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 July 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) 494-4777
(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 Sept. 5, 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
July 31, 1995 and January 31, 1995 3 .... 4
Consolidated statements of operations
for the six months and the three
months ended July 31, 1995 and 1994 5
Consolidated statements of cash flows
for the six months ended July 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 JULY 31, 1995 AND
JANUARY 31, 1995
<TABLE>
<CAPTION>
ASSETS
July 31, January 31,
1 9 9 5 1 9 9 5
(Unaudited) (Audited)
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 361,893 $ 278,243
Trade accounts receivable, net of
$9,000 allowance for doubtful
accounts 241,892 368,196
Notes receivable 18,500 19,542
Inventories (principally raw materials) 1,001,507 880,391
Prepaid expenses and
other current assets 291,184 260,906
Due from related party 1,543 1,454
Income taxes receivable and prepaid 2,049 883
--------- ---------
TOTAL CURRENT ASSETS 1,918,568 1,809,615
PROPERTY, PLANT AND EQUIPMENT:
Land 778,840 775,992
Buildings and improvements 2,117,619 2,117,619
Machinery and equipment 619,783 611,671
Furniture and fixtures 1,221,273 1,203,889
Transportation equipment 142,028 113,735
--------- ---------
4,879,543 4,822,906
Less: accumulated depreciation (2,935,646) (2,853,497)
--------- ---------
TOTAL PROPERTY, PLANT AND
EQUIPMENT - net 1,943,897 1,969,409
OTHER ASSETS:
Due from related party 76,809 77,615
Assets held for resale 71,825 71,825
Deposits and other assets 548 1,000
Intangible assets, net of amortization 41,937 7,950
--------- ---------
TOTAL OTHER ASSETS 191,119 158,390
--------- ---------
TOTAL ASSETS $4,053,584 $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 JULY 31, 1995 AND
JANUARY 31, 1995
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
July 31, January 31,
1 9 9 5 1 9 9 5
(Unaudited) (Audited)
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Current installments of long-term debt $ 231,848 $ 214,064
Notes payable (note 4) 395,000 240,000
Other credit - redeemable
common stock, current 94,305 62,500
Trade accounts payable 956,881 1,067,409
Customer deposits 1,223,195 896,080
Accrued payroll and related taxes
and withholdings 45,415 49,780
Accrued expenses 450,909 581,856
--------- ---------
TOTAL CURRENT LIABILITIES 3,397,553 3,111,689
LONG-TERM DEBT, net of current
installments:
Convertible subordinated debentures 700,000 700,000
Retirement agreement -- 107,345
Other 44,875 36,661
--------- ---------
TOTAL LONG-TERM DEBT (net of current) 744,875 844,006
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 July 31, 1995
and January 31, 1995 13,561 12,621
Additional paid-in capital 3,800,920 3,739,360
Accumulated deficit (3,113,195) (3,136,937)
--------- ---------
701,286 615,044
Less: cost of 410,305 shares and
316,370 shares of common stock
in treasury at July 31, 1995 and
January 31, 1995 ( 790,130) ( 727,630)
TOTAL STOCKHOLDERS' DEFICIT ( 88,844) ( 112,586)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $4,053,584 $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 SIX MONTHS AND THE THREE MONTHS ENDED JULY 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
July 31,
---------------------
1 9 9 5 1 9 9 4
--------- ---------
<S> <C> <C>
SALES, net of commissions of
$579,662 and $579,013 respectively $ 3,596,433 $ 3,672,536
COST OF SALES 2,377,059 2,630,720
--------- ---------
GROSS PROFIT 1,219,374 1,041,816
OPERATING EXPENSES:
Selling, general and administrative 1,133,894 1,162,539
--------- ---------
INCOME (LOSS) FROM OPERATIONS 85,480 ( 120,723)
OTHER INCOME (EXPENSE):
Interest income 18,588 15,266
Interest expense ( 94,152) ( 86,758)
Other 13,826 20,419
--------- ---------
Total other income (expense) - net ( 61,738) ( 51,073)
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 23,742 ( 171,796)
INCOME TAXES -- --
--------- ---------
NET INCOME (LOSS) $ 23,742 $( 171,796)
========== =========
PER SHARE DATA (note 2):
Primary earnings (loss) per common
and common equivalent share $ .03 $( .18)
========== =========
Fully diluted earnings per common
and common equivalent share $ .01 $( --)
========== =========
Three Months Ended
July 31,
---------------------
1 9 9 5 1 9 9 4
--------- ---------
SALES, net of commissions of
$427,672 and $421,833 respectively $ 2,725,632 $ 2,656,311
COST OF SALES 1,724,823 1,831,672
--------- ---------
GROSS PROFIT 1,000,809 824,639
OPERATING EXPENSES:
Selling, general and administrative 534,466 538,444
--------- ---------
INCOME FROM OPERATIONS 466,343 286,195
OTHER INCOME (EXPENSE):
Interest income 11,152 7,505
Interest expense ( 50,634) ( 51,221)
Other 10,017 18,152
--------- ---------
Total other income (expense) - net ( 29,465) ( 25,564)
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 436,878 260,631
INCOME TAXES -- --
--------- ---------
NET INCOME $ 436,878 $ 260,631
========= =========
PER SHARE DATA (note 2):
Primary earnings per common
and common equivalent share $ .46 $ .28
========= =========
Fully diluted earnings per common
and common equivalent share $ .10 $ .06
========= =========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 31, 1995 and 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
July 31,
-----------------------
1 9 9 5 1 9 9 4
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 23,742 $( 171,796)
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Depreciation and amortization 85,162 109,713
Changes in operating assets and
liabilities:
Trade accounts receivable 126,304 ( 231,888)
Inventories ( 121,116) ( 1,768)
Prepaid expenses and other current
assets ( 30,278) 22,308
Trade accounts payable ( 110,528) ( 18,747)
Customer deposits 327,115 339,089
Accrued expenses and other operating
activities ( 60,312) ( 11,007)
Accrued and prepaid income taxes ( 1,166) ( 3,959)
--------- ---------
Net cash provided by
operating activities 238,923 31,945
--------- ---------
INVESTING ACTIVITIES:
Repayments of notes receivable 1,042 1,061
Additions to property, plant and equipment ( 18,649) ( 6,642)
Decrease in due from related parties 717 674
Decrease in deposits and other assets 452 159
Increase in intangible assets ( 37,000) --
--------- ---------
Net cash used by
investing activities ( 53,438) ( 4,748)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from notes payable, net 80,000 240,000
Reduction of other credit - redeemable
common stock ( 62,500) ( 62,500)
Reductions in long-term debt ( 119,335) ( 154,855)
--------- ---------
Net cash provided (used) by
financing activities ( 101,835) 22,645
--------- ---------
Net increase in cash and cash
equivalents 83,650 49,842
Cash and cash equivalents at beginning of
period 278,243 292,459
--------- ---------
Cash and cash equivalents at end of period $ 361,893 $ 342,301
========= =========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
LINCOLN LOGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JULY 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 six month periods ended July 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 six month periods and three month periods ended July 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 six month period ended July 31, 1995 and for the
three month periods ended July 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. Of the $275,000 borrowed under the original Cant Financing
Program, which matured on June 30, 1995, $50,000 was repaid when due
and $225,000 was rolled over into new notes with the terms of Cant
Financing Program II. Notes issued in Cant Financing Program II are
for a fixed term and amount, bear interest at an annual rate of 18%
payable monthly, and have no commitment fee. As of July 31, 1995, a
total of $395,000 has been loaned to the Company by various
individuals, including directors and shareholders; of this total,
$115,000 is due on October 31, 1995 and $280,000 is due on June 30,
1996.
(5) SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
During the six months ended July 31, 1995, cash was paid in the
amounts of $81,393 for interest and $1,166 for income taxes.
Noncash investing and financing activity:
During the six month period ended July 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
Six months ended July 31, 1995 vs. July 31, 1994:
The Company's revenues, net of sales commissions, for the six
months ended July 31, 1995 were $3,596,433 as compared to $3,672,536
for the six months ended July 31, 1994, a decrease of $76,103 or 2%.
There was a 7% increase in the number of home units shipped during the
current six 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 decreased overall due to a smaller
number of units being shipped in the Company's solarium product line,
down from 15 in the first six months of the prior year to 8 in the
current period.
Gross profits amounted to 34% of sales for the six months ended
July 31, 1995 as compared to 28% 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 $1,133,894, or 32% of sales, have
decreased $28,645 from the previous year's amount of $1,162,539, also
32% 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 July 31, 1995 vs. July 31, 1994:
Sales, net of commissions, amounted to $2,725,632 for the three
months ended July 31, 1995 as compared to $2,656,311 in the same
period in 1994, an increase of $69,321, or 3%. When compared with the
previous year, there was a 6% increase in the number of home units
shipped while the average sales value per home unit shipped decreased
3%. 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 8 units in the current period, an increase of
one unit over the prior year's second quarter.
Gross profits amounted to 37% of net sales for the three months
ended July 31, 1995 as compared to 31% 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 in prior months and
from the substantial decrease in market prices for lumber and plywood
products since the start of the current fiscal year.
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<PAGE>
RESULTS OF OPERATIONS - continued
Total operating expenses of $534,466, or 20% of sales, have
decreased $3,978 from the previous year's amount of $538,444, also 20%
of sales. The decrease in total operating expenses amounted to 1%,
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 July
31, 1995 and July 31, 1994 of $1,478,985 and $1,201,656, respectively.
For the six month period ended July 31, 1995, working capital
decreased $176,911 as compared to a decrease of $222,586 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, in the current period by
payment for a trademark agreement, and in the prior period by the
Company's operations.
For the six months ended July 31, 1995 the Company's operations
were a net provider of $238,923 of cash, while in the comparable
period of the previous year it was a net provider of cash in the
amount of $31,945. Overall, the Company experienced a net increase in
its cash position of $83,650 at July 31, 1995 as compared with an
increase in its cash position of $49,842 at July 31, 1994. During the
six months ended July 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 and from new short-term borrowing from several
individuals, including directors and shareholders.
Although the Company realized a profit of $23,742 for the six
months ended July 31, 1995, current liabilities exceeded current
assets by $1,478,985 as of that date, and the Company had a net
capital deficiency of $88,844. 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.
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<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
At the Annual Meeting of Shareholders held on June 28,
1995, two proposals were presented and approved by the shareholders.
They were the re-election of the Company's existing directors and the
approval of the independent accounting firm of KPMG Peat Marwick LLP
to continue as auditors for the Company.
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: September 5, 1995
/s/Marjory B. Moeller
--------------------------------
Marjory B. Moeller
Vice President, Finance
Date: September 5, 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.
<NAME> LINCOLN LOGS LTD.
<CIK> 0000717422
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JUL-31-1995
<CASH> 361,893
<SECURITIES> 0
<RECEIVABLES> 250,892
<ALLOWANCES> 9,000
<INVENTORY> 1,001,507
<CURRENT-ASSETS> 1,918,568
<PP&E> 4,879,543
<DEPRECIATION> 2,935,646
<TOTAL-ASSETS> 4,053,584
<CURRENT-LIABILITIES> 3,397,553
<BONDS> 744,875
<COMMON> 13,561
0
0
<OTHER-SE> (102,405)
<TOTAL-LIABILITY-AND-EQUITY> 4,053,584
<SALES> 3,596,433
<TOTAL-REVENUES> 3,596,433
<CGS> 2,377,059
<TOTAL-COSTS> 2,377,059
<OTHER-EXPENSES> 1,133,894
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,152
<INCOME-PRETAX> 23,742
<INCOME-TAX> 0
<INCOME-CONTINUING> 23,742
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,742
<EPS-PRIMARY> .03
<EPS-DILUTED> .01
</TABLE>
