<PAGE>
SECURITY 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 AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995.
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[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to \
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Commission file number 0 - 15942
INTEGRATED BRANDS INC.
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(Exact name of registrant as specified in its charter)
New Jersey
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(State or other jurisdiction of incorporation or organization)
11-2778439
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(I.R.S. Employer Identification No.)
4175 Veterans Highway, Ronkonkoma, NY 11779
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(Address of principal executive offices - Zip code)
Registrant's telephone number, including area code: 516 - 737 - 9700
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Former name, former address and former fiscal year, if changes since last
report.
Indicate by check whether the registrant (1) has filed all reports required to
be filed be 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
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APPLICABLE ONLY TO ISSUERS 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 No
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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 November 10, 1995.
Common Stock Par Value $.01 Per Share. Shares Outstanding 9,953,288
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INTEGRATED BANDS INC.
Form 10-Q
September 30, 1995
TABLE OF CONTENTS
Part I. - Financial Information
Item 1. Financial statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of
Operations 5
Condensed Consolidated Statement of
Stockholders' Equity 7
Condensed Consolidated Statements of
Cash Flows 8
Notes to Condensed Consolidated
Financial Statements 10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 12
Part II. - Other Informatio
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
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(Unaudited)
(In thousands)
Assets
Current Assets:
Cash and cash equivalents $2,105 $ 3,860
Receivables 8,222 3,258
Receivables - affiliates 1,470 515
Inventories 1,286 987
Prepaid expenses 1,412 446
- -------------------------------------------------------------------------------
Total Current Assets 14,495 9,066
Improvements and equipment,
at cost, - net of accumulated
depreciation and amortization 1,045 1,102
Other assets:
Intangible assets, at
cost - net of accumulated
amortization of $3,888,000
and $3,419,000 12,643 9,247
Investment in Heidi's 1,356 1,356
Other 407 449
- -------------------------------------------------------------------------------
Total assets $29,946 $21,220
===============================================================================
See accompanying notes to Condensed Consolidated Financial Statements.
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INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1995 1994
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(Unaudited)
(In thousands)
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of long-term debt $ 156 $ 253
Trade accounts payable 7,089 4,026
Income taxes payable 817 527
Payable - affiliates 919 307
Accrued liabilities 1,595 1,688
Liability for lease terminations 110 110
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Total Current Liabilities 10,686 6,911
Long-term debt, net of current maturities 5,318 1,339
Liability for lease terminations,
net of current portion 255 318
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Total liabilities 16,259 8,568
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Minority interest 216 198
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Commitments and contingencies
Stockholders' equity:
Class A common stock, $.01 par
value 20,000,000 shares authorized;
12,107,903 shares issued 121 121
Paid-in capital 8,169 8,168
Retained earnings 6,846 5,830
Treasury stock, at cost 2,154,615 shares (1,665) (1,665)
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Total stockholders' equity 13,471 12,454
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Total liabilities and stockholders' equity $29,946 $21,220
===============================================================================
See accompanying notes to Condensed Consolidated Financial Statements.
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INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen Weeks Ended
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September 30, October 1,
1995 1994
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(Unaudited)
(In thousands, except
per share amount)
Revenues:
Net sales $10,429 $8,044
Store operations 900 1,242
Franchise revenue 521 541
Other 58 47
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11,908 9,874
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Operating costs and expenses:
Cost of goods sold 7,012 5,251
Store operations 872 1,122
Selling, general and administrative
expenses 3,724 2,635
Interest 83 49
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11,691 9,057
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Income before taxes on income 217 817
Taxes on income 86 457
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Net income $131 $360
===============================================================================
Earnings per common share $.01 $.03
===============================================================================
Weighted average number of common
and common equivalent shares
outstanding 10,250 11,449
===============================================================================
See accompanying notes to Condensed Consolidated Financial Statements.
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Thirty-Nine weeks Ended
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September 30, October 1,
1995 1994
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(Unaudited)
(In thousands, except
per share amount)
Revenues:
Net sales $26,270 $22,311
Store operations 2,832 3,704
Franchise revenue 1,435 1,634
Other 173 136
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30,710 27,785
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Operating costs and expenses:
Cost of goods sold 16,603 13,742
Store operations 2,670 3,262
Selling, general and administrative
expenses 9,486 7,854
Interest 128 119
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28,887 24,977
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Income before taxes on income 1,823 2,808
Taxes on income 807 1,399
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Net income $1,016 $1,409
===============================================================================
Earnings per common share $.10 $.12
===============================================================================
Weighted average number of common
and common equivalent shares
outstanding 10,233 11,911
===============================================================================
See accompanying notes to Condensed Consolidated Financial Statements.
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INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Common Stock Treasury Stock
------------ --------------
Par Paid-in Retained
Shares Value Capital Earnings Shares Amount Total
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(Unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 12,106 $121 $8,168 $5,830 2,155 $(1,665) $12,454
Exercise of 1,800 shares
employee stock option
for Class A Common Stock
(unaudited) 2 1 1
Net income for the
thirty-nine weeks ended
September 30, 1995 (unaudited) 1,016 1,016
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Balance, September 30, 1995 12,108 $121 $8,169 $6,846 2,155 $(1,665) $13,471
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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<PAGE>
INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirty-Nine Weeks Ended
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September 30, October 1,
1995 1994
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(Unaudited)
(In thousands)
Cash Flows from Operating Activities
Net income $1,016 $1,409
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 871 680
Provision for doubtful accounts 239 495
Minority interest in net income of subsidiary 18 16
Increase (decrease) in cash flows from changes
in operating assets and liabilities:
Receivables (5,203) (1,027)
Receivables - affiliates (955) (699)
Inventories (299) (55)
Prepaid expenses (966) (228)
Other assets 42 85
Trade accounts payable and accrued liabilities 3,197 2,251
Payables - affiliates 612 290
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Net cash provided by (used in) operating activities (1,428) 3,217
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See accompanying notes to Condensed Consolidated Financial Statements.
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INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
Thirty-Nine Weeks Ended
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September 30, October 1,
1995 1994
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(Unaudited)
(In thousands)
Cash Flows from Investing Activities:
Acquisition of long term license agreements $(4,500)
Capital expenditures (119) $ (390)
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Net cash used in investing activities (4,619) $ (390)
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Cash Flows from Financing Activities:
Proceeds from long term debt 4,500
Principal payments on long-term debt (209) (830)
Purchase of treasury stock -- (1,451)
Exercise of stock options by employee 1 --
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Net cash provided by (used in) financing activities 4,292 (2,281)
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Net change in cash and cash equivalents (1,755) 546
Cash and cash equivalents, beginning of period 3,860 2,708
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Cash and cash equivalents, end of period $2,105 $3,254
===============================================================================
Non-cash investing activities:
During the thirty-nine weeks ended September 30, 1994, the Company acquired
certain assets of DCA Food Industries Inc. for a total consideration of
$578,000, as adjusted, which is payable through the year 2000.
See accompanying notes to Condensed Consolidated Financial Statements.
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INTEGRATED BRANDS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
The Company was incorporated in September 1985 and commenced
operations on December 23, 1985 as Steve's Homemade Ice Cream, Inc. In
July 1995, the Company changed its name to INTEGRATED BRANDS INC.
to more appropriately reflect the breadth of the Company's business. In
August 1988, the Company completed the acquisition of Swensen's Inc.
(Swensen's) and it's wholly-owned subsidiaries. In August 1990, the
Company acquired a sixty percent interest in American Glace, Inc.
The Company markets, distributes and sells a variety of branded frozen
dessert products to supermarkets, grocery stores, gourmet shops, delicates-
sens and convenience stores. The Company currently franchises ice cream
parlors, dip shoppes and family style restaurants throughout the United States
and certain foreign countries.
On August 16, 1995, the Company purchased the rights to Colombo brand
hard pack prepackaged frozen dessert product line from General Mills. The
Company also entered into twenty year exclusive license agreements for the
United States and Canada for the use of the Colombo, Trix, Count Chocula
and Lucky Charms tradenames and fifteen years for the Betty Crocker
trademark for frozen products containing ice cream or frozen yogurt for
prepackaged goods of all sizes, prepackaged novelties such as pops, bars and
sandwiches and prepackaged frozen dessert specialties such as ice cream
cakes, pies and brownie sundaes. Each agreement is renewable for an
additional five years. General Mills will continue to market and distribute
Colombo Shoppe Style Frozen Yogurt to its food service customers.
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries except Heidi's Frogen Yozurt Shoppes, Inc.
("Heidi's"). All material intercompany balances and transactions have been
eliminated in consolidation. The Company's investment in Heidi's is stated
at cost. On April 9, 1993, Heidi's and its subsidiary filed voluntary petitions
under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy
Court to reorganize Heidi's.
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INTEGRATED BRANDS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
The Condensed Consolidated Financial Statements included herein are
unaudited and include all adjustments which are, in the opinion of manage-
ment, necessary for a fair presentation of the results of operations of the
interim period pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in accordance with generally accepted accounting princi-
ples have been condensed or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures in such financial
statements are adequate to make the information presented not misleading.
Certain 1994 balances were reclassified to conform to the 1995 presentation.
These condensed consolidated financial statements should be read in conjunc-
tion with the Company's Consolidated Financial Statements filed with the
Securities and Exchange Commission on Form 10-K for the fiscal year ended
December 31, 1994.
The results of operations for the thirty-nine weeks ended September 30, 1995
are not necessarily indicative of the results to be expected for the full year.
NOTE 2 LONG-TERM DEBT
Under a revolving credit facility entered into December 1994, the Company
can borrow up to $7,500,000 through December 31, 1997. As of September
30, 1995 , the Company borrowed $4,825,000. Interest is payable monthly
on the unpaid principal balance of borrowings under this facility at the bank's
prime rate plus 1/2%, which approximated 9.25% at September 30, 1995.
The Company has agreed to pay a fee of 1/8% per annum on the unused
portion of the commitment.
NOTE 3 EARNINGS PER COMMON SHARE
Earnings per share of common stock was computed by dividing net income
by the weighted average number of shares of Common Stock outstanding
during the period presented. 280,000 and 182,000 common equivalent shares
were included in the weighted average number of shares for the thirty-nine
weeks ended September 30, 1995 and October 1, 1994, respectively. The
common stock equivalent shares result from shares issuable upon the exercise
of warrants or options under the treasury stock method.
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<PAGE>
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Thirteen weeks ended September 30, 1995 vs. thirteen weeks ended October
1, 1994.
Total revenues for the thirteen weeks ended September 30, 1995 increased to
$11,908,000 from $9,874,000 for the thirteen weeks ended October 1, 1994.
Prepackaged frozen dessert sales for the thirteen weeks ended September 30,
1995 increased to $8,692,000 from $5,670,000 for the thirteen weeks ended
October 1, 1994. The increase in revenues and in prepackaged frozen dessert
sales was due primarily to the increase of new product authorizations in retail
outlets and an increase in sales promotions. The reduction in bulk frozen
dessert sales was a result of the decline in the number of franchise stores in
operation, and the expiration in late 1994 of an agreement with a licensee
regarding bulk products. The decrease in revenue from store operations of
$342,000 was primarily due to the closing of one Company-owned store.
The following table sets forth the sales of prepackaged frozen desserts, bulk
frozen dessert sales to franchised and licensed stores, and other sales for the
thirteen weeks ended September 30, 1995 and October 1, 1994, respectively.
Thirteen Weeks Ended
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September 30, October 1,
1995 1994
- -------------------------------------------------------------------------------
Prepackaged Frozen Dessert Sales $8,692,000 $5,670,000
Bulk Frozen Dessert Sales 1,356,000 2,183,000
Other sales 381,000 191,000
- -------------------------------------------------------------------------------
Total sales $10,429,000 $8,044,000
===============================================================================
The Company's sales of prepackaged and bulk frozen desserts comprised
84% of the total revenues for the thirteen weeks ended September 30, 1995
and 80% for the thirteen weeks ended October 1, 1994.
The gross profit percentage decreased to 33% for the thirteen weeks ended
September 30, 1995 as compared to 35% for the thirteen weeks ended
October 1, 1994. The decrease is primarily due to an increase in sales
promotions in 1995 versus the comparable period in 1994.
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<PAGE>
Selling, general and administrative expenses increased to $3,724,000 for the
thirteen weeks ended September 30, 1995 from $2,635,000 for the thirteen
weeks ended October 1, 1994. This increase is primarily attributable to the
increase in product support and selling expenses, including an increase in
product introductory expenses incurred during the third quarter of 1995 in
excess of such expenses for the third quarter of 1994, in connection with the
introduction of new licensed and sublicensed products.
Net income for the thirteen weeks ended September 30, 1995 was $131,000 as
compared to $360,000 for the thirteen weeks ended October 1, 1994. This decrease
was primarily attributable to the increase in product support and selling
expenses offset in part by the increased gross profit dollars realized as a
result of increased sales volume.
Thirty-nine weeks ended September 30, 1995 vs. thirty-nine weeks ended
October 1, 1994.
Total revenues for the thirty-nine weeks ended September 30, 1995 increased to
$30,710,000 from $27,785,000 for the thirty-nine weeks ended October 1, 1994.
Prepackaged frozen dessert sales increased to $20,908,000 for the thirty-nine
weeks ended September 30, 1995 from $15,471,000 for the thirty-nine weeks ended
October 1, 1994. The increase in revenues and in prepackaged and frozen dessert
sales was primarily due to the increase in new product authorizations in retail
outlets and an increase in sales promotions. The reduction in bulk frozen
dessert sales was a result of the decline in the number of franchise stores in
operation, and the expiration in late 1994 of an agreement with a licensee
regarding bulk products. The decrease in revenue from store operations of
$872,000 was primarily due to the closing of one Company-owned store.
The following table sets forth the sales of prepackaged frozen desserts, the
sales of bulk frozen desserts to franchised and licensed stores, and other sales
for the thirty-nine weeks ended September 30, 1995 and October 1, 1994,
respectively.
Thirty-Nine Weeks Ended
- -------------------------------------------------------------------------------
September 30, October 1,
1995 1994
- -------------------------------------------------------------------------------
Prepackaged Frozen Dessert Sales $20,908,000 $15,471,000
Bulk Frozen Dessert Sales 4,416,000 5,882,000
Other sales 946,000 958,000
- -------------------------------------------------------------------------------
Total sales $26,270,000 $22,311,000
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<PAGE>
The gross profit percentage decreased to 37% for the thirty-nine weeks ended
September 30, 1995 as compared to 38% for the thirty-nine weeks ended
October 1, 1994. The decrease is due primarily to an increase in sales
promotions during 1995 versus the comparable period in 1994.
Selling, general and administrative expenses increased to $9,486,000 for the
thirty-nine weeks ended September 30, 1995 as compared to $7,854,000 for
the thirty-nine weeks ended October 1, 1994. This increase is primarily
attributable to the increase in product support and selling expenses, including
an increase of product introductory expenses incurred in connection with new
licensed and sublicensed products introduced during 1995 in excess of such
expenses for 1994.
Net income for the thirty-nine weeks ended September 30, 1995 was $1,016,000 as
compared to $1,409,000 for the thirty-nine weeks ended October 1, 1994. The
decrease was primarily attributable to the increase in product support and
selling expenses offset in part by the increased gross profit dollars realized
as a result of increased sales volume.
Liquidity and Capital Resources
Net cash used in operations was $1,428,000 for the thirty-nine weeks ended
September 30, 1995 as compared to net cash provided by operations of $3,217,000
for the thirty-nine weeks ended October 1, 1994.
Working capital on September 30, 1995 was $3,809,000. The Company believes this
working capital plus internally generated funds and the funds available from its
credit line will be sufficient to meet its cash and working capital requirements
for its established operations for the current fiscal year.
PART II. OTHER INFORMATION
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the registrant during the thirteen
weeks ended September 30, 1995.
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<PAGE>
SIGNATURES
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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.
Date: November 17, 1995 INTEGRATED BRANDS INC.
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By: /s/ Gary P. Stevens
----------------------------------
Gary P. Stevens, President
and Chief Financial and
Accounting Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,105
<SECURITIES> 0
<RECEIVABLES> 10,431
<ALLOWANCES> 739
<INVENTORY> 1,286
<CURRENT-ASSETS> 14,495
<PP&E> 3,226
<DEPRECIATION> 2,181
<TOTAL-ASSETS> 29,946
<CURRENT-LIABILITIES> 10,686
<BONDS> 0
<COMMON> 121
0
0
<OTHER-SE> 13,350
<TOTAL-LIABILITY-AND-EQUITY> 29,946
<SALES> 29,102
<TOTAL-REVENUES> 30,710
<CGS> 16,603
<TOTAL-COSTS> 19,273
<OTHER-EXPENSES> 9,486
<LOSS-PROVISION> 239
<INTEREST-EXPENSE> 128
<INCOME-PRETAX> 1,823
<INCOME-TAX> 807
<INCOME-CONTINUING> 1,016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,016
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
