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 NOVEMBER 28, 1998 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
------------------ TO -----------------
0-24390
Commission file number . . . . . . . . . . . . . . . . .
TREND - LINES, INC.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Exact name of registrant as specified in its charter)
Massachusetts 04-2722797
. . . . . . . . . . . . . . . . . . . . . . . . . .
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
135 American Legion Highway, Revere , Massachusetts 02151
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Address of principal executive office) (Zip Code)
(617) 853 - 0900
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Registrant's telephone number, including area code)
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......
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS NUMBER OF SHARES OUTSTANDING NOVEMBER 30, 1998
----- ------------------------------------------------
Class A Common Stock, $.01 par value 5,923,841
Class B Common Stock, $.01 par value 4,726,794
<PAGE>
Trend-Lines, Inc. and Subsidiary
INDEX
Page
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
November 28, 1998 (Unaudited) and February 28, 1998 3
Condensed Consolidated Statements of Operations
Three Months Ended November 28, 1998 and
November 29, 1997 and Nine Months Ended November 28, 1998
and November 29, 1997 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended November 28, 1998 and
November 29, 1997 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 8-12
Part II - Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE>
TREND-LINES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
November 28
1998 February 28,
(Unaudited) 1998
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,038 $ 669
Accounts receivable, net 22,677 18,546
Inventories 126,965 102,172
Prepaid expenses and other current assets 7,188 6,906
--------- ---------
Total current assets 157,868 128,293
PROPERTY AND EQUIPMENT, NET 21,806 19,387
INTANGIBLE ASSETS, NET 6,709 6,973
OTHER ASSETS 759 799
--------- ---------
$ 187,142 $ 155,452
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank credit facility $ 78,304 $ 43,801
Current portion of capital lease obligations 813 777
Accounts payable 63,343 53,830
Accrued expenses 4,462 8,111
--------- ---------
Total current liabilities 146,922 106,519
--------- ---------
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 570 1,182
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value -
Class A --
Authorized - 20,000,000 shares
Issued - 6,423,841 and 6,385,178 shares at
November 28, 1998 and February 28, 1998, respectively 64 64
Class B --
Authorized - 5,000,000 shares
Issued and outstanding - 4,726,794 and 4,738,066 shares at
November 28, 1998 and February 28, 1998, respectively 47 47
Additional paid-in capital 41,625 41,524
Retained earnings 374 8,576
Less: 500,000 Class A shares held in treasury at November 28, 1998
and February 28, 1998, at cost (2,460) (2,460)
--------- ---------
Total stockholders' equity 39,650 47,751
--------- ---------
$ 187,142 $ 155,452
========= =========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
TREND-LINES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
November 28 November 29 November 28 November 29
1998 1997 1998 1997
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
NET SALES $ 60,102 $ 52,357 $ 184,638 $ 160,266
COST OF SALES 41,735 36,141 128,683 108,704
------------ ------------ ------------ ------------
Gross Profit 18,367 16,216 55,955 51,562
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 16,730 13,872 63,388 46,416
------------ ------------ ------------ ------------
Income (loss) from operations 1,637 2,344 (7,433) 5,146
INTEREST EXPENSE, NET 1,578 944 3,999 2,374
------------ ------------ ------------ ------------
Income (loss) before provision (benefit) for income taxes 59 1,400 (11,432) 2,772
PROVISION (BENEFIT) FOR INCOME TAXES -- 546 (3,230) 1,081
------------ ------------ ------------ ------------
Net income (loss) $ 59 $ 854 $ (8,202) $ 1,691
============ ============ ============ ============
BASIC NET INCOME (LOSS) PER SHARE $ 0.01 $ 0.08 $ (0.77) $ 0.16
============ ============ ============ ============
DILUTED NET INCOME (LOSS) PER SHARE $ 0.01 $ 0.08 $ (0.77) $ 0.15
============ ============ ============ ============
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING (Note 2) 10,650,635 10,589,070 10,647,610 10,581,109
============ ============ ============ ============
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING (Note 2) 10,723,142 11,174,886 10,647,610 11,119,541
============ ============ ============ ============
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
TREND-LINES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine months ended
November 28 November 29
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (8,202) $ 1,691
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities--
Depreciation and amortization 3,503 1,951
Changes in current assets and liabilities
Accounts receivable (4,132) (3,549)
Deferred income taxes -- --
Inventories (24,793) (3,078)
Prepaid expenses and other current assets (282) 89
Accounts payable 9,512 (11,382)
Accrued expenses (3,647) 538
-------- --------
Net cash (used in) operating activities (28,041) (13,740)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (5,658) (4,859)
Proceeds from sale of property and equipment -- 9
Increase in other assets 40 135
-------- --------
Net cash (used in) investing activities (5,618) (4,715)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under bank credit facilities 34,503 18,411
Payments on capital lease obligations (576) (514)
Proceeds from exercise of stock options 101 141
Purchases of treasury stock -- (310)
-------- --------
Net cash provided by financing activities 34,028 17,728
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 369 (727)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 669 1,006
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,038 $ 279
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for -
Interest $ 3,599 $ 2,289
======== ========
Income taxes $ 339 $ 1,622
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
TREND-LINES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The 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 Trend-Lines, Inc. (the "Company") for the interim
periods presented. The operating results for the nine months ended November 28,
1998 are not necessarily indicative of the results to be expected for the fiscal
year ending February 27, 1999.
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 fiscal year February 28, 1998. Certain information in 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. Earnings Per Share Data
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128
Earning Per Share, which changed the method of calculating earnings per share.
SFAS 128 requires the presentation of "basic" earnings per share and "diluted"
earnings per share. Basic earnings per share is computed by dividing the net
income available to common shareholders by the weighted average number of shares
of common stock outstanding. For the purposes of calculating diluted earnings
per share, the denominator includes both the weighted average number of common
stock outstanding and the dilutive effect of common stock equivalents such as
stock options and warrants. The Company adopted SFAS 128 in the fourth quarter
of fiscal 1997. All prior period per share amounts have been restated to comply
with SFAS 128.
Potentially dilutive securities include outstanding options under the Company's
stock option plan. For the quarter ended, November 28, 1998, the diluted
earnings per share calculation has been computed using the basic weighted
average shares outstanding, as the potentially dilutive securities are
anti-dilutive. The number of potentially dilutive shares excluded from the
earnings per share calculation was 266,413 for nine months ended November 28,
1998. Below is a summary of the shares used in calculating basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 28 November 29 November 28 November 29
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Basic weighted average shares outstanding 10,650,635 10,589,070 10,647,610 10,581,109
Dilutive effect of stock options 72,507 585,816 0 538,432
---------- ---------- ---------- ----------
Dilutede weighted averages shares outstanding 10,723,142 11,174,886 10,647,610 11,119,541
========== ========== ========== ==========
</TABLE>
<PAGE>
3. Bank Credit Facility
During fiscal 1996, the Company entered into a secured line-of-credit agreement
with a bank (the "credit facility") that, as amended during fiscal 1997, expires
on December 31, 2000. The credit facility bears interest at the bank's reference
rate plus .75% (9.50% at November 28, 1998) or LIBOR plus 2.25% (7.875% at
November 28, 1998). If for any 12 month rolling period the fixed charges ratio
exceeds certain limits, as defined, the bank's interest rate on the credit
facility is decreased by .25% for the period immediately following such rolling
period. A commitment fee of .375% per year of the average unused commitment
amount, as defined, is payable monthly. The credit facility allows for borrowing
up to $80 million based on a percentage of inventory (the "advance rate").
Borrowings include 50% of the amounts reserved for outstanding letters of
credit.
At November 28, 1998, the Company had approximately $78.3 million of borrowings
outstanding and approximately $200,000 of letters of credit outstanding. The
Company had approximately $1.2 million in available borrowings under this
facility at November 28, 1998. The bank has a security interest in substantially
all assets of the Company. The bank credit facility agreement contains certain
financial covenants, including, but not limited to, maintaining minimum levels
of tangible net worth, and interest coverage ratios and limitations on capital
expenditures. At November 28, 1998, the Company was in compliance with all
financial covenants.
Pursuant to an amendment with its bank dated as of September 30, 1998, the bank
amended the credit facility agreement to increase the advance rate to 70%
through December 31, 1998. On and after January 1, 1999 the advance rate will be
65%.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the third quarter of fiscal 1998 increased by $7.7 million, or
14.7%, from $52.4 million for the third quarter of fiscal 1997 to $60.1 million.
Net retail sales for the third quarter of 1998 increased $10.7 million or 27.0%
from $39.7 million for the third quarter of fiscal 1997 to $50.4 million.
However, net catalog sales for the third quarter of fiscal 1998 decreased $3.0
million or 23.6%, from $12.7 million for the third quarter of fiscal 1997 to
$9.7 million for fiscal 1998. The decrease in net catalog sales was attributable
to the Company's opening of retail stores in areas only previously served by its
catalog. The Company plans to continue its practice of not mailing catalogs to
areas where it operates retail stores. The revenue growth of retail stores is
attributable to the maturation and expansion of the Company's retail store base.
The store base expanded over 31.4% from 175 locations at the end of the third
quarter of fiscal 1997 to 230 locations at the end of the third quarter of
fiscal 1998. Comparable net store sales for Woodworkers Warehouse / Post Tool
stores and Golf Day stores for the third quarter of fiscal 1998 increased by
3.8% as compared to the third quarter of fiscal 1997.
Net sales for the first nine months of fiscal 1998 increased by $24.3 million,
or 15.2%, from $160.3 million for the first nine months of fiscal 1997 to $184.6
million for the first nine months of fiscal 1998. Retail sales for the first
nine months of fiscal 1998 increased $34.5 million, or 29.3%, from $117.7
million for the first nine months of fiscal 1997 to $152.2 million for the first
nine months of fiscal 1998. In contrast, catalog sales for the first nine months
of fiscal 1998 decreased $10.0 million, or 23.5%, from $42.5 million for the
first nine months of fiscal 1997 to $32.5 million for the first nine months of
fiscal 1998. The decrease in net catalog sales was attributable to the Company's
openings of retail stores in areas previously only served by its catalogs. The
Company intends to continue to mail catalogs only to areas not served by its
retail stores. The revenue growth of retail stores was attributable to the
maturation and expansion of the Company's retail base. Comparable net store
sales for Woodworkers Warehouse / Post Tool Stores and Golf Day for the first
nine months of fiscal 1998 increased by 1.2% as compared to the first nine
months of fiscal 1997.
Following is a summary of retail store growth.
Third Quarter Year To Date
Stores operated at the beginning of the period 217 204
Stores opened during the period 17 35
Stores closed during the period 4 9
- -
Stores operated at the end of the period 230 230
=== ===
Gross profit for the third quarter of fiscal 1998 increased $2.2 million, or
13.3%, from $16.2 million for the third quarter of fiscal 1997 to $18.4 million
for the third quarter of fiscal 1998. As a percentage of net sales, gross profit
decreased .4% from 31.0% of net sales for the third quarter of fiscal 1997 to
30.6% of net sales in the third quarter of fiscal 1998. The decrease in gross
profit as a percentage of net sales was primarily due to the Company's changing
sales mix, given the percentage increase in retail store sales, as the catalog
business has higher gross margins than retail store operations.
<PAGE>
Gross profit for the first nine months of fiscal 1998 increased $4.4 million
from $51.6 million for the first nine months of fiscal 1997 to $56.0 million for
the first nine months of fiscal 1998. As a percentage of net sales, gross profit
decreased 1.9% from 32.2% of net sales for the first nine months of fiscal 1997
to 30.3% for the first nine months of fiscal 1998.
Selling, general and administrative expenses for the third quarter of fiscal
1998 increased $2.8 million, or 20.6%, from $13.9 million for the third quarter
of fiscal 1997 to $16.7 million for the third quarter of fiscal 1998. As a
percentage of net sales, selling, general and administrative expenses increased
1.3% from 26.5% of net sales in the third quarter of fiscal 1997 to 27.8% of net
sales in the third quarter of fiscal 1998. The dollar increases in selling,
general and administrative expenses are primarily related to the Company's
continuing retail expansion to 230 locations, which is a 31.4% increase in the
number of stores operated. The increase in selling, general and administrative
expenses as a percentage of net sales was primarily attributable to lower than
anticipated retail store sales, coupled with increases in administrative and
store staffing levels.
Selling, general and administrative expenses for the first nine months of fiscal
1998 increased 36.7%, or $17.0 million, from $46.4 million for the first nine
months of fiscal 1997 to $63.4 million for the first nine months of fiscal 1998.
As a percentage of net sales, selling, general and administrative expenses
increased 5.3% from 29.0% of net sales for the first nine months of fiscal 1997
to 34.3% of net sales for the first nine months of fiscal 1998. The dollar
increases in selling, general, and administrative expenses were primarily
related to the Company's continuing retail expansion.
Interest expense, net of interest income, for the third quarter of fiscal 1998
increased by $700,000 from $900,000 in the third quarter of fiscal 1997 to $1.6
million in the third quarter of fiscal 1998. The increase in interest expense
was attributable to the increase in the amount outstanding under the Company's
bank credit facility.
Interest expense, net of interest income, for the first nine months of fiscal
1998 increased $1.6 million from $2.4 million for the first nine months of
fiscal 1997 to $4.0 million in first nine months of fiscal 1998.
The Company recognized a tax benefit for the first nine months of 1998 only to
the extent that a tax loss carryback was available. As a result, the Company
recognized no tax expense in the third quarter.
Liquidity and Capital Resources
The Company incurred operating losses during the first nine months of fiscal
1998 and used funds provided by its bank credit facility to meet its cash
operating needs during this period. The bank credit facility agreement contains
certain financial covenants, including, but not limited to, maintaining minimum
levels of tangible net worth and interest coverage ratios and limitations on
capital expenditures. At November 28, 1998, the Company was in compliance with
all financial covenants. Pursuant to an amendment with its bank dated as of
September 30, 1998, the bank amended the credit facility with respect to the
financial covenants and advance rates for future periods.
The modified covenants require the Company to maintain an interest coverage
ratio of 1.80 : 1.00 for the third quarter of fiscal 1998 and 2.50 : 1.00
thereafter, and adjusted tangible net worth as of the last day of the third
quarter of fiscal 1998 of $39.5 million and as of the last day of each quarter
through the second quarter of fiscal 1999 of $41.0 million and for each fiscal
quarter thereafter $42.0 million.
<PAGE>
The Company believes that projected cash flows from operations in combination
with current available resources are sufficient to meet working capital needs,
such as store openings and debt payments. Achievement of projected cash flows
from operations, however will be dependent upon the Company's attainment of
sales, gross profit, expense and trade support levels that are consistent with
its financial plans. Such operating performance will be subject to financial,
economic and other factors affecting the industry and operations of the Company,
including factors beyond its control, and there can be no assurance that the
Company's plans will be achieved. If projected cash flows from operations are
not realized, then the Company may have to explore various available
alternatives, including obtaining further modification to its existing lending
arrangements or attempting to locate additional sources of financing.
The Company's working capital decreased by $10.9 million, from $21.8 million as
of February 28, 1998 to $10.9 million as of November 28, 1998. The decrease
resulted primarily from an increase in the net borrowings under the Company's
bank credit facility of $34.5 million, which was offset by a $24.8 million
increase in inventory.
The cash used in operating activities was approximately $28.1 million. The
primary uses of the cash were for a net loss of $8.2 million, and a $24.8
million increase in inventories, with a $3.7 million decrease in accrued
expenses, all of which was offset by $9.5 million increase in accounts payable.
The net cash used in investing activities was approximately $5.7 million. The
main use of the cash was for the purchase of property and equipment required for
the Company's retail expansion.
The net cash provided by financing activities was approximately $34.0 million,
primarily attributable to the increase in borrowings on the Company's bank
credit facility of $34.5 million.
During fiscal 1996, the Company entered into a secured line-of-credit agreement
with a bank (the "credit facility") that, as amended during fiscal 1997, expires
on December 31, 2000. The credit facility bears interest at the bank's reference
rate plus .75% (9.50% at November 28, 1998) or LIBOR plus 2.25% (7.875% at
November 28, 1998). If for any 12 month rolling period the fixed charges ratio
exceeds certain limits, as defined, the bank's interest rate on the credit
facility is decreased by .25% for the period immediately following such rolling
period. A commitment fee of .375% per year of the average unused commitment
amount, as defined, is payable monthly. The credit facility allows for borrowing
up to $80 million based on a percentage of inventory (the "advance rate").
Borrowings include 50% of the amounts reserved for outstanding letters of
credit.
At November 28, 1998, the Company had approximately $78.3 million of borrowings
outstanding and approximately $200,000 of letters of credit outstanding. The
Company had approximately $1.2 million in available borrowings under this
facility at November 28, 1998. The bank has a security interest in substantially
all assets of the Company.
Pursuant to an amendment with its bank dated as of September 30, 1998, the bank
amended the credit facility agreement to increase the advance rate to 70%
through December 31, 1998. On and after January 1, 1999 the advance rate will be
to 65%.
<PAGE>
The Company anticipates that in fiscal 1998, it will continue to invest in
leasehold improvements and equipment to support its retail store expansion
plans. In addition, the Company's expansion plans will require the use of cash
to fund increased inventories associated with the operation of additional retail
stores. The Company estimates that the cost of opening a new store (exclusive of
distribution center inventory) averages approximately $350,000, of which
$290,000 consists of inventory, in the case of tool store, and approximately
$425,000, of which $300,000 consists of inventory, in the case of a golf store.
In each case, a portion of the inventory investment is financed with trade
credit. The Company opened nine new tool stores and eight new golf stores, and
closed two golf stores and two tool stores in the third quarter of fiscal 1998.
For the balance of fiscal 1998, the Company currently plans to open one
additional tool store.
Like many other companies, the Year 2000 computer issue creates risk for the
Company. If both information technology systems and imbedded technology do not
correctly recognize date information when the year changes to 2000, it could
have an adverse impact on the Company's operations. The Company is currently
updating its software to accommodate programming logic that properly interprets
Year 2000 dates, and plans to review embedded technology used in equipment
provided by outside vendors with the manufacturers of such equipment. The
Company does not anticipate difficulty to resolve issues related to embedded
technology in the equipment provided by other manufacturers. Except for
merchandising and call center applications, all software is under maintenance
agreements by software companies that provide updated, Year 2000 compliant
software. The Company is in the process of replacing its call center and
merchandising software with new, Year 2000 compliant applications to be supplied
by outside vendors at a cost estimated at approximately $2.0 million.
Based on the Company's work to date and assuming that the Company's call center
and merchandising software replacement projects can be implemented as planned,
the Company believes that it will be Year 2000 compliant and that future costs
relating to the Year 2000 issue will not have a material impact on the Company's
consolidated financial position, results of operations or cash flows.
Since the Company relies on third-party suppliers for many systems, products and
services including merchandise, telecommunications and call center support, the
Company could be adversely affected if these suppliers do not make necessary
changes to their own systems and products successfully and in a timely manner.
The Company will make inquiries with major third party suppliers regarding their
Year 2000 compliance. However, there can be no assurance that such third parties
will provide complete or accurate Year 2000 readiness disclosures.
Management of the Company believes it has an effective program in place to
resolve the Year 2000 issue in a timely manner. Nevertheless, since it is not
possible to anticipate all possible future outcomes, especially when third
parties are involved, there could be circumstances in which the Company could be
adversely affected. For example, the Company could encounter problems in taking
customer orders, shipping products, invoicing customers or collecting payments.
The amount of potential lost revenue or related consequences as a result of
these unlikely contingencies has not been estimated.
Once the Year 2000 remediation process reaches a higher percentage of
completion, the Company intends to work on a contingency plan to address
remaining material risks, if any.
<PAGE>
Impact of Inflation
The Company does not believe that inflation has had a material impact on its net
sales or results of operations.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Statements included in this report that do not relate to present or historical
conditions are "forward-looking statements" within the meaning of the Safe
Harbor provisions of the Private Securities Litigation Reform Act of 1995.
Additional oral or written forward-looking statements may be made by the Company
from time to time, and such statements may be included in documents other than
this report that are filed with the Securities and Exchange Commission. Such
forward-looking statements involve risks and uncertainties that could cause
results or outcomes to differ materially from those expressed in such
forward-looking statements. Forward-looking statements in this report and
elsewhere may include without limitation, statements relating to the Company's
plans, strategies, objectives, expectations, intentions and adequacy of
resources and are intended to be made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Words such as "believes,"
"forecasts," "intends," "possible," "expects," "estimates," "anticipates," or
"plans" and similar expressions are intended to identify forward-looking
statements. Investors are cautioned that such forward-looking statements involve
risks and uncertainties including without limitation the following: (i) the
Company's plans, strategies, objectives, expectations and intentions are subject
to change at any time at the discretion of the Company; (ii) increased
competition, a change in the retail business in the tool and/or golf sectors or
a change in the Company's merchandise mix; (iii) a change in the Company's
advertising, pricing policies or its net product costs after all discounts and
incentives; (iv) the Company's plans and results of operations will be affected
by the Company's ability to manage its growth and inventory as well as year end
inventory and adjustments; (v) the timing and effectiveness of programs dealing
with the Year 2000 issue and the Company's warehouse management system; and (vi)
other risks and uncertainties indicated from time to time in the Company's
filings with the Securities and Exchange Commission.
<PAGE>
TREND-LINES, INC. AND SUBSIDIARY
Part II - Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number
27 Financial Data Schedule (furnished to the Securities and Exchange
Commission for Electronic Data Gathering, Analysis and Retrieval [Edgar]
purposes only)
(b) Reports on Form 8-K - not applicable
<PAGE>
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.
TREND-LINES, INC.
Registrant
Date: January 12, 1999 By: /s/ Stanley D. Black
Name: Stanley D. Black
Title: (Chief Executive Officer)
By: /s/ Karl P. Sniady
Name: Karl P. Sniady
Title: (Executive Vice President,
Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF FINANCIAL CONDITION AT NOVEMBER
28, 1998 (UNAUDITED) AND THE RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED
NOVEMBER 28, 1998 (UNAUDITED AND IS QUALIFIED IN ITS ENTIRIETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> FEB-27-1999 FEB-28-1998
<PERIOD-START> MAR-1-1998 MAR-1-1997
<PERIOD-END> NOV-28-1998 FEB-28-1998
<CASH> 1,038 669
<SECURITIES> 0 0
<RECEIVABLES> 22,891 18,764
<ALLOWANCES> (214) (218)
<INVENTORY> 126,965 102,172
<CURRENT-ASSETS> 157,868 128,293
<PP&E> 33,446 27,788
<DEPRECIATION> (11,640) (8,401)
<TOTAL-ASSETS> 187,142 155,452
<CURRENT-LIABILITIES> 146,922 106,519
<BONDS> 0 0
0 0
0 0
<COMMON> 111 111
<OTHER-SE> 39,539 47,640
<TOTAL-LIABILITY-AND-EQUITY> 187,142 155,452
<SALES> 184,638 231,143
<TOTAL-REVENUES> 184,638 231,431
<CGS> 128,683 157,129
<TOTAL-COSTS> 128,683 157,129
<OTHER-EXPENSES> 63,388 63,483
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,999 3,239
<INCOME-PRETAX> (11,432) 7,292
<INCOME-TAX> (3,230) 2,844
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (8,202) 4,448
<EPS-PRIMARY> (0.77) 0.42
<EPS-DILUTED> (0.77) 0.40
</TABLE>
