SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-24868
E & B MARINE INC.
--------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2430891
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 Meadow Road
Edison, New Jersey 08818
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 819-7400
---------------
Indicate by a 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 as 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
---- -----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class 3,942,732
----------------------------- --------------------
Common Stock, $.001 par value Shares outstanding at
May 10, 1996
<PAGE>
E & B MARINE INC. AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information --------
Consolidated Balance Sheets -
March 30, 1996 and December 30, 1995 3
Consolidated Statements of Operations -
Three Months Ended March 30, 1996
and April 1, 1995 4
Consolidated Statements of Cash Flows -
Three Months Ended March 30, 1996
and April 1, 1995 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results
of Operations 7- 8
Part II - Other Information
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
E&B MARINE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 30, 1996 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
Dollars in thousands, except per share amounts
1996 1995
UNAUDITED
--------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 962 $ 443
Accounts receivable 1,116 522
Inventory 33,479 22,945
Prepaid expenses 1,370 1,650
Other current assets 2,807 2,793
------ ------
Total current assets 39,734 28,353
Property, plant and equipment, net 6,011 5,549
Excess of cost over fair value of
assets acquired, net of accumulated
amortization 2,023 2,041
Other assets 3,101 1,848
------ ------
TOTAL ASSETS $50,869 $37,791
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving line of credit $1,449
Current maturities of long-term debt 744 $ 740
Accounts payable 15,262 5,766
Accrued expenses 5,027 3,520
------- --------
Total current liabilities 22,482 10,026
Revolving line of credit 12,766 10,168
Long-term debt, less current maturities 5,428 5,463
Shareholders' equity:
Common stock 4 4
Additional paid-in capital 21,800 21,799
Accumulated deficit (9,423) (7,481)
Minimum pension liability
adjustment (104) (104)
Treasury stock - at cost (2,084) (2,084)
------- -------
Total shareholders' equity 10,193 12,134
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $50,869 $37,791
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
E&B MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 30, 1996 AND APRIL 1, 1995
UNAUDITED
<TABLE>
<CAPTION>
Dollars in thousands, except per share amounts
1996 1995
------- -------
<S> <C> <C>
Net sales $19,205 $19,131
Cost of goods sold excluding
amortization and depreciation 15,633 14,935
------- -------
Gross profit 3,572 4,196
Selling, general, and administrative
expenses 5,860 5,390
Depreciation and amortization 287 285
Non-recurring merger expense 201
------ ------
Loss from operations (2,776) (1,479)
Interest expense 461 400
------ -------
Loss before income taxes (3,237) (1,879)
Income tax benefit (1,295) (751)
------- -------
Net loss $(1,942) $(1,128)
======= =======
Per share amounts:
Net loss $ (0.49) $(0.30)
Weighted average number of
shares outstanding 3,943,000 3,708,000
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
E & B MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 30, 1996 AND APRIL 1, 1995
UNAUDITED
<TABLE>
<CAPTION>
Dollars in Thousands 1996 1995
-------- --------
Cash flows from operating activities:
<S> <C> <C>
Net Loss $ (1,942) $(1,128)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 287 285
Increase in deferred tax asset (1,295) (751)
Earned compensation related to ESOP 0 22
Change in assets and liabilities net of
non-cash transactions:
(Increase) in accounts receivable (594) (482)
(Increase) in inventory (10,534) (9,096)
(Increase) in other current assets (14) (47)
Decrease in prepaid expense 280 38
Decrease in other assets 36 23
Increase in accounts payable 9,496 8,255
Increase in accrued expenses 1,507 486
-------- -------
Net cash used in operating activities (2,773) (2,395)
-------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment (725) (421)
-------- -------
Net cash used in investing activities (725) (421)
-------- -------
Cash flows from financing activities:
Borrowings under debt agreements 4,047 3,245
Payments of debt (31) (319)
Proceeds from issuance of stock (net) 1 51
-------- -------
Net cash provided by financing activities 4,017 2,977
-------- -------
Net change in cash and cash equivalents 519 161
Cash and cash equivalents at beginning of year 443 719
-------- -------
Cash and cash equivalents at end of quarter $ 962 $ 880
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
E & B MARINE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1: Basis of Presentation
The financial information included herein is unaudited; however,
such information reflects all adjustments (consisting solely of
normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the
interim periods.
The results of operations for the three-month period ended March
30, 1996 are not necessarily indicative of the results to be
expected for the full year.
2: Inventories
Inventory has been calculated using the cost complement obtained
from the inventory tracking system which is applied on an
individual store basis. Additionally, gross profit margin is
reduced by an estimated percentage of sales for shrinkage.
3: Loss Per Common Share
The loss per Common Share for 1996 and 1995 is based on the
weighted average number of Common Shares outstanding during the
quarters. Common stock equivalents are not considered in the
computation, as their inclusion would be anti-dilutive on the per
share amounts.
-6-
<PAGE>
E & B MARINE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
RESULTS OF OPERATIONS
- --------------------
Consolidated net sales for the three-month period ended March 30,
1996 were $19,205, an increase of $74 or 0.4 percent from sales
of $19,131 for the three-month period ended April 1, 1995.
Retail store net sales were $16,446 for the three-month period
ended March 30, 1996, an increase of 3.3 percent from net sales
of $15,925 in 1995. Sales in stores opened during comparable
periods in 1996 and 1995 decreased 3.4 percent. The increase in
sales in the retail stores is principally attributable to the
seven retail stores opened after the first quarter of 1995.
Mail-order net sales were $2,759 for the three-month period ended
March 30, 1996, a decrease of $447 or 13.9 percent compared to
net sales of $3,206 for the three-month period ended April 1,
1995.
Gross profit for the three-month period ended March 30, 1996 of
$3,572 declined $624 or 14.9 percent as compared to the three-month
period ended April 1, 1995. The Company's first quarter
gross profit margin in 1996 of 18.6 percent decreased 3.3
percentage points from 21.9 percent in the first quarter of
1995. The decrease in margin from the prior year reflects
increased sales of merchandise with lower margins, increased
occupancy costs, which are included in cost of goods sold,
attributable to the opening of new retail stores and the
Company's response to competitive pressures.
Selling, general and administrative expenses increased $470 or
8.7 percent from the previous year. As a percentage of sales,
selling, general and administrative expenses increased from 28.2
percent in 1995 to 30.5 percent in 1996. This increase reflects
the fact that the Company incurred operating expenses relating
to the seven retail stores opened after the first quarter of
1995.
The Company's effective income tax rate for the first quarter of
1996 was consistent with the first quarter of 1995.
Interest expense increased to $461 in 1996 from $400 in 1995.
The Company incurred an increased level of borrowings in 1996,
offsetting a slightly decreased rate of interest from the first
quarter of 1995. See "Liquidity and Capital Resources" below for
further discussion.
The loss for the three-months ended March 30, 1996 was $1,942
compared to the loss at April 1, 1995 of $1,128.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's working capital at March 30, 1996 and December 30,
1995 was $17,252 and $18,327, respectively. The decrease in
working capital was mainly attributable to increased borrowing
under the revolving line of credit and increased accounts payable
to finance increased inventory levels. The Company increased its
inventory to prepare for its peak selling season, to increase its
product assortment and to accommodate store openings.
The Company believes that its working capital and its credit
facility will be adequate to meet identifiable working capital
requirements in the foreseeable future. Total weighted average
borrowings were $19,467 and $16,395 in 1996 and 1995,
respectively and the weighted average interest rate was 9.6
percent and 9.8 percent in the first quarters of 1996 and 1995,
respectively.
Cash flow from operations, combined with the Company's available
line of credit is expected to provide the necessary funds for
planned capital expenditures during 1996. These expenditures are
estimated to total approximately $3,000 in 1996 and primarily
constitute expenditures for store expansion, relocations and
remodelings.
-7-
<PAGE>
E & B MARINE INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
ACCOUNTING STANDARDS
- --------------------
The Company adopted Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-based Compensation" (SFAS 123) in
the first quarter of 1996. In adopting SFAS 123, the Company
intends to continue to utilize the provisions of Accounting
Principles Board Opinion No. 25 and, accordingly, the adoption of
SFAS 123 will result in certain disclosures as to net income
(loss) and per share amounts in the notes to the consolidated
financial statements in the Company's 1996 annual report.
RECENT EVENTS
- -------------
Effective May 6, 1996, the Company amended its Credit Agreement
with United Jersey Bank (I) to temporarily increase its revolving
line of credit from $17,000 to $20,000 through July 31, 1996 and
(ii) to amend certain financial covenants. The funds from the
increased availability under the Company's revolving line of
credit will be used primarily to purchase inventory to enhance
product assortment.
-8-
<PAGE>
E & B MARINE AND SUBSIDIARIES
Part II - Other Information
Item 5. OTHER INFORMATION
The Company entered into an Agreement and Plan of Merger on April
2, 1996 (the "Merger Agreement"), with West Marine, Inc., a
Delaware corporation ("West") and WM Merger Sub, Inc., a Delaware
corporation and wholly-owned subsidiary of West ("Merger Sub"),
pursuant to which, among other things, Merger Sub will, at the
effective time of the Merger, be merged with and into the Company
(the "Merger") and the Company will become a wholly-owned
subsidiary of West. At the effective time of the Merger, each
share of common stock, $.001 par value, of the Company (the
"Company Common Stock") outstanding at the effective time of the
Merger will be converted into the right to receive a fraction
(the Exchange Ratio") of a share of common stock , $.001 par
value, of West (the "West Common Stock") based on the average
closing sales price per share of West Common Stock for the 15
trading days preceding the effective time of the Merger (the
"Average Trading Price"), which exchange ratio will be calculated
as follows: (I) if the Average Trading Price is at least $38.00
and not greater than $43.875, the Exchange Ratio will equal the
quotient of $6.65 divided by the Average Trading Price; (ii) if
the Average Trading Price is greater than $43.875, the Exchange
Ratio will equal 0.15157; and (iii) if the Average Trading Price
is less than $38.00, the Exchange Ratio will equal 0.17500. Upon
the effective time of the Merger, all outstanding options and
warrants to purchase shares of the Company Common Stock will be
assumed by West and become options and warrants to purchase
shares of West Common Stock. Consummation of the Merger is
contingent upon customary closing conditions, including approval
of the Merger by the stockholders of the Company.
-9-
<PAGE>
E&B MARINE INC. AND SUBSIDIARIES
Part II - Other Information
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the
quarter ended March 30, 1996.
-10-
<PAGE>
E&B MARINE INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment to be signed
on its behalf by the undersigned thereunto duly authorized.
May 10, 1996 E&B MARINE INC.
By /s/ Kenneth G. Peskin
------------------------
Kenneth G. Peskin
Chairman and
Chief Executive Officer
By /s/ Walfrido A. Martinez
-------------------------
Walfrido A. Martinez
Senior Vice President and
Chief Financial Officer
-11-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> MAR-30-1996
<CASH> 962
<SECURITIES> 0
<RECEIVABLES> 1116
<ALLOWANCES> 0
<INVENTORY> 33479
<CURRENT-ASSETS> 39734
<PP&E> 6011
<DEPRECIATION> 0
<TOTAL-ASSETS> 50869
<CURRENT-LIABILITIES> 22482
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 10189
<TOTAL-LIABILITY-AND-EQUITY> 50869
<SALES> 19205
<TOTAL-REVENUES> 19205
<CGS> 15633
<TOTAL-COSTS> 15633
<OTHER-EXPENSES> 6348
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 461
<INCOME-PRETAX> (3237)
<INCOME-TAX> (1295)
<INCOME-CONTINUING> (1942)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1942)
<EPS-PRIMARY> (.49)
<EPS-DILUTED> (.49)
</TABLE>
