<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
Commission File Number
33-88628
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FLORISTS' TRANSWORLD DELIVERY, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
MICHIGAN 38-0546960
- ------------------------------- --------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
29200 NORTHWESTERN HIGHWAY
SOUTHFIELD, MICHIGAN 48034
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(Address of Principal Executive Offices) (Zip Code)
(810) 355-9300
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 and 15(d) of the Securities Exchange Action
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
----- -----
As of May 9, 1996, there were outstanding 100 shares of the Registrant's
common stock, par value $.01 per share, which is the only class of common stock
of the Registrant.
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FLORISTS' TRANSWORLD DELIVERY, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Condensed Statements of Financial Position at
March 31, 1996 and June 30, 1995 3
Consolidated Statements of Operations
For the Three Months Ended March 31, 1996
and 1995 4
For the Nine Months Ended March 31, 1996, the
Period July 1, 1994 through December 18, 1994 (Predecessor
Company) and the Period December 19, 1994 through
March 31, 1995 5
Consolidated Condensed Statements of Cash Flows
For the Nine Months Ended March 31, 1996, the Period
July 1, 1994 through December 18, 1994 (Predecessor
Company) and the Period December 19, 1994 through
March 31, 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibit Index 14
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FLORISTS' TRANSWORLD DELIVERY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
March 31,
1996 June 30,
(Unaudited) 1995
----------- --------
ASSETS (In Thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 20,524 $ 24,375
Accounts receivable, less allowance for doubtful accounts
of $1,232 at March 31, 1996 and $1,589 at June 30, 1995 31,069 20,784
Inventories, principally finished goods, net 11,875 13,019
Other current assets 10,912 8,389
--------- ---------
Total current assets 74,380 66,567
Property and equipment, less accumulated depreciation
of $12,893 at March 31, 1996 and $4,962 at June 30, 1995 38,220 43,701
Other noncurrent assets:
Other noncurrent assets 7,189 6,374
Goodwill and other intangible assets, less accumulated amortization
of $4,039 at March 31, 1996 and $1,523 at June 30, 1995 82,976 87,038
--------- ---------
Total other noncurrent assets 90,165 93,412
--------- ---------
Total assets $ 202,765 $ 203,680
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 7,253 $ 4,704
Accounts payable 31,270 28,341
Accrued member incentive programs 12,092 6,754
Accrued severance and related costs 1,661 5,961
Other accrued liabilities 7,716 5,875
Unearned income and members' deposits 11,164 10,026
--------- ---------
Total current liabilities 71,156 61,661
Long-term debt 90,452 96,052
Employee benefit obligations 11,101 10,252
Deferred income taxes 2,072
Minority interest in subsidiary 185 203
Stockholder's equity:
Common stock -- --
Paid-in capital 33,000 33,000
Retained earnings (deficit) (3,129) 440
--------- ---------
Total stockholder's equity 29,871 33,440
--------- ---------
Total liabilities and stockholder's equity $ 202,765 $ 203,680
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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FLORISTS' TRANSWORLD DELIVERY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
------------ ------------
(In Thousands)
<S> <C> <C>
Revenues:
Marketplace $17,960 $21,935
Clearinghouse 8,855 9,718
Mercury Network 8,316 7,605
Other 9,663 8,137
------- -------
Total revenues 44,794 47,395
------- -------
Costs:
Products and distribution 12,395 15,618
Floral order transmissions and processing services 7,920 6,606
Member programs 7,546 7,230
------- -------
Total costs of goods sold & services provided 27,861 29,454
Selling, general and administrative 14,555 12,106
------- -------
Income from operations 2,378 5,835
Interest (income) (366) (428)
Interest expense 3,337 3,678
------- -------
Income (loss) before income taxes and
minority interest (593) 2,585
Income taxes (benefit) (3) 1,107
Minority interest in earnings of subsidiary 14 19
------- -------
Net income (loss) $ (604) $ 1,459
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
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FLORISTS' TRANSWORLD DELIVERY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Predecessor
Company
------------
Nine Months December 19, July 1, 1994
Ended 1994 - through
March 31, March 31, December 18,
1996 1995 1994
----------- ------------ ------------
(In Thousands)
<S> <C> <C> <C>
Revenues:
Marketplace $ 49,758 $ 25,858 $ 28,556
Clearinghouse 26,953 13,216 16,093
Mercury Network 23,876 9,158 13,865
Other 26,608 9,452 16,819
-------- -------- --------
Total revenues 127,195 57,684 75,333
-------- -------- --------
Costs:
Products and distribution 33,931 17,715 21,639
Floral order transmissions and processing services 21,987 7,924 11,572
Member programs 23,587 9,317 15,898
-------- -------- --------
Total costs of goods sold & services provided 79,505 34,956 49,109
Selling, general and administrative 43,123 15,783 28,684
-------- -------- --------
Income from operations 4,567 6,945 (2,460)
Interest (income) (986) (497) (1,095)
Interest expense 10,215 4,216 1,172
-------- -------- --------
Income (loss) before income taxes and
minority interest (4,662) 3,226 (2,537)
Income taxes (benefit) (1,066) 1,426 35
Minority interest in earnings (loss) of subsidiary (18) 23
-------- -------- --------
Net income (loss) $ (3,578) $ 1,777 $ (2,572)
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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FLORISTS' TRANSWORLD DELIVERY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Predecessor
Company
------------
Nine Months December 19, July 1, 1994
Ended 1994 - through
March 31, March 31, December 18,
1996 1995 1994
----------- ------------ ------------
(In Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in) operating activities $ 2,640 $ (5,902) $ 4,231
CASH FLOWS FROM INVESTING ACTIVITIES:
Release of restricted cash related to credit deposit
fund investments 2,173 25
Restriction of cash related to member incentive programs (7,737)
Cash utilized to effect merger (109,323)
Capital expenditures (3,246) (259) (1,414)
------- --------- -------
Net cash used in investing activities (3,246) (115,146) (1,389)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of long-term debt 96,008
Repayments of long-term debt (3,260) (34,153) (1,885)
Issuance of common stock 30,000
Equity contribution from parent 3,000
Additional credit deposits 40
Return of members' equity (920)
------- --------- -------
Net cash provided by (used in) financing activities (3,260) 94,855 (2,765)
Effect of exchange rate changes on cash 15
------- --------- -------
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS (3,851) (26,193) 77
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 24,375 46,577 46,500
------- --------- -------
END OF PERIOD $20,524 $ 20,384 $46,577
======= ========= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $ 7,045 $ 1,314 $ 1,249
======= ========= =======
Income taxes paid $ 158 $ 107 $ 242
======= ========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
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FLORISTS' TRANSWORLD DELIVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. Basis of Presentation
The accompanying unaudited consolidated financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles for interim financial information pursuant to the rules and
regulations of the Securities and Exchange Commission and do not contain all
information included in the audited consolidated financial statements and notes
for the year ended June 30, 1995. In the opinion of Company management, all
adjustments necessary for a fair presentation of the financial position and
results of operations have been included (and any such adjustments are of a
normal, recurring nature, except as disclosed herein). Due to seasonal
variations in the Company's business, operating results for the three and nine
month periods ended March 31, 1996 are not necessarily indicative of the
results that might be expected for the year ended June 30, 1996.
NOTE 2. Accrued Severance and Related Costs
The following table reflects the changes to the severance reserve for the
nine months ended March 31, 1996 (in thousands):
<TABLE>
<CAPTION>
Remaining
Balance at Reduction of Liability as of
June 30, Costs Accrued March 31,
1995 Paid Liability 1996
---------- ------ ------------ ---------------
<S> <C> <C> <C> <C>
Severance benefits $4,730 $1,038 $2,370 $1,322
Relocation costs 600 28 480 92
Other 631 96 288 247
------ ------ ------ ------
Total $5,961 $1,162 $3,138 $1,661
====== ====== ====== ======
</TABLE>
7
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is a discussion of changes in the Company's financial
condition and results of operations for the three and nine month periods ended
March 31, 1996 compared with the corresponding periods of fiscal 1995. The
corresponding nine month period of fiscal 1995 includes both (i) results of the
Company's predecessor (Florists' Transworld Delivery Association) for the
period prior to the acquisition on December 19, 1994 and (ii) results of the
Company for the post-acquisition period December 19, 1994 through March 31,
1995.
The Company generates its revenue from four principal areas of operation.
Marketplace is the Company's wholesale supplier of non-perishable hardgoods to
retail florists in North America. Marketplace products include both
FTD-branded and non-branded holiday and everyday floral arrangement containers,
as well as packaging, greeting cards, promotional products and a wide variety
of other floral-related supplies. The Company's Clearinghouse operation
provides order billing and collection services to sending and receiving
florists, and the Company receives a percentage of the sales price for the
service. Mercury Network is the Company's proprietary telecommunications
network linking 16,400 of its 22,300 florists. Florists use the network to
transmit floral orders through Florists' Transworld Delivery, Inc. or competing
clearinghouses and over 15 million orders are transmitted annually through the
Mercury Network. Other revenue is derived from the Direct Access direct
marketing business, credit card authorization and processing, publications and
an after hours order taking service.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
Revenue decreased by $2.6 million, or 5.5%, to $44.8 million for the three
months ended March 31, 1996, compared to $47.4 million for the three months
ended March 31, 1995. Marketplace revenue experienced a net decrease of $4.0
million primarily due to lower sales of holiday and seasonal containers and
non-branded everyday products. Increased sales of FTD branded everyday
products partially offset this decrease. Clearinghouse revenue decreased by
$0.9 million as a result of a decline in the volume of floral orders cleared
through FTD. Mercury Network revenue increased $0.7 million due to increased
console rental and order transmissions revenue. Other revenue experienced a
net increase of $1.5 million as a result of increased Direct Access order
volume and publications revenue.
The cost of goods sold and services provided decreased by $1.5 million, or
5.4%, to $27.9 million for the three months ended March 31, 1996 from $29.4
million for the three months ended March 31, 1995. The change was primarily
due to the costs of products and distribution which decreased by $3.2 million
corresponding to the lower Marketplace sales volume for the period. This
decrease was partially offset by costs of increased order volume in the Direct
Access business and Mercury Network costs. As a percent of revenue, cost of
goods sold and services provided was 62.2% and 62.1% for the three month
periods ended March 31, 1996 and 1995, respectively.
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Selling, general and administrative expenses increased by $2.5 million, or
20.2%, to $14.6 million for the three months ended March 31, 1996 from $12.1
million for the three months ended March 31, 1995. Advertising and promotional
expenditures were increased by $3.1 million in 1996 over the prior period for
television advertising campaigns and the Company's advertising activities
related to its member incentive program. This increase was partially offset by
reduced general and administrative expenses of $0.6 million.
Interest expense for the three months ended March 31, 1996 was $3.3
million as compared to $3.7 million in the prior year. The decrease was
attributable to lower interest rates and scheduled principal payments which
reduced the debt outstanding in accordance with the terms of the Company's debt
agreements.
Income taxes for the three months ended March 31, 1996 were a benefit of
$3 thousand compared to an expense of $1.1 million for the comparable period in
the prior year.
Net loss was $0.6 million for the three months ended March 31, 1996
compared to net income of $1.5 million for the three months ended March 31,
1995. The change is primarily attributable to the increased advertising
expenditures and lower gross profit due to the decrease in product sales.
NINE MONTHS ENDED MARCH 31, 1996 COMPARED TO NINE MONTHS ENDED MARCH 31, 1995
Revenue decreased by $5.8 million, or 4.4%, to $127.2 million for the nine
months ended March 31, 1996, compared to $133.0 million for the nine months
ended March 31, 1995. The decline in revenue was impacted by the elimination
of $2.7 million in revenue from trade association activities in the prior
comparable period which, since the acquisition, have no longer been conducted
by the Company. Marketplace revenue decreased by a net amount of $4.7 million
from the prior period due to lower sales of holiday, seasonal and non-branded
everyday containers partially offset by increased sales of FTD branded everyday
products in the nine month period. Clearinghouse revenue decreased by $2.3
million which resulted from a decline in the volume of floral orders cleared
through FTD. Mercury Network revenue increased $0.9 million due to increased
console rental and order transmissions revenue. Excluding the trade
association related revenues from the prior nine month period discussed above,
other revenue experienced a net increase of $3.0 million primarily due to
increased Direct Access orders, publications directory advertising revenue and
credit card order processing volume.
The cost of goods sold and services provided decreased by $4.6 million, or
5.4%, to $79.5 million for the nine months ended March 31, 1996 from $84.1
million for the nine months ended March 31, 1995. The decrease in cost of
goods sold is the result of lower cost of sales of Marketplace products and
related freight of $5.4 million and a $1.8 million decrease due to lower costs
of member programs which have not been conducted by the Company since the
acquisition.
9
<PAGE> 10
This decrease was offset by an increase in costs of Direct Access orders,
Mercury Network costs and field service costs. As a percent of revenue, cost
of goods sold and services provided decreased to 62.5% for the nine months
ended March 31, 1996 from 63.2% for the nine months ended March 31, 1995.
Selling, general and administrative expenses decreased by $1.3 million, or
3.0% for the nine months ended March 31, 1996 compared to the same period in
1995. The decrease is primarily due to non-recurring acquisition related costs
of $4.1 million which were incurred by the Company during the nine months ended
March 31, 1995. Also contributing to the decrease was overhead reductions
affecting both promotional and administrative costs and the elimination of the
costs of certain trade association activities which since the acquisition have
not been conducted by the Company. These decreases were partially offset by
(i) $3.2 million in costs from the Company's advertising activities related to
its member incentive program which was implemented in 1996 and (ii) an increase
in the amortization of goodwill and other intangibles of $1.8 million for the
nine month period ended March 31, 1996 from the prior comparable period. Total
selling, general and administrative expenses at March 31, 1996 reflects a
reclassification of certain advertising activities of $2.2 million from cost of
goods sold to selling, general and administrative expenses.
Interest expense for the nine months ended March 31, 1996 was $10.2
million as compared to $5.4 million in the prior year. The increase of $4.8
million was due to the debt incurred in connection with the acquisition on
December 19, 1994, partially offset by a decrease in interest rates for the
nine months ended March 31, 1996 as compared to the prior comparable period.
Income taxes for the nine months ended March 31, 1996 were a benefit of
$1.1 million compared to an expense of $1.5 million for the comparable period
in the prior year. The income tax expense prior to the acquisition was
entirely related to the Company's Canadian operations.
Net loss was $3.6 million for the nine months ended March 31, 1996, an
increase of $2.8 million from a loss of $0.8 million for the nine months ended
March 31, 1995. The change is primarily attributable to increases in interest
expense, goodwill and other intangibles amortization and an offsetting tax
benefit.
LIQUIDITY AND CAPITAL RESOURCES
The Company has two sources of long-term debt consisting of a bank credit
agreement and senior subordinated notes. The bank credit agreement consists of
$45.0 million in term loans and a $25.0 million undrawn revolving credit
facility. The term loans bear interest at floating rates and are to be repaid
over five years. The Company has repaid $3.2 million of these loans in the
nine months ended March 31, 1996 and $4.7 million since the acquisition date.
No borrowings were made under the revolving credit facility during the nine
months ended March 31, 1996. The senior subordinated notes were issued as part
of the sale of units in connection with the acquisition consisting of $60
million aggregate principal of 14% senior subordinated notes (the "Notes") of
the Company and warrants to purchase 750,000 shares of class B common stock of
FTD Corporation. The Company has funded the interest and debt repayments for
the bank debt and the
10
<PAGE> 11
Notes through cash flow from operations.
For the nine months ended March 31, 1996, cash flow reflected a net
decrease in cash of $3.9 million, as compared to a $26.1 million decrease in
cash for the nine months ended March 31, 1995. The decrease in the period
ended March 31, 1995 was primarily attributable to cash used to effect the
acquisition.
Cash provided by operating activities was $2.6 million for the nine months
ended March 31, 1996 compared to cash used of $1.7 million for the nine months
ended March 31, 1995. The increase resulted primarily from non-recurring
expenses of $4.1 million incurred in the nine months ended March 31, 1995
related to the acquisition. Depreciation and amortization was $11.6 million
for the nine months ended March 31, 1996 and $9.2 million for the nine months
ended March 31, 1995.
Cash used in investing activities was $3.2 million for the nine months
ended March 31, 1996 compared to $116.5 million for the nine months ended March
31, 1995. In 1996, the cash used in investing activities consisted entirely of
capital expenditures. The cash used in the nine months ended March 31, 1995
reflects the cash utilized to effect the acquisition. Cash used in financing
activities was $3.3 million for the nine months ended March 31, 1996 compared
to cash provided of $92.1 million for the nine months ended March 31, 1995.
The cash used in the nine months ended March 31, 1996 reflects the payment of
principal on the term loans and the cash provided in the nine months ended
March 31, 1995 reflects the proceeds of debt incurred and equity retained to
effect the acquisition.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
27 Financial Data Schedules
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended March 31, 1996.
12
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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 on the 9th day of May, 1996.
FLORISTS' TRANSWORLD DELIVERY, INC.
By: /s/ Paul A. Luck
------------------------------------------
Paul A. Luck
Vice President and Chief Financial Officer
(Principal financial officer and officer duly authorized
to sign on behalf of registrant)
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EXHIBIT INDEX
Paper (P)
or
Exhibit Description Electronic (E)
------- ----------- --------------
27 Financial Data Schedules E
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FTD INC.
MARCH 31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 20,524
<SECURITIES> 0
<RECEIVABLES> 32,301
<ALLOWANCES> 1,232
<INVENTORY> 11,875
<CURRENT-ASSETS> 74,380
<PP&E> 51,113
<DEPRECIATION> 12,893
<TOTAL-ASSETS> 202,765
<CURRENT-LIABILITIES> 71,156
<BONDS> 97,705
0
0
<COMMON> 0
<OTHER-SE> 29,871
<TOTAL-LIABILITY-AND-EQUITY> 202,765
<SALES> 49,758
<TOTAL-REVENUES> 127,195
<CGS> 33,931
<TOTAL-COSTS> 79,505
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,215
<INCOME-PRETAX> (4,662)
<INCOME-TAX> (1,066)
<INCOME-CONTINUING> (3,578)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,578)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
