-----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, CDu12FvtbPuz2sMDmZaRVfapp1MaAoyCoK98vxqKcadRsBzGDWMu82egMDzIyLzr 6elra9d5QxSqE9pHoxU65Q== 0000950123-00-005066.txt : 20000516 0000950123-00-005066.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950123-00-005066 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: SEC FILE NUMBER: 001-08681 FILM NUMBER: 633063 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 RUSS BERRIE AND COMPANY, INC. 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 ........... March 31, 2000 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 MAY 10, 2000 Common stock, $0.10 stated value 20,426,287 2 RUSS BERRIE AND COMPANY, INC. INDEX PAGE PART I - FINANCIAL INFORMATION NUMBER Item 1. Financial Statements Consolidated Balance Sheet as of March 31, 2000 and December 31, 1999 3 Consolidated Statement of Income for the three months ended March 31, 2000 and 1999 4 Consolidated Statement of Cash Flows for the three months ended March 31, 2000 and 1999 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) MARCH 31, DECEMBER 31, ASSETS 2000 1999 --------- --------- Current assets Cash and cash equivalents ......................... $ 68,945 $ 64,908 Marketable securities ............................. 135,599 137,143 Accounts receivable, trade, less allowances of $4,155 in 2000 and $3,731 in 1999 .............. 66,507 61,385 Inventories - net ................................. 40,823 44,307 Prepaid expenses and other current assets ......... 9,393 9,503 Deferred income taxes ............................. 6,866 6,805 --------- --------- TOTAL CURRENT ASSETS ..................... 328,133 324,051 Property, plant and equipment - net ................. 28,117 28,297 Other assets ........................................ 2,973 3,072 --------- --------- TOTAL ASSETS ............................. $ 359,223 $ 355,420 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable .................................. $ 4,530 $ 6,228 Accrued expenses .................................. 19,596 23,488 Accrued income taxes .............................. 10,052 6,106 --------- --------- TOTAL CURRENT LIABILITIES ................ 34,178 35,822 --------- --------- Commitments and contingencies Shareholders' equity Common stock: $.10 stated value; authorized 50,000,000 shares; issued 2000, 25,371,074 shares; 1999, 25,325,849 shares ................. 2,537 2,532 Additional paid in capital ........................ 61,863 60,957 Retained earnings ................................. 358,620 351,302 Accumulated other comprehensive (loss) ............ (3,230) (2,547) Treasury stock, at cost (4,861,814 shares at March 31, 2000 and 4,752,414 shares at December 31, 1999) .............................. (94,745) (92,646) --------- --------- TOTAL SHAREHOLDERS' EQUITY ............... 325,045 319,598 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 359,223 $ 355,420 ========= =========
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) THREE MONTHS ENDED MARCH 31, 2000 1999 ------- ------- Net sales ................................. $76,108 $75,403 Cost of sales ............................. 30,471 30,277 ------- ------- GROSS PROFIT ............................ 45,637 45,126 Selling, general and administrative expense 29,592 28,768 Investment and other income-net ........... 1,725 2,022 ------- ------- INCOME BEFORE TAXES .................... 17,770 18,380 Provision for income taxes ................ 5,931 6,546 ------- ------- NET INCOME ................................ $11,839 $11,834 ======= ======= NET INCOME PER SHARE: Basic ............................... $ .58 $ .54 ======= ======= Diluted ............................. $ .57 $ .53 ======= =======
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) THREE MONTHS ENDED MARCH 31, 2000 1999 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ................................................... $ 11,839 $ 11,834 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation ............................................. 985 718 Amortization of intangible assets ........................ 29 30 Amortization of premium and discount on marketable debt securities, net .................................. 121 -- Provision for accounts receivable reserves ............... 625 597 Deferred income taxes .................................... (61) 106 Net loss from sale or disposal of property, plant and equipment ......................................... 11 163 Changes in assets and liabilities: Accounts receivable ................................ (5,747) (10,188) Inventories - net .................................. 3,484 8,653 Prepaid expenses and other current assets .......... 110 123 Other assets ....................................... 70 (87) Accounts payable ................................... (1,698) (616) Accrued expenses ................................... (3,892) (754) Accrued income taxes ............................... 3,946 3,389 -------- -------- Total adjustments ................................ (2,017) 2,134 -------- -------- Net cash provided by operating activities . 9,822 13,968 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities ............................ (8,768) (11,689) Proceeds from sale of marketable securities .................. 9,916 14,246 Proceeds from sale of property, plant and equipment .......... 15 18 Capital expenditures ......................................... (1,087) (1,652) -------- -------- Net cash provided by investing activities . 76 923 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock ....................... 911 818 Dividends paid to shareholders ............................... (4,521) (4,403) Purchase of treasury stock ................................... (2,099) (26,648) -------- -------- Net cash (used in) financing activities ... (5,709) (30,233) Effect of exchange rates on cash and cash equivalents ........ (152) (484) -------- -------- Net increase (decrease) in cash and cash equivalents ......... 4,037 (15,826) Cash and cash equivalents at beginning of period ............. 64,908 73,064 -------- -------- Cash and cash equivalents at end of period ................... $ 68,945 $ 57,238 ======== ======== CASH PAID DURING THE PERIOD FOR: Interest ................................................ $ 43 $ 35 Income taxes ............................................ $ 1,985 $ 2,671
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 5 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - INTERIM CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited interim consolidated financial statements have been prepared by Russ Berrie and Company, Inc. and Subsidiaries (the "Company") in accordance with generally accepted accounting principles for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under generally accepted accounting principles have been condensed or omitted pursuant to such principles and regulations. The information furnished reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the interim periods presented. Results for interim periods are not necessarily an indication of results to be expected for the year. This report on Form 10-Q for the three months ended March 31, 2000 should be read in conjunction with the Company's annual report on Form 10-K for its year ended December 31, 1999. Certain prior year amounts have been reclassified to conform with current year's presentation. NOTE 2 - EARNINGS PER SHARE A reconciliation of weighted average common shares outstanding to weighted average common shares outstanding assuming dilution is as follows:
THREE MONTHS ENDED MARCH 31, 2000 1999 ---------- ---------- Average common shares outstanding ................. 20,574,000 22,008,000 Dilutive effect of common shares issuable (1) ..... 46,000 158,000 ---------- ---------- Average common shares outstanding assuming dilution 20,620,000 22,166,000 ========== ==========
(1) Issuable under stock option plans. The Notes to these consolidated financial statements reflect basic earnings per share unless otherwise stated or indicated. NOTE 3 - DIVIDENDS Cash dividends of $4,521,277 ($0.22 per share) were paid on March 24, 2000 to shareholders of record of the Company's Common Stock on March 10, 2000. Cash dividends of $4,403,005 ($0.20 per share) were paid in the three months ended March 31, 1999. 6 7 NOTE 4 - COMPREHENSIVE INCOME In accordance with Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income", comprehensive income, representing all changes in Shareholders' equity during the period other than changes resulting from the issuance or repurchase of the Company's common stock and payment of dividends, is reconciled to net income for the three months ended March 31, 2000 and 1999 as follows:
2000 1999 ------------ ------------ Net income .............................. $ 11,839,000 $ 11,834,000 Other comprehensive (loss), net of taxes: Foreign currency translation adjustments ..................... (408,000) (633,000) Net unrealized loss on securities available-for-sale .............. (275,000) (231,000) ------------ ------------ Other comprehensive (loss) .............. (683,000) (864,000) ------------ ------------ Comprehensive income .................... $ 11,156,000 $ 10,970,000 ============ ============
NOTE 5 - PENDING ACCOUNTING CHANGE ACCOUNTING FOR DERIVATIVES AND HEDGING In June 1999, the Financial Accounting Standards Board issued SFAS No. 137, "Accounting for Derivatives and Hedging Activities - Deferral of the Effective Date of SFAS No. 133" (SFAS No. 137), which deferred the effective date of SFAS No. 133 for an additional year. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133) establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. Under the deferral permitted by SFAS No. 137, SFAS No. 133 is now effective for fiscal years beginning after June 15, 2000, calendar year 2001 for the Company, and cannot be applied retroactively. The Company has not yet quantified the impacts of adopting SFAS No. 133 on the consolidated financial statements and has not determined the timing or method of adoption, however, such adoption could increase volatility in earnings and other comprehensive income. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 The Company's net sales for the three months ended March 31, 2000 were $76,108,000 compared to $75,403,000 for the three months ended March 31, 1999. This represents an increase of $705,000, or less than 1.0%. The Company's product line, including recent product introductions, continues to receive a positive response from customers worldwide. Cost of sales were 40.0% of net sales for the three months ended March 31, 2000 remaining relatively unchanged from 40.2% for the same period in 1999. Selling, general and administrative expense was $29,592,000 or 38.9% of net sales for the three months ended March 31, 2000 compared to $28,768,000 or 38.2% of net sales for the three months ended March 31, 1999, an increase of $824,000 or 2.9% compared to the prior year. This increase can be attributed to the establishment of the Company's new subsidiary in Australia during the quarter ended March 31, 2000. Investment and other income of $1,725,000 for the three months ended March 31, 2000 compares to $2,022,000 for the three months ended March 31, 1999. This decrease can be primarily related to decreased investment income attributable to the Company's investment portfolio. The provision for income taxes as a percent of income before taxes for the three months ended March 31, 2000 was 33.4% compared to 35.6% in the same period in the prior year. This decrease is due primarily to the lower effective tax rate of the Company's domestic operations. Net income for the three months ended March 31, 2000 of $11,839,000 compares to net income of $11,834,000 for the same period last year. The increase in gross profit, resulting from increased net sales and slightly improved gross profit margins, and the decreased effective income tax rate was offset by the increase in selling, general and administrative expense and decreased investment income. YEAR 2000 ISSUE The Company has not experienced any significant business disruptions related to the transition into the Year 2000; however, it will continue to monitor its computer systems and significant third-party relationships. 8 9 LIQUIDITY AND CAPITAL RESOURCES At March 31, 2000, the Company had cash and cash equivalents and marketable securities of $204,544,000 compared to cash and cash equivalents and marketable securities of $202,051,000 at December 31, 1999. Working capital requirements during the three months ended March 31, 2000 were met entirely through internally generated funds. The Company remains in a highly liquid position and believes that the resources available from investments, operations and bank lines of credit are sufficient to meet the foreseeable requirements of its business. At March 31, 2000, the Company had marketable securities of $135,599,000. These investments consist of U.S. government obligations, municipal obligations and preferred stock. The objective of the investment portfolio is to maximize after tax returns while minimizing risk. The Company's portfolio of preferred securities investments are subject to market fluctuations based largely, but not exclusively, on the securities' sensitivity to changes in interest rates. By maintaining an economic hedge consisting of government futures contracts and options, the Company seeks to reduce interest rate related risk. The portfolio of preferred securities and futures contracts and options position are intended to produce offsetting capital gains and losses, both realized and unrealized, as interest rates change. The Company enters into forward exchange contracts and currency options, principally to manage the economic currency risks associated with the purchase of inventory and the repayment of intercompany loans by its European and Canadian operations. Gains and losses, related to such contracts, were not material to its results of operations. The Company does not anticipate any material adverse impact on its results of operations or financial position from these contracts. In February 2000, the Board of Directors authorized the Company to repurchase 2,000,000 additional shares of common stock to bring the total authorization to 7,000,000 shares. During the three months ended March 31, 2000, the Company repurchased 109,400 shares for $2,099,000. As of March 31, 2000, 4,855,700 shares have been repurchased since the beginning of the Company's stock repurchase program in March, 1990. 9 10 FORWARD-LOOKING STATEMENTS This filing of the Form 10-Q contains forward-looking statements. Additional written and oral forward-looking statements may be made by the Company from time to time in Securities and Exchange Commission (SEC) filings and otherwise. The Private Securities Litigation Reform Act of 1995 provides a safe-harbor for forward-looking statements. The Company cautions readers that results predicted by forward-looking statements, including, without limitation, those relating to the Company's future business prospects, revenues, working capital, liquidity, capital needs, interest costs, and income are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. Specific risks and uncertainties include, but are not limited to, the Company's ability to continue to manufacture its products in the Far East, the seasonality of revenues, the actions of competitors, ability to increase production capacity, price competition, the effects of government regulation, possible delays in the introduction of new products, customer acceptance of products, issues related to the Company's computer systems and other factors. 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 March 31, 2000, 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) 5/15/00 By /s/ Eric R. Lohwasser Date Eric R. Lohwasser Vice President - Finance, Chief Financial Officer 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 68,945 135,599 70,662 4,155 40,823 328,133 56,770 28,653 359,223 34,178 0 0 0 2,537 322,508 359,223 76,108 76,108 0 30,471 0 0 0 17,770 5,931 11,839 0 0 0 11,839 0.58 0.57
-----END PRIVACY-ENHANCED MESSAGE-----