<PAGE> 1
UNITED STATES
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 ........... June 30, 1994
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 .................................1-8681
RUSS BERRIE AND COMPANY, INC.
.................................................................
(Exact name of registrant as specified in its charter)
New Jersey 22-1815337
.................................................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 Bauer Drive, Oakland, New Jersey 07436
.................................................................
(Address of principal executive offices) (Zip Code)
(201) 337-9000
.................................................................
(Registrant's telephone number, including area code)
.................................................................
(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 ...
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT AUGUST 5, 1994
----- -----------------------------
Common stock, $.10 stated value 21,469,179
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RUSS BERRIE AND COMPANY, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Consolidated Balance Sheet as of
June 30, 1994 and December 31, 1993 3
Consolidated Statement of Income
for the three-month and six-month periods
ended June 30, 1994 and 1993 4
Consolidated Statement of Cash Flows
for the six-month periods ended
June 30, 1994 and 1993 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7-9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
(2)
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RUSS BERRIE AND COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
ASSETS -------- ------------
------ 1994 1993
---- ----
<S> <C> <C>
Current assets
Cash and cash $49,739 $ 51,478
Short-term investments 32,059 31,421
Accounts receivable, trade, net 40,843 46,899
Merchandise inventories 61,973 66,110
Prepaid expenses and other current assets 5,563 5,005
Deferred income taxes 13,970 12,169
------- --------
Total current assets 204,147 213,082
Property, plant and equipment - net 26,276 28,133
Goodwill and other intangible assets - net 16,711 16,420
Other assets 3,002 1,480
------- -------
Total assets $250,136 $259,115
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities
Accounts payable $ 4,410 $ 5,235
Accrued expenses 23,438 23,171
Accrued restructuring costs 5,843 6,283
Accrued income taxes - 392
------- ------
Total current liabilities 33,691 35,081
Shareholders' equity
Common stock; $.10 stated value;
authorized 50,000,000 shares;
issued 23,918,565 at June 30, 1994
and 23,876,274 at December 31, 1993 2,392 2,388
Additional paid-in capital 37,355 36,840
Retained earnings 216,914 225,650
Foreign currency translation adjustments (2,359) (2,987)
Treasury stock, at cost (2,454,813 shares
at June 30, 1994 and December 31, 1993) (37,857) (37,857)
-------- --------
Total shareholders' equity 216,445 224,034
------- -------
Total liabilities and shareholders'
equity $250,136 $259,115
======= =======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
(3)
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RUSS BERRIE AND COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 57,546 $ 49,887 $121,713 $146,197
Cost of sales 32,233 22,788 63,794 60,523
Selling, general
and administrative expense 31,666 32,761 63,198 71,627
Investment and other income-net 782 649 1,346 1,507
--------- -------- -------- --------
Income (loss) before income taxes (5,571) (5,013) (3,933) 15,554
Provision (benefit) for
for income taxes (2,244) (2,012) (1,628) 4,921
--------- -------- -------- --------
Net income (loss) $ (3,327) $ (3,001) $ (2,305) $ 10,633
======== ======== ======== ========
Net income (loss) per share $ (0.16) $ (0.14) $ (0.11) $ 0.49
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
(4)
<PAGE> 5
RUSS BERRIE AND COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
----------------------------------
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,305) $ 10,633
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 2,411 2,736
Amortization of intangible assets 897 483
Provision for bad debts 3,324 1,687
Loss (gain) on sale of assets and other, net 343 88
Changes in assets and liabilities
Accounts receivable 2,732 35,071
Inventories 4,137 8,196
Prepaid expenses (558) (2,874)
Goodwill and other intangible assets (1,188) -
Other assets (1,522) (100)
Accounts payable (825) (2,720)
Accrued expenses 267 (8,601)
Accrued restructuring costs (440) (444)
Accrued and deferred income taxes (2,193) (4,673)
------- -------
Total adjustments 7,385 28,849
----- -------
Net cash provided by operating activities 5,080 39,482
Cash flows from investing activities:
Increase in short-term investments (638) (787)
Proceeds from sale of fixed assets 218 339
Capital expenditures (1,115) (3,303)
------- -------
Net cash (used in) investing activities (1,535) (3,751)
Cash flows from financing activities:
Payment of long-term debt - (3,000)
Common stock transactions 519 3,356
Transactions in treasury shares - (22,214)
Dividends (6,431) (6,402)
------- --------
Net cash (used in) financing activities (5,912) (28,260)
Effect of exchange rate changes on cash
and cash equivalents 628 (125)
------- -------
Net increase (decrease) in cash and cash equivalents (1,739) 7,346
Cash and cash equivalents at beginning of period 51,478 62,285
------ ------
Cash and cash equivalents at end of period $ 49,739 $ 69,631
====== =======
Cash paid during the period for:
Interest $ 44 $ 433
Income taxes $ 565 $ 9,661
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
(5)
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The information furnished reflects all adjustments which are, in
the opinion of management, necessary for a fair presentation of
the results for the interim periods presented and are of a normal
recurring nature. Results for interim periods are not necessarily
an indication of results to be expected for the year.
NOTE 2
The weighted average number of shares outstanding during the three
and six-month periods ended June 30, 1994 were 21,446,000 and
21,440,000 shares, respectively compared to the three and six-month
periods ended June 30, 1993 of 21,265,000 and 21,622,000 shares,
respectively. Employee stock option plans did not have a material
dilutive effect on the earnings per share calculation.
NOTE 3
Cash dividends of $3,216,323 ($.15 per share) were paid on June 7,
1994 to shareholders of record of the Company's Common Stock on May
20, 1994. Cash dividends of $6,430,884 ($.15 per share per
quarter) were paid in the six-month period ended June 30, 1994.
Cash dividends of $3,189,151 ($.15 per share) were paid on June 7,
1993 to shareholders of record of the Company's Common Stock on May
21, 1993. Cash dividends of $6,402,193 ($.15 per share per
quarter) were paid in the six-month period ended June 30, 1993.
(6)
<PAGE> 7
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Six Months Ended June 30, 1994
Consolidated net sales for the six months ended June 30, 1994 were $121,713,000
compared to $146,197,000 for the six months ended June 30, 1993. The decrease
can be attributed to a lower level of sales of Troll products compared to the
prior year. During the six-month period ended June 30, 1994 net sales of Troll
products were approximately $4,947,000. Net sales of these products during the
six-month period ended June 30, 1993 were approximately $62,008,000. Included
in the results for the six months ended June 30, 1994 are the net sales of
$34,698,000 achieved by Cap Toys, Inc. which was acquired in October 1993.
Cost of sales was 52.4% of net sales for the six months ended June 30, 1994
compared to 41.4% for the same period in 1993. This increase can be attributed
primarily to the higher gross profit margins on sales of Troll products during
the six-month period ended June 30, 1993 and the effects of the reduction of
the selling price of certain of the Company's products in August 1993. Also
contributing to the increase in cost of sales are the lower gross margins
achieved by Cap Toys, Inc. compared to the Company's other sales and
distribution channels. In addition, certain components of cost of sales are
fixed costs which were absorbed by the higher sales volume in the six months
ended June 30, 1993.
Selling, general and administrative expense was $63,198,000 or 51.9% of net
sales for the six months ended June 30, 1994 compared to $71,627,000 or 49.0%
of net sales for the six months ended June 30, 1993, a decrease of $8,429,000
or 11.8%. This decrease can be primarily attributed to a decrease in expenses
required to support lower sales levels (approximately $9,800,000), cost
reductions associated with the restructuring program implemented during 1993 of
closing and consolidating distribution centers and administrative functions
($4,800,000) and to lower expenses related to the Company's "RUSS" consumer
advertising program (approximately $1,400,000). Partially offsetting these
decreases is the inclusions of the selling, general and administrative expenses
of Cap Toys, Inc. (approximately $8,500,000) for the six months ended June 30,
1994.
Investment and other income of $ 1,346,000 for the six months ended June 30,
1994 compares to $1,507,000 for the six months ended June 30, 1993.
(7)
<PAGE> 8
The results for the six months ended June 30, 1994 reflect an income tax
benefit of $1,628,000 due to the loss before income taxes of $3,933,000. This
compares to a provision for income taxes of $4,921,000 for the same period last
year.
Net loss for the six months ended June 30, 1994 of $2,305,000 compares to net
income of $10,633,000 for the same period last year. This decrease in net
income can be attributed to the decrease in net sales and the increase in cost
of sales as a percent of net sales described above, partially offset by the
decrease in selling, general and administrative expense.
Results of Operations for the three months ended June 30, 1994
Consolidated net sales for the three months ended June 30, 1994 were
$57,546,000 compared to $49,887,000 for the three months ended June 30, 1993,
an increase of $7,659,000 or 15.4%. The increase can be attributed to the
inclusion of the net sales of Cap Toys, Inc. of $21,366,000 during the three
months ended June 30, 1994. Excluding Cap Toys, Inc., net sales decreased
$13,707,000 resulting from the lower level of sales of Troll products compared
to the prior year. During the three-month period ended June 30, 1994 net sales
of Troll products were $1,490,000 compared to $17,594,000 during the three
months ended June 30, 1993.
Cost of Sales was 56.0% of net sales for the three months ended June 30, 1994
compared to 45.7% for the same period in 1993. This increase can be attributed
to the higher gross profit margins on sales of Troll products during the
three-month period ended June 30, 1993 and the effects of the reduction of the
selling price of certain of the Company's products in August 1993. Also
contributing to the increase are the lower gross margins achieved by Cap Toys,
Inc. compared to the Company's other sales and distribution channels.
Selling, general and administrative expense was $31,666,000 or 55.0% of sales
for the three months ended June 30, 1994 compared to 32,761,000 or 65.7% of net
sales for the three months ended June 30, 1993, a decrease of $1,095,000 or
3.3%. Included in selling, general and administrative expense for the three
months ended June 30, 1994 are the selling, general and administrative expense
of Cap Toys, Inc.(approximately $5,000,000). Excluding these expenses, selling
general and administrative expense decreased $6,095,000. This decrease can be
primarily attributed to a decrease in expenses required to support lower sales
levels (approximately $3,100,000) and cost reductions associated with the
restructuring program implemented during 1993 of closing and consolidating
distribution centers and administrative functions (approximately $2,400,000).
Investment and other income of $782,000 for the three months ended June 30,
1994 compares to $649,000 for the three months ended June 30, 1993.
The results for the three months ended June 30, 1994 reflect an income tax
benefit of $2,244,000 due to the loss before income taxes of $5,571,000. This
compares to an income tax benefit of $2,012,000 for the same period last year.
Net loss for the three months ended June 30, 1994 of $3,327,000 compares to a
net loss of $3,001,000 for the same period last year. The increase in the net
loss can be primarily attributed to the increase in cost of sales as a
percentage of net sales which is described above.
(8)
<PAGE> 9
Liquidity and Capital Resources
At June 30, 1994, the Company had cash, cash equivalents and short-term
investments of $81,798,000 compared to $82,899,000 at December 31, 1993.
The Company has signed a letter of intent to acquire a toy company based in
California. The acquisition, if consummated, will be accounted for as a
purchase. It is anticipated that the acquisition would be paid for in cash and
funded entirely from available cash and cash equivalents.
Working capital requirements during the six months ended June 30, 1994 were met
entirely through internally generated funds. The Company remains in a highly
liquid position and believes that the resources available from operations and
bank lines of credit are sufficient to meet the foreseeable requirements of its
business.
(9)
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
b) During the quarter ended June 30, 1994,
no reports on Form 8-K were filed.
(10)
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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.
RUSS BERRIE AND COMPANY, INC.
-----------------------------
(Registrant)
8/12/94 By s/Paul Cargotch
- - -------- -----------------------------
Date Paul Cargotch
Vice President - Finance and
Chief Financial Officer
(11)
