-----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, DTUfM29rA6iMkwX1FY6DubKIikMX6a8drDMHJfa/Web7Yxl1vaRGaXjAhHlqulhz VDoggUgk1kHZKXISRFvNcw== 0000950135-98-004641.txt : 19980813 0000950135-98-004641.hdr.sgml : 19980813 ACCESSION NUMBER: 0000950135-98-004641 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 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: 98683306 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 June 30, 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 July 31, 1998 was 10,365,588. 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 9-10 SIGNATURES 11 EXHIBIT INDEX 12 3 THE FIRST YEARS INC. Condensed Consolidated Balance Sheets ASSETS
June 30, December 31, 1998 1997 ----------- ----------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents $17,012,216 $ 7,697,040 Accounts receivable, net 18,874,368 19,962,226 Inventories 21,882,700 24,372,881 Prepaid expenses and other assets 554,623 414,764 Deferred tax assets 1,279,000 1,279,000 ----------- ----------- Total current assets 59,602,907 53,725,911 ----------- ----------- PROPERTY, PLANT, AND EQUIPMENT: Land 167,266 167,266 Building 4,031,889 4,022,095 Machinery and molds 7,228,674 7,151,019 Furniture and equipment 4,225,471 3,947,144 ----------- ----------- Total 15,653,300 15,287,524 Less accumulated depreciation 9,213,168 8,441,874 ----------- ----------- Property, plant, and equipment - net 6,440,132 6,845,650 ----------- ----------- TOTAL ASSETS $66,043,039 $60,571,561 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 9,384,724 $10,004,244 Accrued royalty expense 2,336,128 2,051,721 Accrued payroll expenses 1,466,925 1,143,063 Accrued selling expenses 2,610,841 2,387,029 Federal and state income taxes payable -- 159,600 ----------- ----------- Total current liabilities 15,798,618 15,745,657 ----------- ----------- DEFERRED TAX LIABILITY 816,900 816,900 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock 1,038,041 508,800 Paid-In capital 7,193,576 6,534,308 Retained earnings 41,417,674 37,047,709 Less: 14,818 shares of treasury stock (at cost) (221,770) (81,813) ----------- ----------- Total stockholders' equity 49,427,521 44,009,004 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY $66,043,039 $60,571,561 =========== ===========
See accompanying notes to condensed consolidated financial statements. Page 1 4 THE FIRST YEARS INC. Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- NET SALES $34,797,802 $32,697,252 $70,484,407 $60,519,296 COST OF PRODUCTS SOLD 20,649,650 19,353,753 42,087,280 35,998,692 ----------- ----------- ----------- ----------- GROSS PROFIT 14,148,152 13,343,499 28,397,127 24,520,604 SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 9,821,800 9,882,207 20,209,906 18,286,407 ----------- ----------- ----------- ----------- OPERATING INCOME 4,326,352 3,461,292 8,187,221 6,234,197 OTHER INCOME (EXPENSES): Interest expense -- (15,393) (850) (25,699) Interest income 125,020 7,164 203,329 22,066 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 4,451,372 3,453,063 8,389,700 6,230,564 PROVISION FOR INCOME TAXES 1,802,800 1,443,500 3,397,800 2,554,500 ----------- ----------- ----------- ----------- NET INCOME $ 2,648,572 $ 2,009,563 $ 4,991,900 $ 3,676,064 =========== =========== =========== =========== BASIC EARNINGS PER SHARE $ 0.26 $ 0.20 $ 0.49 $ 0.37 =========== =========== =========== =========== DILUTED EARNINGS PER SHARE $ 0.25 $ 0.19 $ 0.47 $ 0.36 =========== =========== =========== =========== CASH DIVIDENDS PAID PER SHARE $ 0.06 $ 0.05 $ 0.06 $ 0.05 =========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements. Page 2 5 THE FIRST YEARS INC. Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997 (Unaudited)
1998 1997 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,991,900 $ 3,676,064 Adjustments to reconcile net income to net cash provided by (used for) operations: Depreciation 888,746 753,649 Provision for doubtful accounts 243,308 169,564 Loss on disposal of equipment 181,458 -- Increase (decrease) arising from working capital items: Accounts receivable 844,550 (6,531,519) Inventories 2,490,181 (217,056) Prepaid expenses and other assets (139,859) (80,892) Accounts payable and accrued expenses (619,520) 115,666 Accrued royalties 284,407 866,579 Accrued payroll expense 323,862 1,102,112 Accrued selling expenses 223,812 (343,087) Federal and state income taxes - net (159,600) 9,200 ----------- ----------- Net cash provided by (used for) operating activities 9,553,245 (479,720) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property, plant, and equipment (664,686) (1,120,542) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash Dividend (621,935) (496,746) Common stock issued under stock option plans 558,252 164,235 Tax benefit of stock option compensation 490,300 100,000 Net proceeds from short-term borrowings -- 200,000 Repayment of industrial revenue bonds -- (66,666) ----------- ----------- Net cash provided by (used for) financing activities 426,617 (99,177) ----------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,315,176 (1,699,439) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,697,040 4,164,587 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $17,012,216 $ 2,465,148 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for: Interest $ 850 $ 25,699 =========== =========== Income taxes $ 3,164,400 $ 2,518,970 =========== =========== SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES: Issuance of treasury stock $ 139,957 -- =========== ===========
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 balance sheet as of that date. All other condensed 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 June 30, 1998, and the results of operations and cash flows for the periods ended June 30, 1998 and 1997. 2. The Company has 30,000,000 authorized shares of $.10 par value common stock with 10,365,588 and 10,169,182 shares issued and outstanding as of June 30, 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 100% stock dividend paid to stockholders of record on May 29, 1998. Accordingly, all per share and stock option data presented in these financial statements have been restated to reflect the split. The par value for the new shares issued amounted to $519,020 and was transferred from paid-in capital. Distribution of the new shares were paid on June 29, 1998. Additionally, on May 8, 1998 the Board of Directors authorized a $0.06 per share annual cash dividend paid 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:
Income Shares Per Share (Numerator) (Denominator) Amount ----------- ------------- --------- For the Three Months Ended June 30, 1998: Net income................................... $2,648,572 ---------- Basic EPS: Income available to common stockholders............................... 2,648,572 10,329,748 $0.26 ===== Effect of Dilutive Securities - Incentive stock options..................... 381,895 ---------- ---------- Diluted EPS: Income available to common stockholders and assumed conversions.................... $2,648,572 10,711,643 $0.25 ========== ========== =====
Page 4 7 THE FIRST YEARS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Con't) 3. Computation of Earnings Per Share (con't)
Income Shares Per Share (Numerator) (Denominator) Amount ----------- ------------- --------- For the Six Months Ended June 30, 1998: Net income................................... $4,991,900 ---------- Basic EPS: Income available to common stockholders..... 4,991,900 10,263,916 $0.49 ===== Effect of Dilutive Securities - Incentive stock options.................... 388,915 ---------- ---------- Diluted EPS: Income available to common stockholders and assumed conversions.................... $4,991,900 10,652,831 $0.47 ========== ========== ===== For the Three Months Ended June 30, 1997: Net income................................... $2,009,563 ---------- Basic EPS: Income available to common stockholders............................... 2,009,563 9,936,434 $0.20 ===== Effect of Dilutive Securities - Incentive stock options..................... 496,914 ---------- ---------- Diluted EPS: Income available to common stockholders and assumed conversions.................... $2,009,563 10,433,348 $0.19 ========== ========== ===== For the Six Months Ended June 30, 1997: Net income................................... $3,676,064 ---------- Basic EPS: Income available to common stockholders..... 3,676,064 9,918,956 $0.37 ===== Effect of Dilutive Securities - Incentive stock options..................... 433,766 ---------- ---------- Diluted EPS: Income available to common stockholders and assumed conversions.................... $3,676,064 10,352,722 $0.36 ========== ========== =====
Page 5 8 THE FIRST YEARS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Con't) 3. Computation of Earnings Per Share (con't) As of June 30, 1998, no options were anti-dilutive. As of June 30, 1997, options to purchase 6,000 shares of common stock at $9 5/8 per share, 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, were still outstanding at June 30, 1998. 4. The results of operations for the six month period ended June 30, 1998 and 1997 are not necessarily indicative of the results to be expected for the full year. 5. During the first six 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 $2,500,000 of which $200,000 remained outstanding as of June 30, 1997 at a weighted average interest rate of 7.38%. 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. SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" will be effective for the Company's fiscal year ended December 31, 2000. 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 the Annual Report on Form 10K for the year ended December 31,1997, filed with the Securities and Exchange Commission. Net sales for the first six months of 1998 were $70.5 million, an increase of $10.0 million or 16.5%, as compared to $60.5 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 six months of 1998 was $42.1 million, an increase of $6.1 million or 16.9%, as compared to $36.0 million for the comparable period last year. As a percentage of sales, cost of products sold in the first six months of 1998 and 1997 were comparable at 59.7% and 59.5%, respectively. Selling, general, and administrative expenses for the first six months of 1998 were $20.2 million, an increase of $1.9 million or 10.5%, as compared to $18.3 million over such expenses for the first six months of 1997. The increase resulted primarily from costs related to increased sales volume; payroll and payroll related costs and product development. As a percentage of net sales, selling, general, and administrative expenses for the first six months of 1998 decreased to 28.7% from 30.2% in the comparable period of 1997. The decrease was caused by 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 to others if they fail 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 decreased to 40.5% for the first six months of 1998 from 41.0% for the first six months of 1997. Net working capital increased by $5.8 million in the first six months primarily due to profitable operations. Accounts receivable decreased by $1.1 million and inventories decreased by $2.5 due to normal business fluctuations. Cash increased by $9.3 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 six months of 1998, the Company incurred no borrowings under the line and had no balances outstanding as of June 30, 1998. During the first six months of 1997, the Company borrowed various amounts up to $2.5 million of which $200,000 remained outstanding as of June 30, 1997. The Company did not incur any other short-term borrowings during the first six 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. SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" will be effective for the Company's fiscal year ended December 31, 2000. The Company has not determined the effects, if any, that these standards will have on its consolidated financial statements. Page 8 11 THE FIRST YEARS INC. PART II - OTHER INFORMATION Items 1 through 3 - Not Applicable Item 4: Submission of Matters to a Vote of Security holders. (a) An Annual Meeting of the Stockholders of The First Years Inc. was held on May 21, 1998. (c) The following matters were voted upon at such Annual Meeting and the following votes were cast as to each such matter: i. Election of Class III Directors:
Number of Shares ---------------------- Withheld For Authority --------- --------- Ronald J. Sidman 3,975,519 104,425 Benjamin Peltz 3,976,216 103,728 ii. Proposal to approve an amendment to the Company's 1993 Equity Incentive Plan: Number of Shares ---------------- For 2,340,747 Against 552,543 Abstain 19,820 Broker Non-Vote 1,166,834 iii. Proposal to approve an amendment to the Company's 1993 Stock Option Plan for Directors: Number of Shares ---------------- For 2,710,137 Against 183,825 Abstain 19,148 Broker Non-Vote 1,166,834 iv. Proposal to ratify the selection of Deloitte & Touche LLP as auditors for the Company for the fiscal year 1998. Number of Shares ---------------- For 4,070,558 Against 2,782 Abstentions 6,604
Page 9 12 THE FIRST YEARS INC. PART II - OTHER INFORMATION (con't) Item 5: Deadlines for Submission of Stockholder Proposals i. Proposals of Stockholders intended to be presented at the 1999 Annual Meeting of Stockholders and included in the Company's proxy statement and proxy for such annual Meeting, pursuant to Rule 240.14a-8 of the Securities and Exchange Act of 1934 ("Rule 14a-8"), must be received by the Company at its principal executive offices not later than December 15, 1998. ii. As established by the Company's advance notice by-law provision, proposals of Stockholders intended to be presented at the 1999 Annual Meeting of Stockholders, but which are submitted outside the processes of Rule 14a-8, and not intended to be included in the Company's proxy statement or proxy for such Annual Meeting, must be received by the Company at its principal executive offices not later than December 15, 1998. 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 (b) No reports on Form 8-K have been filed during the past quarter covered by this report. Page 10 13 THE FIRST YEARS INC. 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 8/12/98 /s/ John R. Beals -------------------------------------- John R. Beals, Senior Vice President and Treasurer, Duly Authorized Officer and Principal Financial Officer Page 11 14 THE FIRST YEARS INC. EXHIBIT INDEX Exhibit Description Page ------- ----------- ---- 27 Financial Data Schedule 13 Page 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 U.S. DOLLARS 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 1 17,012,216 0 19,059,368 185,000 21,882,700 59,602,907 15,653,300 9,213,168 66,043,039 15,798,618 0 0 0 1,038,041 48,389,480 66,043,039 70,484,407 70,687,736 42,087,280 62,297,186 0 0 850 8,389,700 3,397,800 4,991,900 0 0 0 4,991,900 0.49 0.47
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