-----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, SagQ5cdmIim0T5O0legfVEgBz8u8R6tzoN4GCrDilFwAa8fCR/wHLCCsLcNzGHl6 6ziYfuEtaukAjUo1pf/VSA== 0000950135-98-003168.txt : 19980514 0000950135-98-003168.hdr.sgml : 19980514 ACCESSION NUMBER: 0000950135-98-003168 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 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: 98617670 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 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 March 31, 1998 - -------------------------------------------------------------------------------- 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 April 30, 1998 was 5,149,124. 2 THE FIRST YEARS INC. INDEX -----
Page ---- PART I - FINANCIAL INFORMATION: Condensed Consolidated Balance Sheets 1 Condensed Consolidated Statements of Income 2 Condensed Consolidated Statements of Cash Flows 3 Notes to Condensed Consolidated Financial Statements 4 - 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 - 8 PART II - OTHER INFORMATION Other information 9 SIGNATURES 9 EXHIBIT INDEX 10
3 THE FIRST YEARS INC. CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS
MARCH 31, DECEMBER 31, 1998 1997 ---------- ----------- (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents $11,785,865 $ 7,697,040 Accounts receivable, net 21,063,549 19,962,226 Inventories 25,313,000 24,372,881 Prepaid expenses and other assets 344,438 414,764 Deferred tax assets 1,279,000 1,279,000 ----------- ----------- Total current assets 59,785,852 53,725,911 ----------- ----------- PROPERTY, PLANT, AND EQUIPMENT: Land 167,266 167,266 Building 4,024,237 4,022,095 Machinery and molds 7,353,224 7,151,019 Furniture and equipment 4,046,742 3,947,144 ----------- ----------- Total 15,591,469 15,287,524 Less accumulated depreciation 8,886,196 8,441,874 ----------- ----------- Property, plant, and equipment - net 6,705,273 6,845,650 ----------- ----------- TOTAL ASSETS $66,491,125 $60,571,561 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $12,336,586 $10,004,244 Accrued royalty expense 2,269,240 2,051,721 Accrued payroll expenses 812,961 1,143,063 Accrued selling expenses 2,060,184 2,387,029 Federal and state income taxes payable 891,200 159,600 ----------- ----------- Total current liabilities 18,370,171 15,745,657 ----------- ----------- DEFERRED TAX LIABILITY 816,900 816,900 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock 515,233 508,800 Paid-in capital 7,479,597 6,534,308 Retained earnings 39,391,037 37,047,709 Less: 3,409 shares of treasury stock (at cost) (81,813) (81,813) ----------- ----------- Total stockholders' equity 47,304,054 44,009,004 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $66,491,125 $60,571,561 =========== ===========
See accompanying notes to condensed consolidated financial statements. Page 1 4 THE FIRST YEARS INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
1998 1997 ---- ---- NET SALES $35,686,605 $27,822,044 COST OF PRODUCTS SOLD 21,437,630 16,644,939 ----------- ----------- GROSS PROFIT 14,248,975 11,177,105 SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 10,388,107 8,404,199 ----------- ----------- OPERATING INCOME 3,860,868 2,772,906 OTHER INCOME (EXPENSE): Interest Expense (850) (10,306) Interest Income 78,310 14,902 ----------- ----------- INCOME BEFORE INCOME TAXES 3,938,328 2,777,502 PROVISION FOR INCOME TAXES 1,595,000 1,111,000 ----------- ----------- NET INCOME $ 2,343,328 $ 1,666,502 =========== =========== BASIC EARNINGS PER SHARE $0.46 $0.34 ===== ===== DILUTED EARNINGS PER SHARE $0.44 $0.32 ===== ===== PROFORMA EARNINGS PER SHARE (NOTE 2): BASIC EARNINGS PER SHARE $0.23 $0.17 ===== ===== DILUTED EARNINGS PER SHARE $0.22 $0.16 ===== =====
See accompanying notes to condensed consolidated financial statements. Page 2 5 THE FIRST YEARS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
1998 1997 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,343,328 $ 1,666,502 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation 444,322 366,283 Provision for doubtful accounts 223,834 126,261 Increase (decrease) arising from working capital items: Accounts receivable (1,325,157) (4,847,613) Inventories (940,119) (1,691,155) Prepaid expenses and other assets 70,326 (190,635) Accounts payable 2,332,342 (420,412) Accrued royalty expense 217,519 555,025 Accrued payroll expenses (330,102) (89,899) Accrued selling expenses (326,845) (295,252) Federal and state income taxes - net 731,600 872,300 ----------- ----------- Net cash provided by (used for) operating activities 3,441,048 (3,948,595) ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property, plant, and equipment (303,945) (394,241) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Common stock issued under stock option plans 461,422 90,191 Tax benefit of stock option compensation 490,300 - Repayment of short-term borrowings - 1,700,000 Repayment of industrial revenue bonds - (33,333) ----------- ----------- Net cash provided by financing activities 951,722 1,756,858 ----------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,088,825 (2,585,978) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,697,040 4,164,587 ----------- ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $11,785,865 $ 1,578,609 =========== ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for: Interest $850 $10,306 ==== ======= Income Taxes $373,100 $212,370 ======== ========
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, 1997 are condensed from the company's audited consolidated 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 March 31, 1998, and the results of operations and cash flows for the periods ended March 31, 1998 and 1997. 2. The company has 15,000,000 authorized shares of $.10 par value common stock with 5,148,924 and 5,084,591 shares issued and outstanding as of March 31, 1998 and December 31, 1997, respectively. On May 8, 1998 the Board of Directors authorized a two-for-one stock split effected in the form of a 100% stock dividend payable to stockholders of record on May 29, 1998. Distribution of new shares are payable on June 29, 1998. Additionally, on May 8, 1998 the Board of Directors authorized a $0.12 per share ($0.06 post-split basis) annual cash dividend payable on June 29, 1998 to holders of record at the close of business on May 29, 1998. 3. Computation of the Earnings Per Share ("EPS") in accordance with SFAS No. 128 are as follows: (All share and per share numbers are presented on a pre-split basis)
Income Shares Per Share (Numerator) (Denominator) Amount ----------- ------------- -------- For the Quarter Ended March 31, 1997: Net income.................................... $1,666,502 ---------- Basic EPS Income available to common Stockholders................................ 1,666,502 4,950,701 $0.34 ===== Effect of Dilutive Securities Incentive stock options....................... 185,310 ---------- --------- Diluted EPS Income available to common stockholders and assumed conversions...................... $1,666,502 5,136,011 $0.32 =========== ========= =====
Page 4 7 THE FIRST YEARS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3. Computation of Earnings Per Share (con't)
Income Shares Per Share (Numerator) (Denominator) Amount ----------- ------------- ------ For the Quarter Ended March 31, 1998: Net income......................................... $2,343,328 ---------- Basic EPS Income available to common stockholders.................................... 2,343,328 5,096,320 $0.46 ===== Effect of Dilutive Securities Incentive stock options........................... 197,949 ----------- --------- Diluted EPS Income available to common stockholders and assumed conversions......................... $2,343,328 5,294,269 $0.44 ========== ========= =====
As of March 31, 1997, options to purchase 15,000 and 6,000 shares of common stock at $17 3/4 and $17 1/8 per share, respectively, were not included in the computation of diluted EPS because the option's exercise price was greater than the average price of the common shares. The options, which expire in 2007 and 2006, respectively, were still outstanding at March 31, 1998. As of March 31, 1998, options to purchase 354 and 28,145 shares of common stock at $30 1/8 and $31 1/8 per share, respectively, were not included in the computation of diluted EPS because the option's exercise price was greater than the average price of the common shares. The options, which expire in 2008, were still outstanding at March 31, 1998. 4. The results of operations for the three month period ended March 31, 1998 and 1997 are not necessarily indicative of the results to be expected for the full year. 5. During the first three months of 1998, the Company did not borrow against its unsecured line of credit totaling $10,000,000 available from a bank. During 1997, the Company borrowed various amounts up to $2,200,000 of which $1,700,000 remained outstanding as of March 31, 1997 at a weighted average interest rate of 7.94%. During the first three months of 1997, the Company had available an unsecured line of credit from a second bank totaling $10,000,000. No borrowings were incurred during the period and no balances were outstanding as of March 31, 1997. During 1997, the line was subject to annual renewal and was not renewed at the option of the Company. Page 5 8 THE FIRST YEARS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS No other short-term borrowings were incurred by the Company during the first three months of 1998 or 1997. 6. Statements of Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive Income" became effective for the Company during the quarter ended March 31, 1998. Adoption of SFAS No. 130 did not have a material impact on the consolidated financial statements. The Financial Accounting Standards Board recently issued SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" and SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits." These new standards will be effective in the Company's fiscal year ended December 31, 1998. The Company has not determined the effects, if any, that these standards will have on its consolidated financial statements. Page 6 9 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 Form 10-K for the year ended December 31, 1997, and Exhibit 99 of such Annual Report on Form 10-K for the year ended December 31, 1997, filed with the Securities And Exchange Commission. Net sales for the first three months of 1998 were $35.7 million, an increase of $7.9 million or 28.3%, as compared to $27.8 million for the comparable period last year. The increase was due to new product introductions and expanded retail distribution in domestic and foreign markets. Cost of products sold for the first three months of 1998 was $21.4 million, an increase of $4.8 million or 28.8%, as compared to $16.6 million for the comparable period last year. As a percentage of sales, cost of products sold in the first three months of 1998 and 1997 remained consistent at 60.1% and 59.8%, respectively. Selling, general, and administrative expenses for the first three months of 1998 were $10.4 million, an increase of $2.0 million or 23.6%, as compared to $8.4 million over such expenses for the first three months of 1997. The increase resulted primarily from costs related to increased sales volume; payroll and payroll related costs, product development and integrated marketing communication program expenses. As a percentage of net sales, selling, general, and administrative expenses for the first three months of 1998 decreased to 29.1% from 30.2% in the comparable period of 1997. The decrease reflects the economies of scale provided by the higher volume of business. The Company continues to review the Year 2000 Issue (Y2K). Review of the Company's internal computer systems for Y2K issues is progressing. the company presently believes Y2K will not pose significant operational issues and is not anticipated to be material to its financial position or results of operations in any given year. Communications with significant suppliers, customers and service vendors has been initiated to determine the extent of the Company's exposure from such third party's failure to remedy their own Y2K issues. No guarantee can be made that systems of other companies on which the Company relies upon will be converted in time or that a failure to convert would not have a material effect on the company. Page 7 10 THE FIRST YEARS INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (Con't) Income tax expense as a percentage of pretax income increased to 40.5% for the first three months of 1998 from 40.0% for the first three months of 1997. Net working capital increased by $3.4 million in the first three months primarily due to profitable operations. Accounts receivable increased by $4.7 million primarily as a result of increased sales and inventories increased by $1.0 to meet continued demand for the company's products. Cash increased by $4.1 million primarily resulting from funds generated from operations. An unsecured bank line of credit of $10.0 million is subject to annual renewal. Amounts outstanding under this line are payable upon demand by the bank. During the first three months of 1998, the company incurred no borrowings under the line and no balances were outstanding as of March 31, 1998. During the first three months of 1997, the Company borrowed various amounts up to $2.2 million of which $1.7 million remained outstanding as of March 31, 1997. During the first three months of 1997, the Company had available an unsecured line of credit from a second bank totaling $10.0 million. No borrowings were incurred during the period and no balances were outstanding as of March 31, 1997. During 1997, the line was subject to annual renewal and was not renewed at the option of the Company. The Company did not incur any other short-term borrowings during the first three months of 1998 and 1997. Recent Accounting Pronouncements Statements of Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive Income" became effective for the Company during the quarter ended March 31, 1998. Adoption of SFAS No. 130 did not have a material impact on the consolidated financial statements. The Financial Accounting Standards Board recently issued SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" and SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits." These new standards will be effective in the Company's fiscal year ended December 31, 1998. The Company has not determined the effects, if any, that these standards will have on its consolidated financial statements. Page 8 11 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 ------- ----------- 27 Financial Data Schedule - 3/31/98 27.1 Financial Data Schedule - 3/31/97 - Restated 27.2 Financial Data Schedule - 6/30/97 - Restated 27.3 Financial Data Schedule - 9/30/97 - Restated
(b) On May 12, 1998 the Company filed a Report on Form 8-K to report the two-for-one stock split effected in the form of a 100% stock dividend on the Company's Common Stock, $.10 par value which was declared by the Board of Directors on May 8, 1998. 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 5/13/98 /s/ John R. Beals ------------------- --------------------------------------- John R. Beals, Senior Vice President and Treasurer, Duly Authorized Officer and Principal Financial Officer Page 9 12 EXHIBIT INDEX
Exhibit Description Page - ------- ----------- ---- 27 Financial Data Schedule - 3/31/98 11 27.1 Financial Data Schedule - 3/31/97 - Restated 12 27.2 Financial Data Schedule - 6/30/97 - Restated 13 27.3 Financial Data Schedule - 9/30/97 - Restated 14
Page 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 U.S.DOLLAR 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 1 11,785,865 0 21,248,549 185,000 25,313,000 59,785,852 15,591,469 8,886,196 66,491,125 18,370,171 0 515,233 0 0 46,788,821 66,491,125 35,686,605 35,764,915 21,437,630 31,825,737 0 0 850 3,938,328 1,595,000 2,343,328 0 0 0 2,343,328 0.46 0.44
EX-27.1 3 FDS RESTATED FOR 3/31/97
5 1 U.S.DOLLAR 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 1,578,609 0 20,835,817 185,000 20,279,200 44,020,978 14,999,508 7,925,826 51,094,660 12,699,526 0 496,275 0 0 37,126,859 51,094,660 27,822,044 27,836,946 16,644,939 25,049,138 0 0 10,306 2,777,502 1,111,000 1,666,502 0 0 0 1,666,502 0.34 0.32
EX-27.2 4 FDS RESTATED FOR 6/30/97
5 1 U.S.DOLLAR 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1 2,465,148 0 22,476,420 185,000 18,805,100 44,964,277 15,725,809 8,813,192 52,376,894 12,294,901 0 497,455 0 0 38,812,538 52,376,894 60,519,296 60,541,362 35,998,692 54,285,099 0 0 25,699 6,230,564 2,554,500 3,676,064 0 0 0 3,676,064 0.74 0.71
EX-27.3 5 FDS RESTATED FOR 9/30/97
5 1 U.S.DOLLAR 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 1.10 1.05
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