<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, 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 July 31, 1996
was 4,936,570.
<PAGE> 2
THE FIRST YEARS INC.
INDEX
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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 - 7
SIGNATURES 7
<PAGE> 3
THE FIRST YEARS INC.
<TABLE>
Condensed Balance Sheets
<CAPTION>
ASSETS
June 30, December 31,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 641,182 $ 552,568
Accounts receivable, net 17,364,144 14,191,630
Inventories 20,453,800 19,009,784
Prepaid insurance, taxes, etc 328,362 778,074
Current deferred taxes 872,300 872,300
----------- -----------
Total current assets 39,659,788 35,404,356
----------- -----------
PROPERTY, PLANT, AND EQUIPMENT:
Land 167,266 167,266
Building 3,743,943 3,737,861
Machinery and molds 7,155,450 6,481,504
Furniture and equipment 3,456,882 3,183,379
----------- -----------
Total 14,523,541 13,570,010
Less accumulated depreciation 7,829,935 7,262,286
----------- -----------
Property, plant, and equipment-net 6,693,606 6,307,724
TOTAL ASSETS $46,353,394 $41,712,080
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 133,333 $ 133,333
Short-term borrowings 8,000,000 6,200,000
Accounts payable and accrued expenses 9,327,205 8,868,187
Federal and state income taxes payable 227,800 0
----------- -----------
Total current liabilities 17,688,338 15,201,520
----------- -----------
LONG-TERM DEBT-Less portion due currently 33,334 100,001
----------- -----------
DEFERRED INCOME TAXES 647,300 647,300
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock 453,657 451,514
Paid-in capital 118,910 0
Retained earnings 27,411,855 25,311,745
----------- -----------
Total stockholders' equity 27,984,422 25,763,259
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $46,353,394 $41,712,080
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
Page 1
<PAGE> 4
THE FIRST YEARS INC.
<TABLE>
Condensed Statements of Income
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1996 1995 1996 1995
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $23,349,264 $20,076,749 $46,358,545 $35,878,526
COST OF PRODUCTS SOLD 14,012,342 11,717,221 27,959,513 20,973,464
----------- ----------- ----------- -----------
GROSS PROFIT 9,336,922 8,359,528 18,399,032 14,905,062
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES 6,922,684 6,178,087 13,848,531 11,335,877
----------- ----------- ----------- -----------
OPERATING INCOME 2,414,238 2,181,441 4,550,501 3,569,185
OTHER INCOME (EXPENSES):
Interest expense (131,836) (34,810) (297,209) (48,243)
Interest income 1,692 2,869 2,875 11,566
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 2,284,094 2,149,500 4,256,167 3,532,508
PROVISION FOR INCOME TAXES 917,000 859,800 1,702,500 1,413,000
----------- ----------- ----------- -----------
NET INCOME $ 1,367,094 $ 1,289,700 $ 2,553,667 $ 2,119,508
=========== =========== =========== ===========
EARNINGS PER SHARE $ 0.29 $ 0.28 $ 0.54 $ 0.45
=========== =========== =========== ===========
AVERAGE NUMBER OF SHARES
OUTSTANDING 4,762,330 4,660,798 4,725,891 4,661,312
=========== =========== =========== ===========
CASH DIVIDENDS PAID PER SHARE $ 0.100 $ 0.085 $ 0.100 $ 0.085
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
Page 2
<PAGE> 5
THE FIRST YEARS INC.
<TABLE>
Condensed Statements of Cash Flows for the
Six Months Ended June 30,
(Unaudited)
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,553,667 $ 2,119,508
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Depreciation 602,136 465,155
Provision for doubtful accounts 70,674 73,009
Gain on disposal of equipment 6,359 200
Increase (decrease) arising from working
capital items:
Accounts receivable (3,243,188) (4,441,245)
Inventories (1,444,016) (3,396,665)
Prepaid insurance, taxes, etc 449,712 61,089
Accounts payable and accrued expenses 459,018 1,048,987
Federal and state income taxes - net 227,800 495,423
----------- -----------
Net cash used for operating activities (317,838) (3,574,939)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant, and equipment (994,377) (457,495)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividend (453,557) (382,851)
Common stock issued under stock option plans 121,053 18,943
Net proceeds from short-term borrowings 1,800,000 3,300,000
Repayment of industrial revenue bonds (66,667) (66,667)
----------- -----------
Net cash provided by financing activities 1,400,829 2,869,425
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 88,614 (1,163,009)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 552,568 2,329,041
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 641,182 $ 1,166,032
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 297,209 $ 48,243
=========== ===========
Income taxes $ 1,092,400 $ 917,577
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
Page 3
<PAGE> 6
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 June 30, 1996, and the results of
operations and cash flows for the periods ended June 30, 1996 and 1995.
2. The Company has 15,000,000 shares of $.10 par value common stock with
4,536,570 and 4,515,142 shares issued and outstanding as of June 30, 1996 and
December 31, 1995, respectively.
On May 2, 1996 the Board of Directors authorized a $0.10 per share annual
cash dividend paid 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
six months ended June 30, 1996 and 1995.
4. On June 25, 1996, the Company entered into an agreement with a group of
underwriters to sell 1.6 million shares of common stock ("the shares"),
consisting of 400,000 newly issued shares and 1,200,000 shares of certain
selling stockholders. The closing of the sale was held on July 1, 1996 at
which time the Company issued 400,000 new shares and received the net
proceeds.
The proceeds of the shares was used to repay certain indebtedness of the
Company. Assuming the sale of approximately 400,000 shares as of January 1,
1996 and 1995, pro forma earnings per share would have been $0.27 and $0.26
for the three months ended June 30, 1996 and 1995, respectively, and $0.52
and $0.44 for the six months ended June 30, 1996 and 1995, respectivley.
5. The results of operations for the three and six month periods ended June 30,
1996 and 1995 are not necessarily indicative of the results to be expected
for the full year.
6. During 1996, the Company borrowed various amounts up to $9,900,000 under
unsecured lines of credit totaling $20,000,000 available from banks. As of
June 30, 1996 a balance of $8,000,000 remained outstanding which bears
interest at a weighted average rate of 7.42%. During 1995, the Company
borrowed various amounts up to $3,300,000 of which $3,300,000 remained
outstanding as of June 30, 1995. No other short-term borrowings were incurred
by the Company during 1996 or the first six months of 1995.
Page 4
<PAGE> 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Net sales for the first six months of 1996 were $46.4 million an increase of
$10.5 million or 29.2% as compared to $35.9 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 six months of 1996 was $28.0 million, an
increase of $7.0 million or 33.3%, as compared to $21.0 million for the
comparable period last year. As a percentage of sales, cost of products sold in
the first six months of 1996 increased to 60.3% from 58.5% 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 six months of 1996
were $13.8 million, an increase of $2.5 million or 22.2% as compared to $11.3
million over such expenses for the first six months of 1995. The increase
resulted primarily from costs related to increased sales volume, payroll and
payroll related costs. As a percentage of net sales, selling, general, and
administrative expenses for the first six months of 1996 decreased to 29.9% from
31.6% 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 was 40% for the first six
months of 1996 and 1995.
Net working capital increased by $1.8 million in the first six months primarily
due to profitable operations. Accounts receivable increased by $3.2 million
primarily as a result of increased sales and inventories increased by $1.4 to
meet continued demand for the Company's products. Cash increased by $89,000
primarily resulting from increases in accounts receivable and inventories which
were primarily offset by increases in accounts payable, short-term borrowings
and by funds generated from operations.
Unsecured bank lines of credit aggregating $20.0 million are subject to annual
renewal. Amounts outstanding under these lines are payable upon demand by the
banks. During the first six months of 1996, the Company borrowed various amounts
up to $9.9 million of which $8.0 million remained outstanding as of June 30,
1996. During the first six months of 1995, the Company borrowed various amounts
up to $3.3 million of which $3.3 million remained outstanding as of June 30,
1995. The Company did not incur any other short-term borrowings during the first
six months of 1996 and 1995.
Page 5
<PAGE> 8
PART II - OTHER INFORMATION
Items 1 through 3 - Not Applicable
Item 4: Submission of Matters to a Vote of Securityholders.
(a) An Annual Meeting of the Stockholders of The First Years Inc. was
held on May 16, 1996.
(c) The following matters were voted upon at such Annual Meeting and the
following votes were cast as to each such matter:
<TABLE>
i. Election of Class III Directors:
<CAPTION>
Number of Shares
----------------
Withheld
For Authority
--- ---------
<S> <C> <C>
Jerome M. Karp 4,152,144 5,800
Fred T. Page 4,152,144 5,800
</TABLE>
<TABLE>
ii. Proposal to ratify the selection of Deloitte & Touche LLP as
auditors for the Company for the fiscal year 1996.
<CAPTION>
Number of Shares
----------------
<S> <C>
For 4,156,344
Against 0
Abstentions 1,600
</TABLE>
Page 6
<PAGE> 9
PART II - OTHER INFORMATION (con't)
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 8/12/96 /s/ Benjamin Peltz
-------------------------------
Benjamin Peltz, Senior Vice
President and Treasurer,
Duly Authorized Officer and
Principal Financial Officer
Page 7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 641,182
<SECURITIES> 0
<RECEIVABLES> 17,549,144
<ALLOWANCES> 185,000
<INVENTORY> 20,453,800
<CURRENT-ASSETS> 39,659,788
<PP&E> 14,523,541
<DEPRECIATION> 7,829,935
<TOTAL-ASSETS> 46,353,394
<CURRENT-LIABILITIES> 17,688,338
<BONDS> 33,334
<COMMON> 453,657
0
0
<OTHER-SE> 27,530,765
<TOTAL-LIABILITY-AND-EQUITY> 46,353,394
<SALES> 46,358,545
<TOTAL-REVENUES> 46,361,420
<CGS> 27,959,513
<TOTAL-COSTS> 41,808,044
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 297,209
<INCOME-PRETAX> 4,256,167
<INCOME-TAX> 1,702,500
<INCOME-CONTINUING> 2,553,667
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,553,667
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.54
</TABLE>
