<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 SEPTEMBER 30, 1996
Commission File Number
33-91582
FTD CORPORATION
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 13-3711271
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
29200 NORTHWESTERN HIGHWAY
SOUTHFIELD, MICHIGAN 48034
--------------------------------------------------
(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 November 8, 1996, there were outstanding 6,125,739 shares of
the Registrant's class A common stock, par value $.01 per share, and 1,566,686
shares of the Registrant's class B common stock, par value $.0005 per share.
1
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FTD CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Statements of Financial Position at
September 30, 1996 and June 30, 1996 3
Consolidated Financial Statements for the Three Months Ended
September 30, 1996 and 1995:
Consolidated Statements of Operations 4
Consolidated Condensed Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit Index 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FTD CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
September 30,
1996 June 30,
(Unaudited) 1996
------------- --------
ASSETS (In Thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 26,701 $ 26,650
Accounts receivable, less allowance for doubtful accounts
of $1,536 at September 30, 1996 and $1,412 at June 30, 1996 25,157 24,080
Inventories, principally finished goods, net 13,903 12,467
Other current assets 9,275 7,287
-------- --------
Total current assets 75,036 70,484
Property and equipment, less accumulated depreciation
of $17,687 at September 30, 1996 and $15,158 at June 30, 1996 33,817 35,328
Other noncurrent assets:
Other noncurrent assets 6,687 6,856
Goodwill and other intangible assets, less accumulated amortization
of $5,719 at September 30, 1996 and $4,874 at June 30, 1996 82,569 83,414
-------- --------
Total other noncurrent assets 89,256 90,270
-------- --------
Total assets $198,109 $196,082
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 9,739 $ 8,496
Accounts payable 28,157 28,359
Accrued member incentive programs 12,947 12,949
Accrued severance and related costs 1,008 1,319
Other accrued liabilities 8,518 6,059
Unearned income and members' deposits 12,279 10,584
-------- --------
Total current liabilities 72,648 67,766
Long-term debt 85,113 87,781
Employee benefit obligations 11,619 11,223
Minority interest in subsidiary 159 171
Stockholders' equity:
Common stock:
Class A 62 62
Class B 1 1
Paid-in capital 35,607 35,607
Retained deficit (6,819) (6,274)
Notes receivable (115) (128)
Treasury stock (166) (127)
-------- --------
Total stockholders' equity 28,570 29,141
-------- --------
Total liabilities and stockholders' equity $198,109 $196,082
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
FTD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1996 1995
------------- -------------
(In Thousand, except per share data)
<S> <C> <C>
Revenues:
Marketplace $13,639 $14,900
Clearinghouse 6,627 7,307
Mercury Network 8,497 7,221
Other 8,305 7,108
------- -------
Total revenues 37,068 36,536
------- -------
Costs:
Products and distribution 9,461 10,002
Floral order transmissions and processing services 7,081 6,660
Member programs 6,811 6,309
------- -------
Total costs of goods sold & services provided 23,353 22,971
Selling, general and administrative 11,312 9,908
------- -------
Income from operations 2,403 3,657
Interest (income) (345) (298)
Interest expense 3,283 3,449
------- -------
Income (loss) before income taxes and
minority interest (535) 506
Income taxes 24 406
Minority interest in loss of subsidiary (11) (7)
------- -------
Net income (loss) ($548) $ 107
======= =======
Primary and fully diluted earnings (loss)
per share ($0.07) $ 0.01
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
FTD CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1996 1995
------------- -------------
(In Thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in) operating activities $ 2,964 ($110)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,386) (468)
------- -------
Net cash used in investing activities (1,386) (468)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (1,503) (1,001)
Issuance (repurchase) of common stock (39) 702
Payments on notes receivable 12 104
------- -------
Net cash used in financing activities (1,530) (195)
Effect of exchange rate changes on cash 3 10
------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 51 (763)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 26,650 24,482
------- -------
END OF PERIOD $26,701 $23,719
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $ 931 $ 1,010
======= =======
Income taxes paid $ 100 $ 75
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. Basis of Presentation
The unaudited consolidated financial statements at September 30, 1996,
include the accounts of FTD Corporation and its wholly owned subsidiary,
Florists' Transworld Delivery, Inc. (the "Operating Company") (collectively,
the "Company"). These statements 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, 1996. 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).
Certain amounts in the September 30, 1995 consolidated condensed financial
statements have been reclassified to conform to the current year presentation.
NOTE 2. Accrued Severance and Related Costs
The following table reflects the changes to the severance reserve for
the three months ended September 30, 1996 (in thousands):
<TABLE>
<CAPTION>
Balance Remaining
at Liability as of
June 30, September 30,
1996 Costs Paid 1996
-------- ---------- ---------------
<S> <C> <C> <C>
Severance
benefits $1,050 $310 $ 740
Relocation costs 79 0 79
Other 190 1 189
------- ---- ------
Total $1,319 $311 $1,008
====== ==== ======
</TABLE>
6
<PAGE> 7
NOTE 3. Capital Transactions
During the three months ended September 30, 1996, the Company repurchased
into treasury 6,910 shares of Class A Common Stock at a cost of approximately
$39,100.
Note 4. Earnings Per Share
Primary and fully diluted earnings (loss) per common share and common
equivalent share has been computed based on the weighted average number of
common and common equivalent shares outstanding of 7,700,703 and 7,641,174 for
the three months ended September 30, 1996 and 1995, respectively.
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Except for the historical information contained in this report, certain
statements made herein are forward-looking statements that involve risks and
uncertainties and are subject to important factors that could cause actual
results to differ materially from these forward-looking statements, including,
without limitation, the effect of economic and market conditions and the impact
of competitive activities.
The following is a discussion of changes in the Company's financial
condition and results of operations for the three month period ended September
30, 1996 compared with the corresponding period of fiscal 1996.
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. 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 used by florists to transmit floral orders through Florists'
Transworld Delivery, Inc. or competing clearinghouses. Other revenue is
derived from the Direct Access direct marketing business, Advantage software,
credit card authorization and processing, publications and an after hours
order taking service.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
Revenue increased by $0.5 million, or 1.5%, to $37.0 million for the three
months ended September 30, 1996, compared to $36.5 million for the three months
ended September 30, 1995. Mercury Network revenue increased $1.3 million due
to increased console rental, order transmissions revenue and Advantage floral
business systems sales. Other revenue experienced a net increase of $1.2
million as a result of increased Direct Access order volume and additional
listings in the FTD Directory. Marketplace revenue experienced a net decrease
of $1.3 million primarily due to lower sales of holiday containers and
non-branded everyday products offset by sales of gourmet foods and imprinted
products. Clearinghouse revenue decreased by $0.7 million as a result of a
decline in the volume of floral orders cleared through FTD.
The cost of goods sold and services provided increased by $0.4 million, or
1.7%, to $23.4 million for the three months ended September 30, 1996 from $23.0
million for the three months ended September 30, 1995. The change resulted
primarily from increased costs associated with the sale of Advantage floral
business systems. Lower costs of products and distribution corresponding to
the decline in Marketplace sales partially offsets this increase. As a percent
of revenue, cost of goods sold and services provided was 63.0% and 62.9% for
the three month periods ended September 30, 1996 and 1995, respectively.
8
<PAGE> 9
Selling, general and administrative expenses increased by $1.4 million, or
14.1%, to $11.3 million for the three months ended September 30, 1996 from $9.9
million for the three months ended September 30, 1995. Advertising and
promotional expenditures were increased by $0.8 million for the three months
ended September 30, 1996 over the same period in the prior year as a result of
the Company's advertising activities related to its member incentive program,
which did not commence until the second quarter of fiscal 1996. In addition,
general and administrative expenses increased by $0.6 million for the three
months ended September 30, 1996 over the same period in the prior year
primarily due to costs resulting from the Company's relocation and/or
consolidation efforts.
Interest expense for the three months ended September 30, 1996 was $3.3
million as compared to $3.4 million for the comparable period 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 September 30, 1996 were $24
thousand compared to $0.4 million for the comparable period in the prior year.
The decrease in tax expense resulted from the decrease in taxable income.
Net loss was $0.5 million for the three months ended September 30, 1996
compared to net income of $0.1 million for the three months ended September
30, 1995. The change is primarily attributable to the increased advertising
expenditures and lower gross profit from Marketplace product sales.
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 $1.5 million of these loans in the
three months ended September 30, 1996 and $7.7 million since January 1, 1995.
No borrowings were made under the revolving credit facility during the three
months ended September 30, 1996. The Company has funded the interest and debt
repayments for the bank debt and the notes through cash flow from operations.
The Company has obtained a waiver under the bank credit agreement deferring
compliance with certain covenants at September 30, 1996. The Company is
currently in discussions with its lenders under the bank credit agreement
regarding changes to certain covenants. Management expects that the Company
and such lenders will enter into an amendment to the bank credit agreement
amending such covenants.
For the three months ended September 30, 1996, the Company experienced a
net increase in cash of $51 thousand compared to a net decrease of $0.8 million
for the comparable period in the prior year.
9
<PAGE> 10
Cash provided by operating activities was $3.0 million for the three
months ended September 30, 1996 compared to cash used of $0.1 million for the
three months ended September 30, 1995. The increase resulted primarily from
the timing of receivables settlement due to the timing of the quarter end.
Depreciation and amortization, excluding amortization of deferred financing
costs, was $3.6 million for the three months ended September 30, 1996 and
$3.5 million for the three months ended September 30, 1995.
Cash used in investing activities, consisting solely of capital
expenditures, was $1.4 million for the three months ended September 30, 1996
compared to $0.5 million for the three months ended September 30, 1995. Cash
used in financing activities was $1.5 million for the three months ended
September 30, 1996 compared to $0.2 million for the three months ended
September 30, 1995. The cash used in the three months ended September 30, 1996
reflects the payment of principal on the term loans. The cash used in the
three months ended September 30, 1995 reflects payment of principal on the term
loans partially offset by the cash receipts from capital stock transactions.
In September 1996, based on a preliminary study of the Company's defined
benefit pension plan, the Company determined that it will discontinue accruing
benefits under the plan effective December 31, 1996. The Company expects to
replace benefits under the current plan with a program which partially matches
employees' contributions to a 401(k) program. While the impact of this change
has not been fully determined, it is anticipated that implementation of the new
plan will: (i) reduce operating expenses; (ii) reduce accrued pension
obligations; and (iii) reduce cash payments required to fund the retirement
benefit plan.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On July 25, 1996, KPMG Peat Marwick LLP was re-appointed as the Company's
independent accountants for the 1997 fiscal year and the following people were
elected as directors of the Company by stockholder written consent: Richard C.
Perry (Chairman), Tiffany Faircloth, Veronica Ho, William P. Phelan, Geoffrey
S. Rehnert, Gary K. Silberberg, Alexander Troy, Margaret C. Whitman and Marc B.
Wolpow
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
10 Waiver to Credit Agreement, dated as of
September 12, 1996, among the Company,
Florists' Transworld Delivery, Inc., the various
lending institutions party thereto and Bankers
Trust Company, as Agent.
11 Computation of Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended
September 30, 1996.
11
<PAGE> 12
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 8th day of November, 1996.
FTD CORPORATION
By: /s/ Douglas L. Hagemann
--------------------------------------------------
Douglas L. Hagemann
Director of Finance and Treasurer
(Principal financial officer authorized to sign on
behalf of registrant)
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Paper (P)
Exhibit or
Number Description Electronic (E)
- ------ ----------- ---------------
<S> <C> <C>
10 Waiver to Credit Agreement, dated as of
September 12, 1996, among the Company,
Florists' Transworld Delivery, Inc., the various
lending institutions party thereto and Bankers
Trust Company, as Agent. E
11 Computation of Earnings Per Share E
27 Financial Data Schedule E
</TABLE>
13
<PAGE> 1
EXHIBIT 10
WAIVER TO CREDIT AGREEMENT
WAIVER (this "Waiver"), dated as of September 12, 1996, among FTD
Corporation ("Holdings"), Florists' Transworld Delivery, Inc. (the "Borrower"),
the lenders party to the Credit Agreement referred to below (the "Banks"), and
Bankers Trust Company, as Agent (in such capacity, the "Agent"). Unless
otherwise defined herein, capitalized terms used herein shall have the
respective meanings provided such terms in the Credit Agreement referred to
below.
W I T N E S S E T H:
WHEREAS, Holdings, the Borrower, the Banks and the Agent are parties to
a Credit Agreement, dated as of December 19, 1994 (as amended, modified or
supplemented through the date hereof, the "Credit Agreement"); and
WHEREAS, the Borrower has requested that the Banks grant the waiver
provided for herein, and the Banks party hereto have agreed to grant the waiver
provided for herein on the terms and conditions set forth herein;
NOW, THEREFORE, it is agreed:
1. Effective from and including September 30, 1996 through and
including November 22, 1996, (the "Waiver Termination Date"), the Banks hereby
waive compliance by Holdings and the Borrower with the provisions of Sections
8.10, 8.11 and 8.14 of the Credit Agreement with respect to the Test Period
ending on September 30, 1996. This Waiver shall be effective only for the
period from September 30, 1996 to and including the Waiver Termination Date
(the "Waiver Period") and shall be of no force or effect at any other time (it
being understood that to the extent any Default or Event of Default would have
arisen under Sections 8.10, 8.11 or 8.14 for the Test Period ending on
September 30, 1996 but for the provisions of this Waiver, such Default or Event
of Default will exist after the Waiver Termination Date).
2. In order to induce the Banks to enter into this Waiver, each of
Holdings and the Borrower (x) represents and warrants that no Default or Event
of Default exists on the Waiver Effective Date (as defined below), both before
and after giving effect to this Waiver and (y) makes each of the
representations, warranties and agreements contained in the Credit Agreement or
the other Credit Documents on the Waiver Effective Date, both before and after
giving effect to this Waiver (it being understood and agreed that any
representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such date).
<PAGE> 2
3. This Waiver is limited as specified and shall not constitute the
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
4. This waiver may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Credit Parties and the Agent.
5. THIS WAIVER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
6. This Waiver shall become effective on the date (the "Waiver
Effective Date") when each of Holdings, the Borrower and the Required Banks
shall have signed a copy hereof (whether the same or different copies) and
shall have delivered (including by way of telecopier) the same to the Agent at
its Notice Office.
7. At all times during the Waiver Period, all references in the
Credit Agreement and each of the other Credit Documents to the Credit Agreement
shall be deemed to be references to the Credit Agreement after giving effect to
this Waiver.
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Waiver to be duly executed and delivered as of the date first above
written.
FTD CORPORATION
By /s/ Scott D. Levin
------------------------------------
Title: Vice President and Secretary
FLORISTS' TRANSWORLD
DELIVERY, INC.
By /s/ Scott D. Levin
------------------------------------
Title: Vice President, General Counsel
and Secretary
<PAGE> 3
BANKERS TRUST COMPANY,
Individually and as Agent
By /s/ Christopher Kinslow
----------------------------
Title: Vice President
MICHIGAN NATIONAL BANK
By /s/ Jeffrey W. Billig
----------------------------
Title: Relationship Manager
NBD BANK
By /s/ Teresa A. Kalil
----------------------------
Title: Vice President
COMERICA BANK
By /s/ Phyllis D. McCann
----------------------------
Title: Vice President
HARRIS TRUST AND
SAVINGS BANK
By /s/ Peter J. Dancy
----------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF
CHICAGO
By
----------------------------
Title:
CAISSE NATIONAL DE
CREDIT AGRICOLE
By /s/ David Bouhl
----------------------------
Title: First Vice President
<PAGE> 1
EXHIBIT 11
FTD CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1996 1995
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
Primary Earnings Per Share:
Net earnings (loss) applicable to common stock ($548) $ 107
====== ======
Average number of common shares outstanding 7,701 6,496
Common stock equivalents due to dilutive affect
of stock options 0 20
Common stock equivalents due to dilutive affect
of warrants 0 1,125
------ ------
Total average number of common shares outstanding 7,701 7,641
====== ======
Primary earnings (loss) per share ($0.07) $ 0.01
====== ======
Fully Diluted Earnings Per Share:
Net earnings (loss) applicable to common stock ($548) $ 107
====== ======
Average number of common shares outstanding 7,701 6,496
Common stock equivalents due to dilutive affect
of stock options 0 20
Common stock equivalents due to dilutive affect
of warrants 0 1,125
------ ------
Total average number of common shares outstanding 7,701 7,641
====== ======
Fully diluted earnings (loss) per share ($0.07) $ 0.01
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) FTD
CORPORATION SEPTEMBER 30, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 26,701
<SECURITIES> 0
<RECEIVABLES> 26,693
<ALLOWANCES> 1,536
<INVENTORY> 13,903
<CURRENT-ASSETS> 75,036
<PP&E> 51,504
<DEPRECIATION> 17,687
<TOTAL-ASSETS> 198,109
<CURRENT-LIABILITIES> 72,648
<BONDS> 94,852
0
0
<COMMON> 63
<OTHER-SE> 28,507
<TOTAL-LIABILITY-AND-EQUITY> 198,109
<SALES> 13,639
<TOTAL-REVENUES> 37,068
<CGS> 9,461
<TOTAL-COSTS> 34,665
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,283
<INCOME-PRETAX> (535)
<INCOME-TAX> 24
<INCOME-CONTINUING> (548)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (548)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
