-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QJoJxWByVkfLcTsNYX6/oGy9+7hrqGlxYKU2+ukR7XxrdBSlZJNgy0vMTByv0q8J FOPpJEpKqg86SdPzAI5xmQ== 0000950135-97-004551.txt : 19971113 0000950135-97-004551.hdr.sgml : 19971113 ACCESSION NUMBER: 0000950135-97-004551 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST YEARS INC CENTRAL INDEX KEY: 0000055698 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PLASTIC PRODUCTS [3080] IRS NUMBER: 042149581 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07024 FILM NUMBER: 97717065 BUSINESS ADDRESS: STREET 1: ONE KIDDIE DR CITY: AVON STATE: MA ZIP: 02322-1171 BUSINESS PHONE: 5085881220 MAIL ADDRESS: STREET 1: ONE KIDDIE DR CITY: AVON STATE: MA ZIP: 02322-1171 FORMER COMPANY: FORMER CONFORMED NAME: KIDDIE PRODUCTS INC DATE OF NAME CHANGE: 19920703 10-Q 1 THE FIRST YEARS, INC. 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For The Quarter Ended September 30, 1997 - -------------------------------------------------------------------------------- Commission file number 0-7024 - -------------------------------------------------------------------------------- THE FIRST YEARS INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-2149581 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Kiddie Drive, Avon, Massachusetts 02322-1171 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (508) 588-1220 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (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 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 number of shares of Registrant's common stock outstanding on October 31, 1997 was 5,055,216. 2 THE FIRST YEARS INC. INDEX PART I - FINANCIAL INFORMATION: Condensed Consolidated Balance Sheets Page 1 Condensed Consolidated Statements of Income 2 Condensed Consolidated Statements of Cash Flows 3 Notes to Condensed Consolidated Financial Statements 4 - 5 Management's Discussion and Analysis of Financial Condition and Results of Operations 6 - 7 PART II - OTHER INFORMATION Other information 8 SIGNATURES 8 EXHIBIT INDEX 9 3 THE FIRST YEARS INC. Condensed Consolidated Balance Sheets ASSETS
September 30, December 31, 1997 1996 ------------- ------------ (Unaudited) CURRENT ASSETS: Cash and cash equivalents $10,569,485 $ 4,164,587 Accounts receivable, net 17,309,912 15,929,465 Inventories 19,790,100 18,588,044 Prepaid expenses and other assets 886,938 375,317 Deferred tax assets 946,400 946,400 ----------- ----------- Total current assets 49,502,835 40,003,813 ----------- ----------- PROPERTY, PLANT, AND EQUIPMENT: Land 167,266 167,266 Building 4,018,915 4,016,405 Machinery and molds 7,754,546 7,329,240 Furniture and equipment 3,832,713 3,092,356 ----------- ----------- Total 15,773,440 14,605,267 Less accumulated depreciation 8,577,918 7,559,543 ----------- ----------- Property, plant, and equipment-net 7,195,522 7,045,724 ----------- ----------- TOTAL ASSETS $56,698,357 $47,049,537 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 0 $ 100,000 Accounts payable 9,651,981 6,969,115 Accrued royalties 1,423,333 848,671 Accrued payroll expenses 1,283,271 1,087,302 Accrued selling expenses 1,684,940 1,406,009 Federal and state income taxes payable 0 0 ----------- ----------- Total current liabilities 14,043,525 10,411,097 ----------- ----------- DEFERRED TAX LIABILITY 772,000 772,000 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock 505,522 494,898 Paid-In capital 6,294,523 5,271,875 Retained earnings 35,082,787 30,099,667 ----------- ----------- Total stockholders' equity 41,882,832 35,866,440 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $56,698,357 $47,049,537 =========== ===========
See accompanying notes to condensed consolidated financial statements. Page 1 4 THE FIRST YEARS INC. Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- NET SALES $27,878,092 $23,273,193 $88,397,388 $69,631,738 COST OF PRODUCTS SOLD 16,249,011 13,629,185 52,247,703 41,588,698 ----------- ----------- ----------- ----------- GROSS PROFIT 11,629,081 9,644,008 36,149,685 28,043,040 SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 8,701,661 7,306,213 26,988,068 21,154,744 ----------- ----------- ----------- ----------- OPERATING INCOME 2,927,420 2,337,795 9,161,617 6,888,296 OTHER INCOME (EXPENSES): Interest expense (542) (49,457) (26,241) (346,666) Interest income 67,025 5,125 89,091 8,000 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 2,993,903 2,293,463 9,224,467 6,549,630 PROVISION FOR INCOME TAXES 1,190,100 917,400 3,744,600 2,619,900 ----------- ----------- ----------- ----------- NET INCOME $ 1,803,803 $ 1,376,063 $ 5,479,867 $ 3,929,730 =========== =========== =========== =========== EARNINGS PER SHARE $ 0.34 $ 0.27 $ 1.05 $ 0.81 =========== =========== =========== =========== AVERAGE NUMBER OF SHARES OUTSTANDING 5,257,229 5,150,751 5,203,529 4,862,132 =========== =========== =========== =========== CASH DIVIDENDS PAID PER SHARE $ 0.00 $ 0.00 $ 0.10 $ 0.10 =========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements. Page 2 5 THE FIRST YEARS INC. Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1997 and 1996 (Unaudited)
1997 1996 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5,479,867 $ 3,929,730 Adjustments to reconcile net income to net cash provided by (used for) operations: Depreciation 1,143,226 918,186 Provision for doubtful accounts 245,359 95,595 Gain on disposal of equipment 0 22,881 Increase (decrease) arising from working capital items: Accounts receivable (1,625,806) (1,756,368) Inventories (1,202,056) (1,397,316) Prepaid expenses and other assets (511,621) 523,293 Accounts payable 2,682,866 (783,257) Accrued royalties 574,662 260,366 Accrued payroll expenses 195,969 296,402 Accrued selling expenses 278,931 342,278 Federal and state income taxes - net 0 41,300 ----------- ----------- Net cash provided by operating activities 7,261,397 2,493,090 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property, plant, and equipment (1,293,024) (1,655,302) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash Dividend (496,747) (453,557) Common stock issued under stock option plans 633,272 130,178 Tax benefit of stock option compensation 400,000 0 Net proceeds from public offering -- 5,121,750 Repayment of short term borrowings -- (4,900,000) Repayment of industrial revenue bonds (100,000) (100,001) ----------- ----------- Net cash provided by (used for) financing activities 436,525 (201,630) ----------- ----------- INCREASE IN CASH AND CASH EQUIVALENTS 6,404,898 636,158 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,164,587 552,568 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $10,569,485 $ 1,188,726 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for: Interest $ 26,241 $ 346,666 =========== =========== Income taxes $ 3,738,100 $ 2,196,300 =========== ===========
See accompanying notes to condensed consolidated financial statements. Page 3 6 THE FIRST YEARS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Amounts in the accompanying balance sheet as of December 31, 1996 are condensed from the Company's audited balance sheet as of that date. All other condensed consolidated financial statements are unaudited but, in the opinion of the Company, contain all normal and recurring adjustments necessary to present fairly the financial position as of September 30, 1997, and the results of operations and cash flows for the periods ended September 30, 1997 and 1996. 2. The Company has 15,000,000 authorized shares of $.10 par value common stock with 5,055,216 and 4,948,980 shares issued and outstanding as of September 30, 1997 and December 31, 1996, respectively. On May 8, 1997 the Board of Directors authorized a $0.10 per share annual cash dividend which was paid on June 2, 1997 to holders of record at the close of business on May 21, 1997. 3. Earnings per share of common stock are computed on the basis of the average number of shares and common share equivalents outstanding during each quarter. Fully diluted and primary earnings per share were the same for the nine months ended September 30, 1997 and 1996. In February 1997 the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share" which will become effective for the Company effective December 15, 1997. SFAS No. 128 replaces the presentation of primary earnings per share with a basic earnings per share (which excludes dilution) and a diluted earnings per share. Had the Company used SFAS No. 128, the Company's basic and diluted earnings per share would have been $1.10 and $1.05, respectively for the nine months ended September 30, 1997 and $0.84 and $0.81, respectively for the nine months ended September 30, 1996. 4. The results of operations for the nine month period ended September 30, 1997 and 1996 are not necessarily indicative of the results to be expected for the full year. 5. During 1997, the Company borrowed various amounts up to $2,500,000 under an unsecured line of credit totaling $10,000,000 available from a bank. As of September 30, 1997 there was no balance outstanding. During 1996, the Company borrowed various amounts up to $9,900,000 of which $1,300,000 remained outstanding as of September 30, 1996 at a weighted average interest rate of 7.38%. No other short-term borrowings were incurred by the Company during the first nine months of 1997 or 1996. Page 4 7 THE FIRST YEARS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Con't) 6. In June 1997 the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income" which will become effective for the Company effective December 15, 1997. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general purpose financial statements. SFAS No. 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. SFAS No. 130 requires that a Company (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in-capital in the equity section of the balance sheet. Reclassification of financial statements for earlier periods provided for comparative purposes is required. The Company has not determined the effects, if any, that SFAS No. 130 will have on its financial statements. In June 1997 the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" which will become effective for the Company effective December 15, 1997. SFAS No. 131 establishes standards for the way that public companies report selected information about operating segments in annual financial statements and requires that those companies report selected information about segments in interim financial reports issued to shareholders. It also establishes standards for related disclosure about products and services, geographic areas, and major customers. SFAS No. 131, which supersedes SFAS No. 14, "Financial Reporting Segments of a Business Enterprise" but retains the requirement to report information about major customers, requires that a public company report financial and descriptive information about its reportable operating segments. The Company has not determined the effects, if any, that SFAS No. 131 will have on its financial statements. Page 5 8 THE FIRST YEARS INC. Management's Discussion and Analysis of Financial Condition and Results of Operations Statements in this Report on Form 10-Q that are not strictly historical are "forward-looking" statements, as defined in the Private Securities Litigation Reform Act of 1995. The actual results may differ from those projected in the forward-looking statements due to risks and uncertainties that exist in the Company's operations and business environment in the development and introduction of new products, described more fully in the Company's Annual Report on From 10-K for the year ended December 31, 1996, and the Exhibit 99 of this Form 10-Q for the quarter ended September 30, 1997, filed with the Securities and Exchange Commission. Net sales for the first nine months of 1997 were $88.4 million, an increase of $18.8 million or 26.9%, as compared to $69.6 million for the comparable period last year. The increase was due to new product introductions, including the Sesame Street brand licensed from the Children's Television Workshop, and expanded retail distribution in domestic and foreign markets. Cost of products sold for the first nine months of 1997 was $52.2 million, an increase of $10.6 million or 25.6%, as compared to $41.6 million for the comparable period last year. As a percentage of sales, cost of products sold in the first nine months of 1997 decreased to 59.1% from 59.7% in the comparable period of 1996. The decrease was primarily due to reduced cost of products resulting from manufacturing efficiencies and increased sales of higher margin products. Selling, general, and administrative expenses for the first nine months of 1997 were $27.0 million, an increase of $5.8 million or 27.6%, as compared to $21.2 million of such expenses for the first nine months of 1996. The increase resulted primarily from costs related to increased sales volume; payroll and payroll related costs, and integrated marketing communication program expenses. As a percentage of net sales, selling, general, and administrative expenses for the first nine months of 1997 and 1996 remained consistent at 30.5% and 30.4%, respectively. Income tax expense as a percentage of pretax income was 41% and 40% for the first nine months of 1997 and 1996, respectively. Net working capital increased by $5.9 million in the first nine months primarily due to profitable operations. Accounts receivable increased by $1.4 million primarily as a result of increased sales and inventories increased by $1.2 million to meet continued demand for the Company's products. Cash increased by $6.4 million primarily resulting from funds generated from operations. Page 6 9 THE FIRST YEARS INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (Con't) The Company reviewed its needs with regard to open lines of credit during the three months ended September 30, 1997. After this review, the Company continued with an unsecured bank line of credit aggregating $10.0 million which is subject to annual renewal. Amounts outstanding under the line is payable upon demand by the bank. During the first nine months of 1997, the Company borrowed various amounts up to $2.5 million of which no amount remained outstanding as of September 30, 1997. During the first nine months of 1996, the Company borrowed various amounts up to $9.9 million of which $1.3 million remained outstanding as of September 30, 1996. The Company did not incur any other short-term borrowings during the first nine months of 1997 and 1996. Recent Accounting Pronouncements In June 1997 the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income" which will become effective for the Company effective December 15, 1997. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general purpose financial statements. SFAS No. 130 requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. SFAS No. 130 requires that a Company (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in-capital in the equity section of the balance sheet. Reclassification of financial statements for earlier periods provided for comparative purposes is required. The Company has not determined the effects, if any, that SFAS No. 130 will have on its financial statements. In June 1997 the Financial Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" which will become effective for the Company effective December 15, 1997. SFAS No. 131 establishes standards for the way that public companies report selected information about operating segments in annual financial statements and requires that those companies report selected information about segments in interim financial reports issued to shareholders. It also establishes standards for related disclosure about products and services, geographic areas, and major customers. SFAS No. 131, which supersedes SFAS No. 14, "Financial Reporting Segments of a Business Enterprise", but retains the requirement to report information about major customers, requires that a public company report financial and descriptive information about its reportable operating segments. The Company has not determined the effects, if any, that SFAS No. 131 will have on its financial statements. Page 7 10 THE FIRST YEARS INC. PART II - OTHER INFORMATION Items 1 through 5 - Not Applicable Item 6: Exhibits and Reports on Form 8-K (a) Exhibits - The following exhibits are filed as part of this Report: Exhibit Description ------- ----------- 11 Statement re Computation of Per Share Earnings 27 Financial Data Schedule 99 Important Factors Regarding Forward-Looking Statements (b) No reports on Form 8-K have been filed during the past quarter covered by this report. 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. THE FIRST YEARS INC. -------------------- Registrant Date 11/14/97 /s/ John R. Beals ------------------ ----------------------------- John R. Beals, Vice President and Assistant Treasurer, Duly Authorized Officer and Principal Financial Officer Page 8 11 THE FIRST YEARS INC. EXHIBIT INDEX Exhibit Description Page ------- ----------- ---- 11 Statement re Computation of Per Share Earnings 10 27 Financial Data Schedule 11 99 Important Factors Regarding Forward-Looking Statements 12 - 13 Page 9 EX-11 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 THE FIRST YEARS INC. PRIMARY NET INCOME PER SHARE AND FULLY DILUTED NET INCOME PER SHARE
Three Months Ended Nine Months Ended ------------------------------- ------------------------------- September 30, September 30, ------------------------------- ------------------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- PRIMARY NET INCOME PER SHARE Net income available for common shares and common stock equivalent shares $1,803,803 $1,376,063 $5,479,867 $3,929,730 ---------- ---------- ---------- ---------- Primary net income per share $ 0.34 $ 0.27 $ 1.05 $ 0.81 ---------- ---------- ---------- ---------- SHARES USED IN COMPUTATION Weighted average common shares outstanding 5,017,803 4,937,544 4,979,131 4,661,544 Common stock equivalents - options 239,426 213,207 224,398 200,588 ---------- ---------- ---------- ---------- Total common stock and common stock equivalent dilutive shares 5,257,229 5,150,751 5,203,529 4,862,132 ========== ========== ========== ========== FULLY DILUTED NET INCOME PER SHARE Net income available for common shares and common stock equivalent shares $1,803,803 $1,376,063 $5,479,867 $3,929,730 ---------- ---------- ---------- ---------- Fully diluted net income per share $ 0.34 $ 0.27 $ 1.05 $ 0.81 ---------- ---------- ---------- ---------- SHARES USED IN COMPUTATION Weighted average common shares outstanding 5,017,803 4,937,544 4,979,131 4,661,544 Common stock equivalents - options 260,877 215,264 242,584 211,518 ---------- ---------- ---------- ---------- Total common stock and common stock equivalent dilutive shares 5,278,680 5,152,808 5,221,715 4,873,062 ========== ========== ========== ==========
Page 10 EX-99.1 3 IMPORTANT FACTORS RE: FORWARD-LOOKING STATEMENTS 1 EXHIBIT 99.1 IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS The following factors, among others, could cause results to differ materially from those contained in forward-looking statements made in this Report, or in other SEC filings, Annual Reports to Stockholders on Form 10-K, press releases, and oral statements, among others, made by the Company from time to time. New Product Introductions The growth of the Company has been, and will continue to be, dependent upon its ability to continue to introduce new products. There can be no assurance that the Company will continue to maintain its present rate of growth, that it will continue to generate new product ideas, or that new products will be successfully introduced. Reliance on Licensed Products A substantial factor contributing to the growth in the Company's net sales in the past few years has been its sale of products featuring cartoon characters licensed from other parties, including the use of Winnie the Pooh characters licensed from The Walt Disney Company, and Sesame Street characters licensed from The Children's Television Workshop. These license have fixed terms and limit the type of products that may be sold under the license. There can be no assurance that these licenses will be renewed or that, if renewed, they will result in sales increases in future periods. Dependence on Consumer Preferences The continued success of the Company's business depends in part on the continued consumer demand for its juvenile products and the Company's ability to anticipate, gauge, and respond to changing consumer demands for juvenile products in a timely manner. Changes in consumer demand due to frequently-changing consumer tastes, general economic decline, or to less favorable demographic trends related to childbirth, among other factors, could have a material adverse effect on the Company's business. Moreover, the Company could be materially adversely affected by conditions in the retail industry in general, including consolidation and the resulting decline in the number of retailers, and other cyclical economic factors. Dependence upon Major Customers The three largest customers of the Company, Wal*Mart, Toys "R" Us, and Target accounted for approximately 26%, 19% and 10%, respectively, of net sales during 1996. A significant reduction of purchases by these customers could have a material adverse effect on the Company's business. Competition Competition is intense in the juvenile product markets in which the Company sells its products. The Company competes with a large number of other companies both domestic and foreign, some of which have diversified product lines, well-known brands and financial, distribution and marketing resources substantially greater than those of the Company. The principal competitors for the Company's products are Fisher Price, Playskool, EvenFlo, Playtex, Gerber, Nuk, MAX, Gerry, Century, and Safety 1st. There can be no assurance that the Company will be able to continue to compete effectively in the juvenile products market. 2 Reliance on Foreign Manufacturers The Company does not own or operate its own manufacturing facilities. A number of manufacturers located in the Far East, primarily in China, supply products and product components to the Company. A substantial portion of all of its products sold in 1996 were manufactured in the Far East. The Company is subject to the usual risks of a business involving foreign suppliers, such as currency fluctuations, government regulation of fund transfers, export and import duties, trade limitations imposed by the United States or foreign governments, and political and labor instability. In particular there are a number of trade-related and other issues creating significant friction between the governments of the United States and China, and the imposition of punitive import duties on certain categories of Chinese products has been threatened in the past and may be implemented in the future. Although the Company continues to evaluate alternative sources of supply outside of China, there can be no assurance that the Company will be able to develop alternative sources of supply in a timely and cost-effective manner. In addition, the Company has no long-term manufacturing agreements with its foreign suppliers and competes with other juvenile product companies, including companies that are much larger than the Company, for access to production facilities. Also, the Company, because of its substantial reliance on suppliers in foreign countries, is required to order products further in advance of customer orders than would generally be the case if such products were produced in the United States. The risk of ordering products in this manner is greater during the initial introduction of new products since it is difficult to determine the demand for such products. Cost and Availability of Certain Materials Plastic and paperboard are significant cost components of the Company's products and packaging. Because the primary resource used in manufacturing plastic is petroleum, the cost and availability of plastic for use in the Company's products varies to a great extent with the price of petroleum. The inability of the Company's suppliers to acquire sufficient plastic or paperboard at reasonable prices would adversely affect the Company's ability to maintain its profit margins in the short term. Product Liability Risks The Company's juvenile products are used for and by small children and infants. The Company carries product liability insurance in amounts which management deems adequate to cover risks associated with such use; however, there can be no assurance that existing or future insurance coverage will be sufficient to cover all product liability risks. Government Regulations The Company's products are subject to the provisions of the Federal Consumer Safety Act, the Federal Hazardous Substances Act, the Federal Flammable Fabrics Act, and the Child Safety Protection Act (the "Acts") and the regulations promulgated thereunder. The Acts authorize the Consumer Product Safety Commission (the "CPSC") to protect the public from products which present a substantial risk of injury. The CPSC can require the repurchase or recall by the manufacturer of articles which are found to be defective and impose fines or penalties on the manufacturer. Similar laws exist in some states and cities and in other countries in which the Company markets its products. Any recall of its products could have a material adverse effect on the Company, depending on the particular product. EX-27 4 FINANCIAL DATA SCHEDULE
5 U.S. DOLLARS 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 1 10,569,485 0 17,494,912 185,000 19,790,100 49,502,835 15,773,440 8,577,918 56,698,357 14,043,525 0 0 0 505,552 41,377,310 56,698,357 88,397,388 88,486,479 52,247,703 79,235,771 0 0 26,241 9,224,467 3,744,600 5,479,867 0 0 0 5,479,867 1.05 1.05
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