-----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, N4DDS0GEPBN/3V7jzNnWJxDOYkOWnzLQbMZLi9ntjKhU9coUVgsPW79Yi2AIQmJp 86+s3mjndbqMfptGrjvPLw== 0000927016-96-001127.txt : 19960918 0000927016-96-001127.hdr.sgml : 19960918 ACCESSION NUMBER: 0000927016-96-001127 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960803 FILED AS OF DATE: 19960917 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROOKSTONE INC CENTRAL INDEX KEY: 0000830134 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 061182895 STATE OF INCORPORATION: DE FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21406 FILM NUMBER: 96631308 BUSINESS ADDRESS: STREET 1: 17 RIVERSIDE STREET CITY: NASHUA STATE: NH ZIP: 03062 BUSINESS PHONE: 6038809500 MAIL ADDRESS: STREET 1: 17 RIVERSIDE ST CITY: NASHUA STATE: NH ZIP: 03062 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 3, 1996 -------------- 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 0-21406 . ---------------------------------- Brookstone, Inc. . -------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 06-1182895 -------- ---------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 17 Riverside Street, Nashua, NH 03062 -------------------------------------- (address of principal executive offices, zip code) 603-880-9500 ------------ (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 ------- ------- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No ------- ------- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 7,768,613 shares of Common --------- Stock as of September 12, 1996. ------------------ BROOKSTONE, INC. Index to Form 10-Q
Part I: Financial Information Page No. --------------------- -------- Item 1: Consolidated Balance Sheet as of August 3, 1996, February 3, 1996, and July 29, 1995 3 Consolidated Statement of Operations for the thirteen and twenty-six weeks ending August 3, 1996 and July 29, 1995 4 Consolidated Statement of Cash Flows for the twenty-six weeks ending August 3, 1996 and July 29, 1995 5 Notes to Consolidated Financial Statements 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8 Part II: Other Information ----------------- Item 1: Legal Proceedings 9 Item 2: Change in Securities 9 Item 3: Defaults by the Company upon its Senior Securities 9 Item 4: Submission of matters to a vote of Security Holders 9 Item 5: Other Information 10 Item 6: Exhibits and Reports on Form 8-K 10-11 Signatures 12
2 BROOKSTONE, INC. CONSOLIDATED BALANCE SHEET (In thousands, except share data)
(Unaudited) (Unaudited) Assets August 3, 1996 February 3, 1996 July 29, 1995 ------ -------------- ---------------- ------------- Current Assets: Cash and cash equivalents $ 1,301 $ 11,333 $ 1,080 Receivables, net 3,033 4,312 4,107 Merchandise inventories 28,083 25,744 21,793 Deferred income taxes 3,042 150 4,517 Other current assets 3,852 2,999 3,628 -------- -------- -------- Total current assets 39,311 44,538 35,125 -------- -------- -------- Deferred income taxes 1,864 1,864 1,627 Property and equipment, net 31,052 30,157 27,923 Other assets 454 1,198 321 -------- -------- -------- $ 72,681 $ 77,757 $ 64,996 ======== ======== ======== Liabilities and - --------------- Shareholders' Equity -------------------- Current liabilities: Current Portion of $ 81 $ 75 $ 68 obligation under capital lease Short term borrowings 1,400 -- -- Accounts payable 10,727 9,464 8,263 Other current liabilities 5,363 9,069 6,992 -------- -------- -------- Total current liabilities 17,571 18,608 15,323 Other long term liabilities 8,551 8,572 8,159 Long term obligation under 2,825 2,863 2,901 capital lease Commitments and contingencies Shareholders' Equity: Preferred stock, $0.001 par value: Authorized - 2,000,000 shares; issued and outstanding - 0 shares at August 3, 1996, February 3, 1996 and July 29, 1995 Common stock, $0.001 par value Authorized 50,000,000 shares; issued and outstanding - 7,737,869 at August 3, 1996, 7,680,708 shares at February 3, 1996 and 7,673,391 shares at July 29, 1995 8 8 8 Additional paid-in capital 46,506 46,293 46,127 Retained earnings / (Accumulated deficit) (2,733) 1,460 (7,475) Treasury stock, at cost - 3,616 shares at August 3, 1996, February 3, 1996 and July 29, 1995 (47) (47) (47) -------- -------- -------- Total Shareholders' Equity 43,734 47,714 38,613 -------- -------- -------- $ 72,681 $ 77,757 $ 64,996 ======== ======== ========
3 BROOKSTONE, INC. CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share data) (Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended -------------------------------- ----------------------------- August 3, 1996 July 29, 1995 August 3, 1996 July 29, 1995 -------------- ------------- -------------- ------------- Net Sales $ 39,907 $ 34,794 $ 70,681 $ 59,738 Cost of Sales 26,861 23,800 49,552 42,327 -------------- ------------- ------------- ------------- Gross Profit 13,046 10,994 21,129 17,411 Selling, general and administrative expenses 14,318 12,171 28,600 23,893 -------------- ------------- ------------- ------------- Loss from Operations (1,272) (1,177) (7,471) (6,482) Other (income)/expenses (307) 354 (792) 593 Interest expense, net 164 150 240 293 -------------- ------------- ------------- ------------- Loss before taxes (1,129) (1,681) (6,919) (7,368) Income tax benefit (443) (696) (2,726) (3,050) -------------- ------------- ------------- ------------- Net loss $ (686) $ (985) $ (4,193) $ (4,318) ============== ============= ============= ============= Net loss per share $ (0.09) $ (0.13) $ (0.54) $ (0.56) Weighted Average shares outstanding 7,733 7,665 7,721 7,645 ============== ============= ============= =============
4 BROOKSTONE, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands) (Unaudited)
Twenty-Six Weeks Ended ------------------------------ August 3, 1996 July 29, 1995 -------------- ------------- Cash flows from operating activities: Net loss $ (4,193) $(4,318) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 2,781 2,473 Deferred income taxes (2,892) (3,216) Increase in other assets 744 436 Increase in other long term liabilities (21) 268 Changes in working capital: Accounts receivable, net 1,279 (408) Merchandise Inventories (2,339) 7,288 Other current assets (853) (765) Accounts Payable 1,263 (61) Other current liabilities (3,706) (3,586) -------------- ------------- Net cash used by operating activities (7,937) (1,889) -------------- ------------- Cash flows from investing activities: Expenditures for property and equipment (3,676) (1,329) -------------- ------------- Net cash used for investing activities (3,676) (1,329) -------------- ------------- Cash flows from financing activities: Borrowings from revolving credit 1,400 -- Payments for capitalized lease (32) (35) Proceeds from exercise of stock options and related tax benefits 213 175 -------------- ------------- Net cash provided by financing activities 1,581 140 -------------- ------------- Net decrease in cash and cash equivalents (10,032) (3,078) Cash and cash equivalents at beginning of period 11,333 4,158 -------------- ------------- Cash and cash equivalents at end of period $ 1,301 $ 1,080 ============== =============
5 BROOKSTONE, INC. Notes to Consolidated Financial Statements 1. The results of the thirteen and twenty-six week periods ending August 3, 1996, are not necessarily indicative of the results for the full fiscal year. The Company's business, like the business of retailers in general, is subject to seasonal influences. Historically, the Company's fourth fiscal quarter, which includes the Christmas selling season, has produced a disproportionate amount of the Company's net sales and generally all of its income from operations. The Company expects that its business will continue to be subject to such seasonal influences. 2. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles and practices consistently applied; and in the opinion of the Company, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position and the results of operations for the periods reported. Certain information and footnote disclosures normally included in financial statements presented in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that the accompanying consolidated financial statements be read in conjunction with the annual financial statements and notes thereto which may be found in the Company's 1995 annual report. 3. The exercise of stock options which have been granted under the Company's stock option plans gives rise to compensation which is includable in the taxable income of the optionees and deductible by the Company for tax purposes upon exercise. Such compensation reflects an increase in the fair market value of the Company's Common Stock subsequent to the date of grant. For financial reporting purposes, the tax effect of this deduction is accounted for as a credit to additional paid-in capital rather than as a reduction of income tax expense. Such exercises resulted in a tax benefit to the Company of approximately $35,000 for the thirteen week period ending August 3, 1996 and $166,000 for the twenty-six week period August 3, 1996. 4. The Company's total current assets were $5.2 million lower on August 3, 1996 than they were on February 3, 1996. This decrease was primarily a reflection of a cash and cash equivalents decrease of $10.0 million partially offset by an increase in merchandise inventories of $2.3 million. Additionally, receivables decreased $1.3 million while other current assets increased $.9 million, and deferred income taxes increased $2.9 million due to the Company recording tax benefits resulting from operating losses and tax benefits from the exercise of stock options. 5. The Company's total current liabilities were $1.0 million lower on August 3, 1996 than they were on February 3, 1996. This decrease results from a $3.7 million decrease in other current liabilities, primarily offset by a $1.3 million increase in accounts payable and $1.4 million in short term borrowings. 6. The Company's shareholder's equity was $4.0 million lower on August 3, 1996 than it was on February 3, 1996. This decrease was a reflection of (1) the $4.2 million net loss for the period; and (2) the recording of approximately $0.2 million in proceeds from the exercise of stock options and related tax benefits. 6 BROOKSTONE, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Thirteen and Twenty-Six Week Periods Ended August 3, 1996 Results of Operations - --------------------- For the thirteen and twenty-six week periods ended August 3, 1996, net sales increased 14.7% and 18.3% over comparable periods last year. Comparable store sales for the thirteen and twenty-six week periods increased 7.7% and 9.8%. The sales increase reflects the results of opening ten (10) new stores subsequent to the second quarter during Fiscal 1995 and one new store during the first quarter of Fiscal 1996, partially offset by the loss of sales from closing one store in the first quarter of Fiscal 1996. The total Brookstone stores open at the end of the twenty-six week period ended August 3, 1996 was 144 versus 134 at the end of the comparable period in Fiscal 1995. Mail order sales increased 6.8% and 14.5% for the same thirteen and twenty-six week periods. Gross Profit as a percentage of net sales was 32.7% and 29.9% for the thirteen and twenty-six week periods ended August 3, 1996, versus 31.6% and 29.1% for the comparable periods last year. This increase in gross profit as a percentage of net sales is primarily the result of leveraging occupancy costs associated with the increases in net sales for the thirteen and twenty-six week periods, partially offset by a moderate increase in sales of lower margin products. Selling, general and administrative expenses as a percentage of net sales were 35.9% and 40.5% for the thirteen and twenty-six week periods ended August 3, 1996 versus 35.0% and 40.0% for the comparable periods last year. The increase in the percentage is primarily the result of increased advertising costs associated with increased catalog circulation and higher productions costs. Other income, which represents inventory capitalization, was $307,000 and $792,000 for the thirteen and twenty-six week periods ended August 3, 1996 as compared to other expenses related to inventory capitalization of $354,000 and $593,000 for the comparable periods last year. Net interest expense for the thirteen and twenty-six week periods ended August 3, 1996, was $164,000 and $240,000 compared to $150,000 and $293,000 during the comparable periods last year. The increase for the thirteen week period is related to borrowings under the revolving credit agreement during 1996 verses 1995. The reduction for the twenty-six period is primarily the result of interest income from short term investments versus comparable periods last year. As a result of the foregoing, the Company reported a net loss of $686,000 or $0.09 per share, for the thirteen week period ended August 3, 1996, as compared to a net loss of $985,000 or $0.13 per share for the comparable period last year. For the twenty-six week period ended August 3, 1996, the Company reported a net loss of $4,193,000 or $0.54 per share compared to a net loss of $4,318,000 or $0.56 per share for the comparable period last year. 7 Financial Condition - ------------------- At August 3, 1996, working capital was $21.7 million, a $4.0 million decrease from February 3, 1996. This decline reflects capital expenditures of $3.7 million, a $1.3 million increase in accounts payable and the seasonal operating loss, partially offset by a $2.3 million increase in merchandise inventories. The capital expenditures were principally related to the remodeling of seven retail stores and the opening of one new store year to date. The increase in inventory is primarily the result of actual and scheduled new store growth, an increase in proprietary and imported product offerings and stocking initiatives intended to support continued same store sales growth. The Company maintains a revolving credit agreement to finance inventory purchases, which historically peak in the third quarter in anticipation of the holiday selling season. At August 3, 1996, the Company had $1.4 million in outstanding borrowings under its revolving credit agreement, and at July 29, 1995, it had no such short term borrowings. To ensure that it has adequate liquidity during the third and fourth quarter of Fiscal 1996, the Company has completed negotiations with its lender to increase the amount available under its credit agreement by $5.0 million during the Company's pre-holiday inventory building period. The Company expects to enter into a formal agreement by the end of the third quarter of Fiscal 1996. 8 PART II Other Information Item 1: LEGAL PROCEEDINGS ----------------- The Company is involved in various legal proceedings arising in the normal course of business. The Company believes that the resolution of these matters will not have a material effect on the Company's financial condition or results of operations. Item 2: CHANGES IN SECURITIES --------------------- None Item 3: DEFAULT UPON SENIOR SECURITIES ------------------------------ None Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- A) The 1996 Annual Meeting of Stockholders of the Company was held on June 20, 1996. B) The following persons were elected directors at the 1996 Annual Meeting for a one year term expiring at the 1997 Annual Meeting of Stockholders.
For Withheld --- -------- Merwin F. Kaminstein 7,148,011 8,984 Michael F. Anthony 7,148,012 8,983 Mone Anathan, III 7,148,012 8,983 Adam Kirsch 7,148,011 8,984 Michael L. Glazer 7,147,511 9,484 Robert F. White 7,148,012 8,983
C) Approval and Implementation of the 1996 Directors' Stock Option Plan.
For Against Abstain No Vote --- ------- ------- ------- Shares 6,834,683 233,737 8,575 80,000
D) The appointment of Price Waterhouse LLP as the independent accountants to examine the financial statements of the Company and its subsidiaries for the fiscal year ending February 1, 1997 was ratified. For Against Abstain --- -------- ------- Shares 7,151,059 4,986 950 9 Item 5: OTHER INFORMATION ----------------- None Item 6: EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- A) Exhibits Exhibit 11 - Computation of Net Loss Per Share B) Reports on Form 8-K No reports on Form 8-K were filed during the period for which this report is filed. 10 Exhibit 11 ---------- BROOKSTONE, INC. Computation of Primary and Fully Diluted Earnings (Loss) Per Common Share (In thousands, except per share data) (Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended ---------------------------------- ----------------------------------- August 3, 1996 July 29, 1995 August 3, 1996 July 25, 1995 -------------- ------------- -------------- -------------- Net loss $ (686) $ (985) $(4,193) $(4,318) -------------- ------------- -------------- -------------- -------------- ------------- -------------- -------------- Weighted average number of common shares outstanding 7,681 7,603 7,681 7,603 Adjustments to weighted average common shares outstanding: Common stock issued upon exercise of options 52 62 40 42 ------------- ------------ -------------- -------------- Weighted average number of common shares as adjusted 7,733 7,665 7,721 7,645 ============= ============= ============== ============== Net loss primary and fully diluted earnings per share $ (0.09) $ (0.13) $ (0.54) $ (0.56) ============= ============= ============== ==============
11 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. Brookstone, Inc. ---------------- (Registrant) /s/ Michael F. Anthony ----------------------------------- September 16, 1996 (Signature) --- Michael F. Anthony President, Chief Executive Officer (Acting Principal Financial Officer and duly authorized to sign on behalf of registrant) 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS FEB-01-1997 FEB-04-1996 AUG-03-1996 1,301 0 3,171 (138) 28,083 39,311 56,242 25,190 72,681 17,571 0 0 0 8 43,726 72,681 39,907 39,907 26,861 14,318 (307) 0 164 (1,129) (443) (686) 0 0 0 (686) (.09) (.09)
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