<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1997
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 0-21226
------------------------------
SEAMAN FURNITURE COMPANY, INC.
------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 11-2751205
- ------------------------------- ----------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
300 CROSSWAYS PARK DRIVE
WOODBURY, NEW YORK 11797
- --------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (516) 496-9560
---------------
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 __
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No __
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
Class Outstanding as of March 11, 1997
- --------------------------- --------------------------------
Common Stock $.01 par value 4,537,041
Page 1 of 13
<PAGE>
SEAMAN FURNITURE COMPANY, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page
PART I
- ------
Condensed Consolidated Balance Sheets --
January 31, 1997 and April 30, 1996 3
Condensed Statements of Consolidated Operations --
Three and Nine months ended January 31, 1997 and 1996 4
Condensed Statements of Consolidated Cash Flows --
Nine months ended January 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
PART II
Other Information 11
Signatures 12
Exhibits 13
Page 2 of 13
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
SEAMAN FURNITURE COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
JANUARY 31, APRIL 30,
1997 1996
---- ----
(UNAUDITED) (AUDITED)
ASSETS
CURRENT ASSETS:
Cash & cash equivalents $1,300 $3,436
Accounts receivable, net 68,417 65,716
Merchandise inventories 27,443 27,796
Prepaid expenses and other 921 1,921
Deferred tax asset 5,709 5,709
---------- ----------
Total current assets 103,790 104,578
PROPERTY AND EQUIPMENT-net 32,106 33,151
PROPERTY FINANCED BY CAPITAL LEASES-net 4,829 5,138
OTHER ASSETS 3,388 4,449
DEFERRED TAX ASSET 11,185 11,935
---------- ----------
TOTAL $155,298 $159,251
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $10,468 $11,022
Accrued expenses 19,106 16,670
Customer deposits 7,439 9,266
Current portion of long-term debt 1,112 673
---------- ----------
Total current liabilities 38,125 37,631
LONG-TERM DEBT 13,166 20,085
---------- ----------
STOCKHOLDERS' EQUITY
Common stock 50 50
Additional paid-in capital 86,817 86,817
Retained earnings 22,697 20,225
Treasury stock (5,557) (5,557)
---------- ----------
Stockholders' equity 104,007 101,535
---------- ----------
TOTAL $155,298 $159,251
========== ==========
See notes to condensed consolidated financial statements.
Page 3 of 13
<PAGE>
SEAMAN FURNITURE COMPANY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JANUARY 31, JANUARY 31,
----------- ----------
1997 1996 1997 1996
---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
REVENUES:
<S> <C> <C> <C> <C>
Net sales $63,294 $56,292 $189,675 $171,726
Net finance charge income 3,019 3,506 9,526 10,916
-------------- -------------- -------------- ---------------
Total 66,313 59,798 199,201 182,642
-------------- -------------- -------------- ---------------
OPERATING COST & EXPENSES:
Cost of sales, including
buying and occupancy costs 42,045 38,244 126,927 113,866
Selling, general and administrative 22,027 20,805 66,338 62,451
-------------- -------------- -------------- ---------------
Total 64,072 59,049 193,265 176,317
-------------- -------------- -------------- ---------------
INCOME FROM OPERATIONS 2,241 749 5,936 6,325
INTEREST EXPENSE 549 405 1,642 1,208
INTEREST INCOME (6) (178) (43) (746)
-------------- -------------- -------------- ---------------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,698 522 4,337 5,863
PROVISION FOR INCOME TAXES 730 187 1,865 2,490
-------------- -------------- -------------- ---------------
NET INCOME $968 $335 $2,472 $3,373
============== =============== ============== ===============
NET INCOME PER SHARE $0.19 $0.07 $0.49 $0.68
============== =============== ============== ===============
</TABLE>
See notes to condensed consolidated financial statements.
Page 4 of 13
<PAGE>
SEAMAN FURNITURE COMPANY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JANUARY 31,
-----------
1997 1996
---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $2,472 $3,373
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 3,579 3,104
Deferred tax asset 750 496
Asset and liability management:
Accounts receivable (2,701) (718)
Merchandise inventories 353 (4,203)
Prepaid expenses and other assets 2,061 (1,039)
Accounts payable (554) 214
Accrued expenses and other 2,436 (6,531)
Customer deposits (1,827) 612
-------------- --------------
Net cash provided by (used in) operating activities 6,569 (4,692)
-------------- --------------
INVESTING ACTIVITIES:
Purchase of equipment (2,225) (6,825)
FINANCING ACTIVITIES:
Repayment of loans (6,480) (434)
Purchase/Sale of treasury stock 0 (16)
-------------- --------------
Net cash used in financing activities (6,480) (450)
-------------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,136) (11,967)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,436 20,431
-------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $1,300 $8,464
============== ==============
</TABLE>
See notes to condensed consolidated financial statements.
Page 5 of 13
<PAGE>
SEAMAN FURNITURE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements include the accounts of Seaman Furniture Company, Inc. and
its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all the adjustments
necessary to present fairly the results of consolidated operations for
each of the three and nine month periods ended January 31, 1997 and
January 31, 1996; the financial position at January 31, 1997 and the
cash flows for the nine month periods ended January 31, 1997 and
January 31, 1996. Such adjustments consisted only of normal recurring
items. The condensed consolidated financial statements and notes
thereto should be read in conjunction with the consolidated financial
statements and notes for the years ended April 30, 1996 and 1995
included in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
The interim financial results are not necessarily indicative
of the results to be expected for the full year.
2. NET INCOME PER SHARE
Net income per share is based on the weighted average number
of common and common equivalent shares outstanding during the period.
Employee and director stock options are considered to be Common Stock
equivalents; accordingly, 461,276 Common Stock equivalent shares have
been included in the computation for the three and nine month periods
ended January 31, 1997 using the treasury stock method.
Page 6 of 13
<PAGE>
Item 2
- ------
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended January 31, 1997 compared to Three Months Ended
- ------------------------------------------------------------------
January 31, 1996
- ----------------
Net sales for the three months ended January 31, 1997 of $63.3
million increased by $7.0 million (12.4%) compared to net sales for the
three months ended January 31, 1996. Comparable store sales were $61.0
million and $56.3 million for the three months ended January 31, 1997
and 1996 respectively, an increase of $4.8 million (8.5%). Management
believes the increase in comparable store sales is primarily
attributable to the prior year's severe winter weather conditions.
Net finance charge income decreased from $3.5 million for the
three months ended January 31, 1996 to $3.0 million for the three
months ended January 31, 1997. This decrease is attributed to an
increased amount of deferred interest credit promotions and a decrease
in the customer accounts receivable balance.
As a result of the foregoing, total revenues for the three
months ended January 31, 1997 were $66.3 million, an increase of $6.5
million (10.9%) from the comparable prior year period.
Cost of sales, including buying and occupancy costs, increased
$3.8 million (9.9%) primarily due to the additional sales.
Selling, general and administrative expenses increased $1.2
million (5.9%) principally due to the costs, including advertising and
payroll, of operating six additional stores that opened in the January
1996 quarter.
As a result of the foregoing, income from operations was $2.2
million for the three months ended January 31, 1997 compared to
$749,000 for the three months ended January 31, 1996, an increase of
approximately $1.5 million (199.2%).
Net interest expense of $543,000 for the three months ended
January 31, 1997 increased $316,000 (139.2%) from $227,000 for the
three months ended January 31, 1996. This is primarily attributed to
decreased interest income due to the Company's lower cash balance and
to increased interest expense associated with the revolving credit line
entered into in April 1996 and increased capital lease interest
expense.
The provision for income taxes for the three months ended
January 31, 1997, is $730,000 compared to $187,000 for the three months
ended January 31, 1996. The increase is primarily related to the
increase in income before taxes.
Page 7 of 13
<PAGE>
As a result of the foregoing, the Company's net income for the
three months ended January 31, 1997 was $968,000 an increase of
$633,000 (189%) compared to $335,000 for the three months ended January
31, 1996.
NINE MONTHS ENDED JANUARY 31, 1997 COMPARED TO NINE MONTHS ENDED
- -----------------------------------------------------------------
JANUARY 31, 1996
- ----------------
Net sales for the nine months ended January 31, 1997 of $189.7
million increased $17.9 million (10.5%) compared to net sales for the
nine months ended January 31, 1996. The increase in net sales is
attributed to the Company opening new stores. Comparable store sales
were $172.2 million and $171.7 million for the nine months ended
January 31, 1997 and 1996 respectively, an increase of $500,000 (.3%).
Net finance charge income decreased from $10.9 million for the
nine months ended January 31, 1996 to $9.5 million for the nine months
ended January 31, 1997. This decrease is attributed to an increased
amount of deferred interest credit promotions and a decrease in the
customer accounts receivable balance.
As a result of the foregoing, total revenues for the nine
months ended January 31, 1997 were $199.2 million, an increase of $16.6
million (9.1%) over the comparable prior year period.
Cost of sales, including buying and occupancy costs, increased
$13.1 million (11.5%) principally due to the costs associated with the
increased sales volume, and the warehousing and occupancy costs
associated with opening six new stores during the January 1996 quarter.
Selling, general and administrative expenses increased $3.9
million (6.2%) principally due to the costs, including advertising and
payroll, of operating six additional stores.
As a result of the foregoing, income from operations was $5.9
million for the nine months ended January 31, 1997 compared to $6.3
million for the nine months ended January 31, 1996, a decrease of 6.2%.
Net interest expense of $1.6 million for the nine months ended
January 31, 1997, increased $1.1 million from $462,000 for the nine
months ended January 31, 1996. This increase is attributed to decreased
interest income due to the Company's lower cash balance and to
increased interest expense associated with the revolving credit line
entered into in April 1996 and increased capital lease interest
expense.
Page 8 of 13
<PAGE>
As a result of the foregoing, the Company's net income for the
nine months ended January 31, 1997 was approximately $2.5 million, a
decrease of $901,000 (26.7%) compared to $3.4 million for the nine
months ended January 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At January 31, 1997 the Company had working capital of $65.7
million, including cash and cash equivalents of $1.3 million. The
Company's principal sources of liquidity are earnings before income
taxes, depreciation and amortization and borrowings under the $40
million Revolving Credit and Security Agreement (the "Loan Agreement")
with The Bank of New York Commercial Corporation and Fleet Bank N.A.
(as successor by merger to Nat West Bank N.A.), as co-lenders. The
Company's principal uses of cash are working capital needs, capital
expenditures and debt service obligations, including capitalized lease
costs.
The Company's working capital decreased from $66.9 million at
April 30, 1996 to $65.7 million at January 31, 1997. Cash and cash
equivalents declined from $3.4 million at April 30, 1996 to $1.3
million at January 31, 1997. As of January 31, 1997 the Company had
stockholder's equity of $104 million. The Company's largest asset at
such date was accounts receivable of $68.4 million (net of bad debt
reserves). At January 31, 1997, $783,049 was outstanding under the Loan
Agreement, including letters of credit of approximately $762,000. In
addition at January 31, 1997 the Company had $13.2 million in other
long term debt, consisting of a mortgage in connection with its Central
Islip, New York warehouse facility (the "Central Islip Warehouse") and
capitalized lease obligations.
On November 8, 1996, the Company prepaid an industrial revenue
Bond, which had an outstanding principal balance of approximately $3.7
million, with proceeds received from Fleet Bank N.A. in the amount of
approximately $6.2 million pursuant to a Mortgage Note ("Note") issued
by the Company to Fleet. The Note, payable monthly and maturing on
November 8, 2003, is secured by a Mortgage, Security Agreement and
Assignment of Lease Rights covering the Company's Central Islip
Warehouse. The balance of the proceeds was used to reduce the
outstanding borrowing under the Loan Agreement.
Capital expenditures were $2.2 million for the nine months
ended January 31, 1997. These expenditures were primarily related to
relocating one store, renovation of existing stores and the development
of a radio frequency warehouse inventory control system. The Company
expects to spend approximately $4 million in capital expenditures
during the current fiscal year ending April 30, 1997, the majority of
which will be related to the renovation and opening of new stores. The
Company expects that the borrowing under the Loan Agreement together
with cash from operations will be sufficient to meet the Company's
planned capital expenditures.
Page 9 of 13
<PAGE>
CERTAIN FACTORS AFFECTING FUTURE PERFORMANCE
From time to time information provided by the Company,
statements by its employees or information included in its filing with
the Securities and Exchange Commission (including those portions of
this Management Discussion and Analysis that refer to the future) may
contain forward looking statements that are not historical facts. These
statements are "forwarding looking" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward looking
statements and the Company's future performance operating results,
financial position and liquidity are subject to a variety of factors
that could materially affect results including the Company's ability to
select and stock merchandise attractive to customers, general economic
cycles affecting consumer spending, weather factors affecting retail
operations, the Company's inventory controls, operating factors
affecting customers satisfaction, the Company's relationship with its
employees, the mix of goods sold, pricing and other competitive
factors.
Page 10 of 13
<PAGE>
PART II
OTHER INFORMATION
ITEM 1 Legal Proceedings
None
ITEM 2 Change in Securities
None
ITEM 3 Defaults Upon 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) The exhibits listed on the Exhibit Index
following the signature page hereof are
filed herewith in response to this item.
(b) There were no reports filed in the current quarter.
Page 11 of 13
<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.
SEAMAN FURNITURE COMPANY, INC.
Date 3/14/97 /s/ Alan Rosenberg
------------------------- ----------------------------------
Alan Rosenberg, President &
Chief Executive Officer
/s/ Peter McGeough
----------------------------------
Peter McGeough, Executive Vice
President / Chief Administrative
& Financial Officer
Page 12 of 13
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- ------------
11 Statement regarding computation of per share earnings.
See Note 2 to Consolidated Financial Statements.
27 Financial Data Schedule
Page 13 of 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> APR-30-1997 APR-30-1996
<PERIOD-START> NOV-01-1996 NOV-01-1995
<PERIOD-END> JAN-31-1997 JAN-31-1996
<CASH> 1,300 3,436
<SECURITIES> 0 0
<RECEIVABLES> 77,079 74,864
<ALLOWANCES> 8,497 8,983
<INVENTORY> 27,443 27,796
<CURRENT-ASSETS> 103,790 104,578
<PP&E> 49,285 47,060
<DEPRECIATION> 17,179 13,909
<TOTAL-ASSETS> 155,298 159,251
<CURRENT-LIABILITIES> 38,125 37,631
<BONDS> 0 0
0 0
0 0
<COMMON> 50 50
<OTHER-SE> 103,957 101,485
<TOTAL-LIABILITY-AND-EQUITY> 155,298 159,251
<SALES> 63,294 56,292
<TOTAL-REVENUES> 66,313 59,798
<CGS> 42,045 38,244
<TOTAL-COSTS> 22,027 20,805
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 543 227
<INCOME-PRETAX> 1,698 522
<INCOME-TAX> 730 187
<INCOME-CONTINUING> 968 335
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 968 335
<EPS-PRIMARY> .19 .07
<EPS-DILUTED> .19 .07
</TABLE>
