-----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, KqL5yrLa7ErXwc20Og/cnnYUJKJHaT4L7ZqqLc2kNJeGC5peQPWUwZCBJWies03+ +Ik4UxmKEzhWTOwHS3K/Hg== /in/edgar/work/20000912/0000927016-00-003321/0000927016-00-003321.txt : 20000922 0000927016-00-003321.hdr.sgml : 20000922 ACCESSION NUMBER: 0000927016-00-003321 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000729 FILED AS OF DATE: 20000912 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROOKSTONE INC CENTRAL INDEX KEY: 0000830134 STANDARD INDUSTRIAL CLASSIFICATION: [5990 ] IRS NUMBER: 061182895 STATE OF INCORPORATION: DE FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21406 FILM NUMBER: 721373 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 0001.txt FORM 10Q 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 July 29, 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 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: 8,319,640 shares of common stock as of September 8, 2000. BROOKSTONE, INC. Index to Form 10-Q Part I: Financial Information Page No. --------------------- -------- Item 1: Consolidated Balance Sheet as of July 29, 2000, January 29, 2000 and July 31, 1999 3 Consolidated Statement of Operations for the thirteen & twenty-six weeks ended July 29, 2000 and July 31, 1999 4 Consolidated Statement of Cash Flows for the twenty-six weeks ended July 29, 2000 and July 31, 1999 5 Notes to Consolidated Financial Statements 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II: Other Information ----------------- Item 1: Legal Proceedings 10 Item 2: Change in Securities 10 Item 3: Defaults by the Company upon its Senior Securities 10 Item 4: Submission of Matters to a Vote of Security Holders 10 Item 5: Other Information 10 Item 6: Exhibits and Reports on Form 8-K 10 Signatures 11
2 BROOKSTONE, INC. CONSOLIDATED BALANCE SHEET (In thousands, except share data)
(Unaudited) (Unaudited) July 29, 2000 January 29, 2000 July 31, 1999 ------------- ---------------- ------------- Assets - ------ Current assets: Cash and cash equivalents $ 3,992 $ 31,389 $ 1,773 Receivables, net 5,200 5,425 5,389 Merchandise inventories 46,861 43,639 39,620 Deferred income taxes 5,801 2,561 4,782 Other current assets 4,733 4,572 5,323 ------------- ---------------- ------------- Total current assets 66,587 87,586 56,887 Deferred income taxes 3,806 3,806 3,643 Property and equipment, net 40,751 43,074 42,036 Intangible assets, net 5,632 5 ,906 6,506 Other assets 1,106 1,534 842 ------------- ---------------- ------------- $ 117,882 $ 141,906 $ 109,914 ============= ================ ============= Liabilities and Shareholders' Equity - ------------------------------------ Current liabilities: Short-term borrowings $ ----- $ ----- $ 1,840 Accounts payable 9,157 15,759 15,770 Other current liabilities 13,137 25,530 11,183 ------------- ---------------- ------------- Total current liabilities 22,294 41,289 28,793 Other long-term liabilities 10,895 10,796 10,193 Long-term obligation under capital lease 2,457 2,511 2,565 Commitments and contingencies Shareholders' equity: Preferred stock, $0.001 par value: Authorized - 2,000,000 shares; issued and outstanding - 0 shares at July 29, 2000, January 29, 2000 and July 31, 1999 Common stock, $0.001 par value: Authorized 50,000,000 shares; issued and outstanding - 8,304,140 shares at July 29, 2000, 8,296,890 shares at January 29, 2000 and 8,133,838 shares at July 31, 1999 8 8 8 Additional paid-in capital 50,109 50,020 48,997 Retained earnings 32,166 37,329 19,405 Treasury stock, at cost-3,616 shares at July 29, 2000, January 29, 2000 and July 31, 1999 (47) (47) (47) ------------- ---------------- ------------- Total shareholders' equity 82,236 87,310 68,363 ------------- ---------------- ------------- $ 117,882 $ 141,906 $ 109,914 ============= ================ =============
Note: The accompanying notes are an integral part of these financial statements. 3 BROOKSTONE, INC. CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share data) (Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended --------------------------------- --------------------------------- July 29, 2000 July 31, 1999 July 29, 2000 July 31, 1999 ------------- ------------- ------------- ------------- Net sales $ 66,651 $ 64,104 $ 115,878 $ 106,204 Cost of sales 43,582 41,059 78,923 72,878 ------------- ------------- ------------- ------------- Gross profit 23,069 23,045 36,955 33,326 Selling, general and 23,748 22,682 45,332 40,334 administrative expenses ------------- ------------- ------------- ------------- Income (loss) from operations (679) 363 (8,377) (7,008) Interest expense, net 42 348 5 483 ------------- ------------- ------------- ------------- Income (loss) before taxes (721) 15 (8,382) (7,491) Income tax provision (benefit) (277) 6 (3,219) (2,877) ------------- ------------- ------------- ------------- Net income (loss) $ (444) $ 9 $ (5,163) $ (4,614) ------------- ------------- ------------- ------------- Earnings (loss) per share - $ (0.05) $ 0.00 $ (0.62) $ (0.57) basic/diluted ------------- ------------- ------------- ------------- Weighted average shares 8,304 8,134 8,301 8,115 outstanding - basic ------------- ------------- ------------- ------------- Weighted average shares 8,304 8,413 8,301 8,115 outstanding - diluted ============= ============= ============= =============
Note: The accompanying notes are an integral part of these financial statements. 4 BROOKSTONE, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands) (Unaudited)
Twenty-Six Weeks Ended --------------------------------- July 29, 2000 July 31, 1999 ------------- ------------- Cash flows from operating activities: Net loss $ (5,163) $ (4,614) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 5,029 4,311 Amortization of debt issuance costs 79 75 Deferred income taxes (3,240) (3,001) Decrease in other assets 349 382 Increase in other long-term liabilities 99 231 Changes in working capital: Accounts receivable, net 225 867 Merchandise inventories (3,222) 227 Other current assets (161) 579 Accounts payable (6,602) 5,043 Other current liabilities (12,397) (8,498) ------------- ------------- Net cash used by operating activities (25,004) (4,398) ------------- ------------- Cash flows from investing activities: Expenditures for property and equipment (2,432) (4,064) Expenditures for Gardeners Eden acquisition --- (9,616) ------------- ------------- Net cash used for investing activities (2,432) (13,680) ------------- ------------- Cash flows from financing activities: Borrowings from Revolving credit --- 1,840 Payments for capitalized lease (50) (47) Proceeds from exercise of stock options and related tax benefits 89 667 ------------- ------------- Net cash provided by financing activities 39 2,460 ------------- ------------- Net decrease in cash and cash equivalents (27,397) (15,618) Cash and cash equivalents at beginning of period 31,389 17,391 ------------- ------------- Cash and cash equivalents at end of period $ 3,992 $ 1,773 ============= =============
Note: The accompanying notes are an integral part of these financial statements. 5 BROOKSTONE, INC. Notes to Consolidated Financial Statements 1. The results of the twenty-six week period ended July 29, 2000 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 winter holiday selling season, has produced a disproportionate amount of the Company's net sales and substantially 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. In the opinion of the Company, these financial statements 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 Fiscal 1999 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 of approximately $22,000 for the twenty-six week period ended July 29, 2000. 4. Business conducted by the Company can be segmented into two distinct areas determined by the method of distribution channel. The retail segment is comprised of all full-year stores in addition to all temporary stores and kiosks. Retail product distribution is conducted directly through the store location. The direct marketing segment is comprised of the Hard-to-Find Tools, Brookstone Gift Collection and Gardeners Eden catalogs and the interactive Internet site www.Brookstone.com. Direct marketing product ------------------ distribution is conducted through the Company's direct marketing call center and distribution facility located in Mexico, Missouri or by the company's vendors. Both segments of the Company sell similar products, although not all Company products are fully available within both segments. All costs directly attributable to the direct marketing segment are charged accordingly while all remaining operating costs are charged to the retail segment. The Company's management does not review assets by segment. 6 The tables below disclose segment net sales and pre-tax income/(loss) for the thirteen and twenty-six week periods ended July 29, 2000 and July 31, 1999 (in thousands).
Thirteen Weeks: Net Sales Pre-tax Income/(Loss) ------------------------------------ --------------------------------- July 29, 2000 July 31, 1999 July 29, 2000 July 31, 1999 ------------------------------------ --------------------------------- Reportable segment: Retail $ 56,401 $ 53,824 $ (487) $ 570 Direct marketing 10,250 10,280 (192) (207) Reconciling items: Interest expense --- --- (252) (350) Interest income --- --- 210 2 ------------------------------------ ---------------------------------- Consolidated: $ 66,651 $ 64,104 $ (721) $ 15 ==================================== ================================== Twenty-six Weeks: Net Sales Pre-tax (Loss) ------------------------------------ ---------------------------------- July 29, 2000 July 31, 1999 July 29, 2000 July 31, 1999 ------------------------------------ ---------------------------------- Reportable segment: Retail $ 96,990 $ 91,126 $(6,704) $(6,107) Direct marketing 18,888 15,078 (1,673) (901) Reconciling items: Interest expense --- --- (569) (638) Interest income --- --- 564 155 ------------------------------------ ---------------------------------- Consolidated: $115,878 $106,204 $(8,382) $(7,491) ==================================== ==================================
5. Basic and diluted earnings per share (EPS) were calculated for the thirteen and twenty-six week periods ended July 29, 2000 and July 31, 1999 as follows:
Thirteen Weeks Ended Twenty-Six Weeks Ended --------------------------------------- -------------------------------------- July 29, 2000 July 31, 1999 July 29, 2000 July 31, 1999 ---------------------------------------- -------------------------------------- Net income/(loss) $ (444) $ 9 $ (5,163) $ (4,614) ================ =============== ================= ============== Weighted average number of common shares outstanding 8,304 8,134 8,301 8,115 Effect of dilutive securities: Stock options --- 279 --- --- ---------------- --------------- ----------------- -------------- Weighted average number of common shares as adjusted 8,304 8,413 8,301 8,115 ================ =============== ================= ============== Net loss per share - basic/diluted $ (0.05) $ 0.00 $ (0.62) $ (0.57) ================ =============== ================= ==============
For the thirteen and twenty-six week periods ended July 29, 2000, antidilutive shares of 148,162 and 195,351 respectively were excluded from the computations of diluted earnings per share. For the thirteen week period ended July 31, 1999, there were no antidilutive shares excluded from the computation of diluted earnings per share. For the twenty-six week period ended July 31, 1999, antidilutive shares of 268,099 were excluded from the computation of diluted earnings per share. 7 BROOKSTONE, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations for the Thirteen-Week and Twenty-Six Week Periods Ended July 29, 2000 Results of Operations - --------------------- For the thirteen-week and twenty-six week periods ended July 29, 2000, net sales increased 4.0% and 9.1% respectively over the comparable periods last year. Comparable store sales for the thirteen-week and twenty-six week periods decreased 1.4% and 0.1% respectively. The retail sales increase for the thirteen and twenty-six week periods of 4.8% and 6.4% respectively reflected the results of opening nine new stores subsequent to the second quarter in Fiscal 1999 and three new stores during the second quarter of Fiscal 2000. The total number of Brookstone stores open at the end of the twenty-six week period ended July 29, 2000 was 214 versus 202 at the end of the comparable period in Fiscal 1999. Direct marketing sales for the thirteen week period ended July 29, 2000 remained essentially flat when compared to the thirteen week period ended July 31, 1999. Direct marketing sales increased 25.3% over the comparable twenty-six week period last year. This increase was primarily the result of revenue from the Gardeners Eden catalog, which was acquired, in the second fiscal quarter of 1999. For the thirteen-week and twenty-six week periods ended July 29, 2000, gross profit as a percentage of net sales was 34.6% and 31.9% respectively versus 35.9% and 31.4% for the comparable periods last year. The decrease in the gross profit percentage for the thirteen week period was primarily attributable to a higher occupancy rate due to decreased leveraging of the fixed occupancy costs. For the twenty-six week period this occupancy increase was offset by a decrease in the net material costs resulting from lower sourcing costs. Selling, general and administrative expenses as a percentage of net sales for the thirteen and twenty-six week periods ended July 29, 2000 were 35.6% and 39.1% respectively versus 35.4% and 38.0% respectively for the comparable period last year. The thirteen week increase in percentage was primarily due to the de- leveraging of expenses due to same store sales performance. The twenty-six week increase in percentage was primarily due to costs associated with the production and distribution of the Gardeners Eden catalog, in the first quarter of Fiscal 2000, with no comparable costs in the first quarter of Fiscal 1999. Net interest expense for the thirteen and twenty-six week periods ended July 29, 2000 was $42 thousand and $5 thousand respectively compared to $348 thousand and $483 thousand during the comparable period last year. This decrease is primarily the result of no borrowings under the Company's Revolving Credit Agreement in Fiscal 2000 versus $1.9 million in borrowings outstanding in Fiscal 1999. As a result of the foregoing, the Company reported a net loss of $444 thousand, or $0.05 per basic/diluted share, for the thirteen-week period ended July 29, 2000, as compared to a $9 thousand net income, or $0.00 per basic and diluted share, for the comparable period last year. For the twenty-six week period ended July 29, 2000 the Company reported a net loss of $5.2 million, or $0.62 per basic/diluted share as compared to a $4.6 million net loss, or $0.57 per basic/diluted share for the comparable period last year. Financial Condition - ------------------- For the twenty-six week period ended July 29, 2000, net cash used by operating activities totaled $25.0 million, primarily as a result of the net loss, the payment of income taxes and the purchase of inventory. Cash used for investment activities during the first twenty-six weeks of Fiscal 2000, representing the purchase of property and equipment, amounted to $2.4 million. For the twenty-six week period ended July 31, 1999, net cash used by operating activities totaled $4.4 million, reflecting primarily the net loss and the payment of income taxes, offset by an increase in the accounts payable balance due to the timing of expense and merchandise payments. Cash used for investment activities during the twenty-six week period of Fiscal 1999, representing the purchase of property and equipment and the acquisition of the Gardeners Eden catalog, amounted to $13.7 million. Cash from financing activities during the twenty-six week period of Fiscal 1999 amounted to $2.5 million, acquired primarily through borrowings under the Company's revolving credit agreement and the exercise of stock options and related tax benefits. 8 Merchandise inventories were $46.9 million at July 29, 2000 compared to $43.6 million at January 29, 2000. The increase in inventory was primarily to support the new stores opened or scheduled to open during Fiscal 2000. The accounts payable balance was $9.2 million at July 29, 2000 compared to $15.8 million at January 29, 2000. The decrease in accounts payable reflects the continued transition from domestic to foreign merchandise vendors and the timing of payments. The Company's capital expenditures in the second quarter of Fiscal 2000 were principally related to the opening of three stores and the remodeling of one store, which were completed during the second quarter. Capital expenditures were also made during the second quarter of Fiscal 2000 that are related to new store openings and the remodeling of current stores which are scheduled for completion during the third and fourth quarters of Fiscal 2000. The Company anticipates opening approximately 18 new stores, including as many as five airport locations, and expects to remodel approximately six stores during Fiscal 2000. The Company maintains a revolving credit agreement to finance inventory purchases, which historically peak in the third quarter in anticipation of the winter holiday selling season. At July 29, 2000, the Company had no outstanding borrowings under its revolving credit agreement. At July 31, 1999 the Company had $1.8 million in outstanding borrowings under its revolving credit agreement. The Company believes that available borrowings, cash on hand and anticipated cash generated from operations will be sufficient to finance planned retail store openings / remodelings and other capital requirements throughout Fiscal 2000. Outlook: Important Factors and Uncertainties - -------------------------------------------- Statements in this quarterly report which are not historical facts, including statements about the Company's confidence or expectations, plans for opening new stores, capital needs and liquidity and other statements about the Company's operational outlook, are forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from those set forth in such forward-looking statements. Such risks and uncertainties include, without limitation, risks of changing market conditions in the overall economy and the retail industry, consumer demand, the availability of appropriate real estate locations and the ability to negotiate favorable lease terms in respect thereof, customer response to the Company's direct marketing initiatives, availability of products, availability of adequate transportation of such products and other factors detailed from time to time in the Company's annual and other reports filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. The Company undertakes no obligations to publicly release any revisions to these forward-looking statements or reflect events or circumstances after the date hereof. 9 PART II Other Information Item 1: LEGAL PROCEEDINGS ----------------- Brookstone is involved in various routine legal proceedings incidental to the conduct of its business. The Company does not believe that any of these legal proceedings will have a material adverse effect on Brookstone'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 2000 Annual Meeting of Stockholders of the Company was held on June 13, 2000. B) The following persons were elected Directors at the 2000 Annual Meeting for a one-year term expiring at the 2001 Annual Meeting of Stockholders. For Withheld --- -------- Michael F. Anthony 6,913,909 30,838 Mone Anathan III 6,913,935 30,812 Adam Kirsch 6,694,042 250,705 Michael L. Glazer 6,132,198 812,549 Robert F. White 6,914,335 30,412 C) The Company's 2000 Employee Stock Purchase Plan was approved and adopted. For Against Abstain --- ------- ------- 6,861,689 42,281 40,777 D) The appointment of PricewaterhouseCoopers LLP as the independent accountants to examine the financial statements of the Company and its subsidiaries for the fiscal year ending February 3, 2001 was ratified. For Against Abstain --- ------- ------- 6,928,935 1,879 13,933 Item 5: OTHER INFORMATION ----------------- None Item 6: EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- A) Reports on Form 8-K No reports on Form 8-K were filed during the period for which this report is filed. 10 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/ Philip W. Roizin ---------------------------------------------- September 12, 2000 (Signature) Philip W. Roizin Executive Vice President Finance and Administration, Treasurer and Secretary (Principal Financial Officer and duly authorized to sign on behalf of registrant) 11 EX-27.1 2 0002.txt FINANCIAL DATA SCHEDULE
5 1,000 6-MOS FEB-03-2001 JAN-30-2000 JUL-29-2000 3,992 0 5,411 211 46,861 66,587 89,566 48,815 117,882 22,294 0 8 0 0 82,228 117,882 115,878 115,878 78,923 124,255 0 0 5 (8,382) (3,219) (5,163) 0 0 0 (5,163) (0.62) (0.62)
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