UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO ________
Commission file number 0-26374
PLAY BY PLAY TOYS & NOVELTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Texas 74-2623760
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4400 Tejasco
San Antonio, Texas 78218-0267
(Address of principal executive offices and zip code)
(210) 829-4666
(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 [ ].
The aggregate number of the Registrant's shares outstanding on December 10,
1997 was 7,220,100 shares of Common Stock, no par value.
<PAGE>
PLAY BY PLAY TOYS & NOVELTIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements:
Consolidated Balance Sheets as of October 31, 1997 (unaudited)
and July 31, 1997 3
Consolidated Statements of Income (unaudited) for the
Three Months Ended October 31, 1997 and 1996 4
Consolidated Statements of Cash Flows (unaudited) for the
Three Months Ended October 31, 1997 and 1996 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 11
SIGNATURES 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PLAY BY PLAY TOYS & NOVELTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
AS OF
-----------------------------------
OCTOBER 31, 1997 JULY 31, 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................ $ 8,120,962 $ 4,960,612
Accounts and notes receivable, less allowance for
doubtful accounts of $3,677,392 and $3,213,653 .. 40,811,420 37,728,254
Inventories .......................................... 52,606,470 47,239,520
Other current assets ................................. 7,310,809 3,781,724
------------- -------------
Total current assets ............................ 108,849,661 93,710,110
Property and equipment, net ............................... 15,328,023 14,985,887
Goodwill, less accumulated amortization
of $513,940 and $365,433 ............................. 14,311,274 14,412,736
Other assets .............................................. 2,701,575 2,796,841
------------- -------------
Total assets .................................... $ 141,190,533 $ 125,905,574
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft ....................................... $ 1,082,404 $ 461,220
Notes payable to banks and others .................... 19,259,564 22,607,721
Current maturities of long-term debt ................. 3,430,099 3,472,017
Current obligations under capital leases ............. 715,842 691,333
Accounts payable, trade .............................. 32,673,617 22,340,182
Other accrued liabilities ............................ 9,801,466 5,831,652
Income taxes payable ................................. 3,296,768 2,437,432
Deferred income tax payable .......................... -- 496,431
------------- -------------
Total current liabilities ....................... 70,259,760 58,337,988
------------- -------------
Long-term liabilities:
Long-term debt, net of current maturities ............ 6,705,590 7,320,233
Convertible subordinated debentures .................. 15,000,000 15,000,000
Obligations under capital leases ..................... 858,754 917,506
Deferred income tax payable .......................... 715,136 660,918
------------- -------------
Total liabilities ............................... 93,539,240 82,236,645
------------- -------------
Commitments and contingencies
Shareholders' equity :
Preferred stock - no par value; 10,000,000 shares
authorized; no shares issued .................... -- --
Common stock - no par value; 20,000,000 shares
authorized; 4,904,100 and 4,901,300 shares issued 1,000 1,000
Additional paid-in capital ........................... 35,079,544 35,006,539
Deferred compensation ................................ (583,333) (618,333)
Cumulative foreign currency translation adjustments .. (1,885,976) (2,303,027)
Retained earnings .................................... 15,040,058 11,582,750
------------- -------------
Total shareholders' equity ...................... 47,651,293 43,668,929
------------- -------------
Total liabilities and shareholders' equity ...... $ 141,190,533 $ 125,905,574
============= =============
</TABLE>
The accompany notes are an integral part
of the Consolidated Financial Statements.
3
<PAGE>
PLAY BY PLAY TOYS & NOVELTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net sales .................................. $ 58,417,556 $ 39,890,521
Cost of sales .............................. 37,879,530 28,475,871
------------ ------------
Gross profit .......................... 20,538,026 11,414,650
Selling, general and administrative expenses 14,033,055 7,936,036
------------ ------------
Operating income ...................... 6,504,971 3,478,614
Interest expense ........................... (1,298,330) (1,151,209)
Interest income ............................ 64,476 91,631
Other income (expense) ..................... 47,818 (48,681)
------------ ------------
Income before income tax .............. 5,318,935 2,370,355
Income tax provision ....................... (1,861,627) (924,438)
------------ ------------
Net income ............................ $ 3,457,308 $ 1,445,917
============ ============
Income per share:
Primary ................................. $ 0.65 $ 0.30
Fully diluted ........................... $ 0.58 $ 0.30
Weighted average shares outstanding:
Primary ................................. 5,347,652 4,841,100
Fully diluted ........................... 6,299,698 4,841,100
</TABLE>
The accompanying notes are an integral part
of the Consolidated Financial Statements.
4
<PAGE>
PLAY BY PLAY TOYS & NOVELTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 31,
-----------------------------
1997 1996
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................... $ 3,457,308 $ 1,445,917
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization ................................ 596,579 441,956
Provision for doubtful accounts receivable ................... 1,052,257 399,434
Deferred income tax provision (benefit) ...................... (442,213) 52,767
Amortization of deferred compensation ........................ 35,000 --
Change in operating assets and liabilities:
Accounts and notes receivable .............................. (4,135,423) (2,527,191)
Inventories ................................................ (5,366,950) 7,311,744
Prepaids and other assets .................................. (3,401,905) 730,777
Accounts payable and accrued liabilities ................... 14,258,731 (2,050,713)
Income taxes payable ....................................... 859,336 854,281
------------ -----------
Net cash provided by operating activities ............... 6,912,720 6,658,972
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .............................. (591,747) (419,972)
Payments for intangible assets .................................. (37,010) (13,981)
------------ -----------
Net cash used in investing activities ................... (628,757) (433,953)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing (repayments) under Revolving Credit Agreement ..... (3,348,157) (2,814,086)
Proceeds from long-term debt .................................... -- 340,904
Repayment of long-term debt ..................................... (710,854) (604,743)
Repayment of capital lease obligations .......................... (175,842) (129,799)
Increase (decrease) in bank overdraft ........................... 621,184 (2,357,436)
Proceeds from exercise of stock options ......................... 73,005 --
------------ -----------
Net cash used in financing activities ................... (3,540,664) (5,565,160)
------------ -----------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATES ......................... 417,051 10,723
------------ -----------
Increase in cash and cash equivalents ................... 3,160,350 670,582
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................. 4,960,612 531,040
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........................ $ 8,120,962 $ 1,201,622
============ ===========
Non-cash financing and investing activity - capital leases incurred $ 142,000 $ 350,000
============ ===========
</TABLE>
The accompanying notes are an integral part
of the Consolidated Financial Statements.
5
<PAGE>
PLAY BY PLAY TOYS & NOVELTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements and related
disclosures have been prepared in accordance with generally accepted accounting
principles applicable to interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. The year-end balance sheet data
was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments considered necessary for a fair presentation of
the consolidated financial position and interim results of Play By Play Toys &
Novelties, Inc. (the "Company") as of and for the periods presented have been
included. Certain amounts in the financial statements for the prior period have
been reclassified to conform with the current year presentation. Because the
Company's business is seasonal, results for interim periods are not necessarily
indicative of those which may be expected for a full year.
The financial information included herein should be read in conjunction with
the Company's consolidated financial statements and related notes in its Annual
Report on Form 10-K for the fiscal year ended July 31, 1997, which is on file
with the United States Securities and Exchange Commission.
Earnings per share are computed using the weighted average number of common
and common equivalent shares (when dilutive) outstanding during each period.
Common equivalent shares include stock options, warrants and convertible debt.
Earnings per share assuming full dilution is determined by dividing net income
plus tax-effected convertible debt interest by the weighted average number of
common shares outstanding during the year after giving effect for common stock
equivalents arising from stock options, warrants and for convertible debt
assumed converted to common stock.
2. INVENTORIES
Inventories are comprised of the following:
OCTOBER 31, 1997 JULY 31, 1997
---------------- -------------
Purchased for resale $ 52,304,436 $ 46,898,557
Operating supplies 302,034 340,963
---------------- -------------
Total $ 52,606,470 $ 47,239,520
================ =============
6
<PAGE>
PLAY BY PLAY TOYS & NOVELTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SUBSEQUENT EVENT
On December 2, 1997, the Company sold 2,300,000 shares of its Common Stock in
a follow-on public offering at a price of $16.00 per share. The total number of
shares sold includes 300,000 related to the underwriters' over-allotment option,
which was exercised in full. The net proceeds from the issuance and sale of
Common Stock amounted to approximately $34 million after deducting underwriter
discounts and other expenses. Portions of the net proceeds were used to repay
indebtedness of approximately $21.4 million outstanding under the revolving line
of credit under the Revolving Credit Term Loan with Letter of Credit Facility
with a bank syndicated group led by The Chase Manhattan Bank. Approximately
$13.0 million has been invested in short-term, interest bearing instruments.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED
IN THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, INCLUDING,
WITHOUT LIMITATION, RELATIONSHIPS WITH LICENSORS, NEW PRODUCT INTRODUCTION,
ABILITY TO MANAGE GROWTH, ABILITY TO SOURCE PRODUCTS, INTERNATIONAL TRADE
RELATIONS AND MANAGEMENT OF QUARTER-TO-QUARTER RESULTS, AND OTHER RISKS
DISCUSSED FROM TIME-TO-TIME IN THE COMPANY'S SEC REPORTS, INCLUDING THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JULY 31, 1997
(SEE "RISK FACTORS" IN SUCH FORM 10-K). UPDATED INFORMATION WILL BE PERIODICALLY
PROVIDED BY THE COMPANY AS REQUIRED BY THE SECURITIES EXCHANGE ACT OF 1934.
RESULTS OF OPERATIONS
The following table sets forth the Company's results of operations as a
percentage of net sales for the periods indicated below:
THREE MONTHS ENDED
OCTOBER 31,
----------------------
1997 1996
---- ----
(UNAUDITED)
Net sales ........................................ 100.0% 100.0%
Cost of sales .................................... 64.8 71.4
----- -----
Gross profit ..................................... 35.2 28.6
Selling, general and administrative expenses ..... 24.0 19.9
----- -----
Operating income ................................. 11.2 8.7
Interest expense ................................. (2.2) (2.9)
Interest income .................................. 0.1 0.2
Other income (expense) ........................... 0.1 (0.1)
Net income ....................................... 5.9% 3.6%
===== =====
NET SALES. Net sales for the fiscal quarter ended October 31, 1997 increased
46.4%, or $18.5 million, to $58.4 million from $39.9 million in the comparable
period in fiscal 1997. The increase in net sales was primarily attributable to
increased domestic retail growth of 125.9% and international retail growth of
123.9%. Domestic net toy sales for the first quarter of fiscal 1998 compared to
the first quarter of fiscal 1997 increased 43.4%, or $15.3 million, to $50.6
million, and international toy sales increased 86.5%, or $3.2 million, to $7.0
million.
Net sales of licensed products for the first quarter of fiscal 1998 increased
42.9%, or $9.6 million, to $32.0 million from $22.4 million in the comparable
period of fiscal 1997. The increase in licensed product sales was primarily
attributable to growth of sales of the Company's licensed products to both
retail and amusement customers, and the Company's European operations, which
accounted for $4.5 million of the Company's net sales of licensed products for
the first quarter of fiscal 1998, a 68.6% increase from the comparable period of
fiscal 1997. Within licensed products, sales of Looney Tunes' characters
increased 187.9%, or $17.4 million, to $26.7 million for the first quarter of
fiscal 1998 from $9.3 million in the comparable period of fiscal 1997. Net sales
of the "TORNADO TAZ(TM)" accounted for $7.7 million, or 13.3%, of the Company's
net toy sales for the first quarter of fiscal 1998. Net sales of PLAY-FACES(R)
decreased 58.6%, or $4.7 million, to $3.3 million, from $8.0 million in the
comparable period of fiscal 1997. Net sales of non-licensed products for the
first quarter of fiscal 1998 increased 54.0%, or $9.0 million, to $25.6 million
from $16.6 million in the comparable period of fiscal 1997. Net sales of
non-licensed stuffed toys increased
8
<PAGE>
30.8%, or $4.5 million, to $19.0 million from $14.5 million in the comparable
period in fiscal 1997. The Company began selling "TALKIN' TOTS(TM)" during the
fourth quarter of fiscal 1997. Net sales of the "TALKIN' TOTS(TM)" accounted for
$5.5 million, or 9.6%, of the Company's net toy sales for the first quarter of
fiscal 1998.
Net toy sales to retail customers for the first quarter of fiscal 1998 and
fiscal 1997 accounted for 43.9%, or $25.6 million, and 28.5%, or $11.4 million,
respectively, of the Company's net sales. The 125.7%, or $14.3 million, increase
in sales to retail customers from the first quarter of fiscal 1997 to the first
quarter of fiscal 1998 is primarily attributable to the sales of the newly
introduced "TALKIN' TOTS(TM)" and the "TORNADO TAZ(TM)" for the holiday season
which was partially offset by a decrease in sales of PLAY-FACES(R).
Net toy sales to amusement customers for the first quarter of fiscal 1998 and
fiscal 1997 accounted for 54.8%, or $32.0 million, and 69.5%, or $27.7 million,
respectively, of the Company's net sales. The 15.6%, or $4.3 million, increase
in dollar volume is primarily attributable the strong European market, which
accounted for $4.3 million, a 68.2% increase from the comparable period in
fiscal 1997.
GROSS PROFIT. Gross profit increased 79.9% to $20.5 million for the first
quarter of fiscal 1998 from $11.4 million in the comparable period in fiscal
1997, due to the overall increase in the Company's net sales. Gross profit as a
percentage of net sales increased 6.6% from 28.6% for the first quarter of
fiscal 1997 to 35.2% for the comparable period in fiscal 1998. This increase was
principally a result of increased European sales, which carry a higher profit
margin, and from higher domestic retail margins from the television promoted
items.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased approximately 76.8% to $14.0 million for the
first quarter of fiscal 1998 from $7.9 million in the comparable period in
fiscal 1997. This increase is primarily attributable to increased selling
expenses of $6.1 million such as, television advertisement costs of $3.9
million, increased payroll related costs of $1.1 million, professional and
consulting fees, product development expenses and bad debt expense associated
with increased sales volume. As a percentage of net sales, the selling, general
and administrative expenses increased to 24.0% for the first quarter of fiscal
1998 from 19.9% in the comparable period in fiscal 1997.
INTEREST EXPENSE AND OTHER INCOME. Interest expense increased 12.8% or
approximately $147,000, to $1.3 million for the first quarter of fiscal 1998
from $1.1 million in the comparable period in fiscal 1997 primarily due to the
convertible debt interest expense of $300,000 offset by a decrease in the
interest expense for the revolving loans under the Credit Facility.
INCOME TAX EXPENSE. Income tax expense for the first quarter of fiscal 1998
reflects an effective tax rate of 35.0%, compared to 39.0% for the first quarter
of fiscal 1997. The decrease is attributable primarily to lower tax rates on
international earnings.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1997, the Company's working capital was $38.6 million compared
to $25.1 million at October 31, 1996. This increase was primarily attributable
to the increase in net sales.
The Company satisfies its capital requirements and seasonal liquidity
shortfalls with cash flow primarily from borrowings and secondarily from
operations. The Company's primary capital needs have consisted of funding for
acquisitions, acquisitions of inventory, customer receivables, letters of
credit, licenses and international expansion.
The Company's operating activities provided net cash of $6.9 million in the
first quarter of fiscal 1998 and $6.7 million in the comparable period of fiscal
1997. The cash flow from operations for fiscal 1998
9
<PAGE>
was primarily affected by net income, changes in accounts receivable, prepaids,
inventory and accounts payable.
Net cash used in investing activities during the first quarter of fiscal 1998
was $600,000 compared to net cash used in investing activities for the
comparable period of fiscal 1997 of $400,000. In the first quarter of fiscal
1998 and 1997, net cash used in investing activities consisted principally of
the purchase of property and equipment of $592,000 and $420,000, respectively.
Net cash used in financing activities during the first quarter of fiscal 1998
and 1997 was $3.5 million and $5.6 million, respectively. During the first
quarter of fiscal 1998, $39.9 million was used in repayment of notes payable on
the revolving line of credit under the Company's Credit Facility was offset by
draw-down of $36.6 million. In the first quarter of fiscal 1997, cash used in
repayment of notes payable on the revolving loan of $31.6 million was partially
offset by draw-down of approximately $28.8 million.
SEASONALITY
Both the retail and amusement toy industries are inherently seasonal.
Generally, in the past, the Company's sales to the amusement industry have been
highest during the third and fourth fiscal quarters, and collections for those
sales have been highest during the succeeding fiscal quarters. The Company's
sales to the retail toy industry have been highest during its first and fourth
fiscal quarters, and collections from those sales have been highest during the
succeeding quarters. The Company's working capital needs and borrowings to fund
those needs have been highest during the first and fourth fiscal quarters. The
Company's international and domestic operations are also subject to risks due to
inclement weather.
10
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
3.1 Amended Articles of Incorporation of the Company (filed as Exhibit 3.1
to the Registration Statement on Form S-1 (File No. 33-92204)
incorporated herein by reference).
3.2 Amended and Restated Bylaws of the Company (filed as Exhibit 3.2 to the
Registration Statement on Form S-1 (File No. 33-92204) incorporated
herein by reference).
4.1 Specimen of Common Stock Certificate (filed as Exhibit 4.1 to the
Registration Statement on Form S-1 (File No. 33-92204) incorporated
herein by reference).
4.2 Form of Warrant Agreement and Form of Warrant (filed as Exhibit 4.2 to
the Registration Statement on Form S-1 (File No. 33-92204) incorporated
herein by reference).
4.3 Form of Play By Play Toys & Novelties, Inc. Grant of Incentive Stock
Option (filed as Exhibit 4.3 to the Registration Statement on Form S-1
(File No. 33-92204) incorporated herein by reference).
4.4 Form of Play By Play Toys & Novelties, Inc. Non-qualified Stock Option
Agreement (filed as Exhibit 4.4 to the Registration Statement on Form
S-1 (File No. 33-92204), incorporated herein by reference).
4.5 Warrant to Purchase Common Stock issued by the Registrant to Ace
Novelty Co., Inc. (filed as Exhibit 4 to Form 8-K (Date of Event: May
1, 1996), incorporated herein by reference).
10.1 Play By Play Toys & Novelties, Inc. 1994 Incentive Plan (filed as
Exhibit 10.1 to the Registration Statement on Form S-1 (File No.
33-92204) incorporated herein by reference).
10.2 Credit Agreement dated June 20, 1996, among the Registrant, Ace Novelty
Acquisition Co., Inc., Newco Novelty, Inc. and Chemical Bank, as agent
for the lenders (filed as Exhibit 10.1 to Form 8-K (Date of Event: May
1, 1996) incorporated herein by reference).
10.3 Promissory Note dated June 20, 1996, of Ace Novelty Acquisition Co.,
Inc. payable to the order of Ace Novelty Co., Inc. in the principal sum
of $2,900,000 (filed as Exhibit 2.1 to Form 8-K (Date of Event: May 1,
1996) incorporated herein by reference).
10.4 Employment agreement dated November 4, 1996, between the Registrant and
Raymond G. Braun, as amended by Amendment No.1 to Employment agreement
dated August 29, 1997 (filed as Exhibit 10.4 to Form 10-K for the year
ended July 31, 1997, and incorporated herein by reference).
10.5 Non-Qualified Stock Option agreement dated November 4, 1996, between
the Registrant and Raymond G. Braun, as amended by Amendment No. 1
dated August 29, 1997 (filed as Exhibit 10.5 to Form 10-K for the year
ended July 31, 1997, and incorporated herein by reference).
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
10.6 Employment agreement dated May 2, 1996, between the Registrant and Saul
Gamoran, as amended by Amendment No. 1 dated May 16, 1996 (filed as
Exhibit 10.6 to Form 10-K for the year ended July 31, 1997, and
incorporated herein by reference).
10.7 Employment agreement dated June 20, 1997, between the Registrant and
James A. Weisfield (filed as Exhibit 10.7 to Form 10-K for the year
ended July 31, 1997, and incorporated herein by reference).
10.8 Subordinated Convertible Debenture Agreements dated July 3, 1997,
between the Registrant and each of Renaissance Capital Growth and
Income Fund III, Inc., Renaissance U.S. Growth and Income Trust PLC and
Banc One Capital Partners II, Ltd. (the "Convertible Lenders") (filed
as Exhibit 10.8 to Form 10-K for the year ended July 31, 1997, and
incorporated herein by reference).
10.9 Convertible Loan Agreement dated July 3, 1997, among the Registrant,
the Convertible Lenders and Renaissance Capital Group, Inc (filed as
Exhibit 10.9 to Form 10-K for the year ended July 31, 1997, and
incorporated herein by reference).
10.10 License Agreement dated March 22, 1994 by and between Warner Bros., a
division of Time Warner Entertainment, L.P., and the Registrant (as
successor by assignment to Ace Novelty, Inc.) (filed as Exhibit 10.10
to Form 10-K for the year ended July 31, 1997, and incorporated herein
by reference).
10.11 License Agreement dated March 22, 1996 by and between Warner Bros., a
division of Time Warner Entertainment, L.P., and the Registrant (as
successor by assignment to Ace Novelty, Inc.) (filed as Exhibit 10.11
to Form 10-K for the year ended July 31, 1997, and incorporated herein
by reference).
10.12 License Agreement dated September 10, 1997 by and between Warner Bros.,
a division of Time Warner Entertainment, L.P., and the Registrant (as
successor by assignment to Ace Novelty, Inc.) (filed as Exhibit 10.12
to Form 10-K for the year ended July 31, 1997, and incorporated herein
by reference).
11.0 Computation of Income per Common and Common Equivalent Share
27.0 Financial Data Schedule (EDGAR filing only)
(b) Reports on Form 8-K
None
12
<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, this 15th day of December 1997.
PLAY BY PLAY TOYS & NOVELTIES, INC.
By: /s/ RAYMOND G. BRAUN
Raymond G. Braun
CHIEF FINANCIAL OFFICER,
TREASURER AND DIRECTOR
13
EXHIBIT 11.1
PLAY BY PLAY TOYS & NOVELTIES, INC.
COMPUTATION OF EARNINGS PER SHARE
FISCAL QUARTER
ENDED OCTOBER 31,
------------------------
1997 1996
---------- ----------
PRIMARY:
Average shares outstanding ......................... 4,903,078 4,841,100
Dilutive effect of stock options and warrants ...... 444,574 --
---------- ----------
Weighted average number of common
and common equivalent shares ..................... 5,347,652 4,841,100
========== ==========
Net income ......................................... $3,457,308 $1,445,917
========== ==========
Earnings per share: ................................ $ 0.65 $ 0.30
========== ==========
Fully Diluted:
Average shares outstanding ......................... 4,903,078 4,841,100
Assumed conversion of Convertible Subordinated
Debentures ....................................... 882,353 --
Dilutive effect of stock options and warrants ...... 514,267 --
---------- ----------
Weighted average number of common
and common equivalent shares ..................... 6,299,698 4,841,100
========== ==========
Net income ......................................... $3,457,308 $1,445,917
Interest on convertible debt, net of tax ........... 185,490 --
---------- ----------
Net income applicable to common stock .............. $3,642,798 $1,445,917
========== ==========
Earnings per share: ................................ $ 0.58 $ 0.30
========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONDENSED CONSOLIDATED BALANCE SHEETS AND THE CONDENSED STATEMENTS OF
OPERATIONS FOUND ON PAGES F-3 AND F-4 OF THE COMPANY'S FORM 10-Q FOR THE THREE
MONTHS ENDED OCTOBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> OCT-31-1997
<CASH> 8,120,962
<SECURITIES> 0
<RECEIVABLES> 44,488,812
<ALLOWANCES> 3,677,392
<INVENTORY> 52,606,470
<CURRENT-ASSETS> 108,849,661
<PP&E> 19,233,407
<DEPRECIATION> 3,905,384
<TOTAL-ASSETS> 141,190,533
<CURRENT-LIABILITIES> 70,259,760
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 141,190,533
<SALES> 58,417,556
<TOTAL-REVENUES> 58,417,556
<CGS> 37,879,530
<TOTAL-COSTS> 37,879,530
<OTHER-EXPENSES> 14,033,055
<LOSS-PROVISION> 1,052,257
<INTEREST-EXPENSE> 1,298,330
<INCOME-PRETAX> 5,318,935
<INCOME-TAX> 1,861,627
<INCOME-CONTINUING> 3,457,308
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,457,308
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.58
</TABLE>
