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 April 30, 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
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 (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 3,936,400
Title of Class Outstanding at June 12, 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 April 30, 1995
and January 31, 1995 3
Statements of Operations for the three
month periods ended April 30, 1995
and 1994 4
Statements of Cash Flows for the three
month periods ended April 30, 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
HUFFMAN KOOS INC.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
BALANCE SHEETS
(Dollars in thousands, except share and per share amounts)
April 30, January 31,
1995 1995
(Unaudited)
ASSETS
Current assets:
Cash $ 0 $ 1,630
Accounts receivable, net 15,496 23,728
Merchandise inventories 21,361 19,325
Other current assets 1,460 656
Total current assets 38,317 45,339
Land, buildings and equipment, at cost,
less accumulated depreciation
and amortization 5,638 5,566
Leased property under capital leases, net
of accumulated amortization 170 179
Leasehold rights, net of accumulated
amortization 616 658
Deferred income taxes 625 625
Other assets 559 551
$45,925 $52,918
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 687 $ 875
Accounts payable 9,073 10,193
Accrued liabilities 3,218 5,335
Undelivered sales liability 4,891 8,983
Income taxes payable 7 7
Deferred income taxes 927 1,120
Total current liabilities 18,803 26,513
Notes payable to bank 1,036 0
Mortgage payable 1,531 1,562
Stockholders' equity
Common stock, $.01 par value, 10,000,000
shares authorized, 3,925,800 and
3,925,400 (Net of treasury stock)
shares issued and outstanding, respectively 40 40
Additional paid-in capital 17,182 17,181
Retained earnings 7,828 8,117
Treasury stock at cost 90,000 shares (495) (495)
Total stockholders' equity 24,555 24,843
$45,925 $52,918
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)
Three Months Ended April 30,
1995 1994
Net sales $23,035 $22,916
Expenses:
Cost of sales, including buying
and occupancy costs 15,710 15,393
Selling, general and administrative 7,766 7,363
Total expenses 23,476 22,756
Operating income (loss) (441) 160
Interest expense 41 57
Income (loss) before income taxes (482) 103
Income tax benefit (193) 0
Net income (loss) $ (289) $ 103
Net income (loss) per share $ (.07) $ .03
The accompanying notes are an integral part of these financial statements.
HUFFMAN KOOS INC.
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended April 30,
1995 1994
Cash flows from operating activities:
Cash received from customers $33,636 $32,021
Cash paid to suppliers (23,535) (19,972)
Cash paid for selling, general
and administrative expenses (12,591) (12,238)
Interest paid (42) (79)
Income taxes paid (26) (29)
Net cash used in
operating activities (2,558) (297)
Net cash used in investing activities:
Capital expenditures (315) (209)
Cash flows from financing activities:
Net borrowings (payments) under
Revolving Loan 1,036 (840)
Principal payments on mortgage (31) (31)
Change in cash overdraft 425 417
Principal payments on term loans (188) (331)
Proceeds due to the exercise of stock
options 1 2
Net cash provided by (used in)
financing activities 1,243 (783)
Net change in cash (1,630) (1,289)
Cash at beginning of period 1,630 1,289
Cash at end of period $ 0 $ 0
Three Months ended April 30,
1995 1994
Reconciliation of net income (loss)
to net cash used in operating
activities:
Net income (loss) $ (289) $ 103
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Depreciation and amortization 294 203
Provision for cancellation of undelivered
sales and doubtful accounts (151) (106)
Provision for LIFO reserve 30 30
Change in accounts receivable 8,383 6,937
Gross change in inventory (2,066) (1,311)
Change in other current assets (804) (139)
Change in due to affiliate 0 2
Change in accounts payable (1,545) 1,274
Change in accrued liabilities (2,117) (2,422)
Change in undelivered sales liability (4,092) (4,880)
Change in other assets (8) 12
Change in net deferred income taxes (193) 0
Net cash used in operating
activities $(2,558) $ (297)
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 April 30, 1995 and the
results of its operations and its cash flows for the three month
periods ended April 30, 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 $1,546,000 and $1,516,000
higher at April 30, 1995 and January 31, 1995, respectively.
3. Net income (loss) per share has been computed by dividing net income
(loss) by the weighted average number of common shares outstanding
during the period.
4. Accounts receivable consist of the following (dollars in thousands):
April 30, January 31,
1995 1995
Undelivered trade accounts receivable $14,138 $22,462
Other trade accounts receivable 1,591 1,650
15,729 24,112
Less allowances for doubtful accounts
and cancellation of undelivered sales (233) (384)
$15,496 $23,728
5. Land, buildings and equipment are shown net of accumulated depreciation
and amortization of $5,921,000 and $5,678,000 at April 30, 1995 and
January 31, 1995, respectively. Leased property under capital leases
is shown net of accumulated amortization of $367,000 and $358,000 at
April 30, 1995 and January 31, 1995, respectively. Leasehold rights
are shown net of accumulated amortization of $2,103,000 and $2,061,000
at April 30, 1995 and January 31, 1995, respectively.
6. A tax benefit of $193,000 was recorded for the three months ended April
30, 1995 as a result of the Company recognizing the tax benefit of the
loss associated with that period. Recognition of such benefit as a
differed tax asset resulted in a corresponding decrease in the deferred
tax liability.
No provision for income taxes was recorded for the three months ended
April 30, 1994 as a result of the Company utilizing net operating loss
carryforwards. The corresponding decrease in the net deferred tax
asset balance was offset by the corresponding decrease in the valuation
allowance.
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
Accounts receivable decreased $8.2 million due to the record deliveries made
during the quarter fueled by the January sales volume. Inventory increased
$2.0 million primarily due to the recently acquired floor sample inventory
for the newly remodeled Bridgewater store, and the purchase of additional
floor sample goods for the newly remodeled stores. Other assets increased
due to the prepayment of certain expenses which contributed to the reduction
in cash.
Current liabilities decreased by $7.7 million. Undelivered sales liability
decreased by $4.1 million due to the receipt of special order goods during
the quarter from the January sales promotion. Accounts payable decreased
$1.1 million due to the payment for floor samples at the Nanuet store which
was remodeled in the fourth quarter of fiscal 1995. Accrued liabilities
decreased $2.1 million mainly due to the payment of the January sales
commission.
In the first quarter of fiscal 1996, the Company began renovation of its
Bridgewater, New Jersey store at an approximate cost of $450,000 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 started preliminary negotiations to extend its Modified and
Restated Loan and Security Agreement (the "Agreement") with its financial
institution. 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. The Agreement
expires on June 30, 1996.
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 April 30,
1995 and decreased to $4.2 million at June 6, 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 April 30, 1995 compared to three months ended April 30,
1994.
Net sales increased $119,000 or .5% compared to the prior year period. After
a very strong February, the Company experienced a softening in customer
demand in March and April. April was further hampered by the promotional
calendar and the fact that Easter and Passover fell at the same time. In
general, there was a softening in retailing during this period due to
uncertainty in the economy caused by an increase in interest rates and a slow
down in housing starts, especially in the Northeast. Sales did improve
during the month of May as the Company posted a 4% increase in same store
sales including its largest Memorial Day sale.
Cost of sales, including buying and occupancy costs, as a percentage of sales
was 68.2% and 67.2% for the three months ended April 30, 1995 and 1994,
respectively. This increase was mainly due to increased occupancy costs at
the Nanuet store due to the lease extension, the impact of the Lawrenceville
store being opened for the entire quarter, and depreciation expense related
to store openings and remodeling.
Selling, general and administrative expenses (SG&A) were $7,766,000 (33.7%
of net sales) and $7,363,000 (32.1% of net sales) for the three months ended
April 30, 1995 and 1994, respectively. The increase in SG&A expenses as a
percentage of net sales was primarily a result of the Company incurring
additional fixed expenses including salaries, health insurance, and costs
associated with the retention of Chicago Corp. who was retained by the
Company to review strategic alternatives, including the possible sale of the
Company in an effort to enhance shareholder's value. In addition, the
Company expanded its customer service department to expand coverage during
the evening and Saturdays to provide a higher level of service to its
customers.
The operating loss of $441,000 and income of $160,000 for the three months
ended April 30, 1995 and 1994, respectively, is due to the above mentioned
items.
Interest expense decreased $16,000 due to lower levels of borrowing during
the quarter.
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)
June 12, 1995 /s/Joseph Albanese
(Date) Joseph Albanese
Vice President
Chief Financial Officer
/s/John G. Walsh
John G. Walsh
Controller Chief
Accounting Officer
