<PAGE>
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 June 30, 2000
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-24048
GEERLINGS & WADE, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2935863
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
960 Turnpike Street, Canton, MA 02021
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (781) 821-4152
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:
Par Value Date Number of Shares
--------- ---- ----------------
Common Stock $.01 August 14, 2000 3,855,940
<PAGE>
GEERLINGS & WADE, INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of December 31, 1999 and
June 30, 2000 (Unaudited)............................................. 3
Statements of Operations for the Quarters Ended June 30, 1999
and June 30, 2000 and for the Six Months ended June 30, 1999
and June 30, 2000 (Unaudited)......................................... 4
Statements of Cash Flows for the Six Months ended June 30, 1999
and June 30, 2000 (Unaudited)......................................... 5
Notes to Financial Statements......................................... 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations...................... 7
Item 3. Quantitative and Qualitative Disclosure about Market Risk........ 9
PART II. OTHER INFORMATION
Item 5. Other Information................................................ 10
Item 6. Exhibits and Reports on Form 8-K................................. 10
SIGNATURES.................................................................. 11
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GEERLINGS & WADE, INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,624,990 $ 111,641
Accounts receivable 1,395,305 1,182,613
Inventory 9,481,779 12,818,324
Prepaid mailing costs 899,400 240,557
Prepaid expenses and other assets 1,265,916 983,791
Deferred income taxes, net 229,139 229,139
----------- -----------
Total Current Assets 15,896,529 15,566,065
----------- -----------
PROPERTY AND EQUIPMENT, AT COST 2,442,285 2,322,817
Less--Accumulated Depreciation 1,326,174 1,414,852
----------- -----------
1,116,111 907,965
----------- -----------
Deferred Income Taxes, net 352,408 352,408
----------- -----------
Other Assets 390,411 371,105
----------- -----------
$17,755,459 $17,197,543
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ --- $ 2,000,000
Accounts payable 3,354,972 2,978,425
Current portion of deferred revenue 1,171,406 1,125,810
Accrued expenses 1,316,166 1,125,603
----------- -----------
Total Current Liabilities 5,842,544 7,229,838
----------- -----------
Deferred Revenue, less current revenue 436,206 478,710
----------- -----------
Purchase Price Advance from Liquid Holdings 1,250,0000 ---
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value -
Authorized-1,000,000 shares
Outstanding-none
Common stock, $.01 par value-
Authorized-10,000,000 shares-
Issued and outstanding-3,849,071 and 3,855,940 shares in
1999 and 2000, respectively 38,491 38,559
Additional paid-in capital 10,075,279 10,107,108
Retained earnings (deficit) 112,939 (656,672)
----------- -----------
Total Stockholders' Equity 10,226,709 9,488,995
----------- -----------
$17,755,459 $17,197,543
=========== ===========
</TABLE>
-3-
<PAGE>
GEERLINGS & WADE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30, June 30, June 30,
1999 2000 1999 2000
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $8,559,354 $8,893,487 $17,089,277 $17,045,218
Cost of Sales 4,403,731 4,589,481 8,831,631 8,711,535
---------- ---------- ----------- -----------
Gross Profit 4,155,623 4,304,006 8,257,646 8,333,683
Selling, general and administrative expenses 3,793,530 4,620,722 8,397,289 10,202,018
Merger related expenses --- --- --- 48,981
---------- ---------- ----------- -----------
Income (loss) from operations 362,093 (316,716) (139,643) (1,917,316)
Loss on disposal of fixed asset --- --- --- (68,886)
Purchase price advance from Liquid Holdings --- --- --- 1,250,000
Interest income 11,755 159 26,765 6,814
Interest expense --- (40,222) --- (40,222)
---------- ---------- ----------- -----------
Income (loss) before income taxes 373,848 (356,779) (112,878) (769,610)
Provision (benefit) for income taxes 157,300 --- (47,100) ---
---------- ---------- ----------- -----------
Net income (loss) $ 216,548 $ (356,779) $ (65,778) $ (769,610)
========== ========== =========== ===========
Net income (loss) per share
Basic $0.06 $(0.09) $(0.02) $(0.20)
========== ========== =========== ===========
Diluted $0.06 $(0.09) $(0.02) $(0.20)
========== ========== =========== ===========
Weighted average common shares and common
equivalents outstanding
Basic 3,846,623 3,855,940 3,837,352 3,854,193
========== ========== =========== ===========
Diluted 3,922,428 3,855,940 3,837,352 3,854,193
========== ========== =========== ===========
</TABLE>
-4-
<PAGE>
GEERLINGS & WADE, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1999 2000
----------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss $ (65,778) $ (769,610)
Adjustments to reconcile net income to net cash used in
operating activities --
Depreciation and amortization 228,731 277,030
Loss on disposition of fixed asset --- 68,886
Recognition of purchase price advance from Liquid Holdings --- (1,250,000)
Changes in current assets and liabilities --
Accounts receivable 180,080 212,687
Inventory (1,640,290) (3,336,545)
Prepaid mailing costs 1,037,596 658,842
Prepaid expenses 201,139 276,608
Accounts payable (289,245) (376,548)
Deferred revenue (153,530) (3,092)
Accrued expenses (574,181) (190,563)
----------- -----------
Net cash used in operating activities (1,075,478) (4,432,305)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (424,509) (118,375)
Change in other assets 12,560 5,430
----------- -----------
Net cash used in investing activities (411,949) (112,945)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under the loan facility --- 2,000,000
Proceeds from issuance under the Employee Stock Purchase Plan 15,998 11,021
Proceeds from exercise of stock options 247,689 20,875
----------- -----------
Net cash provided by financing activities 263,687 2,031,896
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,223,740) (2,513,354)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,289,645 2,624,995
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,065,905 $ 111,641
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period -
Income Taxes $ 304,389 $ 10,666
=========== ===========
Interest $ --- $ 40,222
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
Notes to Financial Statements
1. Basis of Presentation
--------------------------
The interim period information set forth in these financial statements is
unaudited and may be subject to normal year-end adjustments. In the opinion of
management, the information reflects all adjustments, which consist of normal
recurring accruals that are considered necessary to present a fair statement of
the results of operations of Geerlings & Wade, Inc. (the "Company") for the
interim periods presented. The operating results for the quarter ended June 30,
2000 are not necessarily indicative of the results to be expected for the fiscal
year ending December 31, 2000.
The financial statements presented herein should be read in conjunction with the
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999. Certain information in these footnote
disclosures normally included in financial statements has been condensed or
omitted in accordance with the rules and regulations of the Securities and
Exchange Commission.
2. Basic and Diluted Net Income Per Common Share
--------------------------------------------------
The Company applies the provisions of Statement of Financial Accounting
Standards No. 128, Earnings Per Share, which establishes standards for computing
and presenting earnings per share. For the quarters ending June 30, 1999 and
June 30, 2000 options to purchase a total of 268,162 and 339,549 common shares,
respectively, have been excluded from the calculation of diluted earnings per
share. For the six months ending June 30, 1999 and June 30, 2000 options to
purchase a total of 343,967 and 339,549 common shares, respectively, have been
excluded from the calculation of diluted earnings per share. These shares are
considered antidilutive as the Company has recorded a loss for both six-month
periods.
3. Comprehensive Income (Loss)
--------------------------------
SFAS No. 130, Reporting Comprehensive Income, requires disclosure of all
components of comprehensive income (loss) on an annual and interim basis.
Comprehensive Income (loss) is defined as a change in equity of a business
enterprise during a period from transactions or other events and circumstances
from nonowner sources. The Company did not have any other items of comprehensive
loss for the quarters ended June 30, 1999 and June 30, 2000, and therefore,
total comprehensive loss was the same as reported net loss for those periods.
4. Change in Accounting Estimate
----------------------------------
During the quarter ended March 31, 2000, the Company performed a review of its
amortization period for acquisition mailing costs. Based on this review of the
period over which revenue is generated from acquisition mailings, the Company
made a change in accounting estimate that reduced the period over which
acquisition mailing costs are amortized. This change in estimate resulted in
additional marketing expense of approximately $356,000 for the six months ended
June 30, 2000. This change in estimate increased loss per share by $0.09.
5. Purchase Price Advance from Liquid Holdings
------------------------------------------------
During 1999, the Company received $1,250,000 from Liquid Holdings, Inc. related
to the proposed merger with Liquid Acquisition Corp., a subsidiary of Liquid
Holdings Inc. As this amount was refundable by the Company under certain limited
circumstances, it was recorded as a liability on the balance sheet at December
31, 1999. This amount was recognized as other income during the quarter ended
March 31, 2000 upon the automatic termination of the merger agreement on
February 22, 2000.
6. Line of Credit
-------------------
On April 13, 2000, the Company entered into a credit agreement with a bank under
which the Company can borrow up to a maximum principal amount equal to the
lesser of 50% of qualifying inventory or $5.0 million. Amounts borrowed under
this facility bear interest at the prime rate and are collateralized by
substantially all of the assets of the Company. During the second quarter, the
Company borrowed approximately $2,000,000 under this credit facility, which is
currently outstanding. The Company is currently in default under the credit
agreement (as a result of the Company's failures to meet the required debt
service ratio in the second quarter and to obtain certain landlord's consent and
subordination agreements) and is seeking a waiver from the bank. Management
believes that the Company will obtain a waiver, but there can be no assurance
that the Company will be able to do so.
-6-
<PAGE>
Important Factors Regarding Forward-Looking Statements
The Company may occasionally make forward-looking statements and estimates such
as forecasts and projections of the Company's future performance or statements
of management's plans and objectives. These forward-looking statements may be
contained in SEC filings, press releases and oral statements, among others, made
by the Company. Actual results could differ materially from those in such
forward-looking statements. Therefore, no assurance can be given that the
results in such forward-looking statements will be achieved. Important factors
could cause the Company's actual results to differ from those contained in such
forward-looking statements, including, among other things, the factors mentioned
in the Company's Annual Report on Form 10-K for the year ended December 31, 1999
on file with the U.S. Securities and Exchange Commission.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Geerlings & Wade is a direct marketer and Internet retailer of premium wines and
wine-related merchandise to retail consumers. The Company currently maintains
licensed facilities in sixteen states. Federal, state and local laws strictly
govern the sale of wine in each market served by the Company.
Quarters Ended June 30, 1999 and June 30, 2000
Sales
Sales increased $334,000, or 3.9%, from $8,559,000 in the quarter ended June 30,
1999 to $8,893,000 in the quarter ended June 30, 2000. Sales levels depend
largely on the number of "house mailings," which are product offerings to
existing customers, and "acquisition mailings," which are product offerings to
potential new customers, and the response rates to these mailings. Catalog,
retail store and Internet sales also contribute to total sales. Sales resulting
from acquisition mailings increased $390,000 during the second quarter of 2000
as compared to the same period in 1999. This increase resulted from higher
response rates to the 2000 mailings as well as from a timing difference in the
mailings. The 1999 acquisition campaign was mailed at the end of the first
quarter whereas the acquisition campaign for 2000 was mailed entirely in the
second quarter. Sales to existing customers increased $150,000 during the second
quarter of 2000 as compared with the same period in 1999, resulting primarily
from the increased circulation of house mailings, e-mail promotions and wine
catalogs. Sales from e-commerce transactions increased by 295% from $388,000 in
the second quarter of 1999 to $1,531,000 in the second quarter of 2000. Many of
these sales came from existing customers who previously ordered products by
telephone. Sales of wine accessories decreased by $73,000 from $163,000 in the
second quarter of 1999 to $90,000 in the second quarter of 2000 as a result of
not mailing an accessory catalog during the spring of 2000 as was done in the
spring of 1999. Sales from the Passport Wine Club decreased by $131,000 from
$271,000 in the second quarter of 1999 to $140,000 in the same quarter in 2000
because the Company has not promoted this program through separate direct
mailings since the fall of 1998. The Company has continued to advertise the
Passport Wine Club in its other mailings and on its web sites and is considering
other means by which to promote the program.
Sales of wine increased 3.9% in the second quarter of 2000 as compared to the
second quarter of 1999 in markets (defined by the shipping region of each
warehouse) in which the Company has operated for at least one year. The number
of twelve-bottle equivalent cases ("cases"), exclusive of wine reservation
sales, sold by the Company increased by 15,584, or 21.5%, from 72,595 in the
quarter ended June 30, 1999 to 88,179 in the quarter ended June 30, 2000. The
average case price, exclusive of wine reservation sales, decreased by $14.61, or
13.0%, from $112.50 in the quarter ended June 30, 1999 to $97.89 in the quarter
ended June 30, 2000. The average number of cases purchased per customer order
was 1.12 in the quarter ended June 30, 2000 as comapred to 1.17 in the second
quarter of 1999. The decrease in average case price and average number of cases
per order resulted from increased sales from acquisition mailings because the
average case price and average number of cases ordered in acquisition orders is
lower than in orders from existing customers.
Gross Profit
Gross profit increased $148,000, or 4.2%, from $4,156,000 in the quarter ended
June 30, 1999 to $4,304,000 in the quarter ended June 30, 2000. Gross profit as
a percentage of sales decreased slightly from 48.6% in the quarter ended June
30, 1999 to 48.4% in the quarter ended June 30, 2000. Gross profit attributable
to wine sales decreased $7.22 per case, or 13.4%, from $54.05 per case in the
quarter ended June 30, 1999 to $46.83 per case in the quarter ended June 30,
2000. The decrease in gross profit per case resulted from increased sales from
acquisition mailings since the average case price for acquisition orders was
lower than for orders from existing customers.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $827,000, or 21.8%, from
$3,794,000 in the quarter ended June 30, 1999 to $4,621,000 in the quarter ended
June 30, 2000 and increased as a percentage of sales from 44.3% in the quarter
ended June 30, 1999
-7-
<PAGE>
to 52.0% in the quarter ended June 30, 2000. Nearly half of the net increase in
selling, general and administrative expenses was attributable to one-time
charges of $305,000 payable to the Company's former Chief Executive Officer
pursuant to a severance arrangement and $93,000 in legal expenses related to the
merger agreement with Liquid Holdings Inc. which was not consummated and to the
negotiation of the Company's new credit agreement. The significant portion
($230,000) of the remaining net increase in selling, general and administrative
expenses was attributable to shipping costs associated with the expense of
switching from UPS to third-party couriers in Connecticut and Florida and of
building the Company's business in Texas and North Carolina, neither of which
are served by UPS. Shipping costs have risen as UPS has ceased shipping
alcoholic beverages in a number of states. The Company is continuing to seek
means to reduce its shipping costs. Marketing expenses increased $70,000 from
$1,363,000 in the second quarter of 1999 to $1,433,000 in the second quarter of
2000.
Interest and Other Expense and Income
Interest income decreased from $11,755 in the quarter ended June 30, 1999 to
$159 in the quarter ended June 30, 2000. This decrease in interest income was
due to having lower cash balances invested during the second quarter of 2000 as
compared to the second quarter of 1999. There was no interest expense in the
second quarter of 1999 and $40,000 of interest expense in the second quarter of
2000. The interest paid during the second quarter of 2000 was due to borrowings
under the Company's new line of credit.
Six-Month Periods Ended June 30, 1999 and June 30, 2000
Sales
Sales decreased $44,000, or 0.3%, from $17,089,000 in the six months ended
June 30, 1999 to $17,045,000 in the six months ended June 30, 2000. The decrease
in sales resulted from the sales decrease in the first quarter of 2000 resulting
from fewer house mailings and catalog mailings to existing customers and to the
cessation of outbound telemarketing efforts to existing customers. Sales,
exclusive of wine accessory sales, decreased 0.4% in markets (defined by the
shipping region of each warehouse) in which the Company has operated for at
least one year. The number of cases, exclusive of wine reservation sales, sold
by the Company increased by 20,071, or 13.8%, from 145,298 in the six months
ended June 30, 1999 to 165,369 in the six months ended June 30, 2000. The
average case price decreased by $11.73, or 10.5%, from $111.49 in the six months
ended June 30, 1999 to $99.76 in the six months ended June 30, 2000. The average
number of cases purchased per customer order was 1.08 in the six months ended
June 30, 2000 compared to 1.12 in the comparable fiscal period of 1999. The
decrease in average case price and average number of cases per order resulted
from increased sales from acquisition mailings because the average case price
and average number of cases ordered in acquisition orders is lower than in
orders from existing customers.
Gross Profit
Gross profit increased $76,000, or 0.9%, from $8,258,000 in the six months
ended June 30, 1999 to $8,334,000 in the six months ended June 30, 2000. Gross
profit as a percentage of sales increased from 48.3% in the six months ended
June 30, 1999 to 48.9% in the six months ended June 30, 2000. The increase in
gross profit as a percentage of sales was attributable to favorable foreign
exchange rates and to improved purchasing methods. Gross profit attributable to
wine sales, exclusive of wine reservation sales, decreased $5.02 per case, or
9.5%, from $53.01 per case in the six months ended June 30, 1999 to $47.98 per
case in the six months ended June 30, 2000. The decrease in average gross
profit per case resulted from the increase in sales from acquisition mailings
since the average case price in acquisition orders is lower than in orders
from existing customers.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $1,805,000, or
21.7%, from $8,397,000 in the six months ended June 30, 1999 to $8,334,000 in
the six months ended June 30, 2000. As a percentage of sales, these expenses
increased from 49.1% in the six months ended June 30, 1999 to 59.9% in the six
months ended June 30, 2000. The net increase in selling, general and
administrative expenses is largely attributable to increased shipping expense of
$500,000, which resulted from switching couriers in certain states and a change
in accounting estimate made in the first quarter 2000 that reduced the period
over which the Company amortizes costs of acquisition mailings. Shipping costs
have risen as UPS has ceased shipping alcoholic beverages in a number of states.
The Company is continuing to seek means to reduce its shipping costs. The
accounting estimate change had the effect of increasing marketing expense in the
first six months of 2000 by $356,000. The Company also incurred legal expenses
of $221,000 related to a merger with Liquid Holdings Inc. that was not
consummated and the Company's new line of credit. Additionally, the Company
recognized a one-time charge of $305,000 payable to the Company's former Chief
Executive Officer pursuant to a severance arrangement. Marketing expenses,
including the effect of the change in accounting estimate, increased $411,000
from $3,425,000 in the first six months of 1999 to $3,836,000 in the first six
months of 2000.
Interest
Interest income decreased from $26,765 in the period ended June 30, 1999 to
$6,814 in the period ended June 30, 2000 due to lower invested cash balances.
Interest expense increased from $0 in the six months ended June 30, 1999 to
$40,222 in the six months ended June 30, 2000 as a result of borrowings under
the Company's line of credit during the second quarter of 2000.
-8-
<PAGE>
Provision for Income Taxes
The Company's recorded no provision for income taxes for the quarter ended June
30, 2000 due to the uncertainty of using this provision in the near term.
During the quarter ended June 30, 1999, the Company recorded a provision for
income taxes of $157,000.
Liquidity and Capital Resources
The Company's primary working capital needs include purchases of inventory,
software development and advertising expenses related to e-commerce sites and
the cost of acquisition mailings and other expenses associated with promoting
sales. As of June 30, 2000, the Company had cash and cash equivalents totaling
$112,000. On April 13, 2000, the Company entered into a credit agreement with a
bank under which the Company can borrow up to a maximum principal amount equal
to the lesser of 50% of qualifying inventory or $5.0 million. Amounts borrowed
under this facility bear interest at the prime rate and are collateralized by
substantially all of the assets of the Company. During the second quarter,
the Company borrowed approximately $2,000,000 under this credit facility, which
is currently outstanding. The Company is currently in default under its credit
agreement (as a result of the Company's failures to meet the required debt
service ratio in the second quarter and to obtain certain landlord's consent and
subordination agreements) and is seeking a waiver from the bank. Management
believes that the Company will obtain a waiver, but there can be no assurance
that the Company will be able to do so.
During the six months ended June 30, 2000, net cash of $4,432,000 was used by
operating activities, resulting principally from net losses, recognition of a
purchase price advance from Liquid Holdings and an increase in inventory and
accounts payable, which reductions were offset by decreases in accounts
receivable, prepaid mailing costs and prepaid expenses.
The Company invested $93,960 in computer hardware and software in the second
quarter of 2000.
At December 31, 1999 and June 30, 2000, the Company had working capital of
$10,054,000 and $8,336,000, respectively. The decrease in working capital was
primarily due to a decrease in cash and cash equivalents and an increase in the
Company's line of credit and inventory.
The Company presently believes that cash flows from operations and amounts
available under the Company's credit facility will be sufficient to meet the
Company's working capital and capital expenditure requirements for the
foreseeable future.
Exchange Rates
The Company engages, from time to time, in currency-hedging activities related
to firm commitments for the purchase of inventories in an effort to fix costs
and manage the impact of exchange rate fluctuations. The Company has a foreign
exchange line of credit with BankBoston, N.A., which allows the Company to enter
into forward currency exchange contracts of up to $500,000 maturing on any one
day. As of June 30, 2000, the Company had one forward currency exchange contract
to purchase approximately 1.49 million French francs (FF) (equivalent to
approximately $230,000).
Item 3: Quantitative and Qualitative Disclosure about Market Risk
The following discussion about the Company's market risk disclosures involves
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements.
The Company is exposed to market risk related to foreign currency exchange
rates. The Company does not use derivative financial instruments for
speculative or trading purposes. The Company enters into foreign exchange
forward contracts to reduce its exposure to currency fluctuations on vendor
accounts payable denominated in foreign currencies. The objective of these
contracts is to neutralize the impact of foreign currency exchange rate
movements on the Company's operating results. The gains and losses on these
contracts are included in earnings when the underlying foreign currency
denominated transaction is recognized. Gains and losses related to these
instruments for the quarters ended June 30, 2000 and 1999 were not material to
the Company. Looking forward, the Company does not anticipate any material
adverse effect on its financial position, results of operations or cash flows
resulting from the use of these instruments. However, there can be no assurance
that these strategies will be effective or that transaction losses can be
minimized or forecasted accurately.
-9-
<PAGE>
PART II. OTHER INFORMATION
Item 4. SUBMISSIONS OF MATTERS TO A VOTE OF STOCKHOLDERS
(a) The Company held its annual meeting on May 9, 2000.
(b) At the annual meeting, stockholders elected Messrs. John M. Connors,
Jr. and Huib E. Geerlings as a director. Messrs. James C. Curvey,
Phillip D. Wade and Robert Webb continued serving their terms of
office after the annual meeting.
(c) Results of annual meeting votes:
<TABLE>
<CAPTION>
Proposal For Against Withheld Abstentions
<S> <C> <C> <C> <C>
To elect as director John M. Connors, Jr. 3,194,978 5,990
To elect as director Huib E. Geerlings 3,188,478 12,490
To ratify the appointment of Arthur
Andersen LLP as independent auditors
of the Company 3,192,824 6,110 2,034
</TABLE>
Item 5. On April 5, 2000, David Pearce, the Company's Chief Financial Officer,
was named President and Chief Executive Officer following the resignation of Jay
Essa, the Company's previous President and Chief Executive Officer.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Agreement dated as of April 7, 2000 between the Company and David
Pearce.
10.2 Credit Agreement dated as of April 13, 2000 between the Company
and Citizens Bank of Massachusetts.
10.3 Post-Closing Agreement dated as of April 13, 2000 between the
Company and Citizens Bank of Massachusetts.
10.4 Lease Agreement dated as of April 24, 2000 between the Company
and Tampa Tri-County Flexxspace, Ltd.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended June 30,
2000.
-10-
<PAGE>
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.
GEERLINGS & WADE, INC.
(Registrant)
By: /s/ David R. Pearce
-----------------------
Name: David R. Pearce
Title: President, Chief Executive
Officer and Chief Financial
Officer
Dated: August 14, 2000
-11-
