SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Total No. of
Pages 12
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1995
Commission file number 2-82833
Lincoln Logs Ltd.
(Exact name of small business issuer as specified in its charter)
New York 14-1589242
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Riverside Drive, Chestertown, New York 12817
(Address of principal executive offices)
(518) 494-5500
(Issuer's telephone number)
____________________________________________________________________
Former name, former address and former fiscal year, if changed since
last report.
Check whether the issuer (1) has filed all reports required to be
filed
by Section 13 or 15(d) of the Exchange Act during the past 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____________
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding at Dec. 7, 1995
Common Stock, $ .01 par value 1,039,694
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<PAGE>
LINCOLN LOGS LTD. AND SUBSIDIARIES
I N D E X
Page Number
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated balance sheets as of
October 31, 1995 and January 31, 1995 3 .... 4
Consolidated statements of operations
for the nine months and the three
months ended October 31, 1995 and 1994 5
Consolidated statements of cash flows
for the nine months ended October 31,
1995 and 1994 6
Notes to consolidated financial statements 7 .... 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 9 .... 10
PART II. OTHER INFORMATION 11
SIGNATURES 12
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<PAGE>
LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF OCTOBER 31, 1995 AND
JANUARY 31, 1995
<TABLE>
<CAPTION>
ASSETS
October 31, January 31,
1 9 9 5 1 9 9 5
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 279,194 $ 278,243
Trade accounts receivable, net of
$9,000 allowance for doubtful
accounts 207,170 368,196
Notes receivable 18,500 19,542
Inventories (principally raw materials) 907,527 880,391
Prepaid expenses and
other current assets 294,951 260,906
Due from related party 1,543 1,454
Income taxes receivable and prepaid 2,049 883
--------- ---------
TOTAL CURRENT ASSETS 1,710,934 1,809,615
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements 782,840 775,992
Buildings and improvements 2,118,426 2,117,619
Machinery and equipment 619,783 611,671
Furniture and fixtures 1,223,358 1,203,889
Transportation equipment 142,028 113,735
4,886,435 4,822,906
--------- ---------
Less: accumulated depreciation (2,976,720) (2,853,497)
--------- ---------
TOTAL PROPERTY, PLANT AND
EQUIPMENT - net 1,909,715 1,969,409
OTHER ASSETS:
Due from related party 76,443 77,615
Assets held for resale 71,825 71,825
Deposits and other assets 548 1,000
Intangible assets, net of amortization 39,505 7,950
--------- ---------
TOTAL OTHER ASSETS 188,321 158,390
--------- ---------
TOTAL ASSETS $3,808,970 $3,937,414
========= =========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF OCTOBER 31, 1995 AND
JANUARY 31, 1995
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
October 31, January 31,
1 9 9 5 1 9 9 5
(Unaudited) (Audited)
----------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
Current installments of long-term debt $ 180,399 $ 214,064
Notes payable (note 4) 470,000 240,000
Other credit - redeemable
common stock, current 94,305 62,500
Trade accounts payable 830,039 1,067,409
Customer deposits 997,322 896,080
Accrued payroll and related taxes
and withholdings 44,535 49,780
Accrued expenses 448,735 581,856
--------- ---------
TOTAL CURRENT LIABILITIES 3,065,335 3,111,689
LONG-TERM DEBT, net of current
installments:
Convertible subordinated debentures 700,000 700,000
Retirement agreement -- 107,345
Other 41,519 36,661
--------- ---------
TOTAL LONG-TERM DEBT (net of current) 741,519 844,006
COMMITMENTS AND CONTINGENCIES
OTHER CREDIT - REDEEMABLE COMMON STOCK -- 94,305
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value;
authorized 1,000,000 shares; issued
and outstanding -0- shares -- --
Common stock, $.01 par value;
authorized 5,000,000 shares; issued
and outstanding 1,449,999 shares, less
93,935 and 187,870 shares subject to
redemption agreement at October 31, 1995
and January 31, 1995 respectively 13,561 12,621
Additional paid-in capital 3,800,920 3,739,360
Accumulated deficit (3,022,235) (3,136,937)
--------- ---------
792,246 615,044
Less: cost of 410,305 shares and
316,370 shares of common stock
in treasury at October 31, 1995 and
January 31, 1995 respectively ( 790,130) ( 727,630)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 2,116 ( 112,586)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $3,808,970 $3,937,414
========= =========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS AND THREE MONTHS ENDED OCTOBER 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
October 31,
-----------------------
1 9 9 5 1 9 9 4
--------- ---------
<S> <C> <C>
SALES, net of commissions of
$923,199 and $910,442 respectively $ 5,851,611 $ 5,800,195
COST OF SALES 3,949,026 4,112,369
--------- ---------
GROSS PROFIT 1,902,585 1,687,826
OPERATING EXPENSES:
Selling, general and administrative 1,715,336 1,762,734
--------- ---------
INCOME (LOSS) FROM OPERATIONS 187,249 ( 74,908)
OTHER INCOME (EXPENSE):
Interest income 25,972 26,537
Interest expense ( 144,190) ( 122,375)
Other 45,671 114,004
--------- ---------
Total other income (expense) - net ( 72,547) 18,166
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 114,702 ( 56,742)
INCOME TAXES -- --
--------- ---------
NET INCOME (LOSS) $ 114,702 $( 56,742)
========= =========
PER SHARE DATA (note 2):
Primary earnings (loss) per common
and common equivalent share $ .12 $( .06)
========= =========
Fully diluted earnings per common
and common equivalent share $ .04 $( --)
========= =========
Three Months Ended
October 31,
-----------------------
1 9 9 5 1 9 9 4
--------- ---------
SALES, net of commissions of
$343,537 and $331,429 respectively $ 2,255,178 $ 2,127,659
COST OF SALES 1,571,967 1,481,649
--------- ---------
GROSS PROFIT 683,211 646,010
OPERATING EXPENSES:
Selling, general and administrative 581,442 600,195
--------- ---------
INCOME FROM OPERATIONS 101,769 45,815
OTHER INCOME (EXPENSE):
Interest income 7,384 11,271
Interest expense ( 50,038) ( 35,617)
Other 31,845 93,585
--------- ---------
Total other income (expense) - net ( 10,809) 69,239
--------- ---------
INCOME BEFORE INCOME TAXES 90,960 115,054
INCOME TAXES -- --
--------- ---------
NET INCOME $ 90,960 $ 115,054
========= =========
PER SHARE DATA (note 2):
Primary earnings per common
and common equivalent share $ .10 $ .12
========= =========
Fully diluted earnings per common
and common equivalent share $ .03 $ .03
========= =========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 31, 1995 and 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
October 31,
-----------------------
1 9 9 5 1 9 9 4
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 114,702 $( 56,742)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 128,668 164,568
Changes in operating assets and
liabilities:
Trade accounts receivable 161,026 ( 56,073)
Inventories ( 27,136) ( 41,414)
Prepaid expenses and other current
assets ( 34,045) 39,302
Trade accounts payable ( 237,370) 234,604
Customer deposits 101,242 ( 5,906)
Accrued expenses and other operating
activities ( 63,366) ( 158,384)
Accrued and prepaid income taxes ( 1,166) ( 4,434)
---------- ----------
Net cash provided by
operating activities 142,555 115,521
---------- ----------
INVESTING ACTIVITIES:
Repayments of notes receivable 1,042 1,552
Additions to property, plant and equipment ( 25,541) ( 12,756)
Decrease in due from related parties 1,083 1,019
Decrease in deposits and other assets 452 159
Increase in intangible assets ( 37,000) --
---------- ----------
Net cash used by
investing activities ( 59,964) ( 10,026)
---------- ----------
FINANCING ACTIVITIES:
Proceeds from notes payable, net 155,000 240,000
Reduction of other credit - redeemable
common stock ( 62,500) ( 62,500)
Reductions in long-term debt ( 174,140) ( 218,380)
---------- ----------
Net cash used by
financing activities ( 81,640) ( 40,880)
---------- ----------
Net increase in cash and cash
equivalents 951 64,615
Cash and cash equivalents at beginning of
period 278,243 292,459
---------- ----------
Cash and cash equivalents at end of period $ 279,194 $ 357,074
========== ==========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
LINCOLN LOGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 31, 1995 AND 1994
(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 nine month periods ended October
31, 1995 and 1994 are not indicative of the results to be expected for
the full year, due to the seasonal nature of the business.
Certain amounts in the 1994 financial statements have been
reclassified to conform with the presentation in the 1995 financial
statements.
(2) EARNINGS PER SHARE
Primary earnings per common and common equivalent share is
computed by dividing net earnings by the weighted average number of
common and common equivalent shares outstanding during the respective
periods. The weighted average number of common and common equivalent
shares used to compute primary earnings per share was 945,759 for each
of the nine month periods and three month periods ended October 31,
1995 and 1994, respectively.
Fully diluted earnings per common and common equivalent share is
computed based on the weighted average number of common and common
equivalent shares outstanding during the respective periods, assuming
the convertible subordinated debentures were converted into common
stock at the beginning of the period after giving retroactive effect
to the elimination of interest expense, net of income tax effect,
applicable to the convertible subordinated debentures. The fully
diluted weighted average number of common and common equivalent shares
was 4,445,759 for the nine month period ended October 31, 1995 and for
the three month periods ended October 31, 1995 and 1994.
(3) INCOME TAXES
The Company accrues income tax expense on an interperiod basis as
necessary, and accrues income tax benefits only when it is more likely
than not that such tax benefits will be realized.
(4) NOTES PAYABLE
During 1995 the Company expanded its Cant Financing Program, which
was initiated in 1994 to raise capital for the purchase of pine and
cedar cants (logs) to be held in inventory and then used by the
Company in the manufacture of its log home building packages. The
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
notes are generally collateralized by the cant inventory thus
purchased. Notes presently outstanding are for a fixed term and
amount, and bear interest at an annual rate of 18% payable monthly.
As of October 31, 1995, a total of $470,000 had been loaned to the
Company by various individuals, including directors and shareholders.
Holders of $75,000 of the notes scheduled to mature on October 31,
1995 have elected to renew their notes with a new due date of June 30,
1996, while the balance of $40,000 was redeemed on November 1, 1995.
The remaining total of $430,000 will be due on June 30, 1996.
(5) SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
During the nine months ended October 31, 1995, cash was paid in the
amounts of $130,420 for interest and $1,166 for income taxes.
Noncash investing and financing activity:
During the nine month period ended October 31, 1995, the following
transactions took place:
- The Company financed $37,988 of the purchase of assets having a
total cost of $38,988.
- The Company reclassified $75,000 of accrued liabilities due to
various individuals, including an officer and a director, to
notes bearing the terms of Cant Financing Program II.
- 8 -
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Nine months ended October 31, 1995 vs. October 31, 1994:
The Company's revenues, net of sales commissions, for the nine
months ended October 31, 1995 were $5,851,611 as compared to
$5,800,195 for the nine months ended October 31, 1994, an increase of
$51,416 or 1%. There was a 9% increase in the number of home units
shipped during the current nine month period as compared to the
previous year while the average sales value per home unit shipped was
5% lower than in the previous year. The decrease in sales value per
home unit shipped is the result of an increase in the number of
smaller home packages shipped in the current period. Although more
home units were shipped than in the prior year, net sales showed a
smaller increase overall due to a smaller number of units being
shipped in the Company's solarium product line, down from 18 in the
first nine months of the prior year to 13 in the current period.
Gross profits amounted to 33% of sales for the nine months ended
October 31, 1995 as compared to 29% for the same period in 1994. In
realizing an increase in gross profit, the Company has benefited from
two catalog price increases put into place during the prior fall and
winter and from the substantial decrease in market prices for lumber
and plywood products since the start of the current fiscal year.
Total operating expenses of $1,715,336, or 29% of sales, have
decreased $47,398 from the previous year's amount of $1,762,734, or
30% of sales. The decrease in total operating expenses was 3%, and
was due to the Company's ongoing efforts to reduce expenses wherever
possible and to improve its management systems.
Three months ended October 31, 1995 vs. October 31, 1994:
Sales, net of commissions, amounted to $2,255,178 for the three
months ended October 31, 1995 as compared to $2,127,659 in the same
period in 1994, an increase of $127,519, or 6%. When compared with
the previous year, there was a 13% increase in the number of home
units shipped while the average sales value per home unit shipped
decreased 5%. The decrease in sales value per home unit shipped is
the result of an increase in the number of smaller home packages
shipped in the current period. The increase in net sales was a result
of the overall increase in home units shipped. Shipments in the
Company's solarium product line amounted to 5 units in the current
period, an increase of two units over the prior year's third quarter.
Gross profits amounted to 30% of net sales for the three months
ended October 31, 1995 as compared to 30% for the same period in 1994.
Market prices for lumber and plywood products rose during the period
from those levels experienced during the first half of the current
fiscal year. In addition, direct labor utilized per unit shipped
increased during the current quarter.
- 9 -
<PAGE>
RESULTS OF OPERATIONS - continued
Total operating expenses of $581,442, or 26% of sales, have
decreased $18,753 from the previous year's amount of $600,195, or 28%
of sales. The decrease in total operating expenses amounted to 3%,
and was due to the Company's ongoing efforts to reduce expenses
wherever possible and to improve its management systems.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a negative working capital position at both
October 31, 1995 and October 31, 1994 of $1,354,401 and $1,080,361,
respectively. For the nine month period ended October 31, 1995,
working capital decreased $52,327 as compared to a decrease of
$101,291 in the same period in 1994. As of the Company's fiscal year
end at January 31, 1995, current liabilities exceeded current assets
by $1,302,074. Working capital was primarily consumed during both
reporting periods by the repayment of long-term debt, including
obligations related to the retirement of the Company's founder and, in
the current year, by payment for a trademark agreement.
For the nine months ended October 31, 1995 the Company's
operations were a net provider of $142,555 of cash, while in the
comparable period of the previous year it was a net provider of cash
in the amount of $115,521. Overall, the Company experienced a net
increase in its cash position of $951 at October 31, 1995 as compared
with an increase in its cash position of $64,615 at October 31, 1994.
During the nine months ended October 31, 1995, cash provided by
operations was primarily consumed by the repayment of long-term debt
obligations, including obligations related to the retirement of the
Company's founder, and payment for a trademark agreement. During the
prior period, the Company's cash position was improved by funds
generated from operations, including an increase in trade accounts
payable, and from new short-term borrowing from several individuals,
including directors and shareholders.
Although the Company realized a profit of $114,702 for the nine
months ended October 31, 1995, current liabilities exceeded current
assets by $1,354,401 as of that date. The Company has obtained
additional funds during the period through its second Cant Financing
Program. It has not, however, been successful in securing new capital
through bank or governmental agency sources. The Company's ability to
continue operating is presently dependent on the cash flow provided
from its operating activities. These funds are expected to be
sufficient for the Company's needs for the remainder of the current
fiscal year, but any reduction in its sales activity may further
reduce its liquidity and, eventually, force the Company to cease
operations.
- 10 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults of Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
None
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<PAGE>
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.
LINCOLN LOGS LTD.
/s/Richard C. Farr
---------------------------------
Richard C. Farr,
Chairman of the Board, President,
Chief Executive Officer and
Treasurer
Date: December 7, 1995
/s/Marjory B. Moeller
---------------------------------
Marjory B. Moeller
Vice President, Finance
Date: December 7, 1995
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS DATA EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND
THE CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<NAME> LINCOLN LOGS LTD.
<CIK> 0000717422
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> OCT-31-1995
<CASH> 279,194
<SECURITIES> 0
<RECEIVABLES> 216,170
<ALLOWANCES> 9,000
<INVENTORY> 907,527
<CURRENT-ASSETS> 1,710,934
<PP&E> 4,886,435
<DEPRECIATION> 2,976,720
<TOTAL-ASSETS> 3,808,970
<CURRENT-LIABILITIES> 3,065,335
<BONDS> 741,519
<COMMON> 13,561
0
0
<OTHER-SE> (11,445)
<TOTAL-LIABILITY-AND-EQUITY> 3,808,970
<SALES> 5,851,611
<TOTAL-REVENUES> 5,851,611
<CGS> 3,949,026
<TOTAL-COSTS> 3,949,026
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 144,190
<INCOME-PRETAX> 114,702
<INCOME-TAX> 0
<INCOME-CONTINUING> 114,702
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114,702
<EPS-PRIMARY> .12
<EPS-DILUTED> .04
</TABLE>
