<PAGE>
SECURITIES & 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 Period Ended June 30, 1994
-------------
[ ] 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 1-9357
------
TYCO TOYS, INC.
- ------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3319358
- ------------------------ ------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
6000 Midlantic Drive, Mt. Laurel, New Jersey 08054
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (609) 234-7400
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------- -------
Number of shares outstanding of each class of Registrant's Stock as of
August 9, 1994:
<TABLE>
<S> <C>
Common, $.01 par value.............................. 34,676,726 shares
Preferred, 6% Series B, $.10 par value.............. 47,619 shares
</TABLE>
<PAGE>
TYCO TOYS, INC. AND SUBSIDIARIES
FORM 10-Q
JUNE 30, 1994
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page
- ------------------------------ ----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1994 and 1993
and December 31, 1993 3
Consolidated Statements of Operations - Quarters and Six
Months Ended June 30, 1994 and 1993 4
Consolidated Statements of Stockholders' Equity -
Six Months Ended June 30, 1994 and Year Ended
December 31, 1993 5
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1994 and 1993 6
Notes to Consolidated Financial Statements 7-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-13
Part II. Other Information
- --------------------------
Item 1. Legal Proceedings 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
-2-
<PAGE>
Part I. Financial Information.
Item 1. Financial Statements.
Tyco Toys, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
------------------------------
1994 1993 1993
-------------- -------------- -------------
Assets (unaudited)
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 18,300 $ 25,620 $ 32,036
Receivables, net 195,713 156,598 219,232
Inventories, net 111,605 137,560 93,902
Prepaid expenses and other current assets 23,472 23,025 27,187
Deferred taxes 17,636 24,273 16,489
-------- -------- --------
Total current assets 366,726 367,076 388,846
Property and equipment, net 52,551 75,497 50,182
Other assets
Goodwill, net 234,258 239,514 235,824
Deferred taxes 25,635 - 25,635
Other assets 18,757 18,438 14,682
-------- -------- --------
Total other assets 278,650 257,952 276,141
-------- -------- --------
Total assets $697,927 $700,525 $715,169
======== ======== ========
Liabilities and Stockholders' Equity
Current liabilities
Notes and acceptances payable $ 81,885 $ 27,859 $ 68,963
Current portion of long-term debt 15,312 14,837 15,259
Accounts payable 46,482 55,356 62,602
Accrued expenses and other current liabilities 74,293 71,014 109,681
-------- -------- --------
Total current liabilities 217,972 169,066 256,505
Long-term debt, net of current portion 160,674 189,017 179,771
Deferred income taxes and other liabilities 1,449 2,313 1,444
Stockholders' Equity
Preferred stock, 6% Series B voting convertible,
exchangeable, $.10 par value, 1,000,000 shares
authorized; 47,619 shares issued and outstanding 5 - -
Common stock, $.01 par value, 50,000,000
shares authorized; 34,852,316, 34,831,852
and 34,847,316 shares issued as of
June 30, 1994 and 1993 and as of
December 31, 1993, respectively 347 347 347
Additional paid-in capital 342,144 293,974 294,500
Retained earnings (deficit) (5,495) 61,625 7,298
Treasury stock, at cost; 175,590 shares (1,595) (1,595) (1,595)
Cumulative translation adjustment (17,574) (14,222) (23,101)
-------- -------- --------
Total stockholders' equity 317,832 340,129 277,449
-------- -------- --------
Total liabilities and stockholders' equity $697,927 $700,525 $715,169
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
Tyco Toys, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
For the Quarters Ended For the Six Months
Ended
June 30, June 30,
------------------------ ----------------------
1994 1993 1994 1993
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $158,454 $146,665 $265,245 $246,987
Cost of goods sold 89,015 81,484 151,585 137,752
-------- -------- -------- --------
Gross profit 69,439 65,181 113,660 109,235
Marketing, advertising and
promotion 34,201 34,001 64,464 62,112
Selling, distribution and
administrative expenses 28,324 29,444 56,220 57,608
Amortization of goodwill 1,632 1,591 3,152 3,198
-------- -------- -------- --------
Total operating expenses 64,157 65,036 123,836 122,918
-------- -------- -------- --------
Operating income (loss) 5,282 145 (10,176) (13,683)
Interest and debt expense 6,873 5,561 13,434 10,957
Foreign exchange (gain) loss 1,253 263 1,089 750
Other (income) expense, net (1,114) (557) (2,392) (1,472)
-------- -------- -------- --------
Interest and other
expense, net 7,012 5,267 12,131 10,235
-------- -------- -------- --------
Loss before income taxes (1,730) (5,122) (22,307) (23,918)
Benefit for income taxes (2,937) (1,592) (10,139) (7,438)
-------- -------- -------- --------
Net income (loss) 1,207 (3,530) (12,168) (16,480)
Preferred stock dividend 625 - 625 -
-------- -------- -------- --------
Net income (loss)
available to common
shareholders $ 582 $ (3,530) $(12,793) $(16,480)
======== ======== ======== ========
Net income (loss) per
common share:
Primary $ 0.02 $ (0.11) $ (0.37) $ (0.51)
Fully diluted $ 0.02 $ (0.11) $ (0.37) $ (0.51)
Weighted average number of
common shares
outstanding:
Primary 34,677 33,093 34,676 32,503
Fully diluted 34,677 33,093 34,676 32,503
Dividends per common share $ - $ 0.025 $ - $ 0.05
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
Tyco Toys, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Year ended December 31, 1993
and Six Months Ended June 30, 1994 (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Paid-in Capital Treasury Stock
----------------- ------------- -------------------------- --------------
Number Number Retained Number Cumulative
of Par of Par Preferred Common Earnings of Translation
Shares Value Shares Value Stock Stock (Deficit) Shares Amount Adjustment
--------- ------ ------ ----- -------------- ---------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 - $- 31,830 $320 $ - $271,417 $ 79,769 176 $(1,595) $(14,670)
Exercise of stock options - - 170 1 - 612 - - - -
Exercise of warrants - - 2,672 26 - 22,017 - - - -
Foreign currency translation - - - - - - - - - (8,431)
Dividends declared - - - - - - (2,531) - - -
Tax benefit from exercise of
stock options - - - - - 454 - - - -
Net loss - - - - - - (69,940) - - -
----- --- ------ --- ------- ------- ------ ---- ------- ------
Balance at December 31, 1993 - - 34,672 347 - 294,500 7,298 176 (1,595) (23,101)
Exercise of stock options - - 5 - - 23 - - - -
Issuance of preferred stock 48 $5 - - 46,996 - - - - -
Preferred stock dividend - - - - 625 - (625) - - -
Foreign currency translation - - - - - - - - - 5,527
Net loss - - - - - - (12,168) - - -
----- --- ------ --- ------- ------- ------ ---- ------- ------
Balance at June 30, 1994 48 $5 34,677 $347 $47,621 $294,523 $(5,495) 176 $(1,595) $(17,574)
===== === ====== === ======= ======= ====== ==== ====== ======
</TABLE>
See accompanying notes consolidated financial statements.
-5-
<PAGE>
Tyco Toys, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------
1994 1993
------- -------
<S> <C> <C>
Cash Flows from Operating
Activities:
Net loss $(12,793) $(16,480)
Adjustments to reconcile net loss to net cash
utilized by operating activities:
Depreciation 10,428 12,128
Amortization 3,152 3,198
Decrease in allowance for bad debts, returns,
discounts and other receivable reserves (25,215) (34,709)
Decrease in allowance for obsolescence and
other inventory reserves (6,234) (4,505)
Change in assets and liabilities:
Decrease in receivables 54,195 100,434
Increase in inventories (5,500) (38,460)
Decrease in prepaid expenses and other current assets 4,194 8,934
Increase in other assets (514) (6,120)
Decrease in accounts payable (17,260) (14,072)
Decrease in accrued expenses and other current
liabilities (37,675) (40,024)
------ ------
Total adjustments (20,429) (13,196)
------ ------
Net cash utilized by operating activities (33,222) (29,676)
------ ------
Cash Flows From Investing Activities:
Disposition of property and equipment 1,200 1,817
Capital expenditures (13,771) (16,725)
------ ------
Net cash utilized by investing activities (12,571) (14,908)
------ ------
Cash Flows From Financing Activities:
Repayment of long-term debt (7,297) (1,312)
Increase (repayment) of notes and acceptances
payable, net (1,378) 4,118
Proceeds from issuance of preferred stock 50,000 -
Proceeds from issuance of common stock 23 22,584
Dividends paid - (798)
------ ------
Net cash provided by financing activities 41,348 24,592
------ ------
Effect of exchange rate changes on cash (9,291) (5,569)
------ ------
Net Decrease in Cash and Cash Equivalents (13,736) (25,561)
Cash and Cash Equivalents, Beginning of Year 32,036 51,181
------ ------
Cash and Cash Equivalents, End of Period $ 18,300 $ 25,620
====== ======
Cash Payments During Period For:
Interest $ 13,733 $ 4,470
Taxes 282 1,603
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
TYCO TOYS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
(1) Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The consolidated financial statements
include the accounts of Tyco Toys, Inc. (the Company, Tyco or Tyco Toys) and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation. Investments in unconsolidated joint ventures and
other companies are accounted for on the equity method or cost basis depending
upon the level of the investment and/or the Company's ability to exercise
influence over operating and financial policies. In the opinion of management,
all adjustments (consisting of a normal recurring nature) considered necessary
for a fair presentation of results for interim periods have been made. Certain
items in the prior period's financial statements have been reclassified to
conform with the current year's presentation. Due to the seasonal nature of the
Company's business, the results of operations for the interim periods are not
necessarily indicative of the results for a full year. The unaudited financial
statements herein should be read in conjunction with the Company's Annual Report
on Form 10-K for the year ended December 31, 1993 which was filed with the
Securities and Exchange Commission.
(2) Accounting For Income Taxes
---------------------------
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109), effective January 1, 1993. There was
no cumulative effect on the deferred tax balances as a result of adopting this
pronouncement.
In accordance with SFAS 109, deferred income taxes reflect the impact of
temporary differences between values recorded for assets and liabilities for
financial reporting purposes and the values utilized for measurement in
accordance with current tax laws.
-7-
<PAGE>
TYCO TOYS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
The tax effects of the significant temporary differences giving rise to the
Company's deferred tax assets (liabilities) for the year ended December 31,
1993, which the adoption of SFAS 109 has required the Company to recognize, are
as follows (in thousands):
<TABLE>
<S> <C>
Current:
Sales and product allowances $ 4,790
Co-operative advertising 4,738
Receivable reserves 4,230
Obsolescence reserve 3,934
------
17,692
Valuation allowance (1,203)
------
$16,489
======
Noncurrent:
Net operating losses $48,461
State temporary differences 10,411
Foreign tax credits 5,269
Depreciation (1,885)
Other 5,983
------
68,239
Valuation allowance (42,604)
------
$25,635
======
</TABLE>
Management has determined, based on the Company's history of earnings from prior
operations (after adjustments for nonrecurring items, restructuring charges and
permanent differences), that the Company will generate sufficient taxable income
in the fifteen-year carryforward period to realize the benefit of the current
and prior year net operating losses. The total net deferred tax assets (both
current and noncurrent) have been reduced by establishing valuation allowances
aggregating $43,807,000. Based on the weight of available evidence, management
has concluded that more likely than not, its future taxable income will be
sufficient to support the current recognition of the total net deferred tax
assets of $42,124,000.
The valuation allowances have been established due to management's analysis
indicating that certain tax credit carryforwards and net operating loss
carryforwards, which are limited under the income tax laws, may expire prior to
their full utilization. The valuation allowances include $16,836,000 related to
the preacquisition net operating losses of Matchbox and $174,000 related to the
Company's Belgium subsidiaries. Any subsequently recognized benefits related to
these net operating losses will be allocated to reduce goodwill.
The valuation allowances are generally established annually, when management
undertakes a comprehensive analysis. During interim periods, management makes
its best estimate of what year end balances will be to determine the interim tax
provision. Changes to the valuation allowance on an interim basis, however, are
and will be made, if appropriate. During the second quarter of 1994, the
Company changed their estimate of what the annual effective rate should be, and
recording this change resulted in a credit to the tax provision during the
second quarter of approximately $2,000,000.
-8-
<PAGE>
TYCO TOYS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
(3) Receivables, Net (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
----------------------
1994 1993 1993
-------- -------- -----------
<S> <C> <C> <C>
Trade $216,197 $172,322 $262,330
Other receivables 10,967 7,558 13,568
Less:
Doubtful accounts 7,057 9,579 11,201
Returns, discounts and
other reserves 24,394 13,703 45,465
-------- -------- --------
$195,713 $156,598 $219,232
======== ======== ========
</TABLE>
(4) Inventories, Net (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
----------------------
1994 1993 1993
-------- -------- -----------
<S> <C> <C> <C>
Raw materials $ 26,508 $ 34,460 $ 27,836
Work-in-process 2,101 2,960 2,355
Finished goods 93,183 109,082 80,132
Less obsolescence and other
reserves 10,187 8,942 16,421
-------- -------- --------
$111,605 $137,560 $ 93,902
======== ======== ========
</TABLE>
(5) Legal Proceedings
-----------------
Italian Litigation
- ------------------
The former managing director of the Company's Italian sales and marketing
subsidiary has initiated two court actions against the Company in Italy as the
result of the Company's previously announced decision to close or sell the
subsidiary. One action, alleging violations of Italian employment laws and
regulations has been dismissed and no appeal has been taken todate. The second
action, alleging breach of a letter of intent with the plaintiff for the sale of
the subsidiary, resulted in the sequestration of the Company's shares in the
subsidiary and has prevented the completion of the announced sale of the
subsidiary to Giochi Preziosi, an Italian toy distributor. In the opinion of
management and its outside counsel, the Company has meritorious legal and
factual defenses to the claims made in this litigation; therefore, the outcome
is not likely to have a material adverse impact on the Company's earnings,
financial condition or liquidity.
Lego Litigation
- ---------------
Tyco Industries, Inc. (Tyco Industries), a wholly-owned subsidiary of the
Company, has been a defendant in proceedings in Italy, the Netherlands, and in
the Federal Court of Canada in which Interlego A.G. (Lego) has asserted unfair
competition claims. The Company received a favorable ruling in the Italian
proceedings and an appeal has been taken by Lego. An adverse determination in
any of these cases is not, in the opinion of management, likely to have a
material adverse impact on the earnings, financial condition or liquidity of the
Company.
-9-
<PAGE>
TYCO TOYS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
Shareholder Suits
- -----------------
In December 1992, a stockholder filed litigation in federal court in New Jersey
asserting class action claims under the federal securities laws as a result of
the announcement made by the Company on October 21, 1992 relating to its outlook
for earnings.
In December 1993 and January 1994, two additional stockholders filed litigation
in the same court asserting claims under federal and state securities laws as a
result of the Company's financial performance in 1993. Both are class action
cases and they have been consolidated.
The Company's outside counsel is of the opinion that the Company has substantial
and meritorious defenses to these claims and there is a likelihood that the
Company will prevail. Accordingly, it is the opinion of management that the
outcome of this litigation is not likely to have a material adverse effect on
the earnings, financial condition or liquidity of the Company.
U.S. Customs
- ------------
The U.S. Customs Service has issued a penalty notice of an assessment for lost
duty in the amount of $1,500,000, penalties for gross negligence of $5,800,000,
and penalties for fraud of $5,600,000. All of the claims arise from activities
of the Company's View-Master subsidiary for the period prior to its acquisition
by the Company in 1989. Management and the Company's outside counsel are of the
opinion that the Company has legal and factual defenses to the penalty claims
made by the U.S. Customs Service, and that the outcome of the proceedings
relating to these claims, which proceedings may be protracted, are not likely to
have a material adverse impact on the earnings, financial condition or liquidity
of the Company.
Environmental Litigation
- ------------------------
Tyco Industries is a party to three matters arising out of waste hauled by a
transporter to various sites, including the GEMS Landfill. In litigation
relating directly to remediation of the landfill, Tyco Industries has signed a
Consent Order and Trust Agreement and made a settlement contribution of an
amount not material to Tyco Industries. In another matter, the court has
certified class action claims of homeowners near the GEMS Landfill against
approximately 150 defendants, including Tyco Industries, for various types of
unspecified monetary damages, including punitive damages. In the third matter,
the New Jersey Department of Environmental Protection is asserting claims for
remediation expenses at a different site in Sewell, New Jersey used as a waste
transfer station by the same transporter involved in the other two matters. In
management's opinion, there are meritorious factual and legal defenses to these
claims. Management of the Company and its outside counsel are of the opinion
that these three matters are not likely to have a material adverse impact on the
earnings, financial condition or liquidity of the Company. In addition, the
Company will receive a contribution from a third party towards certain expenses
in these matters.
-10-
<PAGE>
TYCO TOYS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
Other Litigation
- ----------------
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse impact on the
Company's earnings, financial condition or liquidity.
(6) Net Income (Loss) Per Share
---------------------------
Net income (loss) per share was calculated using the weighted average number of
shares of common stock and dilutive common stock equivalents outstanding during
the period. Outstanding options, convertible debentures and preferred shares
were determined to be anti-dilutive for the quarter and six months ended June
30, 1993 and for the six months ended June 30, 1994 and were not materially
dilutive for the quarter ended June 30, 1994; therefore, these items were
excluded from the per share calculations.
-11-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS.
-----------------------------------
Results of Operations
- ---------------------
Net sales for the quarter and six months ended June 30, 1994 were $158,454,000
and $265,245,000, respectively, compared to $146,665,000 and $246,987,000 for
the same periods last year, representing an increase of 8.0% and 7.4%,
respectively. Increased sales for the quarter and six months ended June 30, 1994
resulted from higher domestic shipments of Matchbox vehicles, activity toys and
large dolls, in addition to slightly higher sales by Tyco International,
partially offset by lower sales as a result of product delays experienced by the
Company's direct import business, Tyco Playtime.
Gross profit for the quarter and six months ended June 30, 1994 was $69,439,000
and $113,660,000, respectively (43.8% and 42.9%, respectively, of net sales),
compared to $65,181,000 and $109,235,000, respectively (44.4% and 44.2%,
respectively, of net sales), for the comparable periods last year. Gross profit
margins decreased for the quarter and six months ended June 30, 1994 due
primarily to the replacement of sales made in 1993 of high margin action figures
with shipments of lower gross margin products and reduced prices on carryover
inventory in 1994.
Total operating expenses for the quarter and six months ended June 30, 1994 were
$64,157,000 and $123,836,000, respectively (40.5% and 46.7%, respectively, of
net sales), compared to $65,036,000 and $122,918,000, respectively (44.3% and
49.8% of net sales), for the same periods last year. The marginal increase for
the six months ended June 30, 1994 is principally due to volume-related
expenses. Total operating expenses, expressed as a percentage of net sales,
were lower for the quarter and six months ended June 30, 1994 reflecting the
Company's continued cost-containment efforts.
Interest and debt expense for the quarter and six months ended June 30, 1994 was
$6,873,000 and $13,434,000, respectively, compared to $5,561,000 and
$10,957,000, respectively, for the same periods last year as a result of higher
borrowings under the Company's credit facilities. Total average debt for the
six months ended June 30, 1994 was $226,803,000 at an effective interest rate of
12.0% compared to total average debt of $177,307,000 with an effective rate of
12.3% for the first six months of 1993.
The Company recorded tax benefits of $2,937,000 and $10,139,000 for the quarter
and six months ended June 30, 1994, respectively compared to $1,592,000 and
$7,438,000, respectively, for the same periods last year reflecting an increase
in the Company's overall effective tax rate.
In connection with an examination of the consolidated federal income tax returns
of Tyco Toys, Inc. and Subsidiaries for the fiscal years ended August 31, 1987
through August 31, 1990, the Internal Revenue Service has issued a deficiency
notice to the Company. The Company has elected to appeal this determination and
management believes that the final outcome of this appeal will not materially
affect the results of operations (including realization of net operating loss
carryforwards), financial condition or liquidity of the Company.
-12-
<PAGE>
Net income for the quarter ended June 30, 1994 was $582,000 or $0.02 per share
compared to a net loss of $3,530,000 or $0.11 per share for the same period last
year. The net loss for the six months ended June 30, 1994 was $12,793,000 or
$0.37 per share compared to $16,480,000 or $0.51 per share for the same period
last year. Average shares outstanding for the quarter and six months ended June
30, 1994 were 34,677,000 and 34,676,000, respectively compared to 33,093,000 and
32,503,000, respectively, for the same periods during 1993. In 1993, warrants
that were exercised into 2,672,000 shares of common stock during the first six
months were reflected during that period on a weighted average basis for
earnings per share purposes.
Financial Condition
- -------------------
Six Months Ended June 30, 1994
- ------------------------------
Cash decreased $13,736,000 to $18,300,000 at June 30, 1994 from $32,036,000 at
December 31, 1993 reflecting cash utilized by operating and investing activities
of $45,793,000 and the effect of exchange rate fluctuations of $9,291,000,
offset by cash provided by financing activities of $41,348,000. Cash generated
from the collection of receivables of $54,195,000 was used to paydown current
liabilities. The Company's issuance of $50,000,000 of 6% series B voting
convertible, exchangeable preferred stock generated $47,000,000 of net proceeds
which were used to reduce borrowings under the Company's credit facility with
NationsBank and for general corporate purposes. The preferred stock has an
annual dividend yield of 6% and is convertible into Tyco common stock at a price
of $10 per share. The preferred stock can be exchanged at any time for 6%
convertible subordinated notes at the Company's option.
Six Months Ended June 30, 1994 vs. Six Months Ended June 30, 1993
- -----------------------------------------------------------------
On a comparative basis, the first six months of 1994 reported an increase in net
receivables of $39,115,000 due to increased domestic and international sales.
Net inventories declined by $25,955,000 primarily due to the Company's efforts
to maintain lower worldwide inventory levels. The increase of $3,279,000 in
accrued expenses and other current liabilities reflects an increase in
advertising, offset by a decrease in corporate tax accruals and the utilization
of the purchase accounting reserves which were established as part of the 1992
Matchbox acquisition.
The Company believes that its internally-generated funds combined with its
existing credit facilities will provide adequate financing for its current and
foreseeable levels of operation.
-13-
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings.
- ------ -----------------
Reference is made to Note 5 of Notes to Consolidated Financial
Statements included in Part I, Item 1 of this report.
Item 5. Other Information.
- ------ -----------------
Board of Directors
------------------
On May 26, 1994, at the annual meeting of shareholders of the Company,
Messrs. John A. Canning, Jr., Jerome I. Gellman and Ariel Gratch were
re-elected as Directors of the Company for a term of three years. In
addition, Messrs. David Golub and Jonathan Kagan have been seated as
Directors pursuant to the terms of the 6% series B voting convertible,
exchangeable preferred stock sold by the Company on April 15, 1994.
Item 6. Exhibits and Reports on Form 8-K.
- ------ --------------------------------
(a) Exhibits.
---------
11. Statements Regarding Computation of Income (Loss) Per Share -
Quarters and Six Months Ended June 30, 1994 and 1993.
(b) Reports on Form 8-K.
--------------------
On April 15, 1994, the Company filed Form 8-K relating to the issuance
of $50,000,000 of 6% series B voting convertible, exchangeable
preferred stock, including a Certificate of Designation relating to the
preferred issue, which was filed as an exhibit.
-14-
<PAGE>
SIGNATURE
---------
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.
TYCO TOYS, INC.
---------------
Registrant
Date August 9, 1994
--------------
By: /s/ Harry J. Pearce
-------------------------
Harry J. Pearce
Vice Chairman,
Chief Financial Officer,
and Director
-15-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
11.1 Statements regarding computation
of income (loss) per share for the quarters
ended June 30, 1994 and 1993. 17-18
11.2 Statements regarding computation
of loss per share for the six months ended
June 30, 1994 and 1993. 19-20
-16-
<PAGE>
Exhibit 11.1
Tyco Toys, Inc. and Subsidiaries
Statement Regarding Computation of Per Share Earnings
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Quarter Ended
June 30, 1994
---------------------------------------------------------------
As As (1) Fully
Reported Adjustments Primary Reported Adjustments Diluted
-------- ----------- ------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
NET INCOME $1,207 $ - $1,207 $1,207 $147 $1,354
Preferred stock dividend 625 - 625 625 - 625
----- --- ----- ----- --- -----
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $ 582 $ - $ 582 $ 582 $147 $ 729
===== === ===== ===== ==== =====
</TABLE>
<TABLE>
<CAPTION>
Fully
SHARES Primary Diluted
- ------ ------- -------
<S> <C> <C>
Average shares outstanding 34,677 34,677
Additional shares issued assuming conversion of:
Debentures (2) - 1,397
Preferred Stock (3) - 4,121
------ ------
Total average shares outstanding 34,677 40,195
====== ======
NET INCOME PER COMMON SHARE (4) $0.02 $0.02
==== ====
</TABLE>
Note: Reference is made to Note 6 to Consolidated Financial Statements in Part
I, Item 1 of this report.
(1) Reflects the interest savings, net of taxes, from the conversion of
convertible debentures (reference note 2 below), at the beginning of the
year.
(2) Assumes the conversion (for fully diluted earnings per share only) of the
$13,973,000 of 7% convertible debentures into common stock of the Company
at a conversion price of $10 per share as of the beginning of the year
(or date of issuance, if later).
(3) Assumes the conversion (for fully diluted earnings per share only) of the
$50,000,000 of 6% series B voting convertible, exchangeable preferred
stock into 4,999,995 shares of the Company's common stock at a conversion
price of $10 per share as of April 15, 1994, the date of issuance.
(4) Fully diluted earnings per share is not presented in the Consolidated
Statements of Operations since it is not materially dilutive.
-17-
<PAGE>
Exhibit 11.1
Tyco Toys, Inc. and Subsidiaries
Statement Regarding Computation of Per Share Earnings
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Quarter Ended
June 30, 1993
---------------------------------------------------------------
As As (1) Fully
Reported Adjustments Primary Reported Adjustments Diluted
-------- ----------- ------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
NET LOSS $(3,530) $ - $(3,530) $(3,530) $142 $(3,388)
===== ==== ===== ===== === =====
<CAPTION>
Fully
SHARES Primary Diluted
- ------ ------- -------
<S> <C> <C>
Average shares outstanding 33,093 33,093
Incremental shares issued assuming exercise of
stock options (2)(5) 505 505
Additional shares issued assuming conversion of
Debentures (3) - 1,350
------ ------
Total average shares outstanding 33,598 34,948
====== ======
NET LOSS PER COMMON SHARE (4) $(0.11) $(0.10)
==== ====
</TABLE>
Note: Reference is made to Note 6 to Consolidated Financial Statements in Part
I, Item 1 of this report.
(1) Reflects the interest savings, net of taxes, from the conversion of
convertible debentures (reference note 3 below), at the beginning of the
year.
(2) Reflects the shares issuable upon the assumed conversion of all the
outstanding stock options as of the beginning of the period presented (or
date of issuance, if later), net of shares repurchased with the exercise
proceeds.
(3) Assumes the conversion (for fully diluted earnings per share only) of the
$13,500,000 of 7% convertible debentures into common stock of the Company
at a conversion price of $10 per share as of the beginning of the year.
(4) Fully diluted loss per share is not presented in the Consolidated
Statements of Operations since it is anti-dilutive.
(5) For financial statement purposes, the incremental shares for primary
earnings per share have not been included, as the effect is
anti-dilutive.
-18-
<PAGE>
Exhibit 11.2
Tyco Toys, Inc. and Subsidiaries
Statement Regarding Computation of Loss Per Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 1994
--------------------------------------------------------------
As As (1) Fully
Reported Adjustments Primary Reported Adjustments Diluted
-------- ----------- ------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
NET LOSS $(12,168) $ $(12,168) $(12,168) $293 $(11,875)
Preferred stock dividend 625 - 625 625 - 625
------ ---- ------ ------ --- ------
NET LOSS AVAILABLE TO COMMON
SHAREHOLDERS $(12,793) $ - $(12,793) $(12,793) $293 $(12,500)
====== ==== ====== ====== === ======
<CAPTION>
Fully
SHARES Primary Diluted
------- -------
<S> <C> <C>
Average shares outstanding 34,676 34,676
Additional shares issued assuming conversion of:
Debentures (2) 1,397
Preferred stock (3) - 2,072
------ ------
Total average shares outstanding 34,676 38,145
====== ======
NET LOSS PER COMMON SHARE (4) $(0.37) $(0.33)
==== ====
</TABLE>
Note: Reference is made to Note 6 to Consolidated Financial Statements in Part
I, Item 1 of this report.
(1) Reflects the interest savings, net of taxes, from the conversion of
convertible debentures (reference note 2 below), at the beginning of the
year.
(2) Assumes the conversion (for fully diluted earnings per share only) of the
$13,973,000 of 7% convertible debentures into common stock of the Company
at a conversion price of $10 per share as of the beginning of the year
(or date of issuance, if later).
(3) Assumes the conversion (for fully diluted earnings per share only) of the
$50,000,000 of the 6% voting convertible, exchangeable preferred stock
into 4,999,995 shares of the Company's common stock at a conversion price
of $10 per share as of April 15, 1994, the date of issuance.
(4) Fully diluted loss per share is not presented in the Consolidated
Statements of Operations since it is anti-dilutive.
-19-
<PAGE>
Exhibit 11.2
Tyco Toys, Inc. and Subsidiaries
Statement Regarding Computation of Loss Per Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 1993
---------------------------------------------------------------
As As (1) Fully
Reported Adjustments Primary Reported Adjustments Diluted
-------- ----------- ------- -------- ----------- -------
NET LOSS $(16,480) $ - $(16,480) $(16,480) $284 $(16,196)
====== ==== ====== ====== === ======
<CAPTION>
Fully
SHARES Primary Diluted
------- -------
<S> <C> <C>
Average shares outstanding 32,503 32,503
Incremental shares issued assuming exercise of
stock options (2)(5) 767 767
Additional shares issued assuming conversion of
Debentures (3) - 1,350
------ ------
Total average shares outstanding 33,270 34,620
====== ======
NET LOSS PER COMMON SHARE (4) $(0.50) $(0.47)
==== ====
</TABLE>
Note: Reference is made to Note 6 to Consolidated Financial Statements in Part
I, Item 1 of this report.
(1) Reflects the interest savings, net of taxes from the conversion of
convertible debentures (reference note 3), at the beginning of the year.
(2) Reflects the shares issuable upon the assumed conversion of all the
outstanding stock options as of the beginning of the period presented (or
date of issuance, if later), net of shares repurchased with the exercise
proceeds.
(3) Assumes the conversion (for fully diluted earnings per share only) of the
$13,500,000 of 7% convertible debentures into common stock of the Company
at a conversion price of $10 per share as of the beginning of the year.
(4) Fully diluted loss per share is not presented in the Consolidated
Statements of Operations since it is anti-dilutive.
(5) For financial statement purposes, the incremental shares for primary
earnings per share have not been included, as the effect is
anti-dilutive.
-20-
