-----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, BNOVmlJoBq6PYhccl8dqO1wSmjZqzix4VgDcbagVndTwBSsimkZjsXUtGoxHG3mT NrT0470zRKB7q931vHfWyw== 0000927016-97-000065.txt : 19970114 0000927016-97-000065.hdr.sgml : 19970114 ACCESSION NUMBER: 0000927016-97-000065 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TREND LINES INC CENTRAL INDEX KEY: 0000922978 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 042722797 STATE OF INCORPORATION: MA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24390 FILM NUMBER: 97504792 BUSINESS ADDRESS: STREET 1: 135 AMERICAN LEGION HWY CITY: REVERE STATE: MA ZIP: 02151 BUSINESS PHONE: 6178530900 MAIL ADDRESS: STREET 1: 135 AMERICAN LEGION HWY CITY: REVERE STATE: MA ZIP: 02151 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ---------------- TO ----------------- 0-24390 Commission file number . . . . . . . . . . . . . . . . . TREND - LINES, INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . (Exact name of registrant as specified in its charter) Massachusetts 04-2722797 . . . . . . . . . . . . . . . . . . . . . . . . . (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 135 American Legion Highway, Revere , Massachusetts 02151 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Address of principal executive office) (Zip Code) (617) 853 - 0900 . . . . . . . . . . . . . . . . . . . . . . . . . . (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months ( or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ..X... No...... Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
CLASS NUMBER OF SHARES OUTSTANDING JANUARY 7, 1997 -------------- -------------------------------------------- Class A Common Stock, $.01 par value 6,139,754 Class B Common Stock, $.01 par value 4,750,026 *
* Each share of Class B Common Stock is convertible into a share of Class A Common Stock. 1 INDEX Page ---- Part I - Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets November 30, 1996 (Unaudited) and March 2, 1996 3 Condensed Consolidated Statements of Operations Three Months and Nine Months Ended November 30, 1996 and November 25,1995 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows Nine Months Ended November 30, 1996 and November 25, 1995 (Unaudited) 5 Notes to Condensed Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 Part II - Other Information Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 2
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TREND-LINES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (amounts in thousands) (Unaudited) November 30, March 2, ASSETS 1996 1996 ------------- ----------- CURRENT ASSETS: Cash $ 369 $ 436 Accounts receivable, net 11,736 8,319 Refundable and prepaid income taxes 1,561 4,401 Inventories 77,107 68,885 Prepaid expenses and other current assets 6,934 5,492 -------- -------- Total current assets 97,707 87,533 -------- -------- PROPERTY AND EQUIPMENT, NET 13,564 12,815 OTHER ASSETS 622 310 -------- -------- $111,893 $100,658 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Bank credit facility $ 34,348 $ 18,483 Current portion of capital lease obligations 618 566 Accounts payable 26,464 30,476 Accrued expenses 6,113 6,602 -------- -------- Total current liabilities 67,543 56,127 -------- -------- CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 1,774 2,243 STOCKHOLDERS' EQUITY: Common stock, $.01 par value - Class A - Authorized - 20,000,000 shares Issued - 6,299,754 shares and 6,252,965 62 62 shares at November 30, 1996 and March 2, 1996, respectively Class B - Authorized - 5,000,000 shares Issued and outstanding - 4,750,026 shares and 4,790,915 shares at November 30, 1996 and March 2, 1996, respectively 48 48 Additional paid-in capital 41,310 41,300 Retained earnings 1,927 878 -------- -------- Less: 160,000 Class A shares held in treasury stock at November 30,1996, at cost (771) - -------- -------- Total stockholders' equity 42,576 42,288 -------- -------- $111,893 $100,658 ======== ========
See notes to condensed consolidated financial statements 3
TREND-LINES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands) (Unaudited) Three months ended Nine months ended ---------------------------------------- ----------------- November 30, November 25, November 30, November 25, 1996 1995 1996 1995 ------------ ------------ ------------ ----------------- NET SALES $49,100 $40,061 $145,238 $113,896 COST OF SALES 33,083 26,329 97,582 73,149 ------- ------- -------- -------- Gross Profit 16,017 13,732 47,656 40,747 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 14,249 12,208 44,175 35,506 ------- ------- -------- -------- Income from operations 1,768 1,524 3,481 5,241 INTEREST EXPENSE, net of interest income 693 463 1,718 1,428 ------- ------- -------- -------- Income before provision for income taxes 1,075 1,061 1763 3,813 PROVISION FOR INCOME TAXES 435 430 714 1,537 ------- ------- -------- -------- Net income $ 640 $ 631 $ 1,049 $ 2,276 ======= ======= ======== ======== NET INCOME PER COMMON SHARE $0.06 $0.06 $0.09 $0.22 ======= ======= ======== ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 11,305 11,201 11,294 10,396 ======= ======= ======== ========
See notes to condensed consolidated financial statements. 4
TREND-LINES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) (Unaudited) Nine Months Ended ------------------ November 30, November 25, 1996 1995 ------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,049 $ 2,276 Adjustments to reconcile net income to net cash used in operating activities - Depreciation and amortization 1,292 1,115 Gain on sale of property and equipment (18) - Changes in current assets and liabilities- Accounts receivable (3,417) (4,385) Refundable and prepaid income taxes 2,840 - Inventories (8,222) (16,443) Prepaid expenses and other current assets (1,442) (3,061) Accounts payable (4,012) (1,958) Accrued expenses and other current liabilities (489) 2,212 -------- -------- Net cash used in operating activities (12,419) (20,244) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (2,023) (5,121) Increase in other assets (312) (521) -------- -------- Net cash used in investing activities (2,335) (5,642) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock - 19,579 Net proceeds from exercise of stock options 10 - Net borrowings under bank credit facility 15,865 6,754 Net borrowings (payments) under capital lease obligations (417) 1,095 Payments to acquire treasury stock (771) - -------- -------- Net cash provided by financing activities 14,687 27,428 -------- -------- NET INCREASE (DECREASE) IN CASH (67) 1,542 CASH, BEGINNING OF PERIOD 436 361 -------- -------- CASH, END OF PERIOD $ 369 $ 1,903 ======== ======== Supplemental Disclosure of Cash Flow Information: Cash paid for - Interest $ 1,220 $ 1,372 ======== ======== - Income Taxes $ 170 $ 3,266 ======== ======== Supplemental Schedule of Noncash Investing and Financing Activities: Equipment acquired under capital lease obligations $ - $ 715 ======== ========
See notes to condensed consolidated financial statements. 5 TREND - LINES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION ------------------------ The information set forth in these financial statements is unaudited and may be subject to normal year end adjustments. In the opinion of management, the information reflects all adjustments, which consist of normal recurring accruals, that are considered necessary to present a fair statement of the results of operations of Trend-Lines, Inc. (the Company) for the interim periods presented. The operating results for the nine months ended November 30, 1996 are not necessarily indicative of the results to be expected for the fiscal year ending March 1, 1997. The financial statements presented herein should be read in conjunction with the financial statements included in the Company's Annual Report on Form 10-K for the year ended March 2, 1996. Certain information in footnote disclosures normally included in financial statements have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. 2. EARNINGS PER SHARE DATA -------------------------- Net income per common share for the nine months ended November 30, 1996 and November 25, 1995 is computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Common stock equivalents are calculated using the treasury stock method and consist of common stock issuable upon the exercise of outstanding stock options. Outstanding shares and options have been adjusted to reflect a three-for-two split of the Class A and Class B Common Stock (Note 3). 3. STOCK SPLIT -------------- In August 1995, the Board of Directors approved a three-for-two stock split of the Class A Common Stock effected in the form of a stock dividend. The record date for the stock split was August 24, 1995 and the dividend was paid on September 1, 1995. In July 1996, the Board of Directors approved a corresponding three-for-two stock split of the Class B Common Stock effected in the form of a stock dividend. The stock splits have been retroactively reflected in the accompanying condensed consolidated statements and notes for all periods presented. 6 TREND-LINES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4. BANK CREDIT FACILITY ----------------------- On July 3, 1996, the Company entered into a new, three-year revolving secured credit facility with another institution, pursuant to which the Company may borrow a maximum of $40 million based on a borrowing formula related to inventory levels, as defined. The facility bears interest, at the Company's option, at the bank's reference rate plus .75% or LIBOR plus 2.25%. A commitment fee of .375% per year of the average unused commitment amount, as defined, is payable monthly. As of November 30, 1996, the Company had approximately $34.3 million of borrowings outstanding and approximately $1.0 million of letters of credit outstanding. The Company had approximately $4.7 million in available borrowings under this facility. 5. RESTRUCTURING CHARGE ------------------------ In the fourth quarter of fiscal 1995, the Company recorded a restructuring charge of approximately $1.4 million, representing the costs associated with reorganizing its operations. These costs include a $954,000 charge for the rent and related expenses for closing 12 retail store locations and the severance and related benefits for terminated employees. Additionally, $443,000 was charged for the consolidation of the Company's distribution centers. As of November 30, 1996, 12 retail store locations were closed and approximately $559,000 was charged against the restructuring reserve for store closing related activities. In addition, approximately $384,000 associated with the consolidation of the Company's distribution centers was also charged against the restructuring reserve. There were no non-cash adjustments to the accrual during the nine months ended November 30, 1996. 6. TREASURY STOCK ------------------ In November 1996, the Company's Board of Directors approved a stock repurchase plan, whereby the Company may purchase up to 500,000 shares of common stock at fair market value, to be used for future Stock Option programs, investment and / or other corporate purposes. The treasury stock represents shares purchased under this program. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations --------------------- Net sales for the third quarter of fiscal 1996 increased by $9.0 million, or 22.6%, from $40.1 million for the third quarter of fiscal 1995 to $49.1 million for the third quarter of fiscal 1996. Net catalog sales for the third quarter of fiscal 1996 decreased $1.7 million or 10.4%, from $16.4 million for the third quarter of fiscal 1995 to $14.7 million for the third quarter of fiscal 1996, while retail sales increased $10.7 million or 45.1% as compared to the third quarter of fiscal 1995. The decrease in net catalog sales was primarily caused by a reduced response rate for the Trend-Lines catalog, which was partially offset by higher sales attributed to increased circulation for the Golf Day catalog. Also the Company's opening of retail stores in areas previously only serviced by its catalogs has resulted in a decrease in the Company's catalog sales in those areas. The Company believes that the expansion of its retail store operations will continue to result in a decrease in its catalog sales. The revenue growth of retail stores was attributable to a more promotional pricing strategy and the expansion of the Company's retail store base, which expanded 16.7% from 126 locations at the end of the third quarter of fiscal 1995 to 147 locations at the end of the third quarter of fiscal 1996. Comparable net store sales for Woodworkers Warehouse / Post Tool stores and Golf Day stores for the third quarter of fiscal 1996 increased by 25.3% as compared to the third quarter of fiscal 1995. Net sales for the first nine months of fiscal 1996 increased by $31.3 million, or 27.5%, from $113.9 million for the first nine months of fiscal 1995 to $145.2 million for the first nine months of fiscal 1996. Comparable net store sales for Woodworkers Warehouse / Post Tool Stores and Golf Day for the first nine months of fiscal 1996 increased by 17.1% as compared to the first nine months of fiscal 1995. Net catalog sales for the first nine months of fiscal 1996 decreased $.3 million , or .7%, from $48.3 million for the first nine months of fiscal 1995 to $48.0 million for the nine months of fiscal 1996, while retail sales increased $31.6 million, or 48.2%, as compared to the first nine months of fiscal 1995. The decrease in net catalog sales was primarily attributable to the Trend-Lines catalog lower third quarter response rate, which was largely offset by the moderate expansion of the Company's Golf Day catalog circulation. Gross profit for the third quarter of fiscal 1996 increased 16.6% from $13.7 million for the third quarter of fiscal 1995 to $16.0 million for the third quarter of fiscal 1996. As a percentage of net sales, gross profit decreased 1.7% from 34.3% of net sales for the third quarter of fiscal 1995 to 32.6% of net sales in the third quarter of fiscal 1996. The decrease in the Company's gross profit percentage was the result of more promotional catalog activity and the Company's changing sales mix, which was caused by the increase in retail sales as a percentage of total sales. The Company's retail store sales generally have lower overall gross margins than catalog sales. Gross profit for the first nine months of fiscal 1996 increased 17.0% from $40.7 million for the first nine months of fiscal 1995 to $47.7 million for the first nine months of fiscal 1996. As a percentage of net sales, gross profit decreased 3.0% from 35.8% of net sales for first nine months 8 of fiscal 1995 to 32.8% of net sales for the first nine months of fiscal 1996. The decrease in the Company's gross profit percentage was primarily the result of more promotional catalog activity and the Company's changing sales mix. Selling, general and administrative expenses for the third quarter of fiscal 1996 increased 16.7%, or $2.0 million, from $ 12.2 million for the third quarter of fiscal 1995 to $14.2 million for the third quarter of fiscal 1996. As a percentage of net sales, selling, general and administrative expenses decreased 1.5% from 30.5% of net sales in the third quarter of fiscal 1995 to 29.0% of net sales in the third quarter of fiscal 1996. Selling, general and administrative expenses increased in dollar terms and decreased as a percentage of net sales due primarily to the Company's continuing retail expansion. The Company's retail stores generally have lower selling, general and administrative expenses as a percentage of sales than catalog operations. Selling, general and administrative expenses for the first nine months of fiscal 1996 increased 24.4%, or $8.7 million, from $35.5 million for the first nine months of fiscal 1995 to $44.2 million for the first nine months of fiscal 1996. As a percentage of net sales, selling, general and administrative expenses decreased .8% from 31.2% of net sales for the first nine months of fiscal 1995 to 30.4% of net sales for the first nine months of fiscal 1996. Selling, general and administrative expenses increased in dollar terms and decreased as a percentage of net sales due primarily to the Company's continuing retail expansion. The Company's retail stores generally have lower selling, general and administrative expenses as a percentage of sales than catalog operations. As the result of the above factors income from operations for the third quarter of fiscal 1996 increased by $.3 million, or 16.0%, from $1.5 million in the third quarter of fiscal 1995 to $1.8 million in the third quarter of fiscal 1996. As a percentage of net sales, income from operations decreased .2% from 3.8% of net sales in the third quarter of fiscal 1995 to 3.6% of net sales in the third quarter of fiscal 1996. As the result of the above factors income from operations for the first nine months of fiscal 1996 decreased $1.7 million, or 33.6% from $5.2 million in the first nine months of fiscal 1995 to $3.5 million in the first nine months of fiscal 1996. As a percent of net sales, income from operations decreased 2.2% from 4.6% of net sales in the first nine months of 1995 to 2.4% of the net sales in the first nine months of fiscal 1996. Interest expense, net of interest income, for the third quarter of fiscal 1996 increased by $230,000 from $463,000 in the third quarter of fiscal 1995 to $693,000 in the third quarter of fiscal 1996. The increase in interest expense was attributable to a higher borrowing base and interest rate. Interest expense, net of interest income, for the first nine months of fiscal 1996 increased by $.3 million from $1.4 million in the first nine months of fiscal 1995 to $1.7 million in the first nine months of fiscal 1996, caused by the increased interest rate. 9 Liquidity and Capital Resources -------------------------------- The Company's working capital decreased by $1.2 million, from $31.4 million as of March 2, 1996 to $30.2 million as of November 30, 1996. During the first nine months of fiscal 1996, net cash used in operating activities was approximately $12.4 million, net cash used in investing activities was approximately $2.3 million and net cash provided from financing activities was approximately $14.7 million. The net cash used in operating activities resulted primarily from $2.3 million provided by net income and depreciation and amortization, $2.8 million provided from income tax refunds, offset by a combined increase of $13.1 million in inventories, accounts receivable and prepaid expenses and other current assets, associated with retail store expansion, and also offset by a decrease in accounts payable and accrued expenses of $4.5 million. The net cash used in investing activities was primarily related to purchases of property and equipment required for the Company's retail expansion. During the first nine months of fiscal 1996, the net cash provided from financing activities was primarily attributable to $15.9 million in net borrowings under the Company's bank credit facility, offset by $.8 million in payments to acquire treasury stock and $.4 million in payments under capital leases obligations. The Company anticipates that for the remainder of fiscal 1996, it will continue to invest in leasehold improvements and equipment to support its retail store expansion plans. In addition, the Company's expansion plans will require the use of cash to fund increased inventories associated with the operation of additional retail stores. The Company opened three stores and closed one store in the third quarter. For the remainder of fiscal 1996, the Company currently plans to open approximately 25 to 30 retail stores, including the 14 stores opened in the last three quarters. The amount available under the credit facility is $40.0 million, of which $35.3 million (including letters of credit totaling approximately $1.0 million) was outstanding as of November 30, 1996. The Company believes that the cash generated from operating activities, trade credit and available bank borrowings will be sufficient to fund its operations and its retail store expansion program for the next twelve months, however, there can be no assurance that this will be the case. See "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995." Impact of Inflation ------------------- The Company does not believe that inflation has had a material impact on its net sales or results of operations. Safe Harbor Statement under the Private Securities Litigation Reform Act of --------------------------------------------------------------------------- 1995 ---- 10 Forward-looking statements in this report, including without limitation, statements relating to the Company's plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) the Company's plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company; (ii) the Company's ability to open the planned number of stores will depend upon a number of other factors, including securing desirable locations, negotiating leases with acceptable terms, and hiring, training and retraining qualified personnel; (iii) the Company's plans and results of operations will be affected by the Company's ability to manage its growth and inventory; (iv) the Company's tool and golf businesses are highly competitive and the entrance of new competitors into or the expansion of the operations by existing competitors in the Company's markets and other changes in the tool or golf retail climate could adversely affect the Company's plans and results of operations; and (v) other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission. 11 TREND - LINES, INC. Part II - Other Information Item 1. Legal Proceedings Not applicable Item 2. Changes in Securities Not applicable Item 3. Defaults Upon Senior Securities Not applicable Item 4. Submission of Matters to a vote of Security Holders Not applicable Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - Not applicable (b) Reports on Form 8-K - Not applicable 12 SIGNATURE 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. TREND-LINES, INC ------------------------- Registrant Date: January 9, 1997 /s/ Stanley D. Black ------------------------- Stanley D. Black (Chief Executive Officer) /s/ Karl P. Sniady ------------------------- Karl P. Sniady (Executive Vice President, Chief Financial Officer) 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS YEAR MAR-01-1997 MAR-02-1996 MAR-03-1996 MAR-01-1995 NOV-30-1996 MAR-02-1996 369 436 0 0 11,736 8,319 0 0 77,107 68,885 97,707 87,533 13,564 12,815 0 0 111,893 100,658 67,543 56,127 0 0 0 0 0 0 110 110 42,466 42,178 111,893 100,658 145,238 174,795 145,238 174,795 97,582 117,447 97,582 117,447 44,175 61,242 0 0 1,718 1,654 1,763 (5,548) 714 (2,229) 1,049 (3,319) 0 0 0 0 0 0 1,049 (3,319) .09 (.33) 0 0
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