-----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, QFH8JAQhooTw42G/Yb7ngtZzEHD40/1NfmNGfK9CoO2rvdyJ8G5mElKdmEQMCZOd NXoCBHQkeNB/B6hOJXT/3A== 0000950123-97-006923.txt : 19970815 0000950123-97-006923.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950123-97-006923 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RUSS BERRIE & CO INC CENTRAL INDEX KEY: 0000739878 STANDARD INDUSTRIAL CLASSIFICATION: DOLLS & STUFFED TOYS [3942] IRS NUMBER: 221815337 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08681 FILM NUMBER: 97662828 BUSINESS ADDRESS: STREET 1: 111 BAUER DR CITY: OAKLAND STATE: NJ ZIP: 07436 BUSINESS PHONE: 2013379000 MAIL ADDRESS: STREET 2: 111 BAUER DRIVE CITY: OAKLAND STATE: NJ ZIP: 07436 FORMER COMPANY: FORMER CONFORMED NAME: BERRIE RUSS & CO INC DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) {X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR { } 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 1-8681 RUSS BERRIE AND COMPANY, INC. (Exact name of registrant as specified in its charter) New Jersey 22-1815337 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 111 Bauer Drive, Oakland, New Jersey 07436 (Address of principal executive offices) (Zip Code) (201) 337-9000 ----------------------------------------------------- (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 ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AT JULY 22, 1997 ----- ---------------------------- Common stock, $.10 stated value 21,885,123 2 RUSS BERRIE AND COMPANY, INC. INDEX PAGE PART I - FINANCIAL INFORMATION NUMBER ------ Item 1. Financial Statements Consolidated Balance Sheet as of June 30, 1997 and December 31, 1996 3 Consolidated Statement of Income for the three month and the six month periods ended June 30, 1997 and 1996 4 Consolidated Statement of Cash Flows for the six month periods ended June 30, 1997 and 1996 5 Notes to Consolidated Financial Statements 6 and 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 10 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 2 3 PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS RUSS BERRIE AND COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
(UNAUDITED) ASSETS JUNE 30, DECEMBER 31, 1997 1996 --------- --------- Current assets Cash and cash equivalents ........................ $ 134,082 $ 52,257 Short-term investments ........................... 63,493 -- Accounts receivable, trade, less allowances; $2,515 in 1997 and $2,258 in 1996 .............. 44,820 49,355 Inventories - net ................................ 54,175 54,350 Prepaid expenses and other current assets ........ 12,501 2,558 Deferred income taxes ............................ 11,456 9,707 Net current assets of discontinued operations .... -- 47,386 --------- --------- TOTAL CURRENT ASSETS .................. 320,527 215,613 Property, plant and equipment - net ................ 21,145 21,765 Other assets ....................................... 9,143 2,948 Net assets of discontinued operations .............. -- 36,640 --------- --------- TOTAL ASSETS .......................... $ 350,815 $ 276,966 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable ................................. $ 4,847 $ 3,709 Accrued expenses ................................. 22,007 18,776 Accrued income taxes ............................. 29,725 5,755 --------- --------- TOTAL CURRENT LIABILITIES ............. 56,579 28,240 Commitments and contingencies Shareholders' equity Common stock: $.10 stated value; authorized 50,000,000 shares; issued 1997, 24,718,681 shares; 1996, 24,333,952 shares ................ 2,472 2,433 Additional paid in capital ....................... 48,643 43,280 Retained earnings ................................ 289,513 240,373 Foreign currency translation adjustments ......... (472) 497 Treasury stock, at cost (2,853,714 shares at June 30, 1997 and 2,454,814 shares at December 31, 1996) ............................. (45,920) (37,857) --------- --------- TOTAL SHAREHOLDERS' EQUITY ............ 294,236 248,726 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .................. $ 350,815 $ 276,966 ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 3 4 RUSS BERRIE AND COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED) (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1997 1996 1997 1996 --------- --------- --------- --------- Net sales ......................................... $ 58,479 $ 41,776 $ 120,550 $ 98,342 Cost of sales ..................................... 26,408 19,647 53,872 45,849 --------- --------- --------- --------- GROSS PROFIT ................................... 32,071 22,129 66,678 52,493 Selling, general and administrative expense ....... 26,616 20,943 52,016 45,515 Investment and other income-net ................... 1,476 595 2,128 5,823 --------- --------- --------- --------- INCOME FROM CONTINUING OPERATIONS BEFORE TAXES ................................. 6,931 1,781 16,790 12,801 Provision for income taxes on continuing operations ........................ 2,143 637 5,531 4,742 --------- --------- --------- --------- NET INCOME FROM CONTINUING OPERATIONS .......... 4,788 1,144 11,259 8,059 NET (LOSS) INCOME FROM DISCONTINUED OPERATIONS . (1,065) 326 (1,324) 1,007 GAIN FROM SALE OF DISCONTINUED OPERATIONS ...... 46,700 -- 46,700 -- --------- --------- --------- --------- NET INCOME ..................................... $ 50,423 $ 1,470 $ 56,635 $ 9,066 ========= ========= ========= ========= NET INCOME (LOSS) PER SHARE: Continuing operations .......................... $ 0.22 $ 0.05 $ 0.51 $ 0.37 Discontinued operations ........................ (0.05) 0.02 (0.06) 0.05 Gain from sale of discontinued operations ...... 2.12 -- 2.12 -- --------- --------- --------- --------- Total ..................................... $ 2.29 $ 0.07 $ 2.57 $ 0.42 ========= ========= ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 4 5 RUSS BERRIE AND COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS)
(UNAUDITED) SIX MONTHS ENDED JUNE 30, 1997 1996 --------- --------- CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES: Net income ........................................... $ 56,635 $ 9,066 Adjustments to reconcile net income to net cash provided by continuing operating activities: Net loss (income) - discontinued operations ...... 1,324 (1,007) Depreciation ........................................ 1,456 1,612 Amortization of intangible assets ................... 75 78 Provision for accounts receivable reserves .......... 1,067 558 Gain on sale of subsidiary .......................... -- (4,800) Gain from sale of discontinued operations ........... (75,300) -- Gains from sale or disposal of fixed assets ......... 139 (14) Changes in assets and liabilities, net of effect of acquisitions and dispositions: Accounts receivable .......................... 3,468 3,290 Inventories .................................. 175 2,142 Deferred income taxes ........................ (1,749) -- Prepaid expenses and other current assets .... (9,943) (116) Other assets ................................. (6,270) 360 Accounts payable ............................. 1,138 (301) Accrued expenses ............................. 3,231 (3,819) Accrued income taxes ......................... 23,970 2,104 --------- --------- Total adjustments .......................... (57,219) 87 --------- --------- Net cash provided by (used in) continuing operating activities .................. (584) 9,153 CASH FLOWS FROM INVESTING ACTIVITIES: Decrease (increase) in short-term investments ........ (63,493) -- Proceeds from sale of fixed assets ................... 124 114 Capital expenditures ................................. (1,363) (1,169) Sale of subsidiary ................................... -- 18,858 Sale of discontinued operations ...................... 147,097 -- --------- --------- Net cash provided by (used in) investing activities .................. 82,365 17,803 CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock ............................. 5,402 2,081 Dividends ............................................ (7,495) (6,491) Treasury Stock ....................................... (8,063) -- --------- --------- Net cash provided by (used in) financing activities .................. (10,156) (4,410) Effect of exchange rates ............................. (705) (104) Cash provided by discontinued operations ............................ 10,905 (388) --------- --------- Net increase in cash and cash equivalents ............ 81,825 22,054 Cash and cash equivalents at beginning of year ....... 52,257 35,802 --------- --------- Cash and cash equivalents at end of year ............. $ 134,082 $ 57,856 ========= ========= CASH PAID DURING THE PERIOD FOR: Interest ........................................ $ 69 $ 69 Income taxes .................................... $ 5,421 $ 2,390
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 5 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 The information furnished reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Results for interim periods are not necessarily an indication of results to be expected for the year. On May 2, 1997, the Company completed the sale of substantially all of the assets of its wholly-owned subsidiaries, Cap Toys, Inc. and OddzOn Products, Inc., to a wholly-owned subsidiary of Hasbro, Inc. These two subsidiaries represented the Company's Toy business segment. The operating results of the Toy business segment have been classified as discontinued operations and the financial statements have been restated to reflect this presentation. See Note 4 regarding discontinued operations. The transaction resulted in a gain of $75,300,000 before tax or $46,700,000 ($2.12 per share) after tax in the period ended June 30, 1997. Investment and other income-net for the six months ended June 30, 1996 includes the gain on the sale of the Company's subsidiary Papel/Freelance, Inc. of approximately $4,800,000 before tax or $3,000,000 ($0.14 per share) after tax. An additional $2,000,000 before tax gain will be recognized contingent upon satisfaction of the terms of a transitional agreement. Selling, general and administrative expense for the six months ended June 30, 1997 includes a provision of $1,500,000 before tax or $945,000 ($0.04 per share) after tax for costs associated with closing all remaining retail operations. Included in the results for the six months ended June 30, 1996 is a provision of $900,000 before tax or $575,000 ($0.03 per share) after tax for costs associated with closing certain of the Company's retail stores. NOTE 2 The weighted average number of shares outstanding during the three and six month periods ended June 30, 1997 were 22,005,603 and 22,044,590, shares, respectively, compared to the three and six month periods ended June 30, 1996 of 21,670,935 and 21,628,476 shares, respectively. Employee stock option plans did not have a material dilutive effect on the earnings per share calculation. NOTE 3 Cash dividends of $3,722,827 ($0.17 per share) were paid on June 6, 1997 to shareholders of record of the Company's Common Stock on May 23, 1997. Cash dividends of $7,494,673 ($0.17 per share per quarter) were paid in the six month period ended June 30, 1997. Cash dividends of $3,250,299 ($0.15 per share) were paid on June 5, 1996 to shareholders of record of the Company's Common Stock on May 20, 1996. Cash dividends of $6,490,964 ($0.15 per share per quarter) were paid in the six month period ended June 30, 1996. 6 7 NOTE 4 - DISCONTINUED OPERATIONS On May 2, 1997, the Company completed the sale of substantially all of the assets of its wholly-owned subsidiaries, Cap Toys, Inc. and OddzOn Products, Inc., to a wholly-owned subsidiary of Hasbro, Inc. for a purchase price of $166,650,000, subject to adjustment based on the net tangible value of the assets sold on the day of closing. The sale transaction resulted in a gain on sale of discontinued operations for the six months ended June 30, 1997 of $75,300,000 before tax or $46,700,000 ($2.12 per share) after tax. The Company intends to use the proceeds of the sale to pursue acquisitions of companies within the gift industry and for general corporate purposes, including the repurchase of a portion of the Company's outstanding stock pursuant to the previously announced stock purchase program. Amounts included in net (loss) income from discontinued operations for the Toy business segment for the three and six months ended June 30 are as follows:
THREE MONTHS ENDED JUNE 30, 1997 1996 - --------------------------- ------------ ------------ Net sales $ 12,162,000 $ 23,907,000 (Loss) income before taxes (1,806,000) 510,000 (Benefit) provision for income taxes (741,000) 184,000 ------------ ------------ Net (loss) income $ (1,065,000) $ 326,000 ============ ============ SIX MONTHS ENDED JUNE 30, 1997 1996 - ------------------------- ------------ ------------ Net sales $ 38,614,000 $ 50,222,000 (Loss) income before taxes (2,483,000) 1,577,000 (Benefit) provision for income taxes (1,159,000) 570,000 ------------ ------------ Net (loss) income $ (1,324,000) $ 1,007,000 ============ ============
7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF CONTINUING OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 The Company's net sales for the six months ended June 30, 1997 were $120,550,000 compared to $98,342,000 for the six months ended June 30, 1996. This represents an increase of $22,208,000 or 22.6%. This increase in net sales reflects the positive customer response to the Company's redesign of its gift product line focusing on coordinated in store product offerings. Cost of sales were 44.7% of net sales for the six months ended June 30, 1997 compared to 46.6% for the same period in 1996. The decrease primarily reflects higher gross profit margins on sales of certain of the Company's product line concepts. Selling, general and administrative expense was $52,016,000 or 43.1% of net sales for the six months ended June 30, 1997 compared to $45,515,000 or 46.3% of net sales for the six months ended June 30, 1996. As a percent of net sales, the decrease in selling, general and administrative expense can be attributed to fixed costs which were absorbed by the increase in net sales. Included in the selling, general and administrative expense for the six months ended June 30, 1997 is a provision of $1,500,000 for costs associated with closing all remaining retail operations. The six month period ended June 30, 1996 includes a provision of $900,000 related to costs associated with closing certain of the Company's retail stores. Excluding these provisions, selling, general and administrative expense increased $5,901,000 or 13.2% when compared to the prior year. This increase can be primarily attributed to the increase in expenses required to support the higher sales levels, in particular compensation and travel costs associated with the salesforce. Investment and other income of $2,128,000 for the six months ended June 30, 1997 compares to $5,823,000 for the six months ended June 30, 1996. Included in the results for the six months ended June 30, 1996 is a gain of approximately $4,800,000 before tax related to the sale of the Company's Papel/Freelance, Inc. subsidiary. Excluding this gain, investment and other income increased $1,105,000 which can be primarily attributed to increased investment income relative to the Company's short-term investment portfolio resulting from higher investment balances as a result of the proceeds from the sale of the Toy business segment. The provision for income taxes as a percent of income before taxes for the six months ended June 30, 1997 was 32.9% compared to 37.0% in the same period in the prior year. This decrease can be primarily attributed to lower tax provisions related to certain foreign subsidiaries during the six months ended June 30, 1997. 8 9 Net income from continuing operations for the six months ended June 30, 1997 of $11,259,000 compares to net income from continuing operations of $8,059,000 for the same period last year. Included in the results for the six months ended June 30, 1996 is the gain on the sale of the Company's subsidiary Papel/Freelance, Inc., of $3,000,000 after tax. Excluding this gain, net income from continuing operations increased $6,200,000 or 122.6%. This increase can be attributed to the increase in net sales, improved gross profit margins and increased investment income partially offset by the increase in selling, general and administrative expense. RESULTS OF CONTINUING OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1997 The Company's net sales for the three months ended June 30, 1997 were $58,479,000 compared to $41,776,000 for the three months ended June 30, 1996. This represents an increase of $16,703,000 or 40.0%. This increase in net sales reflects the growing positive customer response to the Company's redesign of its gift product line focusing on coordinated in store product offerings. Cost of sales were 45.2% of net sales for the three months ended June 30, 1997 compared to 47.0% for the same period in 1996. The decrease primarily reflects higher gross profit margins on sales of certain of the Company's product line concepts. Selling, general and administrative expense was $26,616,000 or 45.5% of net sales for the three months ended June 30, 1997 compared to $20,943,000 or 50.1% of net sales for the three months ended June 30, 1996. As a percent of net sales, the decrease in selling, general and administrative expense can be attributed to fixed costs which were absorbed by the increase in net sales. Included in the selling, general and administrative expense for the three months ended June 30, 1997 is a provision of $1,500,000 for costs associated with closing all remaining retail operations. Excluding this provision, selling, general and administrative expense increased $4,173,000 or 19.9% when compared to the prior year. This increase can be primarily attributed to the increase in expenses required to support the higher sales levels, in particular compensation and travel costs associated with the salesforce. Investment and other income of $1,476,000 for the three months ended June 30, 1997 compares to $595,000 for the three months ended June 30, 1996. This increase can be attributed to increased investment income relative to the Company's short-term investment portfolio resulting from higher investment balances. The provision for income taxes as a percent of income before taxes for the three months ended June 30, 1997 was 30.9% compared to 35.8% in the same period in the prior year. This decrease can be primarily attributed to lower tax provisions related to certain foreign subsidiaries during the three months ended June 30, 1997. Net income from continuing operations for the three months ended June 30, 1997 of $4,788,000 compares to net income from continuing operations of $1,144,000 for the same period last year. Net income from continuing operations has increased $3,644,000 or 318.5%. This increase can be attributed to the increase in net sales, improved gross profit margins and increased investment income partially offset by the increase in selling, general and administrative expense. 9 10 DISCONTINUED OPERATIONS On May 2, 1997, the Company completed the sale of substantially all of the assets of its wholly-owned subsidiaries, Cap Toys, Inc. and OddzOn Products, Inc., to a wholly-owned subsidiary of Hasbro, Inc. for a purchase price of $166,650,000, subject to adjustment based on the net tangible value of the assets sold on the day of closing. These two subsidiaries represented the Company's Toy business segment. The operating results of the Toy business segment have been classified as discontinued operations and the financial statements have been restated to reflect this presentation. The sale transaction resulted in a gain of $75,300,000 before tax or $46,700,000 ($2.12 per share) after tax based on the net tangible value of the assets sold on the day of closing less costs associated with the transaction. Net sales of the Company's discontinued operations for the three and six month periods ended June 30, 1997 were $12,162,000 and $38,614,000, respectively, compared to the three and six month periods ended June 30, 1996 of $23,907,000 and $50,222,000, respectively. Net loss from discontinued operations for the three and six month periods ended June 30, 1997 of $1,065,000 and $1,324,000, respectively, compares to net income of $326,000 and $1,007,000, respectively, for the same period last year. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1997, the Company had cash and cash equivalents and short-term investments of $197,575,000 compared to cash and cash equivalents of $52,257,000 at December 31, 1996. On May 2, 1997, the Company sold substantially all of the assets of its wholly-owned subsidiaries, Cap Toys, Inc. and OddzOn Products, Inc. The sale resulted in an increase in cash and cash equivalents and short-term investments of $147,097,000, which represents the purchase price less costs associated with the transaction. Working capital requirements during the six months ended June 30, 1997 were met entirely through internally generated funds. The Company remains in a highly liquid position and believes that the resources available from operations and bank lines of credit are sufficient to meet the foreseeable requirements of its business. The Company enters into forward exchange contracts and currency options, principally to hedge the currency risk associated with the purchase of inventory by certain foreign subsidiaries. Gains and losses are reported as a component of the related transaction. The Company does not anticipate any material adverse impact on its results of operations or financial position from these contracts. The Company intends to use the proceeds of the sale of the toy companies to pursue acquisitions of companies within the gift industry and for general corporate purposes, including the repurchase of a portion of the Company's outstanding stock, pursuant to the previously announced stock purchase program. During the period ended June 30, 1997, the Company utilized $8,063,000 for the purchase of 398,900 shares of Company stock. 10 11 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Documents filed as part of this Report. 27.1 Financial Data Schedule. b) During the quarter ended June 30, 1997, no reports on Form 8-K were filed. 11 12 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) 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. RUSS BERRIE AND COMPANY, INC. (Registrant) August 14, 1997 By /s/ Paul Cargotch - --------------- ---------------------------------- Date Paul Cargotch Executive Vice President, Chief Financial Officer, Assistant Secretary and Director 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 134,082 63,493 47,335 2,515 54,175 320,527 47,582 26,437 350,815 56,579 0 0 0 2,472 291,764 350,815 120,550 120,550 0 53,872 0 0 0 16,790 5,531 11,259 45,376 0 0 56,635 2.57 2.57
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