SECURITIES 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 Exchange Act of 1934
For the quarterly period ended July 31, 1995
OR
( ) Transition 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 - 15185
Huffman Koos Inc.
(Exact name of registrant as specifies in its charter)
Delaware 36-3451329
(State of other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Route 4 and Main Street, River Edge, New Jersey 07661
(Address of principal executive offices) (Zip code)
(201) 343-4300
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
sincelast 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 (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 CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 Par Value 3,938,400
Title of Class Outstanding at September 11, 1995
10 pages with index of exhibits on Page 9.
HUFFMAN KOOS INC.
INDEX
PART I - FINANCIAL INFORMATION
Page
Number(s)
Item 1. Financial Statements
Balance Sheets as of July 31, 1995
and January 31, 1995 3
Statements of Operations for the three
and six month periods ended
July 31, 1995 and 1994 4
Statements of Cash Flows for the six
month periods ended July 31, 1995
and 1994 5
Notes to Financial Statements 6
Items 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7 - 8
Part II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 9
Signatures 10
<TABLE>
HUFFMAN KOOS INC.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
BALANCE SHEETS
(Dollars in thousands, except share and per share amounts)
<CAPTION>
July 31, January 31,
1995 1995
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 524 $ 1,630
Accounts receivable, net 20,182 23,728
Merchandise inventories 19,916 19,325
Other current assets 1,116 656
Total current assets 41,738 45,339
Land, buildings and equipment, at cost,
less accumulated depreciation
and amortization 5,767 5,566
Leased property under capital leases, net
of accumulated amortization 161 179
Leasehold rights, net of accumulated
amortization 573 658
Deferred income taxes 625 625
Other assets 568 551
$49,432 $52,918
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 500 $ 875
Accounts payable 7,285 10,193
Accrued liabilities 4,911 5,335
Undelivered sales liability 7,836 8,983
Income taxes payable 7 7
Deferred income taxes 1,305 1,120
Total current liabilities 21,844 26,513
Notes payable to bank 958 0
Mortgage payable 1,500 1,562
Stockholders' equity
Common stock, $.01 par value, 10,000,000
shares authorized, 3,938,400 and
3,925,400 (Net of treasury stock)
shares issued and outstanding, respectively 40 40
Additional paid-in capital 17,190 17,181
Retained earnings 8,395 8,117
Treasury stock at cost 90,000 shares (495) (495)
Total stockholders' equity 25,130 24,843
$49,432 $52,918
</TABLE>
The accompanying notes are an integral part of these financial statements.
HUFFMAN KOOS INC.
STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended July 31, Six Months Ended July 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $30,796 $31,848 $53,831 $54,765
Expenses:
Cost of sales, including
buying and occupancy costs 20,843 21,585 36,553 36,978
Selling, general and
administrative 8,949 8,911 16,715 16,274
Total expenses 29,792 30,496 53,268 53,252
Operating income 1,004 1,352 563 1,513
Interest expense 59 105 100 163
Income before income taxes 945 1,247 463 1,350
Income tax expense 378 0 185 0
Net income $ 567 $ 1,247 $ 278 $ 1,350
Net income per share $ .14 $ .32 $ .07 $ .34
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
HUFFMAN KOOS INC.
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
Six Months Ended July 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $63,370 $61,458
Cash paid to suppliers (41,668) (39,592)
Cash paid for selling, general
and administrative expenses (22,550) (22,193)
Interest paid (99) (167)
Income taxes paid (26) (54)
Net cash used in
operating activities (973) (548)
Net cash used in investing activities:
Capital expenditures (663) (596)
Cash flows from financing activities:
Net borrowings under Revolving Loan 958 929
Principal payments on mortgage (62) (62)
Principal payments on term loans (375) (518)
Proceeds due to the exercise of stock
options 9 3
Net cash provided by
financing activities 530 352
Net change in cash (1,106) (792)
Cash at beginning of period 1,630 1,289
Cash at end of period $ 524 $ 497
</TABLE>
<TABLE>
<CAPTION>
Six Months ended July 31,
1995 1994
<S> <C> <C>
Reconciliation of net income
to net cash used in operating
activities:
Net income $ 278 $ 1,350
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 565 451
Provision for cancellation of undelivered
sales and doubtful accounts (77) 22
Provision for LIFO reserve 60 60
Change in accounts receivable 3,623 975
Gross change in inventory (651) (150)
Change in other current assets (460) (357)
Change in accounts payable (2,908) (426)
Change in accrued liabilities (424) (798)
Change in undelivered sales liability (1,147) (1,592)
Change in other assets (17) 2
Change in income tax payable 0 (85)
Change in net deferred income taxes 185 0
Net cash used in operating
activities $( 973) $ (548)
</TABLE>
The accompanying notes are an integral part of these financial statements.
HUFFMAN KOOS INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying interim financial statements are unaudited and, in
the opinion of management of the Company, contain all adjustments
necessary to present fairly its financial position at July 31, 1995
and the results of its operations and its cash flows for the three
and six month periods ended July 31, 1995 and 1994. These
adjustments consist solely of normal recurring accruals. The
results of operations for such interim periods are not necessarily
indicative of the results to be expected for the full year. In
addition, it is suggested that these interim financial statements be
read in conjunction with the financial statements and notes thereto
in the Company's latest annual report on Form 10-K.
2. The Company's inventories are valued at the lower of cost or market
on a last-in, first-out (LIFO) cost basis using the retail inventory
method. If the first-in, first-out (FIFO) basis had been used,
merchandise inventories would have been $1,576,000 and $1,516,000
higher at July 31, 1995 and January 31, 1995, respectively.
3. Net income per share has been computed by dividing net income by the
weighted average number of common shares outstanding during the
period.
4. Accounts receivable consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
July 31, January 31,
1995 1995
<S> <C> <C>
Undelivered trade accounts receivable $19,273 $22,462
Other trade accounts receivable 1,216 1,650
20,489 24,112
Less allowances for doubtful accounts
and cancellation of undelivered sales (307) (384)
$20,182 $23,728
</TABLE>
5. Land, buildings and equipment are shown net of accumulated
depreciation and amortization of $6,141,000 and $5,678,000 at July
31, 1995, and January 31, 1995, respectively. Leased property under
capital leases is shown net of accumulated amortization of $376,000
and $358,000 at July 31, 1995 and January 31, 1995, respectively.
Leasehold rights are shown net of accumulated amortization of
$2,145,000 and $2,061,000 at July 31, 1995 and January 31, 1995,
respectively.
6. Tax expense of $378,000 and $185,000 was recorded for the three and
six months ended July 31, 1995, respectively. As a result of the
Company recognizing the tax expense associated with the income for
those periods. Recognition of such expense as a deferred tax
liability resulted in a corresponding increase in the deferred tax
liability.
No provision for income taxes was recorded for the three and six
months ended July 31, 1994 as a result of the Company utilizing net
operating loss carryforwards.
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
At July 31, 1995, accounts receivables decreased by $3.5 million due to
record deliveries made during the first half of the fiscal year.
Inventory increased $591,000 mainly due to additional floor samples
purchased for the newly remodeled stores. Other current assets increased
due to the prepayment of certain expenses.
Accounts payables decreased $2.9 million. The decrease in accounts
payable is mainly due to the payment for floor samples purchased with
extended terms for the newly remodeled Nanuet store. Undelivered sales
liability decreased $1.1 million mainly due to the decrease in sales
volume due primarily to the seasonal nature of the Company's business.
Accrued liabilities decreased $424,000 primarily due to the decrease in
accrued sales commission.
In the first quarter of fiscal 1996, the Company began renovation of its
Bridgewater, New Jersey store at an approximate cost of $410,000 which was
funded by working capital. The store was closed for remodeling during
parts of the first two quarters and reopened on May 20, 1995.
The Company has extended its Modified and Restated Loan and Security
Agreement (the "Agreement") with its financial institution to June 30,
1997. Under the terms of the Agreement, the interest rate on the
revolving loan is .5% above the prime rate. Available borrowings of up to
$5.5 million are predicated on 40% of eligible inventory.
All borrowings with this institution are collateralized by the Company's
inventory, owned real estate, and fixtures and equipment therein. The
Agreement requires maintenance of certain financial ratios and restricts
additional indebtedness and the payment of dividends to shareholders.
Remaining availability on the revolving loan was $4.5 million at July 31,
1995 and increased to $5.5 million at August 30, 1995.
The Company believes that current working capital, internally generated
funds, and banks lines will be sufficient to meet its current operating
needs, scheduled debt payments, and anticipated capital expenditures.
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
Results of Operations
Three months ended July 31, 1995 compared to three months ended July 31,
1994.
Operating income for the three months ended July 31, 1995 was $1,004,000
compared to $1,352,000 for the three months ended July 31, 1994.
For the quarter, sales decreased $1,052,000 or 3.3% compared to the prior
year period. The Company experienced a soft July sales period as compared
to last year as sales were off by $1.4 million or 7.8%. The prior year
quarter included a 28.1% increase in sales including a 16% same store
sales increase. The Company is currently experiencing a very difficult
economy as evidenced by the significant decrease in the resale of existing
homes and new home starts in the Northern New Jersey area of approximately
26%. The Company continued to feel the softness in the economy during the
August sale period.
Cost of sales, including buying and occupancy cost, as a percentage of
sales was 67.7% and 67.8% for the three months ended July 31, 1995 and
1994, respectively. The slight improvement in occupancy cost as a
percentage of sales was achieved through improved margins through lower
promotional markdowns.
Selling, general and administrative expenses (SG&A) were $8,949,000 (29.1%
of net sales) and $8,911,000 (28.0% of net sales) for the three months
ended July 31, 1995 and 1994, respectively. The increase in SG&A expenses
is primarily due to costs associated with the retention of Chicago
Corporation who was retained by the Company to review strategic
alternatives, including the possible sale of the Company, in an effort to
enhance shareholders value.
Six months ended July 31, 1995 compared to six months ended July 31, 1994.
Net sales decreased $934,000 or 1.7% compared to the prior year period.
The Company has experienced an extremely soft economy during the second
quarter as indicated by the over 25% decrease in housing starts and the
resale of existing homes in the Northern New Jersey area.
Cost of sales, including buying and occupancy costs, as a percentage of
sales was 67.9% and 67.5% for six months ended July 31, 1995 and 1994,
respectively. The increase is mainly due to an increase in occupancy cost
at the Nanuet store due to the renovation and lease extension, as well as
the Lawrenceville store being opened the entire six months and the
depreciation expense associated with the cost of remodeling of that store.
Selling, general and administrative expenses (SG&A) were $16.7 million
(31.1% of net sales) and $16.3 million (29.7% of net sales) for six months
ended July 31, 1995 and 1994, respectively. Increase in SG&A expenses as
a percentage of net sales was primarily a result of the Company incurring
additional fixed expenses including salaries, and costs associated with
the retention of Chicago Corporation, who was retained by the Company to
review strategic alternatives, including the possible sale of the Company
in order to enhance shareholder value. In addition, the Company expanded
its customer service department to have coverage during the evenings and
Saturdays to provide a higher level of service to its customers.
The operating income of $563,000 and $1.5 million for the six months ended
July 31, 1995 and 1994, respectively, is due to the above mentioned items.
Interest expense decreased $63,000 due to lower levels of borrowings
during the six months ended July 31, 1995 as compared to the comparable
prior year period.
HUFFMAN KOOS INC.
PART II - OTHER INFORMATION
Item 5. Other Information - None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None
b) Reports on Form 8-K - None
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.
HUFFMAN KOOS INC.
(Registrant)
September 12, 1995 /s/Joseph Albanese
(Date) Joseph Albanese
Vice President
Chief Financial Officer
/s/John G. Walsh
John G. Walsh
Controller
Chief Accounting Officer
<PAGE>
