<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 March 30, 1996.
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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
----- -----
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 May 10, 1996.
Common Stock Par Value $.01 Per Share. Shares Outstanding 10,103,288
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<PAGE>
INTEGRATED BRANDS, INC.
Form 10-Q
March 30, 1996
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 6
Condensed Consolidated Statements of
Cash Flows 7
Notes to Condensed Consolidated
Financial Statements 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
Part II. - Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 30, December 30,
1996 1995
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(Unaudited)
(In thousands)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,273 $ 2,086
Receivables 5,964 4,416
Receivables - affiliates 1,180 1,043
Inventories 2,295 2,089
Prepaid market introductory expenses 2,235 701
Other prepaid expenses 422 281
--------------------------------------------------------------------------------------
Total Current Assets 13,369 10,616
Improvements and equipment,
at cost, - net of accumulated
depreciation and amortization 1,696 1,103
Other assets:
License agreements - net of accumulated
amortization of $977,000 and $878,000 6,371 6,470
Intangible assets, at cost - net of
accumulated amortization of $3,048,000
and $2,967,000 5,997 6,077
Investment in Heidi's 1,447 1,590
Other 525 521
--------------------------------------------------------------------------------------
Total assets $29,405 $26,377
======================================================================================
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
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<PAGE>
INTEGRATED BRANDS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
March 30, December 30,
1996 1995
-------------------------------------------------------------------------------------------------------
(Unaudited)
(In thousands)
<S> <C> <C>
Liabilities and Stockholders' Equity
Liabilities:
Current maturities of long-term debt $ 716 $ 576
Trade accounts payable 6,749 4,244
Income taxes payable 213 465
Payable - affiliates 995 902
Accrued marketing expenses 106 162
Other accrued liabilities 1,289 1,021
Liability for lease terminations 110 110
-------------------------------------------------------------------------------------------------------
Current Liabilities 10,178 7,480
Long-term debt, less current maturities 5,166 4,996
Liability for lease terminations,
net of current portion 242 242
-------------------------------------------------------------------------------------------------------
Total liabilities 15,586 12,718
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Minority interest 224 225
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Commitments and contingent liabilities
Stockholders' equity:
Class A common stock, $.01 par
value 20,000,000 shares authorized;
12,357,903 shares issued 124 124
Paid-in capital 8,432 8,432
Retained earnings 6,811 6,543
Treasury stock, at cost 2,254,615 and 2,154,615 shares (1,772) (1,665)
-------------------------------------------------------------------------------------------------------
Total stockholders' equity 13,595 13,434
-------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 29,405 $ 26,377
=======================================================================================================
</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)
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March 30, April 1,
1996 1995
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(In thousands, except
per share amount)
<S> <C> <C>
Revenues:
Net sales $ 6,855 $ 4,631
Store operations 815 950
Franchise revenue 448 385
Other 44 55
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8,162 6,021
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Operating costs and expenses:
Cost of goods sold 3,852 2,839
Store operations 828 905
Selling, general and administrative expenses 2,829 2,205
Interest 117 39
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7,626 5,988
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Income before taxes on income 536 33
Taxes on income 268 17
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Net income $ 268 $ 16
======================================================================================
Earnings per common share $ .03 nil
======================================================================================
Weighted average number of common
and common equivalent shares
outstanding 10,386 10,235
======================================================================================
</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 THIRTEEN WEEKS ENDED MARCH 30, 1996
<TABLE>
<CAPTION>
Common Stock
Par Paid-in Retained Treasury
Shares Value Capital Earnings Stock Total
-------------------------------------------------------------------------------------------------------------
(Unaudited
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 30, 1995 12,358 $ 124 $ 8,432 $ 6,543 $(1,665) $13,434
Purchase of treasury stock (107) (107)
Net income for the
thirteen weeks ended
March 30, 1996 268 268
-------------------------------------------------------------------------------------------------------------
Balance, March 30, 1996 12,358 $ 124 $ 8,432 $ 6,811 $(1,772) $13,595
=============================================================================================================
</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>
Thirteen Weeks Ended
-------------------------------------------------------------------------------------------------------------
March 30, April 1,
1996 1995
-------------------------------------------------------------------------------------------------------------
(Unaudited)
(In thousands)
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 268 $ 16
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 272 220
Provision for doubtful accounts 110 50
Minority interest in net income of subsidiary 1 8
Increase (decrease) in cash flows from changes in operating assets and
liabilities:
Receivables (1,658) (682)
Receivables - affiliates (27) (268)
Inventories (206) 17
Prepaid expenses and other (1,675) (699)
Other assets (4) 36
Trade accounts payable and accrued liabilities 2,465 (476)
Payables - affiliates 93 273
-------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (361) (1,505)
-------------------------------------------------------------------------------------------------------------
</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>
Thirteen Weeks Ended
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March 30, April 1,
1996 1995
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(Unaudited)
(In thousands)
<S> <C> <C>
Cash Flows from Investing Activities:
Capital expenditures (651)
------------------------------------------------------------------------------------
Net cash used in investing activities (651)
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Cash Flows from Financing Activities:
Proceeds from long-term debt 450
Principal payments on long-term debt (144) (88)
Purchase of treasury stock (107)
Exercise of stock options by employee 1
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Net cash used in financing activities 199 (87)
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Net change in cash and cash equivalents (813) (1,592)
Cash and cash equivalents, beginning of period 2,086 3,860
------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 1,273 $ 2,268
====================================================================================
</TABLE>
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 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. In July 1995, the Company changed its name to INTEGRATED BRANDS
INC. to more appropriately reflect the breadth of the Company's
business. INTEGRATED BRANDS INC. and its subsidiaries, are
collectively referred to herein as the "Company".
The Company markets, distributes and sells a variety of branded
frozen dessert products to supermarkets, grocery stores, club
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. Total revenues from foreign sources are not
material.
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
1995 balances were reclassified to conform to 1996 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 30, 1995.
The results of operations for the thirteen weeks ended March 30,
1996 are not necessarily indicative of the results to be expected
for the full year.
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<PAGE>
STEVE'S HOMEMADE ICE CREAM, 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.
Interest is payable monthly on the unpaid principal balance of
borrowings under this facility at the bank's prime rate plus 1/2%.
The Company has agreed to pay a fee of 1/8% per annum on the unused
portion of the commitment.
On March 8, 1996, the loan agreement was amended and the Company
refinanced $4,500,000 of the existing revolving credit facility with
a new five year term loan. The term loan is payable in 19 quarterly
principal installments of $140,000 beginning April 1, 1996, and the
remaining principal balance is due on January 1, 2001. Interest is
payable monthly on the unpaid principal balance of this term loan at
the banks prime rate plus 1/2%. As of March 30, 1996, the Company
had available credit of $6,775,000 under the revolving credit
facility.
NOTE 3 EARNINGS PER COMMON SHARE
Earnings per share of common stock for the thirteen weeks ended
March 30, 1996 and April 1, 1995 was computed by dividing net income
by the weighted average number of shares of Common Stock outstanding
during the period presented. 216,000 and 281,000 common equivalent
shares were included in the weighted average number of shares for
the thirteen weeks ended March 30, 1996 and April 1, 1995,
respectively. The common stock equivalent shares result from shares
issuable upon the exercise of warrants or options under the treasury
stock method.
NOTE 4 ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT
The Company has adopted Statement of Financial Accounting Standards
Number 121 "Accounting for the Impairment of long-lived assets and
for long-lived assets to be disposed of ("SFAS Numbers 121"). The
impact of adopting SFAS Number 121 was not material.
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<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Thirteen weeks ended March 30, 1996 vs. thirteen weeks ended April
1, 1995.
Total revenue for the thirteen weeks ended March 30, 1996 increased
to $8,162,000 from $6,021,000 for the thirteen weeks ended April 1,
1995. Prepackaged frozen dessert sales increased to $5,500,000 for
the thirteen weeks ended March 30, 1996 from $3,232,000 for the
thirteen weeks ended April 1, 1995. The increase in revenues in
prepackaged frozen dessert sales was primarily due to the increase
in new product authorizations in retail outlets and the acquisition
in August 1995 of the right to manufacture and sell the Colombo
brand frozen desserts in hard pack containers. The reduction in bulk
frozen dessert sales resulted from the decline in the number of
domestic franchise and company-owned stores in operation. The
decrease in revenue from store operations of $135,000 was due to the
permanent closing of one company-owned store in February 1995 and
the temporary closing in November 1995 of the company-owned store
located in Paradise Valley, Arizona for remodeling and conversion to
a company-owned Jerry Tucci's Pizza & Pasta Restaurant, a prototype
Italian restaurant concept being developed by the Company. This
restaurant reopened in March 1996.
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 March 30, 1996
and April 1, 1995, respectively.
Thirteen Weeks Ended
--------------------------------------------------------------------
March 30, April 1,
1996 1995
--------------------------------------------------------------------
Prepackaged Frozen Dessert Sales $5,500,000 $3,232,000
Bulk Frozen Dessert Sales 1,093,000 1,203,000
Other sales 262,000 196,000
--------------------------------------------------------------------
Total sales $6,855,000 $4,631,000
====================================================================
The Company's sales of bulk and prepackaged frozen desserts
comprised 81% of the total revenues for the thirteen weeks ended
March 30, 1996 as compared to 74% of the total revenues for the
thirteen weeks ended April 1, 1995.
The gross profit percentage increased to 44% for the thirteen weeks
ended March 30, 1996 as compared to 39% for the thirteen weeks ended
April 1, 1995. The increase is due primarily to the increased sales
of higher margin products in 1996 as compared to 1995.
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<PAGE>
Selling, general and administrative expenses increased to
$2,829,0000 for the thirteen weeks ended March 30, 1996 as compared
to $2,205,000 for the thirteen weeks ended April 1, 1995. This
increase is primarily attributable to the increased product support
and selling expenses including product introductory expenses
incurred in the thirteen weeks ended March 30, 1996 in excess of
such expenses for the thirteen weeks ended April 1, 1995.
Net income for the thirteen weeks ended March 30, 1996 was $268,000
as compared to $16,000 for the thirteen weeks ended April 1, 1995.
The increase is primarily attributable to the increase in gross
profit dollars for the thirteen weeks ended March 30, 1996 as
compared to the same period in 1995, offset by the increase in
product support and selling expenses and higher taxes on income. The
Company anticipates continued increased spending in 1996 for product
introductory expenses in an effort to increase revenues and market
share, which may have an adverse short-term effect on net income.
Liquidity and Capital Resources
Net cash used in operations was $361,000 for the thirteen weeks
ended March 30, 1996 as compared to net cash used in operations of
$1,505,000 for the thirteen weeks ended April 1, 1995.
Working capital on March 30, 1996 was $3,191,000. 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 and the additional funds to support the Company's growth
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 March 30, 1996.
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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: May 17, 1996 INTEGRATED BRANDS INC.
----------------------
By: /s/
-------------------------------
Gary P. Stevens, President
and Chief Financial and
Accounting Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 1,273
<SECURITIES> 0
<RECEIVABLES> 7,779
<ALLOWANCES> 635
<INVENTORY> 2,295
<CURRENT-ASSETS> 13,369
<PP&E> 2,876
<DEPRECIATION> 1,180
<TOTAL-ASSETS> 29,405
<CURRENT-LIABILITIES> 10,178
<BONDS> 0
124
0
<COMMON> 0
<OTHER-SE> 13,471
<TOTAL-LIABILITY-AND-EQUITY> 29,405
<SALES> 7,670
<TOTAL-REVENUES> 8,162
<CGS> 3,852
<TOTAL-COSTS> 4,680
<OTHER-EXPENSES> 2,719
<LOSS-PROVISION> 110
<INTEREST-EXPENSE> 117
<INCOME-PRETAX> 536
<INCOME-TAX> 268
<INCOME-CONTINUING> 268
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 268
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
