-----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, Th8a6W9hwVYAgA2jwk7HXYzRNAesG4pf+LZH4O+j/NPZwqIGyxOPmZi4rN0SFNOU 39+Nc0pef5UhFMiscORj/g== 0000868780-97-000003.txt : 19970514 0000868780-97-000003.hdr.sgml : 19970514 ACCESSION NUMBER: 0000868780-97-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: R & B INC CENTRAL INDEX KEY: 0000868780 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 232078856 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18914 FILM NUMBER: 97601375 BUSINESS ADDRESS: STREET 1: 3400 E WALNUT ST CITY: COLMAR STATE: PA ZIP: 18915 BUSINESS PHONE: 2159971800 MAIL ADDRESS: STREET 1: 3400 E WALNUT ST CITY: COLMAR STATE: PA ZIP: 18915 10-Q 1 QUARTERLY REPORT - R&B, INC. - -------------------------------------------------------------------------------- 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 March 29, 1997 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------- Commission file number 0-18914 R&B, INC. Incorporated pursuant to the Laws of the Commonwealth of Pennsylvania ------------------- IRS - Employer Identification No. 23-2078856 3400 East Walnut Street, Colmar, Pennsylvania 18915 (215) 997-1800 ------------------- 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 |_| As of May 9, 1997 the Registrant had 8,026,298 common shares, $.01 par value, outstanding. - -------------------------------------------------------------------------------- R & B, INC. AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q MARCH 29, 1997 Page Part I -- FINANCIAL INFORMATION Item 1.Consolidated Financial Statements (unaudited) Statements of Income: Thirteen Weeks Ended March 29, 1997 and March 30, 1996 3 Balance Sheets....................................... 4 Statements of Cash Flows............................. 5 Notes to Financial Statements........................ 6 Item 2.Management's Discussion and Analysis of Results of Operations and Financial Condition.............................. 7 Part II -- OTHER INFORMATION Item 1.Legal Proceedings.................................... 11 Item 6.Exhibits and Reports on Form 8-K..................... 11 Signature .............................................. 12 Page 2 of 12 PART I. FINANCIAL INFORMATION R&B, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited)
For the Thirteen Weeks Ended ----------------------------- March 29, March 30, (in thousands, except per share data) 1997 1996 - ------------------------------------------------------------------------------------------- Net Sales $33,299 $32,540 Cost of goods sold 19,994 19,782 - ------------------------------------------------------------------------------------------- Gross profit 13,305 12,758 Selling, general and administrative expenses 10,692 10,583 - ------------------------------------------------------------------------------------------- Income from operations 2,613 2,175 Interest expense, net 1,100 967 - ------------------------------------------------------------------------------------------- Income before taxes 1,513 1,208 Provision for taxes 552 445 - ------------------------------------------------------------------------------------------- Net Income $ 961 $ 763 =========================================================================================== Earnings Per Share $ 0.12 $ 0.10 =========================================================================================== Average Shares Outstanding 8,027 7,983 ===========================================================================================
The accompanying Notes are an integral part of these Consolidated Financial Statements. Page 3 of 12 R&B, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 29, December 28, (in thousands, except share data) 1997 1996 - --------------------------------------------------- ----------------- ----------------- (unaudited) Assets Current Assets: Cash and cash equivalents $ 3,240 $ 923 Accounts receivable, less allowance for doubtful accounts and customer credits of $8,078 and $11,305 34,388 35,134 Inventories 42,407 41,652 Deferred income taxes 2,748 2,748 Prepaids and other current assets 510 606 - --------------------------------------------------- ----------------- ----------------- Total current assets 83,293 81,063 - --------------------------------------------------- ----------------- ----------------- Property, Plant and Equipment, net 14,355 14,567 Intangible Assets 30,575 30,850 Other Assets 3,227 2,490 - --------------------------------------------------- ----------------- ----------------- Total $131,450 $128,970 =================================================== ================= ================= Liabilities and Shareholders' Equity Current Liabilities: Current portion of long-term debt $ 6,202 $ 6,066 Accounts payable 7,496 7,146 Accrued compensation 2,285 2,220 Other accrued liabilities 3,233 2,263 - --------------------------------------------------- ----------------- ----------------- Total current liabilities 19,216 17,695 Long-Term Debt 56,246 56,248 Deferred Income Taxes 858 858 Commitments and Contingencies Shareholders' Equity: Common stock, par value $.01; authorized 25,000,000 shares; issued 8,026,254 and 8,026,254 80 80 Additional paid-in capital 29,943 29,943 Retained earnings 25,107 24,146 Total shareholders' equity 55,130 54,169 - --------------------------------------------------- ----------------- ----------------- Total $131,450 $128,970 =================================================== ================= =================
The accompanying Notes are an integral part of these Consolidated Financial Statements. Page 4 of 12 R&B, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the Thirteen Weeks Ended -------------------------------------- March 29, March 30, (in thousands) 1997 1996 - -------------------------------------------------------------- ------------------ ------------------- Cash Flows from Operating Activities: Net income $ 961 $763 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 1079 896 Provision for doubtful accounts 68 87 Provision for deferred income tax - 85 Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable 678 (4,934) Inventories (755) (1,386) Prepaids and other current assets 95 716 Other assets (852) 17 Accounts payable 350 4,711 Other accrued liabilities 1,035 (184) - -------------------------------------------------------------- ------------------ ------------------- Cash provided by operating activities 2,659 771 - -------------------------------------------------------------- ------------------ ------------------- Cash Flows from Investing Activities: Property, plant and equipment additions (476) (1,025) Business acquisitions - (5,228) - -------------------------------------------------------------- ------------------ ------------------- Cash used in investing activities (476) (6,253) - -------------------------------------------------------------- ------------------ ------------------- Cash Flows from Financing Activities: Net proceeds from revolving credit 1,650 8,525 Repayment of term loans and capitalized lease obligations (1,516) (2,496) - -------------------------------------------------------------- ------------------ ------------------- Cash provided by financing activities 134 6,029 - -------------------------------------------------------------- ------------------ ------------------- Net Increase in Cash and Cash Equivalents 2,317 547 Cash and Cash Equivalents, Beginning of Period 923 1,247 - -------------------------------------------------------------- ------------------ ------------------- Cash and Cash Equivalents, End of Period $3,240 $1,794 ============================================================== ================== =================== Supplemental Cash Flow Information Cash paid for interest expense $ 732 $ 870 Cash paid for income taxes $ 590 $ 132
The accompanying Notes are an integral part of these Consolidated Financial Statements. Page 5 of 12 R&B, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRTEEN WEEKS ENDED MARCH 29, 1997 AND MARCH 30, 1996 (UNAUDITED) 1. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. However, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the thirteen week period ended March 29, 1997 are not necessarily indicative of the results that may be expected for the fiscal year ending December 27, 1997. For further information, refer to the financial statements and footnotes thereto included in R&B, Inc.'s (the "Company") Annual Report on Form 10-K for the year ended December 28, 1996. 2. Inventories Inventories include the cost of material, freight, direct labor and overhead utilized in the processing of the Company's products. Inventories were as follows: March 29, December 28, (in thousands) 1997 1996 - ------------------- -------------- -------------- Bulk product $20,003 $19,365 Finished product 16,651 16,907 Packaging materials 5,753 5,380 - ------------------- -------------- -------------- Total $42,407 $41,652 =================== ============== ============== 3. Intangible Assets Intangible assets consist of goodwill, patents and a non-compete covenant. Goodwill is amortized over a period of 40 years with patents and the non-compete covenant amortized over the specific life of each asset. At March 29, 1997, goodwill was $28.9 million, patents were $1.5 million and the non-compete covenant was $0.2 million. Amortization of these assets was $0.3 million and $0.3 in the first quarter of 1997 and 1996, respectively. 4. Earnings Per Share In February 1997, the Financial Accounting Standards Board issued Statement 128 (FAS 128), Earnings Per Share (EPS). This statement is effective for both interim and annual financial statements for periods ending after December 15, 1997. FAS 128 replaces primary and fully diluted EPS as required by Accounting Principles Opinion No.15 (APB 15) with basic and diluted EPS, respectively. Under the terms of this statement, basic EPS is calculated using the weighted average shares of common stock outstanding during the applicable period, and diluted EPS is calculated using the weighted average shares of common stock outstanding during the applicable period and the effects of any potentially dilutive securities such as stock options. The Company expects that basic EPS and diluted EPS will not be materially different to EPS as previously reported by the Company under APB 15. Page 6 of 12 R&B, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Over the periods presented, the Company has focused its efforts on providing an expanding array of new product offerings and strengthening its relationships with its customers. To that end, the Company has made significant investments to increase market penetration, primarily in the form of product development, customer service, customer credits and allowances, and strategic acquisitions. The Company calculates its net sales by subtracting credits and allowances from gross sales. Credits and allowances include costs for co-operative advertising, product returns, discounts given to customers who purchase new products for inclusion in their stores, and the cost of competitors' products that are purchased from the customer in order to induce a customer to purchase new product lines from the Company. The credits and allowances are designed to increase market penetration and increase the number of product lines carried by customers by displacing competitors' products within customers' stores and promoting consolidation of customers' suppliers. The introduction of new products and product lines to customers may cause significant fluctuations from quarter to quarter in the Company's results of operations. Over the periods presented, the Company has increased the percentage of products sold to its major customers, in part due to consolidation within the automotive aftermarket. As a general rule, sales to the Company's major customers are at lower margins than sales to other customers. Page 7 of 12 Results of Operations The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in the Company's Consolidated Statements of Income.
Percentage of Net Sales For the Thirteen Weeks Ended -------------------------------------------------- March 29, March 30, 1997 1996 - --------------------------------------- ------------------------- ------------------------ Net sales 100.0% 100.0% Cost of goods sold 60.0 60.8 - --------------------------------------- ------------------------- ------------------------ Gross profit 40.0 39.2 Selling, general and administrative expenses 32.1 32.5 - --------------------------------------- ------------------------- ------------------------ Income from operations 7.8 6.7 Interest expense, net 3.3 3.0 - --------------------------------------- ------------------------- ------------------------ Income before taxes 4.5 3.7 Provision for taxes 1.7 1.4 - --------------------------------------- ------------------------- ------------------------ Net income 2.9% 2.3% ======================================= ========================= ========================
Thirteen Weeks Ended March 29, 1997 Compared to Thirteen Weeks Ended March 30, 1996 Net sales increased to $33.3 million for the thirteen weeks ended March 29, 1997 from $32.5 million for the same period in 1996, an increase of 2.3%. This increase resulted from increased sales in all segments of our core business. Cost of goods sold for the thirteen weeks ended March 29, 1997 increased to $20.0 million from $19.8 million for the same period in 1996, an increase of 1.1%. As a percent of net sales, cost of goods sold for the thirteen weeks ended March 29, 1997 decreased to 60.0% from 60.8% for the thirteen weeks ended March 30, 1996. The decrease was primarily due to an improved sales mix of higher margin products. Selling, general and administrative expenses for the thirteen weeks ended March 29, 1997 increased to $10.7 million from $10.6 million for the thirteen weeks ended March 30, 1996, an increase of 1.0%. As a percent of net sales, selling, general and administrative expenses decreased to 32.1% from 32.5%. This decrease was the result of leveraging higher sales against a fixed expense base. Interest expense, net, increased to $1.1 million for the thirteen weeks ended March 29, 1997 from $1.0 million for the thirteen weeks ended March 30, 1996. This increase was the result of additional interest expense on borrowings for increased working capital requirements. A provision for income taxes of $0.6 million was recorded for the thirteen weeks ended March 29, 1997 and $0.4 million was recorded for the thirteen weeks ended March 30, 1996. The Company's effective tax rate was 36.5% for the thirteen weeks ended March 29, 1997 and 36.9% for the thirteen weeks ended March 30, 1996. The decrease in the effective tax rate is primarily the result of lower state taxes. Net income increased to $1.0 million for the thirteen weeks ended March 29, 1997 from $0.8 million for the thirteen weeks ended March 30, 1996. As a percentage of net sales, net income increased to 2.9% for the thirteen week period in 1997 from 2.3% for the same period in 1996. Page 8 of 12 Liquidity and Capital Resources The Company has financed its growth primarily through cash flow from its operations and borrowings under its credit facility. Working capital was $64.1 million as of March 29, 1997 and $56.4 million as of March 30, 1996. The Company believes that the cash generated from operations and borrowings available under its revolving credit facility will be sufficient to meet the Company's working capital needs and to fund expansion for the foreseeable future. Net cash provided by operating activities was $2.7 million for the thirteen weeks ended March 29, 1997 and $0.8 million for the thirteen weeks ended March 30, 1996. These amounts represent net income plus depreciation and amortization less changes in working capital. During 1997, the most significant changes were increases in other accrued liabilities, other assets and inventories. During 1996, the most significant changes were increases in accounts receivable, accounts payable and inventories. Net cash used in investing activities amounted to $0.5 million and $6.3 million for the thirteen weeks ended March 29, 1997 and March 30, 1996, respectively. In 1997, additions to property, plant and equipment accounted for all of the cash used. In 1996, the acquisition of MPI and and additions to property, plant and equipment including progress payments for the addition at our Warsaw, Kentucky facility represented nearly all of the total investing activities. Net cash provided by financing activities amounted to $0.1 million and $6.0 million for the thirteen weeks ended March 29, 1997 and March 30, 1996, respectively. In 1997, proceeds from the Company's revolving credit facility nearly equaled the repayment of term loans and capitalized lease obligations. In 1996, cash was received from the Company's credit facility, offset somewhat by the payoff of the debt assumed with the acquisition of MPI and the continued paydown of capitalized lease obligations. The Acquisition of MPI. MPI was acquired with the payment of cash consideration in the amount of approximately $5.2 million and the assumption of certain liabilities, including approximately $2.3 million in the assumption of bank debt. Commercial Borrowings. In January 1995, the Company expanded its credit facility to $60.0 million from a syndicate of commercial banks comprised of CoreStates Bank, N.A. (agent), The Fifth Third Bank N.A. and First Chicago NBD Corporation (formerly NBD Bank). The credit facility consists of a term portion of $25.0 million (1995 Term Loan), a revolving credit portion of $30.0 million, and a letter of credit portion of $5.0 million used to secure the Bonds. The term portion of the facility bears interest at a floating rate equal, at the Company's option, to Libor plus 110 basis points, or CoreStates Bank, N.A.'s prime rate, has a seven-year term and requires graduated amortization payments in the amount of $3.0 million in 1997 increasing by $0.5 million each year thereafter with a final payment of $6.0 million in 2001. The revolving credit portion bears interest at a floating rate equal, at the Company's option, to Libor plus 85 basis points, or CoreStates Bank, N.A.'s prime rate, and expires January 15, 1998. In April 1996, the Company amended its credit facility to include a new $12.0 million term loan (1996 Term Loan) with interest at a floating rate equal, at the Company's option to Libor plus 150 basis points, or the bank's prime rate. The loan has a five year term and is payable in equal monthly principal payments of $200,000 beginning in May 1996. In May 1996, the Company entered into an interest rate swap agreement with the agent bank of the syndicate of commercial banks providing the Company's credit facility. The swap agreement has the effect of fixing the interest rate on $11.1 million of term debt to 7.32% from a floating rate of Libor plus 1.1%. The Company is exposed to credit loss in the event of nonperformance under the interest rate swap agreement by the agent bank, however, such nonperformance is not anticipated. In December 1996, the revolving credit portion of the facility was increased from $30.0 million to $35.0 million. Borrowings under the revolving credit portion of the facility and the 1996 Term Loan are subject to a borrowing base computation equal to 80% of qualified receivables and 50% of qualified inventories, as defined. The credit facility is secured by the stock of the Company's subsidiaries and first priority liens on the Company's and subsidiaries assets, including accounts receivable, inventory and all other tangible or intangible property. At March 29, 1997, the Company had borrowings of $30.1 million under the term loans and $25.5 million under the revolving facility and has $9.5 million of borrowing capacity under the revolving facility. Page 9 of 12 Industrial Revenue Bonds. Construction of the Company's Warsaw, Kentucky facility in 1990 was funded by the Bonds. The Bonds bear interest at an annual rate of 4% payable monthly and require annual principal payments of $300,000 or $350,000 in alternating years with the final payment due in July, 2009. Capitalized Leases. The Company's leases for its Pennsylvania and Georgia facilities are recorded as capitalized leases in the Company's financial statements. Impact of Inflation The Company has not generally been adversely affected by inflation. The Company believes that price increases resulting from inflation generally could be passed on to its customers, since prices charged by the Company are not set by long-term contracts. Page 10 of 12 PART II: OTHER INFORMATION Item 1. Legal Proceedings In addition to commitments and obligation which arise in the ordinary course of business, the Company is subject to various claims and legal actions from time to time involving contracts, competitive practices, trademark rights, product liability claims and other matters arising out of the conduct of the Company's business. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description 27 Financial Data Schedule (b) Reports on Form 8-K None Page 11 of 12 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. R & B, INC. Date May 13, 1997 \s\ Richard Berman Richard Berman President Date May 13, 1997 \s\ Malcolm Walter Malcolm Walter Chief Financial Officer Page 12 of 12 EX-27 2 3/29/97 FINANCIALS
5 1,000 OTHER DEC-27-1997 DEC-29-1996 MAR-29-1997 3,240 0 42,475 (8,087) 42,407 83,293 27,391 (13,036) 131,450 19,216 56,246 0 0 80 55,050 131,450 33,299 33,299 19,994 19,994 0 0 1,100 1,513 552 961 0 0 0 961 0.12 0.12
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