<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, 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 JULY 25, 1996
----- ----------------------------
Common stock, $.10 stated value 21,737,627
<PAGE> 2
RUSS BERRIE AND COMPANY, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION NUMBER
------
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 1996
and December 31, 1995 3
Consolidated Statement of Income for three-month
and the six-month periods ended June 30, 1996 and 1995 4
Consolidated Statement of Cash Flows for the six-month
periods ended June 30, 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 - 9
</TABLE>
PART II - OTHER INFORMATION
<TABLE>
<S> <C> <C>
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
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)
ASSETS JUNE 30, DECEMBER 31,
1996 1995
-------- -------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 57,139 $ 36,836
Accounts receivable, trade-net 45,465 62,675
Merchandise inventories 69,870 79,090
Prepaid expenses and other current assets 6,503 5,253
Deferred income taxes 16,775 16,775
-------- --------
TOTAL CURRENT ASSETS 195,752 200,629
Property, plant and equipment - net 23,944 24,797
Goodwill and other intangible assets - net 32,564 34,050
Other assets 5,708 5,687
-------- --------
TOTAL ASSETS $257,968 $265,163
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,583 $ 7,369
Accrued expenses 19,746 30,044
Accrued restructuring costs 2,593 3,359
Accrued income taxes 3,498 1,395
-------- --------
TOTAL CURRENT LIABILITIES 30,420 42,167
Commitments and contingencies
Shareholders' equity
Common stock; $.10 stated value;
authorized 50,000,000 shares;
issued 24,164,951 at June 30, 1996 and
24,011,198 at December 31, 1995 2,416 2,401
Additional paid-in capital 40,711 38,646
Retained earnings 224,297 221,722
Foreign currency translation adjustments (2,019) (1,916)
Treasury stock, at cost (2,454,813 shares) (37,857) (37,857)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 227,548 222,996
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $257,968 $265,163
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS.
3
<PAGE> 4
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,
1996 1995 1996 1995
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 65,683 $ 74,263 $ 148,564 $ 154,381
Cost of sales 33,061 38,676 74,207 78,000
-------- -------- --------- ---------
Gross profit 32,622 35,587 74,357 76,381
Selling, general
and administrative expense 31,096 35,865 65,973 71,708
Investment and other income-net 765 453 5,996 1,181
-------- -------- --------- ---------
Income before income taxes 2,291 175 14,380 5,854
Provision for income taxes 821 21 5,314 1,617
-------- -------- --------- ---------
Net income $ 1,470 $ 154 $ 9,066 $ 4,237
======== ======== ========= =========
Net income per share $ 0.07 $ 0.01 $ 0.42 $ 0.20
======== ======== ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS.
4
<PAGE> 5
RUSS BERRIE AND COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
1996 1995
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,066 $ 4,237
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,852 2,067
Amortization of intangible assets 1,330 1,499
Provision for accounts receivable reserves 4,079 3,759
Sale of subsidiary (3,000) --
Loss (gain) on sale of assets and other, net 15 (37)
Changes in assets and liabilities
Accounts receivable 7,844 1,475
Inventories 1,152 (11,833)
Prepaid expenses (1,341) (297)
Goodwill and other intangible assets (92) (300)
Other assets (21) (519)
Accounts payable (2,581) (1,570)
Accrued expenses (10,134) (2,405)
Accrued restructuring costs (218) (1,159)
Accrued and deferred income taxes 304 (160)
--------- ----------
Total adjustments (811) (9,480)
--------- ----------
Net cash (used in) operating activities 8,255 (5,243)
Cash flows from investing activities:
Decrease in short-term investments -- 5,203
Proceeds from sale of fixed assets 114 199
Capital expenditures (1,877) (2,408)
Sale of subsidiary 18,325 --
--------- ----------
Net cash provided by investing activities 16,562 2,994
Cash flows from financing activities:
Common stock transactions 2,081 440
Dividends (6,491) (6,458)
--------- ----------
Net cash (used in) financing activities (4,410) (6,018)
Effect of exchange rate changes on cash
and cash equivalents (104) 775
--------- ----------
Net increase (decrease) in cash and cash equivalents 20,303 (7,492)
Cash and cash equivalents at beginning of period 36,836 42,758
--------- ----------
Cash and cash equivalents at end of period $ 57,139 $ 35,266
========= ==========
Cash paid during the period for:
Interest $ 69 $ 130
Income taxes $ 2,390 $ 1,768
</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. Investments and other income-net for the six months ended June 30, 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 six months ended June 30, 1996 is a provision of
$900,000 for costs associated with closing certain of the Company's
retail stores.
NOTE 2
The weighted average number of shares outstanding during the three and
six-month periods ended June 30, 1996 were 21,670,935 and 21,628,476 shares,
respectively, compared to the three and six-month periods ended June 30, 1995
of 21,530,000 and 21,520,000 shares, respectively. Employee stock option plans
did not have a material dilutive effect on the earnings per share calculation.
NOTE 3
Cash dividends of $3,250,299 ($.15 per share) were paid on June 5, 1996 to
shareholders of record of the Company's Common Stock on May 20, 1996. Cash
dividends of $6,490,964 ($.15 per share per quarter) were paid in the
six-month period ended June 30, 1996.
Cash dividends of $3,229,850 ($.15 per share) were paid on June 7, 1995 to
shareholders of record of the Company's Common Stock on May 22, 1995. Cash
dividends of $6,457,813 ($.15 per share per quarter) were paid in the six-month
period ended June 30, 1995.
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, 1996
Consolidated net sales for the six months ended June 30, 1996 were $148,564,000
compared to $154,381,000 for the six months ended June 30, 1995. This represents
a decrease of $5,817,000 or 3.8%. The net sales of the Company's business
segments can be summarized as follows:
<TABLE>
<CAPTION>
PERCENTAGE
SIX MONTHS ENDED SIX MONTHS ENDED INCREASE INCREASE
JUNE 30, 1996 JUNE 30, 1995 (DECREASE) (DECREASE)
---------------- ---------------- ------------ ----------
<S> <C> <C> <C> <C>
GIFT $ 97,139,000 $ 80,486,000 $ 16,653,000 20.7%
TOY 50,222,000 57,449,000 (7,227,000) (12.6%)
DISCONTINUED
OPERATIONS 1,203,000 16,446,000 (15,243,000) --
------------ ------------ ------------- -------
$148,564,000 $154,381,000 $ (5,817,000) (3.8%)
============ ============ ============= =======
</TABLE>
The Company's discontinued operations primarily represents Papel/Freelance,
Inc., a subsidiary which was sold on January 17, 1996. The increase in sales for
the Company's gift business of 20.7% reflects the strong retail acceptance of
the gift product line. The decrease in sales for the Company's toy business of
12.6% represents a decrease in Cap Toys, Inc.'s sales resulting from the
declining sales of the Stretch Armstrong and Vac Man product lines and the
later introduction of new product when compared to the same period in 1995.
Cost of sales were 49.9% of net sales for the six months ended June 30, 1996
compared to 50.5% for the same period in 1995. This decrease can be attributed
primarily to the higher gross profit margins achieved by the Company's gift
business which represented a larger portion of net sales during the six months
ended June 30, 1996 compared to the same period in 1995.
Selling, general and administrative expense was $65,973,000 or 44.4% of net
sales for the six months ended June 30, 1996 compared to $71,708,000 or 46.4% of
net sales for the six months ended June 30, 1995. Included in the selling,
general and administrative expense for the six months ended June 30, 1996 is a
provision of $900,000 related to costs associated with closing certain of
the Company's remaining retail stores. Excluding this provision, selling,
general and administrative expense decreased $6,635,000 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. The decrease in selling,
general and administrative expense as a percent of net sales can be
attributed to fixed costs as they relate to the increase in net sales excluding
discontinued operations.
Investment and other income of $5,996,000 for six months ended June 30, 1996
compares to $1,181,000 for the six months ended June 30, 1995. Included in the
results for the six months ended June 30, 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
six months ended June 30, 1996 was 37.0% compared to 27.6% 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 six months ended
June 30, 1995.
7
<PAGE> 8
Net income for the six months ended June 30, 1996 of $9,066,000 compares to net
income of $4,237,000 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., and the decrease in selling, general and administrative
expense.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996
Consolidated net sales for the three months ended June 30, 1996 were $65,683,000
compared to $74,263,000 for the three months ended June 30, 1995. This
represents a decrease of $8,580,000 or 11.6%. The net sales of the Company's
business segments can be summarized as follows:
<TABLE>
<CAPTION>
PERCENTAGE
THREE MONTHS ENDED THREE MONTHS ENDED INCREASE INCREASE
JUNE 30, 1996 JUNE 30, 1995 (DECREASE) (DECREASE)
------------------ ----------------- ------------ ----------
<S> <C> <C> <C> <C>
GIFT $ 41,776,000 $ 33,536,000 $ 8,240,000 24.6%
TOY 23,907,000 33,571,000 (9,664,000) (28.8%)
DISCONTINUED
OPERATIONS 0 7,156,000 (7,116,000) --
------------ ------------ ------------ -------
$ 65,683,000 $ 74,263,000 $(8,580,000) (11.6%)
============ ============ ============ =======
</TABLE>
The Company's discontinued operations primarily represents Papel/Freelance,
Inc., a subsidiary which was sold on January 17, 1996. The increase in sales
for the Company's gift business of 24.6% reflects the strong retail acceptance
of the gift product line. The decrease in sales for the Company's toy business
of 28.8% represents a decrease in Cap Toys, Inc.'s sales resulting from the
declining sales of the Stretch Armstrong and Vac Man product lines and the
later introduction of new product when compared to the same period in 1995.
Cost of sales were 50.3% of net sales for the three months ended June 30, 1996
compared to 52.1% for the same period in 1995. This decrease can be attributed
primarily to the higher gross profit margins achieved by the Company's gift
business which represented a larger portion of net sales during the three months
ended June 30, 1996 compared to the same period in 1995.
Selling, general and administrative expense was $31,096,000 or 47.3% of net
sales for the three months ended June 30, 1996 compared to $35,865,000 or 48.3%
of net sales for the three months ended June 30, 1995. Selling, general and
administrative expense decreased $4,769,000 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. The decrease in selling, general and
administrative expense as a percent of net sales can be attributed to fixed
costs as they relate to the increase in net sales excluding discontinued
operations.
Investment and other income of $765,000 for three months ended June 30, 1996
compares to $453,000 for the three months ended June 30, 1995.
The provision for income taxes as a percentage of income before taxes for the
three months ended June 30, 1996 was 35.8% compared to 12.0% in the same period
in the prior year.
Net income for the three months ended June 30, 1996 of $1,470,000 compares to
net income of $154,000 for the same period last year. The increase in net income
can be attributed to the decrease in selling, general and administrative
expense.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had cash and cash equivalents of $57,139,000
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 $18,300,000.
Working capital requirements during the six months ended June 30, 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.
9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
b) During the quarter ended June 30, 1996, no reports on Form 8-K were filed.
10
<PAGE> 11
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)
August 13, 1996 By s/Paul Cargotch
Date -----------------------------
Paul Cargotch
Executive Vice President
and Chief Financial Officer
11
<PAGE> 12
EXHIBIT INDEX
-------------
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 57,139
<SECURITIES> 0
<RECEIVABLES> 54,071
<ALLOWANCES> 8,606
<INVENTORY> 69,870
<CURRENT-ASSETS> 195,752
<PP&E> 50,253
<DEPRECIATION> 26,309
<TOTAL-ASSETS> 257,968
<CURRENT-LIABILITIES> 30,420
<BONDS> 0
0
0
<COMMON> 2,416
<OTHER-SE> 225,132
<TOTAL-LIABILITY-AND-EQUITY> 257,968
<SALES> 148,564
<TOTAL-REVENUES> 148,564
<CGS> 0
<TOTAL-COSTS> 74,207
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,380
<INCOME-TAX> 5,314
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,066
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
