21, 1996.
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. Fully diluted and primary earnings per share were the same for the
three months ended March 31, 1996 and 1995.
4. The results of operations for the three month period ended March 31, 1996
and 1995 are not necessarily indicative of the results to be expected for the
full year.
5. During 1996, the Company borrowed various amounts up to $9,900,000 under
unsecured lines of credit totaling $15,000,000 available from banks. As of
March 31, 1996 a balance of $8,500,000 remained outstanding which bears
interest at a weighted average rate of 7.55%. During March of 1995, the
Company borrowed various amounts up to $2,500,000 of which $1,200,000
remained outstanding as of March 31, 1995. No other short-term borrowings
were incurred by the Company during 1996 or the first three 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 three months of 1996 were $23.0 million an increase of
$7.2 million or 45.6% as compared to $15.8 million for the comparable period
last year. The increase was due to new product introductions and expanded
retail distribution in domestic and foreign markets. Additionally, the Company
did not experience significant new product production delays in 1996 as it did
in the first three months of 1995.
Cost of products sold for the first three months of 1996 was $13.9 million, an
increase of $4.6 million or 50.7%, as compared to $9.3 million for the
comparable period last year. As a percentage of sales, cost of products sold in
the first three months of 1996 increased to 60.6% from 58.6% in the comparable
period of 1995. The increase was primarily due to increased sales of
higher-priced, lower-margined products and licensing fees.
Selling, general, and administrative expenses for the first three months of
1996 were $6.9 million, an increase of $1.7 million or 34.3% as compared to
$5.2 million over such expenses for the first three months of 1995. 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 three months of 1996 decreased to 30.1% from 32.6% for the comparable
period in 1995. The decrease reflects the economies of scale provided by higher
volume of business.
Income tax expense as a percentage of pretax income approximated 40% for the
first three months of 1996 and 1995.
Net working capital increased by $767,000 in the first three months primarily
due to profitable operations. Accounts receivable increased by $2.1 million
primarily as a result of increased sales. Cash decreased by $493,000 primarily
resulting from an increase in accounts receivable and a decrease in accounts
payable and accrued expenses which were partially offset by an increase in
short-term borrowings.
Unsecured bank lines of credit aggregating $15.0 million are subject to annual
renewal. Amounts outstanding under these lines are payable upon demand by the
banks. During the first three months of 1996, the Company borrowed various
amounts up to $9.9 million of which $8.5 million remained outstanding as of
March 31, 1996. During March of 1995, the Company borrowed various amounts up
to $2.5 million of which $1.2 million remained outstanding as of March 31,
1995. The Company did not incur any other short-term borrowings during the
first three months of 1996 and 1995 except as noted above.
Page 5
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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.
Registrant
/s/ Benjamin Peltz
Date 5/13/96 ------------------------------
Benjamin Peltz, Senior Vice
President and Treasurer,
Duly Authorized Officer and
Principal Financial Officer
Page 6
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 59,306
<SECURITIES> 0
<RECEIVABLES> 16,428,208
<ALLOWANCES> 185,000
<INVENTORY> 19,637,900
<CURRENT-ASSETS> 37,241,862
<PP&E> 14,262,187
<DEPRECIATION> 7,554,413
<TOTAL-ASSETS> 43,949,636
<CURRENT-LIABILITIES> 16,272,475
<BONDS> 66,667
<COMMON> 451,774
0
0
<OTHER-SE> 26,511,420
<TOTAL-LIABILITY-AND-EQUITY> 43,949,636
<SALES> 23,009,281
<TOTAL-REVENUES> 23,010,464
<CGS> 13,947,171
<TOTAL-COSTS> 20,873,018
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 165,373
<INCOME-PRETAX> 1,972,073
<INCOME-TAX> 785,500
<INCOME-CONTINUING> 1,186,573
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,186,573
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
