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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ____________________ to ________________________.
Commission file number 0-19908
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ODD'S-N-END'S, INC.
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DELAWARE 16-1205515
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(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
5000 Winnetka Avenue North, New Hope, Minnesota 55428
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(Address principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 533-1169
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Indicate by check mark whether the registrant (1) has filed 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. (X) Yes ( ) No
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 the court (X) Yes ( ) No
As of May 3, 1996, 4,724,048 shares of the Company's Common Stock (par value
$.07) were outstanding.
This document contains 10 pages.
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ODD'S-N-END'S, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1996 (Unaudited)
and December 31, 1995 3
Consolidated Statements of Operations (Unaudited)
for the Three Months Ended March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion & Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of Matters to Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Authorized Signature 10
2
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ODD'S-N-END'S, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
March 31, December 31,
ASSETS 1996 1995
------ ----------- ------------
(Unaudited)
Current assets:
Cash $ 462 $ 760
Inventories 3,536 3,803
Other current assets 375 399
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Total current assets 4,373 4,962
Property and equipment, net 1,858 1,851
Other assets 17 17
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Total assets $6,248 $6,830
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LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Demand note payable - shareholder $3,139 $2,228
Current maturities of long-term debt 387 387
Accounts payable 276 778
Accrued expenses 1,033 941
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Total current liabilities 4,835 4,334
Long-term debt, net 1,306 1,663
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Total liabilities 6,141 5,997
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Shareholders' equity:
Common stock, $.07 par value, 20,000 shares
authorized, 4,724 issued and outstanding 331 331
Additional paid-in capital 1,607 1,607
Accumulated deficit (1,831) (1,105)
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Total shareholders' equity 107 833
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Total liabilities and shareholders' equity $6,248 $6,830
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See accompanying notes to unaudited consolidated financial statements.
3
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ODD'S-N-END'S, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended
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March 31, March 31,
1996 1995
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Sales $4,669 $4,011
Cost of goods sold 3,166 2,407
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Gross margin 1,503 1,604
Operating expenses 2,103 1,876
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Loss from operations (600) (272)
Interest expense 126 63
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Loss before income taxes (726) (335)
Income tax provision -- --
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Net loss $ (726) $ (335)
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Net loss per share $ (.15) $ (.07)
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Weighted average common shares outstanding 4,724 4,724
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See accompanying notes to unaudited consolidated financial statements.
4
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ODD'S-N-END'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
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March 31, March 31,
1996 1995
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Cash flows from operating activities:
Net loss $ (726) $ (335)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 51 17
Provision for inventory shrink 93 80
Changes in operating assets and liabilities:
Inventories 174 (720)
Other current assets 24 30
Other assets -- 32
Accounts payable (502) 139
Accrued expenses 92 (319)
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Net cash used for operating activities (794) (1,076)
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Cash flows from investing activities:
Acquisition of property and equipment, net (58) (8)
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Net cash used for investing activities (58) (8)
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Cash flows from financing activities:
Proceeds from demand note payable, net 911 --
Repayment of long-term debt (357) (34)
Repayments on capital lease obligations -- (33)
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Net cash provided by (used for)
financing activities 554 (67)
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Decrease in cash and cash equivalents (298) (1,151)
Cash and cash equivalents - beginning of period 760 1,770
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Cash - end of period $ 462 $ 619
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5
See accompanying notes to unaudited consolidated financial statements.
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ODD'S-N-END'S, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
NOTE 1. - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. These financial statements should be read in conjunction with the
financial statements and related notes included in the Company's 1995 Form 10-K.
In the opinion of management, all adjustments (consisting of normal recurring
items) considered necessary for a fair presentation have been included.
Operating results for any interim period are not necessarily indicative of the
results that may be expected for the full year.
NOTE 2. - RELATED PARTY TRANSACTIONS
During the three months ended March 31, 1996 and 1995, the Company
purchased merchandise of $2,843 and $2,940, respectively, from Universal
International, Inc. ("Universal") pursuant to a supply agreement between the
parties. Universal owns 40.5% of the outstanding common stock of the Company.
The supply agreement allows for, among other things, Universal to achieve a
gross profit margin of approximately 15.25% on the merchandise sold to the
Company.
The Company entered into a discretionary revolving note agreement with
Universal in February 1995. The agreement, as amended, allows for borrowings up
to $3,500 with interest payable at prime plus 2.5%. Outstanding borrowings under
this agreement were $3,139 at March 31, 1996 and $2,228 at December 31, 1995.
Borrowings are subordinated to the bank notes and collateralized by a second
security interest in substantially all assets of the Company. Total interest
charged by Universal pursuant to the note agreement was $76 and $0 during the
three months ended March 31, 1996 and 1995, respectively.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the Company's operating statement data expressed as a percentage of sales.
Three Months Ended
March 31,
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1996 1995
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Sales.................................................. 100.0% 100.0%
Cost of goods sold..................................... 67.8 60.0
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Gross margin...................................... 32.2 40.0
Operating expenses..................................... 45.0 46.8
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Loss from operations................................... (12.8) (6.8)
Interest expense....................................... 2.7 1.6
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Net loss............................................... (15.5%) (8.4%)
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Sales for the three months ended March 31, 1996 were $4,669,000, a 16.4%
increase from sales of $4,011,000 for the same period in the prior year. This
increase was due to increased comparable store sales of 19.4%, offset slightly
by the closing of one store in early 1996.
Gross margin for the three months ended March 31, 1996 was $1,503,000, a
6.3% decrease from the gross margin of $1,604,000 for the prior period. Gross
margin, as a percent of sales, decreased to 32.2% for the quarter ended March
31, 1996, compared to 40.0% for the same quarter of the prior fiscal year. The
decrease in gross margins as a percent of sales is primarily due to greater
markdowns of seasonal merchandise during 1996.
Operating expenses for the three months ended March 31, 1996 increased
12.1% to $2,103,000 compared to $1,876,000 for the same period in the prior
year. Operating expenses, as a percent of sales, decreased to 45.0% for the
first quarter of 1996, compared to 46.8% for the first quarter of the prior
year.
The Company's interest expense for the three months ended March 31, 1996
was $126,000, a 100% increase from interest expense of $63,000 in the prior
year's first quarter. This increase reflects the significant increase in
borrowings from Universal to fund the Company's store remodeling, increased
inventory levels and continuing operating losses.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
There was no income tax benefit from the losses for the three months ended
March 31, 1996 and 1995, since there is no remaining net operating loss
carryback available, and the net benefit attributed to the net operating losses
being carried forward has been fully offset by a valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal lending arrangement is with Universal. The Company
entered into a discretionary revolving note agreement with Universal in February
1995. The agreement, as amended, allows for borrowings up to $3.5 million with
interest payable at prime plus 2.5%. Outstanding borrowings under this agreement
were $3,139,000 at March 31, 1996 and $2,228,000 at December 31, 1995.
Borrowings are subordinated to the bank notes and collateralized by a second
security interest in substantially all assets of the Company. Total interest
charged by Universal pursuant to the note agreement was $76,000 and $0 during
the three months ended March 31, 1996 and 1995, respectively. This agreement may
be terminated by either party at any time. The Company believes that this
agreement will fund its merchandise purchases for the foreseeable future.
The Company used $794,000 for operating activities during the three months
ended March 31, 1996, primarily as a result of a $726,000 net loss. The use of
cash for operating activities, the $58,000 used for purchasing property and
equipment and the repayment of $357,000 of long-term debt were funded
principally by a $911,000 increase in the note payable to Universal.
8
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
9
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AUTHORIZED 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.
Dated: May 13, 1996
ODD'S-N-END'S, INC.
By: /S/
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James A. Patineau
Secretary and Chief Financial
Officer
10
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 462
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 3,536
<CURRENT-ASSETS> 4,373
<PP&E> 1,858
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,248
<CURRENT-LIABILITIES> 4,835
<BONDS> 1,306
0
0
<COMMON> 331
<OTHER-SE> (224)
<TOTAL-LIABILITY-AND-EQUITY> 6,248
<SALES> 4,669
<TOTAL-REVENUES> 4,669
<CGS> 3,166
<TOTAL-COSTS> 3,166
<OTHER-EXPENSES> 2,103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126
<INCOME-PRETAX> (726)
<INCOME-TAX> 0
<INCOME-CONTINUING> (726)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (726)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
