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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 OR TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period __________ to ___________.
Commission File Number: 1-10916
INTERVISUAL BOOKS, INC.
(Exact name of registrant as specified in its charter)
California 95-2929217
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2850 Ocean Park Boulevard, Suite 225
Santa Monica, California 90405
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Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (310) 396-8708
- - -------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check 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
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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 Sections 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
--- ---
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
practical date. As of March 31, 1996, there were 4,782,798 shares of common
stock outstanding.
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INTERVISUAL BOOKS, INC.
TABLE OF CONTENTS
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<CAPTION>
PART I - FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements
Balance Sheets - March 31, 1996, and December 31, 1995 1
Statements of Operations - Three months ended March 31, 1996
and 1995 2
Statements of Cash Flows - Three months ended March 31,
1996 and 1995 3
Notes to Consolidated Financial Statements - March 31, 1996 4
Item 2. Management's Discussion and Analysis of Financial Condition 5
and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
SIGNATURES 7
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INTERVISUAL BOOKS, INC.
BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS 3/31/96 12/31/95
- - ------ ------- --------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,265 $ 915
Investment in marketable securities 2,289 1,928
Accounts receivable, less allowances
of $174 and $158 3,742 6,941
Inventories 374 357
Prepaid expenses 931 541
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Total Current Assets 8,601 10,682
Production costs, net of accumulated
amortization $11,833 and $11,647 3,228 3,139
Property and equipment, less accumulated
depreciation 215 231
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$12,044 $14,052
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LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current Liabilities:
Accounts payable 3,631 5,030
Accrued royalties 586 709
Accrued expenses 114 198
Income taxes payable -- 38
Customer deposits 13 53
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Total Current Liabilities 4,344 6,028
Deferred income taxes 466 466
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TOTAL LIABILITIES 4,810 6,494
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Stockholders' Equity:
Common stock, no par value; shares
authorized 10,000,000, shares issued
and outstanding 4,782,798 at March 31, 1996
and December 31, 1995 4,044 4,044
Additional paid in capital 209 209
Retained earnings 2,981 3,305
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TOTAL STOCKHOLDERS' EQUITY 7,234 7,558
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$12,044 $14,052
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</TABLE>
See notes to financial statements.
1
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INTERVISUAL BOOKS, INC.
STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
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Net Sales $ 2,572 $ 3,127
Cost of Sales 1,961 2,403
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Gross Profit 611 724
Selling, General and Administrative Expenses 1,127 1,034
Interest Income, Net 26 32
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Loss Before Taxes (490) (278)
Income Tax Benefit (167) (69)
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Net Loss $ (323) $ (209)
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Loss Per Share $ (0.07) $ (0.04)
======= =======
Weighted Average Number of Common Shares
and Equivalents Outstanding 4,783 4,783
======= =======
</TABLE>
See notes to financial statements.
2
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INTERVISUAL BOOKS, INC.
STATEMENTS OF CASH FLOWS
Increase(Decrease) in Cash and Cash Equivalents
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
(Unaudited) 1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (324) $ (209)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 203 220
Provision for losses on accounts receivable 16 15
Provision for abandoned titles 10 11
Increase (decrease) from changes in:
Accounts receivable 3,183 1,342
Inventories (17) (40)
Prepaid expenses (390) (255)
Accounts payable (1,399) (410)
Accrued royalties (123) (152)
Accrued expenses (84) (32)
Income taxes payable (38) (201)
Customer deposits (40) 178
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Net cash provided by operating activities 997 467
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Cash flows from investing activities:
Purchase of marketable securities (361) --
Additions to property and equipment (1) (7)
Additions to leasehold improvements -- (2)
Additions to production costs (285) (340)
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Net cash used in investing activities (647) (349)
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Net increase in cash and cash equivalents 350 118
Cash and cash equivalents, beginning of period 915 2,625
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Cash and cash equivalents, end of period $ 1,265 $ 2,743
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ -- $ --
Income taxes $ 55 $ 227
</TABLE>
See notes to financial statements.
3
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INTERVISUAL BOOKS, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
(unaudited)
Note 1 - Statement of Information Furnished
In the opinion of management the accompanying unaudited financial statements
contain all adjustments (consisting only of normal and recurring accruals)
necessary to present fairly the financial position as of March 31, 1996, and the
results of operations and cash flows for the three month period ended March 31,
1996 and 1995. These results have been determined on the basis of generally
accepted accounting principles and practices applied consistently with those
used in the preparation of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995.
The results of operations for the three month period ended March 31, 1996 are
not necessarily indicative of the results to be expected for any other period or
for the full year.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. The accompanying financial statements should be
read in conjunction with the Company's audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
Note 2 - Earnings Per Share
Earnings per share amounts are computed based upon the weighted average number
of common shares actually outstanding during the period. Common stock options
and purchase warrants, which are considered common stock equivalents, are not
considered in the average number of shares since the effect would be
anti-dilutive.
4
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Net sales for the three month period ended March 31, 1996 were $2,572,000 as
compared to $3,127,000 for the comparable period of the prior year. The sales
decrease for the three month period of $555,000 or 17.8% was comprised of a
decrease of $361,000 in the sales of backlist titles and a decrease of $194,000
in the sales of new titles. Sales backlog at March 31, 1996 was $7,857,000
compared to $9,017,000 for the prior year. The decrease in sales can partially
be attributed to the record number of shipments in December of 1995 providing
virtually no carryover into the first quarter of 1996. Also the loss of Bedrock
Press, a division of Turner Publishing, as a customer contributed to the
decrease in sales as they provided over $600,000 in sales during the first
quarter of 1995. Backlog is also behind prior year's figures because of the loss
of business with Turner Publishing and the decline in the number of titles the
Company is doing for Disney.
Gross profit margin for the three month period ended March 31, 1996 was 23.8% of
sales as compared to 23.2% for the same period of 1995. Costs of sales consists
primarily of manufacturing costs, book development amortization, and royalties.
Manufacturing costs were $1,647,000 or 64% of sales for the three months ended
March 31, 1996, compared to $2,073,000 or 66.3% of sales for the same period of
1995. Amortization was $186,000 or 7.2% of sales for the three months ended
March 31, 1996, versus $198,000 or 6.3% of sales for the comparable period of
1995. Royalties for the first three months of 1996 were $103,000 or 4% of sales
compared to $119,000 or 3.8% of sales for the same period of 1995. The increase
in gross profit margin primarily resulted from the higher margins earned on
shipments of mini-books in the first quarter of 1996 which was partially offset
by the increases in amortization and royalties.
Selling, general and administrative expenses for the three month period ended
March 31, 1996 increased to $1,127,000 or 43.8% of sales as compared to
$1,034,000 or 33.1% of sales for the comparable period of the prior year, an
increase of $93,000. These expenses comprised of personnel, selling and
administrative are generally fixed and do not fluctuate with sales. Personnel
expenses were $535,000 for the three month period ended March 31, 1996, as
compared to $546,000 for the same period of 1995. This decrease of $11,000 was
primarily attributable to the Company's measures taken in 1995 to reduce
employees and related personnel expense partially offset by salary increases in
the first quarter of 1996. Selling expenses were $139,000 for the three month
period ended March 31, 1996, as compared to $193,000 for the same period of
1995. This decrease of $54,000 was primarily related to decreases in U.K.
office, travel and sample expenses. The Company's administrative expenses were
$452,000 for the three month period ended March 31, 1996, as compared to
$294,000 for the same period of 1995. The increase was primarily comprised of
acquisition expenses of $128,000, directors' expenses of $31,000 and office
expenses of $21,000 partially offset by smaller decreases in several
administrative expenses. The Company added four new outside directors in the
first quarter of 1996 and also wrote off expenses incurred in the process of
analyzing a prospective acquisition candidate. Office expenses were up primarily
because of the Company's participation in a company workshop.
5
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LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $1,265,000 at March 31, 1996 as compared to
$2,743,000 at December 31, 1995. Net cash provided by operations was $967,000 as
compared to $467,000 for the corresponding period of the previous year. The
$530,000 increase was primarily attributable to a $3,183,000 reduction in
accounts receivable partially offset by a decrease in accounts payable of
$1,342,000 and net loss of $324,000. Net cash used in investing activities
amounted to $647,000 as compared to $349,000 during the same period in 1995.
Collections of accounts receivable were high in the first quarter of 1996
primarily because of the exceptionally high billings in the month of December
1995. The cash generated by these collections was the primary factor responsible
for the increase in cash used in investing activities. Working capital at March
31, 1996 was $4,257,000 compared to $4,654,000 at December 31, 1995.
The Company has an obligation to fund the Hunt Group $400,000 in 1996. This
obligation is being paid at the rate of $33,333 per month.
The Company has a $2,000,000 letter of credit line with City National Bank
expiring May 31, 1996, which the Company expects will be renewed. The credit
facility is available only for the issuance of letters of credit and as of March
31, 1996, the Company had $1,969,600 available under this letter of credit
facility.
As of May 1, 1996, the Company did not have any commitments for any material
capital expenditures for 1996 or beyond. Management of the Company believes that
the existing levels of funds, combined with the Company's ability to generate
cash, are adequate to finance current and expected levels of activity as well as
anticipated capital expenditures of the Company for at least the next twelve
months.
6
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by item 601 of Regulation S-K
27 Financial Data Schedule
(b) Reports on Form 8-K
None
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.
INTERVISUAL BOOKS, INC.
BY: /s/ Charles E. Gates .
----------------------------------------
Charles E. Gates
President, Chief Executive Officer
and Chief Financial Officer
BY: /s/ Gail A. Thornhill
----------------------------------------.
Gail A. Thornhill
Controller and Chief Accounting Officer
Date: May 14, 1996
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<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> 1,265
<SECURITIES> 2,289
<RECEIVABLES> 3,742
<ALLOWANCES> 0
<INVENTORY> 374
<CURRENT-ASSETS> 8,601
<PP&E> 215
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,044
<CURRENT-LIABILITIES> 4,344
<BONDS> 0
0
0
<COMMON> 4,044
<OTHER-SE> 3,190
<TOTAL-LIABILITY-AND-EQUITY> 12,044
<SALES> 2,572
<TOTAL-REVENUES> 2,572
<CGS> 1,961
<TOTAL-COSTS> 1,961
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (490)
<INCOME-TAX> (167)
<INCOME-CONTINUING> (323)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (323)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
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