<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 July 1, 1995.
------------
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from_____________ to ___________
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. Steve's Homemade Ice Cream, Inc.
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 X 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 August 11, 1995.
Common Stock Par Value $.01 Per Share. Shares Outstanding 9,953,288
1
<PAGE>
INTEGRATED BRANDS INC.
Form 10-Q
July 1, 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 14
Part II. - Other Information
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
<TABLE>
<CAPTION>
July 1, December 31,
1995 1994
-------------------------------------------------------------------------------------------------------------------
(Unaudited)
(In thousands)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $2,423 $ 3,860
Receivables 8,211 3,258
Receivables - affiliates 1,747 515
Inventories 1,004 987
Prepaid expenses 2,202 446
-------------------------------------------------------------------------------------------------------------------
Total Current Assets 15,587 9,066
Improvements and equipment,
at cost, - net of accumulated
depreciation and amortization 1,025 1,102
Other assets:
Intangible assets, at
cost - net of accumulated
amortization of $3,718,000
and $3,419,000 8,431 9,247
Investment in Heidi's 1,356 1,356
Other 417 449
-------------------------------------------------------------------------------------------------------------------
Total assets $26,816 $21,220
===================================================================================================================
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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<PAGE>
INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
July 1, December 31,
1995 1994
-------------------------------------------------------------------------------------------------------------------
(Unaudited)
(In thousands)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of long-term debt $ 165 $ 253
Trade accounts payable 8,229 4,026
Income taxes payable 965 527
Payable - affiliates 561 307
Accrued marketing expenses 1,039 882
Other accrued liabilities 1,077 806
Liability for lease terminations 110 110
-------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 12,146 6,911
Long-term debt, net of current maturities 882 1,339
Liability for lease terminations,
net of current portion 241 318
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Total liabilities 13,269 8,568
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Minority interest 207 198
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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 6,715 5,830
Treasury stock, at cost 2,154,615 shares (1,665) (1,665)
-------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 13,340 12,454
-------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $26,816 $21,220
===================================================================================================================
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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<PAGE>
INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Thirteen Weeks Ended
(Unaudited)
-------------------------------------------------------------------------------------------------------------------
July 1, July 2,
1995 1994
-------------------------------------------------------------------------------------------------------------------
(In thousands, except
per share amount)
<S> <C> <C>
Revenues:
Net sales $11,210 $9,601
Store operations 982 1,276
Franchise revenue 529 489
Other 60 17
-------------------------------------------------------------------------------------------------------------------
12,781 11,383
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Operating costs and expenses:
Cost of goods sold 6,752 5,431
Store operations 893 1,136
Selling, general and administrative expenses 3,557 3,258
Interest 6 40
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11,208 9,865
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Income before taxes on income 1,573 1,518
Taxes on income 704 699
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Net income $869 $819
===================================================================================================================
Earnings per common share $.09 $.07
===================================================================================================================
Weighted average number of common
and common equivalent shares
outstanding 10,213 12,120
===================================================================================================================
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Twenty-Six weeks Ended
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July 1, July 2,
1995 1994
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(In thousands, except
per share amount)
<S> <C> <C>
Revenues:
Net sales $15,841 $14,267
Store operations 1,932 2,462
Franchise revenue 914 1,093
Other 115 89
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18,802 17,911
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Operating costs and expenses:
Cost of goods sold 9,591 8,491
Store operations 1,798 2,140
Selling, general and administrative expenses 5,762 5,219
Interest 45 70
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17,196 15,920
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Income before taxes on income 1,606 1,991
Taxes on income 721 942
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Net income $885 $1,049
===================================================================================================================
Earnings per common share $.09 $.09
===================================================================================================================
Weighted average number of common
and common equivalent shares
outstanding 10,225 12,141
===================================================================================================================
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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<PAGE>
INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE TWENTY-SIX WEEKS ENDED JULY 1, 1995
<TABLE>
<CAPTION>
Common Stock Treasury Stock
------------ --------------
Par Paid-in Retained
Shares Value Capital Earnings Shares Amount Total
-----------------------------------------------------------------------------------------------------------------------
(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 2 1 1
Net income for the
twenty-six weeks ended
July 1, 1995 885 885
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Balance, July 1, 1995 12,108 $121 $8,169 $6,715 2,155 $(1,665) $13,340
=======================================================================================================================
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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<PAGE>
INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
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July 1, July 2,
1995 1994
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(Unaudited)
(In thousands)
<S> <C> <C>
Cash Flows from Operating Activities
Net income $885 $1,049
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 440 444
Provision for doubtful accounts 187 450
Minority interest in net income of subsidiary 9 14
Increase (decrease) in cash flows
from changes in operating assets and
liabilities:
Receivables (5,140) (2,908)
Receivables - affiliates (1,232) (518)
Inventories (17) (125)
Prepaid expenses and other (1,756) (557)
Other assets 32 261
Trade accounts payable and accrued liabilities 5,075 3,128
Payables - affiliates 254 340
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Net cash provided by (used in) operating activities (1,263) 1,578
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</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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<PAGE>
INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
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July 1, July 2,
1995 1994
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(Unaudited)
(In thousands)
<S> <C> <C>
Cash Flows from Investing Activities:
Capital expenditures $ (39) $ (306)
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Net cash used in investing activities (39) (306)
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Cash Flows from Financing Activities:
(257)ipal payments on long-term debt $ (136) (257)
Exercise of stock options by employee 1
------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (135) (257)
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Net change in cash and cash equivalents (1,437) 1,015
Cash and cash equivalents, beginning of period 3,860 2,708
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Cash and cash equivalents, end of period $2,423 $3,723
===================================================================================================================
</TABLE>
Non-cash investing activities:
During the second quarter ended July 2, 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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<PAGE>
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 family of consumer brands and 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,
delicatessens and convenience stores. The Company currently franchises
ice cream parlors, dip shoppes and family style restaurants throughout
the United States and certain foreign countries.
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.
The Condensed Consolidated Financial Statements included herein are
unaudited and include all adjustments which are, in the opinion of
management, 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 principles 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 1995 presentation. These condensed
consolidated financial statements should be read in conjunction 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 twenty-six weeks ended July 1, 1995
are not necessarily indicative of the results to be expected for the
full year.
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<PAGE>
INTEGRATED BRANDS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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
July 1, 1995 , the Company borrowed $325,000. 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 9.5% at
July 1, 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. 272,000 and 169,000 common equivalent
shares were included in the weighted average number shares for the
twenty-six weeks ended July 1, 1995 and July 2, 1994, respectively. The
common stock equivalent shares result from shares issuable upon the
exercise of warrants or options under the treasury stock method.
NOTE 4 - SUBSEQUENT EVENT
On August 16, 1995, the Company purchased General Mills Colombo hard
pack prepackaged frozen dessert business. 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.
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<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Thirteen weeks ended July 1, 1995 vs. thirteen weeks ended July 2,
1994.
Total revenues for the thirteen weeks ended July 1, 1995 increased to
$12,781,000 from $11,383,000 for the thirteen weeks ended July 2, 1994.
Prepackaged frozen dessert sales for the thirteen weeks ended July 1,
1995 increased to $8,984,000 from $7,150,000 for the thirteen weeks
ended July 2, 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.
Revenue from store operations decreased as a result of the closing of a
Company owned store.
The following tables 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 July 1, 1995 and July 2,
1994, respectively.
Thirteen Weeks Ended
-----------------------------------------------------------------------
July 1, July 2,
1995 1994
-----------------------------------------------------------------------
Prepackaged Frozen Dessert Sales $8,984,000 $7,150,000
Bulk Frozen Dessert Sales 1,857,000 2,188,000
Other sales 369,000 263,000
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Total sales $11,210,000 $9,601,000
-----------------------------------------------------------------------
The Company's sales of prepackaged and bulk frozen desserts comprised
85% of the total revenues for the thirteen weeks ended July 1, 1995 and
82% for the thirteen weeks ended July 2, 1994.
The gross profit percentage decreased to 40% for the thirteen weeks
ended July 1, 1995 as compared to 43% for the thirteen weeks ended July
2, 1994. The decrease is primarily due to an increase in sales
promotions.
Selling, general and administrative expenses increased to $3,557,000
for the thirteen weeks ended July 1, 1995 from $3,258,000 for the
thirteen weeks ended July 2, 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
the second quarter of 1995 in excess of such expenses for the second
quarter of 1994.
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<PAGE>
Net income for the thirteen weeks ended July 1, 1995 was $869,000 as
compared to $819,000 for the thirteen weeks ended July 2, 1994.
Twenty-six weeks ended July 1, 1995 vs. twenty-six weeks ended July 2,
1994.
Total revenues for the twenty-six weeks ended July 1, 1995 increased to
$18,802,000 from $17,911,000 for the twenty-six weeks ended July 2,
1994. Prepackaged frozen dessert sales increased to $12,216,000 for the
twenty-six weeks ended July 1, 1995 from $9,801,000 for the twenty-six
weeks ended July 2, 1994. The increase in revenues and in prepackaged
and frozen dessert sales was primarily due to the increase in new
product authorization in retail outlets and an increase in sales
promotions. Revenue from store operations decreased as a result of the
closing of a Company owned store.
The following tables sets forth the sales of prepackaged frozen
desserts, the sales of bulk frozen desserts to franchised and licensed
stores, and other sales for the twenty-six weeks ended July 1, 1995 and
July 2, 1994, respectively.
Twenty-Six Weeks Ended
-----------------------------------------------------------------------
July 1, July 2,
1995 1994
-----------------------------------------------------------------------
Prepackaged Frozen Dessert Sales $12,216,000 $ 9,801,000
Bulk Frozen Dessert Sales 3,060,000 3,699,000
Other sales 565,000 767,000
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Total sales $15,841,000 $14,267,000
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The Company's sales of prepackaged and bulk frozen desserts comprised
81% of the total revenues for the twenty-six weeks ended July 1, 1995
and 75% for the twenty-six weeks ended July 2, 1994.
The gross profit percentage decreased to 39% for the twenty-six weeks
ended July 1, 1995 as compared to 40% for the twenty-six weeks ended
July 2, 1994. The decrease is due primarily to an increase in sales
promotions during the second quarter of 1995 over the second quarter of
1994.
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<PAGE>
Selling, general and administrative expenses increased to $5,762,000
for the twenty-six weeks ended July 1, 1995 as compared to $5,219,000
for the twenty-six weeks ended July 2, 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
the second quarter of 1995 in excess of such expenses for the second
quarter of 1994.
Net income for the twenty-six weeks ended July 1, 1995 was $885,000 as
compared to $1,049,000 for the twenty-six weeks ended July 2, 1994. The
decrease was primarily attributable to the increase in product support
and selling expenses offset in part by the increased gross profit
dollars as a result of those expenditures.
Liquidity and Capital Resources
Net cash used in operations was $1,263,000 for the twenty-six weeks
ended July 1, 1995 as compared to net cash provided by operations of
$1,578,000 for the twenty-six weeks ended July 2, 1994.
Working capital on July 1, 1995 was $3,441,000. 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 July 1, 1995.
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<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.
Date: August 18, 1995 INTEGRATED BRANDS INC.
--------------------- ----------------------
By: /s/
--------------------------
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> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> JUL-01-1995
<CASH> 2423
<SECURITIES> 0
<RECEIVABLES> 11,908
<ALLOWANCES> 1,950
<INVENTORY> 1,004
<CURRENT-ASSETS> 15,587
<PP&E> 3,136
<DEPRECIATION> 2,111
<TOTAL-ASSETS> 26,816
<CURRENT-LIABILITIES> 12,146
<BONDS> 0
<COMMON> 121
0
0
<OTHER-SE> 13,219
<TOTAL-LIABILITY-AND-EQUITY> 26,816
<SALES> 17,773
<TOTAL-REVENUES> 18,802
<CGS> 9,591
<TOTAL-COSTS> 11,389
<OTHER-EXPENSES> 5,762
<LOSS-PROVISION> 187
<INTEREST-EXPENSE> 45
<INCOME-PRETAX> 1,606
<INCOME-TAX> 721
<INCOME-CONTINUING> 885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 885
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
