<PAGE> 1
5/9/96 PM
DRAFT
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 ........... March 31, 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 ...................................................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 Identification No.)
incorporation or organization)
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 APRIL 4, 1996
----- ----------------------------
Common stock, $.10 stated value 21,649,164
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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 March 31, 1996
and December 31, 1995 3
Consolidated Statement of Income for the three-month
periods ended March 31, 1996 and 1995 4
Consolidated Statement of Cash Flows for the three-month
periods ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 and 8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
2
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RUSS BERRIE AND COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
(UNAUDITED)
ASSETS MARCH 31, DECEMBER 31,
1996 1995
--------- ---------
Current assets
Cash and cash equivalents $ 47,968 $ 36,836
Accounts receivable, trade - net 62,929 62,675
Merchandise inventories 65,447 79,090
Prepaid expenses and other current assets 6,108 5,253
Deferred income taxes 16,775 16,775
--------- ---------
Total current assets 199,227 200,629
Property, plant and equipment - net 23,944 24,797
Goodwill and other intangible assets - net 33,160 34,050
Other assets 5,625 5,687
--------- ---------
Total assets $ 261,956 $ 265,163
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts Payable $ 4,249 $ 7,369
Accrued expenses 21,420 30,044
Accrued restructuring costs 3,379 3,359
Accrued income taxes 4,992 1,395
--------- ---------
Total current liabilities 34,040 42,167
Commitments and contingencies
Shareholders' equity
Common stock; $.10 stated value;
authorized 50,000,000 shares;
issued as of March 31, 1996; 24,081,820 as of
December 31, 1995; 24,011,198 shares 2,408 2,401
Additional paid-in capital 39,579 38,646
Retained earnings 226,077 221,722
Foreign currency translation adjustments (2,291) (1,916)
Treasury stock, at cost (2,454,813 shares) (37,857) (37,857)
--------- ---------
Total shareholders' equity 227,916 222,996
--------- ---------
Total liabilities and shareholders' equity $ 261,956 $ 265,163
========= =========
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)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1996 1995
------- -------
Net sales $82,881 $80,118
Cost of sales 41,146 39,324
------- -------
Gross profit 41,735 40,794
Selling, general
and administrative expense 34,877 35,843
Investment and other income-net 5,231 728
------- -------
Income before income taxes 12,089 5,679
Provision for income taxes 4,493 1,596
------- -------
Net income $ 7,596 $ 4,083
======= =======
Net income per share $ 0.35 $ 0.19
======= =======
The accompanying notes are an integral part of the
consolidated financial statements.
4
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RUSS BERRIE AND COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1996 1995
-------- --------
Cash flows from operating activities:
Net income $ 7,596 $ 4,083
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 929 1,054
Amortization of intangible assets 665 745
Provision for accounts receivable reserves 2,451 1,879
Sale of subsidiary (3,000) --
Loss on sale of assets and other, net 112 (125)
Changes in assets and liabilities
Accounts receivable (7,992) (7,220)
Inventories 5,576 (3,889)
Prepaid expenses (947) (1,017)
Goodwill and other intangible assets (23) (74)
Other assets 62 (485)
Accounts payable (2,915) (927)
Accrued expenses (8,992) (1,278)
Accrued restructuring costs 325 (789)
Accrued and deferred income taxes 1,797 1,218
-------- --------
Total adjustments (11,952) (10,908)
-------- --------
Net cash (used in) operating activities (4,356) (6,825)
Cash flows from investing activities:
Decrease in short-term investments -- 5,203
Proceeds from sale of fixed assets 61 95
Capital expenditures (755) (1,040)
Sale of subsidiary 18,858 --
-------- --------
Net cash provided by investing activities 18,164 4,258
Cash flows from financing activities:
Common stock transactions 940 344
Dividends (3,241) (3,228)
-------- --------
Net cash (used in) financing activities (2,301) (2,884)
Effect of exchange rate changes on cash
and cash equivalents (375) 1,004
-------- --------
Net increase (decrease) in cash and cash equivalents 11,132 (4,447)
Cash and cash equivalents at beginning of period 36,836 42,758
-------- --------
Cash and cash equivalents at end of period $ 47,968 $ 38,311
======== ========
Cash paid during the period for:
Interest $ 40 $ 22
Income taxes $ 896 $ 378
The accompanying notes are an integral part of the
consolidated financial statements.
5
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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. Investment and other income-net for the three months ended March 31, 1996
includes the gain on the sale of the Company's subsidiary Papel/Freelance, Inc.
of approximately $4,800,000 and included in the selling, general and
administrative expense for the three months ended March 31, 1996 is a provision
of $900,000 for costs associated with closing the Company's remaining
traditional retail stores.
NOTE 2
The weighted average number of shares outstanding during the three-month periods
ended March 31, 1996 and 1995 were 21,586,017 and 21,510,957 shares,
respectively. Employee stock option plans did not have a material dilutive
effect on the earnings per share calculation.
NOTE 3
Cash dividends of $3,240,665 ($.15 per share) were paid on March 18, 1996 to
shareholders of record of the Company's Common Stock on March 3, 1996. Cash
dividends of $3,227,963 ($.15 per share) were paid in the three-month period
ended March 31, 1995.
6
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended March 31, 1996
Consolidated net sales for the three months ended March 31, 1996 were
$82,881,000 compared to $80,118,000 for the three months ended March 31, 1995.
This represents an increase of $2,763,000 or 3.4%. The net sales of the
Company's business segments can be summarized as follows:
Percentage
Three Months Ended Three Months Ended Increase Increase
March 31, 1996 March 31, 1995 (Decrease) (Decrease)
------------------ ------------------ ---------- ----------
GIFT $55,403,000 $46,950,000 $ 8,453,000 18.0%
TOY 26,315,000 23,878,000 2,437,000 10.2%
DISCONTINUED
OPERATIONS 1,163,000 9,290,000 (8,127,000) --
----------- ----------- -----------
$82,881,000 $80,118,000 $ 2,763,000 3.4%
=========== =========== ===========
The Company's discontinued operations primarily represents Papel/Freelance,
Inc., a subsidiary which was sold on January 17, 1996.
Cost of sales were 49.6% of net sales for the three months ended March 31, 1996
compared to 49.1% for the same period in 1995.
Selling, general and administrative expense was $34,877,000 or 42.1% of net
sales for the three months ended March 31, 1996 compared to $35,843,000 or 44.7%
of net sales for the three months ended March 31, 1995. Included in the selling,
general and administrative expense for the three months ended March 31, 1996 is
a provision of $900,000 related to costs associated with closing the Company's
remaining traditional retail stores. Excluding this provision, selling, general
and administrative expense decreased $1,866,000 when compared to the prior year.
This decrease can be attributed to the discontinuance of the selling, general
and administrative expense of the Company's Papel/Freelance, Inc. subsidiary
which was sold in January 1996.
Investment and other income of $5,231,000 for three months ended March 31, 1996
compares to $728,000 for the three months ended March 31, 1995. Included in the
results for the three months ended March 31, 1996 is a gain of approximately
$4,800,000 before tax related to the sale of the Company's Papel/Freelance, Inc.
subsidiary.
The provision for income taxes as a percentage of income before taxes for the
three months ended March 31, 1996 was 37.2% compared to 28.1% in the same period
in the prior year. This increase can be primarily attributed to lower tax
provisions related to certain foreign subsidiaries during the three months ended
March 31, 1995.
Net income for the three months ended March 31, 1996 of $7,596,000 compares to
net income of $4,083,000 for the same period last year. The increase in net
income can be attributed to the gain on the sale of the Company's subsidiary
Papel/Freelance, Inc., the increase in net sales and the decrease in selling,
general and administrative expense.
7
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Liquidity and Capital Resources
At March 31, 1996, the Company had cash and cash equivalents of $47,968,000
compared to cash and cash equivalents of $36,836,000 at December 31, 1995.
On January 17, 1996, the Company sold the assets of its subsidiary
Papel/Freelance, Inc. The sale resulted in an increase in cash and cash
equivalents of approximately $19,000,000.
Working capital requirements during the three months ended March 31, 1996 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.
8
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
b) During the quarter ended March 31, 1996, no reports on Form 8-K were
filed.
9
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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)
May 13, 1996 By /s/Paul Cargotch
- -------------- -------------------------------
Date Paul Cargotch
Vice President - Finance
and Chief Financial Officer
10
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EXHIBIT INDEX
-------------
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 47,968
<SECURITIES> 0
<RECEIVABLES> 72,493
<ALLOWANCES> 9,564
<INVENTORY> 65,447
<CURRENT-ASSETS> 199,227
<PP&E> 50,946
<DEPRECIATION> 27,002
<TOTAL-ASSETS> 261,956
<CURRENT-LIABILITIES> 34,040
<BONDS> 0
0
0
<COMMON> 2,408
<OTHER-SE> 225,508
<TOTAL-LIABILITY-AND-EQUITY> 261,956
<SALES> 82,881
<TOTAL-REVENUES> 82,881
<CGS> 0
<TOTAL-COSTS> 41,146
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,089
<INCOME-TAX> 4,963
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,596
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
