0000043837-95-000004.txt : 19950914 0000043837-95-000004.hdr.sgml : 19950914 ACCESSION NUMBER: 0000043837-95-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950729 FILED AS OF DATE: 19950912 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREENMAN BROTHERS INC CENTRAL INDEX KEY: 0000043837 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISC DURABLE GOODS [5090] IRS NUMBER: 111771705 STATE OF INCORPORATION: NY FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06083 FILM NUMBER: 95573306 BUSINESS ADDRESS: STREET 1: 105 PRICE PKWY CITY: FARMINGDALE STATE: NY ZIP: 11735 BUSINESS PHONE: 5162935300 MAIL ADDRESS: STREET 1: 105 PRICE PARKWAY STREET 2: 105 PRICE PARKWAY CITY: FARMINGDALE STATE: NY ZIP: 11735 10-Q 1 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 July 29, 1995 [ ] 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 1-6083 GREENMAN BROS. INC. (Exact name of Registrant as specified in its charter) NEW YORK 11-1771705 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 105 PRICE PARKWAY, FARMINGDALE, NEW YORK 11735 (Address of Principal Executive Office) (Zip Code) Registrant's Telephone Number, Including Area Code (516) 293-5300 NOT APPLICABLE (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) 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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirement 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 5,349,015 Shares Outstanding as of September 1, 1995. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page Condensed Consolidated Balance Sheets July 29,1995, July 30,1994 and January 28,1995 . . . . . . . 3 Condensed Consolidated Statements of Income (Loss) Thirteen and Twenty-Six Weeks Ended July 29,1995 and July 30,1994. . . . . . . . . . . . . . . . . . . . . . . 4 Condensed Consolidated Statements of Cash Flows Twenty-Six Weeks Ended July 29,1995 and July 30,1994. . . . . 5 Notes to Condensed Consolidated Unaudited Financial Statements. . . . . . . . . . . . . . . . . . . . . 6 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . 9 PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 12 SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 GREENMAN BROS. INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED July 29, July 30, January 28, 1995 1994 1995 (In thousands)
ASSETS Current assets: Cash and cash equivalents $ 11,952 $ 6,353 $ 10,908 Merchandise inventories 7,207 9,907 4,330 Prepaid expenses, taxes and other 2,674 3,782 2,980 Net assets of discontinued operations 12,469 26,918 24,618 Total current assets 34,302 46,960 42,836 Property, plant and equipment - net 8,049 4,581 5,163 Other assets 48 45 43 Total assets $ 42,399 $ 51,586 $ 48,042
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Trade accounts payable $ 3,929 $ 5,000 $ 2,262 Accrued expenses and taxes 9,150 6,050 4,777 Income taxes payable - - 133 Total current liabilities 13,079 11,050 7,172 Stockholders' equity: Preferred stock - authorized - 500 shares, par value $1.00 (none issued) Preferred stock - Series A Junior Participating - authorized - 440 shares, par value $1.00 (none issued) Common stock - authorized - 10,000 shares, par value $.10 - issued 6,270 6,130 and 6,185 respectively 627 613 619 Capital in excess of par value 26,202 25,652 25,801 Retained earnings 6,283 18,063 18,242 Less: treasury stock, at cost - 924 shares (3,792) (3,792) (3,792) 29,320 40,536 40,870 Total liabilities and stockholders' equity $ 42,399 $ 51,586 $ 48,042 See accompanying notes to Condensed Consolidated Financial Statements -3-
GREENMAN BROS. INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (In thousands except per share amounts) UNAUDITED Thirteen Weeks Ended Twenty-Six Weeks Ended July 29, July 30, July 29, July 30, 1995 1994 1995 1994
Net sales $ 3,939 $ 3,835 $ 7,220 $ 7,843 Costs and expenses: Cost of product sold including buying and warehousing costs 2,543 2,575 4,662 5,382 Selling and administrative expenses 3,001 2,189 5,347 4,272 Depreciation 195 137 361 273 Provision for store closings - 3,500 - 3,500 5,739 8,401 10,370 13,427 Operating (loss) (1,800) (4,566) (3,150) (5,584) Interest income 137 119 272 213 Interest expense (11) (19) (22) (38) Loss from continuing operations before income taxes (1,674) (4,466) (2,900) (5,409) Income taxes (benefit) - (1,787) - (2,164) Net loss from continuing operations (1,674) (2,679) (2,900) (3,245) Discontinued operations: (Loss) from discontinued operations, net of income tax benefit of $ -0-, $6, $-0- and $219 respectively (1,074) (8) (1,914) (328) (Loss) on disposal of discontinued operations including operating (loss) of $8,907 during disposal period (including income taxes of $1,602) (7,145) - (7,145) - Net loss from discontinued operations (8,219) (8) (9,059) (328) Net loss $ (9,893) $ (2,687) $ (11,959) $ (3,573) Net loss per share: Continuing operations $ (.32) $ (.51) $ (.55) $ (.62) Discontinued operations (1.55) (.01) (1.72) (.07) Net loss per share $ (1.87) $ (.52) $ (2.27) $ (.69) Average shares outstanding 5,287 5,202 5,275 5,201 See accompanying notes to Condensed Consolidated Financial Statements - 4 -
GREENMAN BROS. INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED Twenty-Six Weeks Ended July 29, July 30, 1995 1994 (In thousands)
Cash flows from operating activities: Net loss from continuing operations $ (2,900) $ (3,245) Adjustments to reconcile to net cash provided (used): Depreciation 361 273 Provision for store closings - 3,500 Decrease (increase) in non-cash working capital accounts: Merchandise inventories (2,877) (3,589) Prepaid expenses, taxes and other current assets 306 (2,651) Trade accounts payable, accrued expenses and taxes 497 2,328 Income taxes (133) (137) Net cash (used in) continuing operations (4,746) (3,521) Net loss from discontinued operations (9,059) (328) Adjustments to reconcile to net cash provided (used): Depreciation 240 238 Provision for doubtful accounts 186 153 Deferred income taxes 1,602 - Decrease (increase) in non-cash working capital accounts and other assets and liabilities 15,757 4,400 Net cash provided by discontinued operations 8,726 4,463 Net cash provided by operating activities 3,980 942 Cash flows from investing activities: Proceeds from sale of marketable securities - 1,000 Property additions - continuing operations (3,247) (1,105) Property additions - discontinued operations (93) (755) Other ( 5) 462 Net cash (used in) investing activities (3,345) (398) Cash flow from financing activities: Proceeds from exercise of employees stock options 409 45 Net cash provided by financing activities 409 45 Net increase in cash and cash equivalents 1,044 589 Cash and cash equivalents - beginning of year 10,908 5,764 Cash and cash equivalents - end of period $ 11,952 $ 6,353 See accompanying notes to Condensed Consolidated Financial Statements - 5 -
GREENMAN BROS. INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED NOTE 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instruction to Form 10-Q and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments for a fair statement of the results and financial position for the interim periods presented have been included. All such adjustments are of a normal recurring nature except for those associated with the discontinued operations. This financial information should be read in conjunction with the financial statements and notes thereto included in the registrant's annual report on Form 10-K for the year ended January 28, 1995. The January 28, 1995 Statements of Income (Loss) and Balance Sheet are restated in this 10Q to reflect the discontinued operation. Due to the seasonal nature of the Company's business, results for the interim period are not necessarily indicative of the results to be expected for the fiscal year. NOTE 2. All highly liquid investments with a maturity of three months or less are considered to be cash equivalents; investments with maturities between three and twelve months are considered to be short-term investments. These investments are stated at cost which approximates market. NOTE 3. Income tax provisions are based on estimated annual effective tax rates. The loss from continuing operations for the periods ended July 29, 1995 provides no current tax benefit. The effective income tax rate used for the periods ended July 30, 1994 was approximately 40%. Income tax expense provided in discontinued operations for the periods ended July 29, 1995 represents the Company's requirement for a 100% valuation allowance for the net deferred tax assets pursuant to SFAS 109. NOTE 4. On August 31, 1995 the Company adopted a formal plan to discontinue its wholesale business segment. The plan provides for the sale of two of the Company's distribution centers and the disposition through sale or liquidation of substantially all of the operating assets. The Company is not aware of any material relationship between prospective purchasers and the Company or any of its affiliates, any director or officer of the Company, or any associate of such director or officer. The operations and net assets of the wholesale business segment are being accounted for as a discontinued operation, and accordingly, its operating results and net assets are reported in this manner in all periods presented in the accompanying consolidated financial statements. Revenues from such operations were $ 20.8 million and $ 26.4 million for the thirteen weeks ended July 29, 1995 and July 30, 1994, respectively and $ 41.9 million and $ 49.6 million for the corresponding twenty-six week periods, respectively. -6- NOTE 5. The following proforma condensed consolidated Statement of Income (Loss) for the fifty-two weeks ended January 28, 1995 illustrates the estimated effect of the Company's disposition of its wholesale distribution industry segment, Greenman Merchandise Services, as if this transaction had occurred for Statement of Income (Loss) purposes as of the beginning of the period presented. The pro forma statement does not purport to represent the results of operations had such transactions occurred on or at the beginning of the period indicated or to project the results of operations for any future date or period. The pro forma adjustments are based upon available information and upon certain assumptions that the Company believes are reasonable. The pro forma statements and accompanying notes should be read in conjunction with the historical consolidated financial statements of the Company including the notes thereto. Greenman Bros. Inc and Subsidiaries Pro Forma Condensed Consolidated Statement of Income (Loss) (Unaudited) For the Fifty-Two Weeks Ended January 28, 1995 Consolidated Wholesale As Originally Distribution Pro Forma Pro Forma Filed Segment Adjustments Consolidated (in thousands)
Net sales $ 136,502 $ 113,194 $ $ 23,308 Costs and expenses: Cost of product sold including buying and warehousing costs 104,782 88,590 16,192 Selling and administrative expenses 32,262 21,998 1,000 11,264 Depreciation 1,101 575 526 Provision for doubtful accounts 250 250 - Provision for store closings 3,900 - 3,900 142,295 111,413 1,000 31,882 Operating income (loss) (5,793) 1,781 (1,000) (8,574) Interest income 372 - 372 Interest expense (75) - (75) Income (loss) before income taxes (5,496) 1,781 (1,000) (8,277) Income taxes (benefit) (2,102) 685 2,787 - Net income (loss) $ (3,394) $ 1,096 $ (3,787) $ (8,277) Net (loss) per share $ (.65) $ (1.59) Average shares outstanding 5,220 5,220 - 7 -
Pro forma adjustments to consolidated statement of income (loss) for the fifty-two weeks ended January 28, 1995 were: Amount of corporate overhead allocated to the wholesale distribution segment estimated to continue. $ 1,000 Income taxes - adjustment related to valuation allowance required (100%) for net deferred tax assets. 2,787 $ 3,787 - 8 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Thirteen and Twenty-Six Weeks Ended July 29,1995 Compared with Thirteen and Twenty-Six Weeks Ended July 30, 1994 Results of Operations The net loss from continuing operations was $1.7 million ($.32 per share) and $2.9 million ($.55 per share) for the second quarter and six months of the current year versus $2.7 million ($.51 per share) and $3.2 million ($.62 per share) for the comparable periods of the prior year. Sales from continuing operations for the thirteen and twenty-six week periods ended July 29, 1995 were $3.9 million and $7.2 million respectively, reflecting an increase of 2.7% for the quarter and 7.9% decrease for the year-to-date period versus the results of the prior year's comparable periods. The increase for the second quarter resulted primarily from the opening of three Noodle Kidoodle stores in the second half of last year and five stores during the first half of fiscal 1996 partially offset by the closing of the majority of the Playworld Toy Stores and one leased department operation during the second half of last year and lower sales in the remaining Playworld stores. The decrease for the six months was primarily attributable to the closing of the majority of the Playworld Toy Stores and one leased department in the second half of last year and lower sales in the remaining Playworld stores, partially offset by increased Noodle Kidoodle sales. Noodle Kidoodle sales are above plan in both periods. Sales of the remaining Playworld stores decreased 37.2% for the thirteen week period and 37.0% for the twenty-six week period versus last year as a result of lower inventory levels including a change of mix to less television promoted current merchandise. Cost of goods sold including buying and warehousing costs from continuing operations decreased as a percent of sales 2.6% and 4.1% for the quarter and year-to-date periods respectively, versus the results of the prior year's comparable periods. The decrease for both the thirteen and twenty-six week periods was primarily due to increased sales in the Noodle Kidoodle stores which operate with higher margins as well as higher margins in the Playworld stores. Operating expenses other than interest and provision for store closings from continuing operations increased 37.4% and 25.6% for the three and six months period ended July 29, 1995 respectively, versus the comparable periods of last year. As a percent of sales expenses increased 20.4% and 21.2% for the thirteen and twenty-six week periods respectively, versus the prior year. The increase resulted primarily from the combination of certain opening costs and a higher cost structure in the Noodle Kidoodle stores than the Playworld stores. Noodle Kidoodle had eight more stores operating during portions of this period versus last year. Provision for store closings of $3.5 million recorded for the thirteen and twenty-six week periods ended July 30, 1994 represents a one time charge to cover unusual cost of closing the majority of the Playworld Toy Stores and one leased department operation. - 9 - Pre-tax interest income increased for both the quarter and year-to-date by $18,000 and $59,000 respectively, versus last year. Pre-tax interest expense decreased by $8,000 and $16,000 for the thirteen and twenty-six week periods respectively, versus last year. For the thirteen and twenty-six week periods ended July 30, 1994 the Company recorded an income tax benefit from continuing and discontinued operations based on an estimated effective tax rate of approximately 40%. There were no tax benefits provided in the current year periods. The Company announced on May 31, 1995 that it was seeking a buyer for its wholesale business. After discussions with numerous interested parties, the Company determined that it would not receive any offers for significant portions of the business. A decision was made to close down the business as of August 31, 1995 and liquidate the remaining assets of that business. Discontinued operations include the wholesale distribution industry segment operating as Greenman Merchandise Services. The $9.1 million ($1.72 per share) year-to-date loss from discontinued operations includes a $7.1 million charge related to the disposal of the wholesale segment including estimated losses through the disposal period, the anticipated sale of two of the Company's distribution centers and income tax expense of $1.6 million. Liquidity and Sources of Capital Cash flows provided from operating activities for the six months ended July 29, 1995, were $4.0 million versus $.9 million for the period ended July 30, 1994. Cash flows used in operating activities from continuing operations for the twenty-six week period ended July 29, 1995 were $4.7 million versus $3.5 million for the period ended July 30, 1994. Net earning before non-cash expenditures of depreciation utilized $2.5 million and changes in working capital components used $2.2 million of cash for the period ended July 29, 1995. For the year-to-date period ended July 30, 1994, net earnings before non-cash expenditures of depreciation and provision for store closing provided $.5 million and changes in working capital components used $4.0 million of cash. Operating activities from discontinued operations provided $8.7 million for the six months ended July 29, 1995 versus $4.5 million for the period ended July 30, 1994. Net earnings before non-cash expenditures of depreciation, provision for doubtful accounts and deferred income taxes used $7.0 million of cash and changes in working capital components provided $15.7 million for the period ended July 29, 1995. For the period ended July 30, 1994 net earnings before non-cash expenditures of depreciation and provision for doubtful accounts provided $.1 million of cash and changes in working capital components provided $4.4 million. Cash used in investing activities was $3.3 million for the six months ended July 29, 1995. Property additions from continuing operations utilized $3.2 million and from discontinued operations $.1 million. Cash used in investing activities for the twenty-six week period ended July 30, 1994 was $.4 million. Property additions from continuing operations used $1.1 million and from discontinued operations $.8 million offset by cash provided from the redemption of U.S. Treasury bills of $1.0 million and proceeds from a life insurance policy of $.5 million. - 10 - Cash provided from financing activities of $.4 million for the six months ended July 29, 1995 was from the exercise of employees stock options. The Company maintained an average cash and cash equivalent balance of approximately $9.1 million during the twenty-six week period ended July 29, 1995. These funds were substantially invested in high grade commercial paper. The Company plans to use the net proceeds of the wholesale liquidation to help fund the growth of its Noodle Kidoodle retail concept. A total of approximately $16 million in cash will have been generated from the dissolution of the wholesale business with approximately $8 million already realized. The Company has a line of credit with its primary bank allowing for maximum borrowing of $12.5 million. Borrowings would be secured by wholesale inventory and receivables and the availability of the line is subject to formulas relating to the eligible amount of those assets. The Company has not required any borrowings for several years. While the Company does not expect to borrow in this fiscal year, the timing of receipts from the wholesale liquidation could be such that a small portion of the line may be utilized temporarily. The Company also announced that it will change its name to Noodle Kidoodle, Inc. subject to stockholders approval with the vote expected to take place in the fourth quarter of this fiscal year. - 11 - Part II - Other Information Item 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Shareholders held July 11, 1995 the following persons were elected as directors of the Company. Class 1 Directors: (until the 1998 meeting) Lester Greenman Barry W. Ridings Irwin Tantleff The following Directors continue in office for the duration of their terms: Class 2 Directors: (until the 1996 meeting) Robin Farkas Stewart Katz Class 3 Directors: (until the 1997 meeting) Stanley Greenman Joseph A. Madenberg Robert Stokvis - 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. GREENMAN BROS. INC. (Registrant) Date: September 12, 1995 STANLEY GREENMAN Stanley Greenman, Chairman of the Board, Chief Executive Officer, Director (Principal Executive Officer) Date: September 12, 1995 WILLIAM A. JOHNSON, JR. William A. Johnson Jr., Vice President, Chief Financial Officer and Secretary (Principal Financial Accounting Officer) - 13 - EX-27 2 ARTICAL 5 FIN. DATA SCHEDULE FOR 2ND. QTR. 10-Q
5 1000 6-MOS FEB-03-1996 JAN-29-1995 JUL-29-1995 11,952 0 0 0 7,207 34,302 10,999 2,950 42,399 13,079 0 627 0 0 28,693 42,399 7,220 7,220 4,662 4,662 5,708 0 22 (2,900) 0 (2,900) (9,059) 0 0 (11,959) (2.27) (2.27)