-----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, NYKSlRroFmqh2Vik9ZOPcYoNjHOGuZg4eD14tNJDFZ0qhzJzV1QHaXnjY+yzmGVr 4EG5z7MckzvYhLLJ7I+vFw== 0000950144-99-011949.txt : 19991020 0000950144-99-011949.hdr.sgml : 19991020 ACCESSION NUMBER: 0000950144-99-011949 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19991019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAXIM GROUP INC / CENTRAL INDEX KEY: 0000910468 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-HOME FURNITURE, FURNISHINGS & EQUIPMENT STORES [5700] IRS NUMBER: 582060334 STATE OF INCORPORATION: DE FISCAL YEAR END: 0205 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-13099 FILM NUMBER: 99730327 BUSINESS ADDRESS: STREET 1: 210 TOWNPARK DR CITY: KENNESAW STATE: GA ZIP: 30144 BUSINESS PHONE: 6783554000 10-Q/A 1 THE MAXIM GROUP, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1998 COMMISSION FILE NUMBER 1-13099 THE MAXIM GROUP, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 58-2060334 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 210 TownPark Drive, Kennesaw, Georgia 30144 - ---------------------------------------- --------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (678) 355-4000 --------------------- N/A - -------------------------------------------------------------------------------- (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 last 90 days. Yes No X --------- --------- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date:
Common Stock, $.001 par value 19,038,347 - ----------------------------------- --------------------------------- Class Outstanding at October 1, 1999
Explanatory Note: During the course of the fiscal 1999 year-end financial audit process, The Maxim Group, Inc. ("Maxim" or the "Company") recorded certain adjustments to its previously reported interim results. The most significant of the adjustments affecting the quarterly period ended April 30, 1998 related to certain vendor support funds and the gain on the sale of equipment recognized in the Company's operating results during the quarter. It was determined that certain revenue related to vendor support funds was incorrectly recorded and that the gain on the sale of certain equipment should be recognized in the quarter ended July 31, 1998. As a result of the adjustments recorded by the Company, the Company has revised its reported results of operations downward for the quarter ended April 30, 1998. This Form 10-Q/A reflects the effects of these adjustments. The following Items are amended hereby: PART I -- FINANCIAL INFORMATION: Item 1. Financial Statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. 2 PART I--FINANCIAL INFORMATION ITEM 1--FINANCIAL STATEMENTS THE MAXIM GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Per Share Information)
April 30, 1998 (As Restated January 31, Assets See Note 2) 1998 - -------------------------------------------------------------------- ------------ ----------- (Unaudited) Current assets: Cash and cash equivalents, including restricted cash of $17,960 at April 30, 1998 and $22,786 at January 31, 1998 $ 21,248 $ 28,880 Current portion of franchise license fees receivable, net of allowance for doubtful accounts of $430 at April 30, 1998 and $528 at January 31, 1998 2,365 3,107 Trade accounts receivable, net of allowance for doubtful accounts of $2,341 at April 30, 1998 and $1,917 at January 31, 1998 61,896 56,432 Accounts receivable from officers and employees 1,651 1,593 Current portion of notes receivable from franchisees and related parties, net of allowance for doubtful accounts of $252 at April 30, 1998 and $261 at January 31, 1998 1,276 1,165 Inventories 58,958 54,693 Refundable income taxes 1,986 2,558 Deferred income taxes 4,731 5,714 Prepaid expenses 5,903 3,406 -------- -------- Total current assets 160,014 157,548 Property and equipment, net of accumulated depreciation and amortization of $51,291 at April 30, 1998 and $48,039 at January 31, 1998 148,127 137,207 Franchise license fees receivable, less current portion, net of allowance for doubtful accounts of $210 at April 30, 1998 and January 31, 1998 3,808 2,718 Notes receivable from franchisees, less current portion 3,753 3,506 Intangible assets, net of accumulated amortization of $1,764 at April 30, 1998 and $1,626 at January 31, 1998 13,520 13,640 Other assets 8,888 6,875 -------- -------- $338,110 $321,494 ======== ======== Liabilities And Stockholders' Equity - -------------------------------------------------------------------- Current liabilities: Current portion of long-term debt $ 154 $ 384 Current portion of capital lease obligations 512 501 Rebates payable to franchisees 2,921 3,975 Accounts payable 22,056 23,376 Accrued expenses 13,609 14,333 Deferred revenue 3,072 1,750 Deposits 3,686 2,897 --------- --------- Total current liabilities 46,010 47,216 Long-term debt, less current portion 146,693 129,349 Capital lease obligations, less current portion 1,289 1,429 Deferred taxes 9,437 9,725 --------- --------- Total liabilities 203,429 187,719 --------- --------- Commitments and contingencies Stockholders' equity: Preferred stock, $.001 par value; 1,000 shares authorized, no shares issued or outstanding -- -- Common stock, $.001 par value; 25,000 shares authorized, 17,526 shares issued at April 30, 1998 and 17,352 shares issued at January 31, 1998 18 17 Additional paid-in capital 120,611 119,264 Retained earnings 30,706 29,388 Treasury stock, 1,319 shares at April 30, 1998 and 1,221 shares at January 31, 1998 (16,654) (14,894) --------- --------- Total stockholders' equity 134,681 133,775 --------- --------- $ 338,110 $ 321,494 ========= =========
See accompanying notes to condensed consolidated financial statements. -2- 3 THE MAXIM GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Information) (Unaudited)
Three Months Ended ------------------------- April 30, 1998 (As Restated April 30, See Note 2) 1997 ------------ --------- Revenues: Sales of floor covering products $ 80,661 $ 71,490 Fiber and PET sales 6,965 5,772 Fees from franchise services 6,857 7,281 Other 2,149 1,682 -------- -------- Total revenues 96,632 86,225 Cost of sales 69,564 59,155 -------- -------- Gross profit 27,068 27,070 Selling, general, and administrative expenses 22,390 20,438 Interest income (386) (94) Interest expense 2,459 1,401 Other 52 (35) -------- -------- Earnings before income taxes 2,553 5,360 Income tax expense 1,235 2,109 -------- -------- Net earnings $ 1,318 $ 3,251 ======== ======== Earnings per common share: Basic $ 0.08 $ 0.20 ======== ======== Diluted $ 0.08 $ 0.20 ======== ======== Weighted average number of common shares outstanding: Basic 16,424 16,110 ======== ======== Diluted 17,247 16,630 ======== ========
See accompanying notes to condensed consolidated financial statements. -3- 4 THE MAXIM GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
Three Months Ended -------------------------- April 30, 1998 (As Restated April 30, See Note 2) 1997 ------------ --------- Cash flows from operating activities: Net earnings $ 1,318 $ 3,251 --------- --------- Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization 3,372 2,729 Deferred income taxes 695 1,401 Changes in assets and liabilities: Increase in receivables (6,229) (7,125) Increase in inventories (4,264) (1,853) Decrease in refundable income taxes 572 49 Increase in prepaid expenses and other assets (4,510) (1,292) Decrease in rebates and accounts payable, accrued expenses, deferred revenue, and deposits (987) (470) --------- --------- Total adjustments (11,351) (6,561) --------- --------- Net cash used in operating activities (10,033) (3,310) --------- --------- Cash flows from investing activities: Capital expenditures (14,172) (3,878) --------- --------- Cash flows from financing activities: Proceeds from issuance of common stock, net -- 47,248 Proceeds from exercise of options, net 1,348 463 Purchase of treasury stock (1,760) (8,944) Borrowings under revolving credit agreement 17,114 -- Repayment of revolving credit agreement -- (33,428) Principal payments on capital lease obligations (129) (190) --------- --------- Net cash provided by financing activities 16,573 5,149 --------- --------- Net decrease in cash (7,632) (2,039) Cash, beginning of period 28,880 6,439 --------- --------- Cash, end of period $ 21,248 $ 4,400 ========= ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 4,711 $ 1,332 ========= ========= Income taxes $ 54 $ 1,122 ========= =========
See accompanying notes to condensed consolidated financial statements. -4- 5 THE MAXIM GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In Thousands, Except Per Share Information) (Unaudited) 1. Consolidated Financial Statements The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and 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 accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1998 Annual Report on Form 10-K as filed with the Securities and Exchange Commission. The results of operations for the periods presented are not necessarily indicative of the operating results for the full year. 2. Restatement During the course of the fiscal 1999 year-end financial audit process, the Company recorded certain adjustments to its previously reported interim results. The most significant of the adjustments affecting the quarterly period ended April 30, 1998 related to certain vendor support funds and the gain on the sale of equipment recognized in the Company's operating results during the quarter. It was determined that certain revenue related to vendor support funds was incorrectly recorded and that the gain on the sale of certain equipment should be recognized in the quarter ended July 31, 1998. As a result of the adjustments recorded by the Company, the Company has revised its reported results of operations downward for the quarter ended April 30, 1998. This Form 10-Q/A reflects the effects of these adjustments.
Three Months Ended April 30, 1998 --------------------------------- As Previously Reported Restated ---------- ----------- Sales of floor covering products $81,136 $80,661 Fees from franchise services 9,287 6,857 Total revenues 99,537 96,632 Cost of sales 69,775 69,564 Gross profit 29,762 27,068 Selling, general, and administrative expenses 22,202 22,390 Interest expense 2,364 2,459 Other (income) expense (187) 52 Earnings before income tax expense 5,769 2,553 Income tax expense 2,225 1,235 Net earnings 3,544 1,318 Earnings per common share: Basic $ 0.22 $ 0.08 Diluted $ 0.21 $ 0.08
April 30, 1998 -------------------------- As Previously Reported Restated ---------- ---------- Trade accounts receivable, net $ 64,326 $ 61,896 Property and equipment, net 148,913 148,127 Deferred taxes, long-term liability 10,427 9,437 Retained earnings 32,932 30,706
6 3. Inventories Inventories consisted of the following:
April 30, January 31, 1998 1998 --------- ----------- Raw materials $16,338 $14,809 Work in process 4,139 3,363 Finished goods 38,481 36,521 ------- ------- $58,958 $54,693 ======= =======
4. Senior Subordinated Notes On October 16, 1997, the Company completed the sale of $100,000 of 9-1/4% Senior Subordinated Notes ("Notes") due 2007, to institutional buyers in a private offering under Rule 144A promulgated under the Securities Act of 1933. The net proceeds to the Company from the offering of the Notes were approximately $96,000, net of an issue discount and fees and related costs. The Company used the net proceeds from the offering of the Notes to repay all borrowings outstanding under its revolving credit agreements of approximately $82,700 and for general corporate purposes, including capital expenditures. -5- 7 Each of the Company's operating subsidiaries has fully and unconditionally guaranteed the Notes on a joint and several basis. The guarantor subsidiaries comprise all of the direct and indirect subsidiaries of the Company. The Company has not presented separate financial statements and other disclosures concerning the guarantor subsidiaries because management has determined that such information is not material to investors. There are no significant restrictions on the ability of the guarantor subsidiaries to make distributions to the Company. 5. Subsequent Events Subsequent to April 30, 1998, the Company has amended its senior credit facility, consummated significant acquisitions and dispositions, defaulted a certain restricted payment covenant contained in the indenture which references the Company's $100 million Senior Subordinated Notes due October 2007 and other debt instruments including its senior credit facility and certain leases, and has been named as a party to legal and regulatory proceedings. Accordingly, the financial statements in this Quarterly Report on Form 10-Q/A should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1999 as filed with the Securities and Exchange Commission. -6- 8 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Total Revenues. Total revenues increased 12.1% to $96.6 million for the three months ended April 30, 1998 from $86.2 million for the three months ended April 30, 1997. The components of total revenues are discussed below: Sales of Floor Covering Products. Sales of floor covering products increased 12.8% to $80.7 million for the three months ended April 30, 1998 from $71.5 million for the three months ended April 30, 1997. Sales of floor covering products in Company-owned stores increased 18.4% to $36.1 million for the three months ended April 30, 1998 from $30.5 million for the three months ended April 30, 1997. The growth in retail sales of floor covering products was primarily due to internal growth. Sales of manufactured carpet increased 6.1% to $40.2 million for the three months ended April 30, 1998 from $37.9 million for the three months ended April 30, 1997. Unit sales of manufactured carpet were constant at 6.9 million square yards for the three months ended April 30, 1998 and April 30, 1997. Sales from the Company's two distribution centers amounted to $4.4 million for the three months ended April 30, 1998 and $3.1 million for the three months ended April 30, 1997, largely representing sales to the Company's franchisees. Fees From Franchise Services. Fees from franchise services, which include franchise license fees and royalties, brokering of floor covering products, and advertising, decreased 5.8% to $6.9 million for the three months ended April 30, 1998 from $7.3 million for the three months ended April 30, 1997. Fiber and PET Sales. Sales of fiber and polyethylene terephthalate ("PET") increased 20.7% to $7 million for the three months ended April 30, 1998 from $5.8 million for the three months ended April 30, 1997. Unit sales increased 5.8% to 16.3 million pounds for the three months ended April 30, 1998 from 15.4 million pounds for the three months ended April 30, 1997. The increase in dollar and unit sales was the result of continued demand for PET fiber and flake products. The Company has continued to expand the customer base for such products. Gross Profit. Gross profit remained the same at $27.1 million for the three months ended April 30, 1998 and $27.1 million for the three months ended April 30, 1997. As a percentage of revenues, gross profit was 28.0% for the three months ended April 30, 1998 compared to 31.4% for the three months ended April 30, 1997. The decrease in gross profit -7- 9 as a percentage of revenues is primarily a result of the recognition of higher raw material costs associated with manufacturing operations. Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased 9.6% to $22.4 million for the three months ended April 30, 1998 from $20.4 million for the three months ended April 30, 1997. Increases in operating expenses on an absolute basis reflect an overall growth in the size of the Company's operations required to serve the growing retail base as well as increased selling costs at Image related to newly created territories. As a percentage of revenues, selling, general, and administrative expenses decreased to 23.2% for the three months ended April 30, 1998 from 23.7% for the three months ended April 30, 1997. Interest Expense. Interest expense increased 75.5% to $2.5 million for the three months ended April 30, 1998 from $1.4 million for the three months ended April 30, 1997 due principally to the Company having a larger debt balance and a higher interest rate during the three months ended April 30, 1998 as compared to the prior year period. In October 1997, the Company sold $100 million of 9-1/4% senior subordinated notes. Income Tax Expense. The Company recorded income tax expense of $1.2 million for the three months ended April 30, 1998 compared to $2.1 million for the three months ended April 30, 1997. The effective tax rate for the three months ended April 30, 1998 was 48.4%. Net Earnings. As a result of the foregoing factors, the Company recorded net earnings of $1.3 million for the three months ended April 30, 1998 compared to net earnings of $3.3 million for the three months ended April 30, 1997. Liquidity and Capital Resources General. The Company's primary capital requirements are for new store openings, investments in the manufacturing operations, working capital, and acquisitions. The Company historically has met its capital requirements through a combination of cash flows from operations, net proceeds from the sale of equity and debt securities, bank lines of credit, and standard payment terms from suppliers. In March 1997, the Board of Directors of the Company authorized management to repurchase up to 1 million shares of common stock of the Company. In October 1997, the Board of Directors of the Company authorized management to repurchase up to an additional 1 million shares of the common stock of the Company. As of June 8, 1998, the Company had repurchased 1,359,000 shares of its common stock in the open market for a total of $17.3 million. These purchases were, and any future purchases will be, financed from borrowings under the Company's revolving credit facility. Credit Facility. On August 26, 1997 and as amended on September 24, 1997, the Company established a credit facility providing for aggregate commitments of $110 million (the "Credit Facility"). The Credit Facility consists of (i) a $50 million revolving credit facility, of which $22 million was available for borrowings on June 8, 1998 and which matures in August 2000, (ii) a $29 million term loan which has been repaid, and (iii) a special-purpose letter of credit in the amount of up to $31 million for use as credit support for the -8- 10 Summerville Loan to be used to finance the expansion of Image's fiber extrusion capabilities at its plant in Summerville, Georgia, that matures in September 2017. As of June 8, 1998, the Company had $28 million outstanding under the revolving credit facility and no borrowings outstanding under the term loan. No amounts have been drawn on the letter of credit. Amounts outstanding under the Credit Facility bear interest at a variable rate based on LIBOR or the prime rate, at the Company's option. The Credit Facility contains customary covenants. As of the date hereof, the Company was in compliance with, or obtained waivers of all violations of, all covenants under the Credit Facility. Summerville Loan. Effective September 1, 1997, the Development Authority of the City of Summerville, Georgia (the "Authority"), issued Exempt Facility Revenue Bonds in an aggregate principal amount of $30 million (the "Facility Revenue Bonds"). On September 17, 1997, the Authority loaned (the "Summerville Loan") the proceeds from the sale of the Facility Revenue Bonds to Image to finance, in whole or in part, the expansion of Image's fiber extrusion capabilities at its plant in Summerville, Georgia. The Facility Revenue Bonds and the interest thereon are special, limited obligations of the Authority, payable solely from the revenues and income derived from a loan agreement between Image and the Authority, which revenues and income have been pledged and assigned by Image to secure payment thereof and funds which may be drawn under the special-purpose letter of credit described above. The Facility Revenue Bonds and the Summerville Loan will mature on September 1, 2017, and the interest rate of the Facility Revenue Bonds is to be determined from time to time based on the minimum rate of interest that would be necessary to sell the Facility Revenue Bonds in a secondary market at the principal amount thereof. The interest rate on the Summerville Loan equals the interest rate on the Facility Revenue Bonds. Senior Notes. On October 16, 1997, the Company completed the sale of $100 million of 9-1/4% senior subordinated notes ("Senior Notes") due 2007. Each of the Company's operating subsidiaries has fully and unconditionally guaranteed the Senior Notes on a joint and several basis. The guarantor subsidiaries comprise all of the direct and indirect subsidiaries of the Company. The Company has not presented separate financial statements and other disclosures concerning the guarantor subsidiaries because management has determined that such information is not material to investors. There are no significant restrictions on the ability of the guarantor subsidiaries to make distributions to the Company. Synthetic Lease Financing. On April 9, 1998, the Company and its subsidiaries established a $13 million short-term end-loaded lease facility (the "Bridge Facility"), also referred to as a synthetic lease facility. Under the Bridge Facility, the Company has the ability to direct its lenders to make loans to the owner-trustee, principally for acquisition or expansion of CarpetMAX store locations, which financed locations are then leased by the owner trustee to the Company or a designated subsidiary. -9- 11 Cash Flows. During the three months ended April 30, 1998, operating activities used $10.0 million compared to $3.3 million for the three months ended April 30, 1997. The increase in cash used in operating activities resulted primarily from an increase in receivables and inventories. The increase in receivables and inventories was due to higher sales of floor covering products to franchisees and other carpet retailers. During the three months ended April 30, 1998, investing activities used $14.2 million compared to $3.9 million for the three months ended April 30, 1997. The increase is primarily due to an increase in capital expenditures related to manufacturing operations and the purchase of real estate for the expansion of retail stores. During the three months ended April 30, 1998, financing activities provided cash of $16.6 million compared to $5.1 million in the prior year period. This increase is primarily due to the proceeds received from borrowings under the Company's revolving credit agreement. Capital Expenditures. The Company anticipates that it will require approximately $15 million for the remainder of fiscal 1999 to (i) open approximately 32 new Gallery stores (assuming approximately 50% of such stores will be located on Company-owned property and the remainder on leased property), (ii) reconfigure three existing CarpetMAX stores, and (iii) upgrade its management information systems. The actual costs that the Company will incur in opening new Gallery stores cannot be predicted with precision because the opening costs will vary based upon geographic location, the size of the store, the amount of supplier contributions, and the extent of the buildout required at the selected site. The Company anticipates that it will require approximately $24 million during the remainder of fiscal 1999 for capital expenditures at Image, including the expansion of Image's polyester fiber production capacity. The Company believes that the net proceeds from the Notes Offering, borrowings under the Credit Facility, the Summerville Loan, and cash flows from the operating activities will be adequate to meet the Company's working capital needs, planned capital expenditures, and debt service obligations through fiscal 1999. As the Company's debt matures, the Company may need to refinance such debt. There can be no assurance that such debt can be refinanced or, if so, whether it can be refinanced on terms acceptable to the Company. If the Company is unable to service its indebtedness, it will be required to adopt alternative strategies, which may include actions such as reducing or delaying capital expenditures, selling assets, restructuring, or refinancing its indebtedness or seeking additional equity capital. There can be no assurance that any of these strategies could be effected on satisfactory terms, if at all. Recent Accounting Pronouncements. Effective with the three months ended April 30, 1998, the Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income". SFAS 130 establishes standards for reporting and display of comprehensive income and its components in financial statements. SFAS 130 did not have an impact on the Company's financial statements. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures About Segments of an Enterprise and Related Information", which is effective for fiscal years beginning after December 15, 1997. SFAS 131 establishes reporting standards for public companies concerning operating segments and related disclosures about products and services, geographic areas and major customers. SFAS 131 will be adopted with the Company's Annual Report for the fiscal year ending January 31, 1999. In March 1998, the American Institute of Certified Public Accountants (AICPA) issued Statement of Position 98-1 ("SOP 98-1"), "Accounting for Costs of Computer Software Developed or Obtained for Internal Use". SOP 98-1 requires capitalization of certain costs of internal-use software. Maxim adopted this statement in the first quarter of fiscal 2000, and has determined that it will have no material impact on the financial statements. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities", which is effective for fiscal years beginning after June 15, 2000. Early adoption is encouraged. SFAS 133 establishes accounting and reporting standards for derivative instruments and transactions involving hedge accounting. The Company does not anticipate this statement will have an impact on its financial statements. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-Up Activities", which is effective for fiscal years beginning after December 15, 1998. SOP 98-5 requires entities to expense certain start-up costs and organization costs as they are incurred. The Company does not anticipate that this statement will have an impact on its financial statements. Subsequent Events. Subsequent to April 30, 1998, the Company has amended its senior credit facility, consummated significant acquisitions and dispositions, defaulted a certain restricted payment covenant contained in the indenture which references the Company's $100 million Senior Subordinated Notes due October 2007 and other debt instruments including its senior credit facility and certain leases, and has been named as a party to legal and regulatory proceedings. Accordingly, this Quarterly Report on Form 10-Q/A should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1999 as filed with the Securities and Exchange Commission. -10- 12 Year 2000. Maxim has conducted an assessment of its computer systems to identify the systems that could be affected by the "Year 2000" issue, which results from computer programs being written using two digits rather than four to define the applicable year. Maxim's Year 2000 readiness efforts are being undertaken on a project team basis with centralized oversight from an external project management firm. Each project team has developed and is implementing a plan to minimize the risk of a significant negative impact on its operations. The teams are performing an inventory of Year 2000 components (software, hardware and other equipment), assessing which components may expose Maxim to business interruptions, reprogramming or replacing components as necessary, testing each component, and returning each component to production. Maxim is utilizing predominantly internal resources to reprogram, replace, or test Maxim's software for Year 2000 compliance. Maxim believes the readiness effort related to critical systems will be completed by the end of the third fiscal quarter ending November 6, 1999, which is prior to any anticipated impact on its operating systems. Maxim believes its other systems will be Year 2000 compliant by December 31, 1999. Maxim has initiated formal communications with all of its significant suppliers to determine the extent to which Maxim's operations and systems are vulnerable to third parties' failure. Key Vendor Initiative documentation has been received from vendors addressing all Year 2000 compliance issues. No significant business disruptions are expected. Maxim presently believes that with the planned conversion to new software and hardware and the planned modifications to existing software and hardware, the effects of the Year 2000 issue will be timely resolved. All other equipment, machinery and systems have been identified, replaced or upgraded as needed. Maxim's contingency plans at the retail store level include the temporary use of manual processes, which Maxim occasionally utilizes during system maintenance. The manual processes have been documented and tested with no significant revenue loss anticipated. Maxim currently believes the costs to remediate Year 2000 issues are approximately $2.8 million, of which $189,000 had been expensed as of January 31, 1999, and approximately $1.6 million remains to be spent as of October 1, 1999. All costs associated with analyzing the Year 2000 issue or making conversions to existing software are being expensed as incurred. The costs to Maxim of Year 2000 compliance and the date on which Maxim believes it will complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources, third party modification plans and other factors. A Business Contingency Plan has been developed utilizing five professional project managers to implement the plan. A Business Systems Implementation schedule lists all issues related to the Year 2000. The issues include identification of changes needed, costs, completion dates and staffing. The plan is in the final stages of completion and will result in minimal Year 2000 effect on the Company's operations. Risks include the availability and cost of personnel trained in this area, the ability to locate and correct all relevant hardware, software, computer codes and similar uncertainties. Such risks could result in a system failure of miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Also, there is the risk that the systems of other companies upon which Maxim's operations and systems rely will not be converted timely and will have an adverse effect on Maxim's results of operations. Forward-Looking Statements. This Report contains statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Those statements appear in a number of places in this Report and include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to, among other things: (i) the timing, magnitude and costs of the roll-out of the Gallery Stores; (ii) potential acquisitions by the Company; (iii) the Company's financing plans; (iv) trends affecting the Company's financial condition or results of operations; (v) the Company's business and growth strategies; and (vi) the declaration and payment of dividends. Any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those projected in the forward-looking statements as a result of various factors. The accompanying information contained in this Report, including without limitation the information set forth under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations," identifies important factors that could cause such differences. -11- 13 ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK N/A -12- 14 PART II--OTHER INFORMATION ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits 11 Statements Regarding Computation of Per Share Earnings 27.1 Financial Data Schedule for three month period ended April 30, 1998 (for SEC use only) 27.2 Restated Financial Data Schedule for three month period ended April 30, 1997 (for SEC use only)* _____________ * Previously filed (B) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended April 30, 1998. -13- 15 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. THE MAXIM GROUP, INC. Dated: October 18, 1999 By: /s/ A. J. Nassar --------------------------------------------------- A. J. Nassar, President and Chief Executive Officer Dated: October 18, 1999 By: /s/ Stephen P. Coburn --------------------------------------------------- Stephen P. Coburn, Principal Accounting Officer -14- EX-11 2 STATEMENTS RE: COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT NO. 11 THE MAXIM GROUP, INC. AND SUBSIDIARIES COMPUTATION OF BASIC AND DILUTED EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE (In Thousands, Except Per Share Information) (Unaudited)
Three Months Ended ----------------------------- April 30, 1998 (As Restated April 30, See Note 2) 1997 ============ ========= Basic: Net earnings $ 1,318 $ 3,251 ========= ========= Weighted average number of common shares outstanding 16,424 16,110 ========= ========= Basic earnings per common share $ 0.08 $ 0.20 ========= ========= Diluted: Net earnings $ 1,318 $ 3,251 ========= ========= Shares: Weighted average number of common shares outstanding 16,424 16,110 Shares issuable from assumed exercise of outstanding stock options 823 520 --------- --------- Weighted average number of common and common equivalent shares (a) 17,247 16,630 ========= ========= Diluted earnings per common share $ 0.08 $ 0.20 ========= =========
(a) Common equivalent shares represent stock options granted to key employees and directors. EX-27.1 3 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF THE MAXIM GROUP, INC. AND SUBSIDIARIES AS OF APRIL 30, 1998 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS FOR THE QUARTERS ENDED APRIL 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-31-1999 FEB-01-1998 APR-30-1998 21,248 0 77,982 3,233 58,958 160,014 199,418 51,291 338,110 46,010 146,693 0 0 18 134,663 338,110 96,632 96,632 69,564 22,390 52 300 2,459 2,553 1,235 1,318 0 0 0 1,318 0.08 0.08
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