<PAGE> 1
United States
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 Period Ended July 31, 1996
Commission file number 0-22502
--------
National Picture & Frame Company
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3832862
- --------------------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
702 Highway 82 West
Greenwood, MS 38930
- --------------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
(601) 451-4800
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(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 periods that
the registrant was required to filed such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
------------ ---------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock, $.01 Par Value - 4,962,823 shares as of September 4, 1996
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NATIONAL PICTURE & FRAME COMPANY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets ---July 31, 1996 and April 30, 1996
Condensed consolidated statements of income --- three months ended
July 31, 1996 and 1995
Condensed consolidated statements of cash flows---three months ended
July 31, 1996 and 1995
Notes to condensed consolidated financial statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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PART I. FINANCIAL INFORMATION
NATIONAL PICTURE & FRAME COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31 April 30
1996 1996
--------------------------------------------
(UNAUDITED) (NOTE)
(In Thousands, except for share data except for share data)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ $287 $ 198
Accounts receivable, net 9,911 12,739
Inventories (Note 2) 9,530 7,812
Other current assets 1,731 1,919
------------------------------------
Total current assets 21,459 22,668
Property, plant and equipment 21,864 20,608
Accumulated depreciation (4,628 ) (4,164 )
------------------------------------
17,236 16,444
Other assets
Goodwill, net 9,677 9,752
Other intangibles, net 132 172
------------------------------------
Total assets $48,504 $49,036
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $5,055 5,363
Accrued expenses 2,139 2,028
Current maturities of long-term debt 1,164 1,164
Total current liabilities ------------------------------------
8,358 8,555
Long-term debt, less current maturities 4,525 5,513
Deferred income taxes 1,396 1,396
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 5,000,000
Issued and outstanding share - None
Common stock, $.01 par value:
Authorized shares - 20,000,000
Issued shares - 5,001,319 at July 31,1996
and 5,000,008 at April 30, 1996;
Outstanding shares - 4,961,249 at July
31, 1996 and 4,959,938 at April 30,
1996.
Nonvoting common stock, $.01 par value:
Authorized shares - 500,000 50 50
Issued and outstanding shares - None --- --
Additional paid-in capital 21,246 21,235
Retained earnings 13,263 12,621
------------------------------------
34,559 33,906
Less cost of stock held in Treasury (334 ) (334 )
------------------------------------
Total stockholders' equity 34,225 33,572
------------------------------------
Total liabilities and stockholders' equity $48,504 $49,036
======================================
</TABLE>
Note: The balance sheet at April 30, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
SEE ACCOMPANYING NOTES
1
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NATIONAL PICTURE & FRAME COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JULY 31
-------------------------------
1996 1995
-------------------------------
(Unaudited)
(In Thousands except for per share data)
<S> <C> <C>
Net sales $14,170 $12,832
Cost of goods sold 10,878 10,204
-------------------------------
3,292 2,628
Operating expenses
Selling 901 776
General and administrative 1,132 822
Amortization of intangibles 108 89
-------------------------------
2,141 1,687
-------------------------------
Operating income 1,151 941
Interest expense (118 ) (126 )
---------------------------------
Income before income taxes 1,033 815
Income taxes 391 306
---------------------------------
Net income $642 $509
=================================
Net income per share $.13 $.10
=================================
Weighted average shares outstanding 4,961 4,999
=================================
</TABLE>
See accompanying notes.
2
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NATIONAL PICTURE & FRAME COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JULY 31
------------------------------
1996 1995
------------------------------
(Unaudited)
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 642 $ $509
Depreciation and amortization 579 460
Changes in operating assets and liabilities 1,101 1,816
--------------------------------
2,322 2,785
INVESTING ACTIVITIES
Purchase of property, plant and equipment (1,256 ) (681 )
--------------------------------
FINANCING ACTIVITIES
Net change in revolving loans
Principal payments on long-term debt and capital
lease obligations (723 (2,139
Purchase of common stock for treasury (265) (26 )
Issuance of common stock through Employee -- (220 )
Stock Discount Purchase Plan 11 -- )
--------------------------------
(977 ) (2,385 )
--------------------------------
Increase (decrease) in cash and cash equivalents 89 (281 )
Cash and cash equivalents at beginning of year 198 336
--------------------------------
Cash and cash equivalents at end of period $ 287 $ 55
================================
</TABLE>
See accompanying notes.
3
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National Picture & Frame Company
Notes to Condensed Consolidated Financial Statements (unaudited)
July 31, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period ended July 31, 1996 are not necessarily indicative of the results that
may be expected for the year ending April 30, 1997. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the National Picture & Frame Company and subsidiary's annual report on Form
10-K for the year ended April 30, 1996.
2. INVENTORIES
Inventories consist of the following:
JULY 31 APRIL 30
1996 1996
---------------------
(In thousands)
Raw materials $3,861 $3,628
Work-in-process 1,520 1,213
Finished goods 4,149 2,971
---------------------
$9,530 $7,812
=====================
3. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Company adopted FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed", during the quarter
ended July 31,1996, and the effect was not material.
4
<PAGE> 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations
GENERAL
Historically, the Company has generated a greater proportion of its net sales
and profits, and increased working capital needs, in the second and fourth
quarters of each fiscal year as retailers expand frame inventories for
increased Christmas and Spring holiday demand. This seasonal pattern combined
with the effects of new product introductions and the timing of customer orders
can cause the Company's results of operations to vary significantly from
quarter to quarter.
The following discussion and analysis compares the results of operations of the
Company for the three months ended July 31, 1996 to the three months ended July
31, 1995.
RESULTS OF OPERATIONS
The following table shows, for the periods indicated, information derived from
the condensed consolidated statements of income of the Company expressed as a
percentage of net sales for such periods.
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET SALES
--------------------------------
THREE MONTHS
ENDED
JULY 31
1996 1995
---------------------------------
(unaudited)
<S> <C> <C>
Net sales 100.0 % 100.0 %
Cost of goods sold 76.8 79.5
----------------------------------
Gross profit 23.2 20.5
Operating expenses
Selling 6.3 6.1
General and administrative 8.0 6.4
Amortization of intangibles .8 .7
----------------------------------
Total operating expenses 15.1 13.2
----------------------------------
Operating income 8.1 7.3
Interest expense (0.8 ) (1.0 )
----------------------------------
Income before income taxes 6.3
Income taxes 2.8 2.3
----------------------------------
Net income (loss) 4.5 % 4.0 %
==================================
</TABLE>
5
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Net Sales. Net sales increased by $1.3 million, or 10.4% for the three
months ended July 31, 1996 compared to the three months ended July 31, 1995.
Substantially all of the increase was from sales of products by the Company's
wholly owned subsidiary, Universal Cork, Inc. which was acquired in a purchase
transaction on April 24,1996.
Gross Profit. Gross profit increased by $0.7 million, or 25.3%, for the three
months ended July 31, 1996 compared to the three months ended July 31, 1995,
and as a percentage of net sales, increased from 20.5% to 23.2% for the same
periods. This increase was primarily due to product mix and the reduced
proportion of lower profit promotional sales incurred to stimulate sales in
the three months ended July 31,1995.
Selling Expenses. Selling and marketing expenses increased by $0.1 million or
16.1% for the three months ended July 31, 1996 compared to the three months
ended July 31, 1995 and as a percentage of net sales, increased 0.2% to 6.3%.
This increase was primarily attributed to different commission rates brought by
the different sales mix of the current quarter compared to the same period of
the prior year.
General and Administrative Expenses. General and administrative expenses
increased by $0.3 million, or 37.7%, for the three months ended July 31, 1996
compared to the three months ended July 31, 1995 and as a percentage of net
sales increased from 6.4% to 8.0% for the same periods. Several quarter
specific charges relating to shareholder communications and corporate filing
were the main contributors to the increase.
Interest Expense. Interest expense decreased $0.01 million for the three
months ended July 31, 1996 compared to the three months ended July 31, 1995 as
a result of decreased cost of funds.
Income Taxes. Income taxes increased from $0.31 million for the three months
ended July 31, 1995 to $.39 million for the three months ended July 31, 1996.
The effective income tax rates for the periods are essentially the same at
approximately 38% for the two periods.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations were $2.3 million for the three month period
ended July 31,1996 as compared to $2.8 million for the three months ended July
31,1995. Cash flows were used to purchase $1.3 million of property, plant
and equipment during the three months ended July 31, 1996, and $0.7 million in
the same period last year. Cash used for reduction of debt was $1.0 million
for the three months ended July 31, 1996 as compared to $2.4 million for the
three months ended July 31,1995.
The Company has credit agreements with two banks. The primary credit facility
from the first bank provides borrowings up to $25 million for working capital,
capital expenditures and other corporate purposes and is limited in
availability based on inventories, receivables and capital expenditures.
Borrowings under the primary facility bears interest at the lower of the bank's
prime rate less 1.50% to 1.00% or LIBOR plus 1.50% to 2.00% with the actual
rate being dependent on the level of funded indebtedness the Company. At July
31,1996, $8.3 million was available under this facility. The Company's
credit agreement with a second bank provided a long term loan of $5 million
payable over 60 months. At July 31, 1996 the remaining balance was $4.7
million.
The Company's current ratio was 2.6 to 1 at July 31, 1996 and April 30, 1996.
6
<PAGE> 9
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
a. The Company's Annual Meeting of Stockholders was held on August
19, 1996.
b. Not required
c. A proposal to adopt the National Picture & Frame Company Non-Employee
Director Stock Option Plan.
For Against Abstain
4,106,093 155,000 2,857
A proposal to ratify the selection of the firm of Ernst & Young LLP as
auditor for the Company for the fiscal year ending April 30, 1997.
For Against Abstain
4,578,301 600 1,000
The following Directors were elected for the ensuing year or until their
successors have been duly elected and qualified by the following vote:
For Withheld
Peter B. Foreman 4,579,501 400
Arthur L. Goeschel 4,579,501 400
Daniel J. Hennessy 4,579,501 400
John F. Levy 4,579,501 400
Jesse C. Luxton 4,579,501 400
John S. Vesley 4,579,501 400
d. Not applicable
Item 6. Exhibits and Reports on Form 8-K
On May 16, 1996 the Company voluntarily reported on Form 8-K the press
release dated April 26,1996, announcing the acquisition of 100 percent of the
stock of Universal Cork, Inc. for $2.5 million.
7
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL PICTURE & FRAME COMPANY
By: /s/ M. Wesley Jordan, Jr.
----------------------------------
M. Wesley Jordan, Jr.
Vice President-Finance
(principal financial officer
and principal accounting officer)
8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 287
<SECURITIES> 0
<RECEIVABLES> 9,911
<ALLOWANCES> 0
<INVENTORY> 9,530
<CURRENT-ASSETS> 21,459
<PP&E> 21,864
<DEPRECIATION> 4,628
<TOTAL-ASSETS> 48,504
<CURRENT-LIABILITIES> 8,358
<BONDS> 0
0
0
<COMMON> 50
<OTHER-SE> 34,175
<TOTAL-LIABILITY-AND-EQUITY> 48,504
<SALES> 14,170
<TOTAL-REVENUES> 14,170
<CGS> 10,878
<TOTAL-COSTS> 10,878
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 118
<INCOME-PRETAX> 1,033
<INCOME-TAX> 391
<INCOME-CONTINUING> 642
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 642
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
