-----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, UVdPMGWOI+w30y3oZz1qsx8o5hVJEYhK+zvSOvFreLOn6qdlK45luuZOGI/26AxM UYRA3YSaw8dB7itWn6n6Ew== 0000899681-98-000311.txt : 19980518 0000899681-98-000311.hdr.sgml : 19980518 ACCESSION NUMBER: 0000899681-98-000311 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBAL DIRECTMAIL CORP CENTRAL INDEX KEY: 0000945114 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 113262067 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13792 FILM NUMBER: 98623004 BUSINESS ADDRESS: STREET 1: 22 HARBOR PARK DR CITY: PORT WASHINGTON STATE: NY ZIP: 11050 BUSINESS PHONE: 5166251555 MAIL ADDRESS: STREET 1: 22 HARBOR PARK DRIVE CITY: PORT WASHINGTON STATE: NY ZIP: 11050 10-Q 1 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 31, 1998 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 1-13792 GLOBAL DIRECTMAIL CORP (Exact name of registrant as specified in its charter) Delaware 11-3262067 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 22 Harbor Park Drive Port Washington, New York 11050 (Address of registrant's principal executive offices) (516) 625-1555 (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. [X] Yes [ ] No The number of shares outstanding of the registrant's Common Stock as of May 14, 1998 was 38,231,990. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GLOBAL DIRECTMAIL CORP Condensed Consolidated Balance Sheets (IN THOUSANDS)
March 31, December 31, 1998 1997 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 55,961 $ 43,432 Short term investments 8,095 9,017 Accounts receivable, net 148,693 132,741 Inventories 105,382 102,599 Prepaid expenses and current assets 28,953 25,541 --------- ---------- Total current assets 347,084 313,330 PROPERTY, PLANT AND EQUIPMENT, net 30,999 29,401 GOODWILL, net 53,959 53,258 OTHER ASSETS 3,759 3,756 --------- ---------- TOTAL $ 435,801 $ 399,745 ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 148,787 $ 125,562 Current portion of long term debt 12 12 --------- ---------- Total current liabilities 148,799 125,574 --------- ---------- LONG TERM DEBT 2,006 1,972 --------- ---------- SHAREHOLDERS' EQUITY: Preferred shares - - Common shares 382 382 Additional paid-in capital 176,743 176,743 Retained earnings 110,069 97,204 Cumulative translation adjustment (2,198) (2,130) ---------- ----------- Total shareholders' equity 284,996 272,199 --------- ---------- TOTAL $ 435,801 $ 399,745 ========= ========== See notes to condensed consolidated financial statements.
GLOBAL DIRECTMAIL CORP Condensed Consolidated Statements of Income (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTH PERIODS ENDED MARCH 31, 1998 1997 (Unaudited) NET SALES $ 358,358 $ 273,537 COST OF SALES 282,989 204,130 --------- ---------- GROSS PROFIT 75,369 69,407 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 55,291 50,776 ---------- ---------- INCOME FROM OPERATIONS 20,078 18,631 INTEREST AND OTHER INCOME, net 842 710 ---------- ---------- INCOME BEFORE INCOME TAXES 20,920 19,341 PROVISION FOR INCOME TAXES 8,055 7,253 ----------- ---------- NET INCOME $ 12,865 $ 12,088 =========== ========== Net income per common share: Basic and Diluted $ .34 $ .32 =========== ========== Common and common equivalent shares outstanding: Basic 38,232 37,857 ========== ========== Diluted 38,351 38,188 ========== ========== See notes to condensed consolidated financial statements
GLOBAL DIRECTMAIL CORP Condensed Statement of Consolidated Shareholders' Equity (IN THOUSANDS)
Additional Cumulative Common Paid-in Retained Translation SHARES CAPITAL EARNINGS ADJUSTMENT BALANCES, DECEMBER 31, 1997 $ 382 $ 176,743 $ 97,204 $ (2,130) Difference arising from translation of foreign statements (68) Net income 12,865 -------- ---------- --------- -------- BALANCES, MARCH 31, 1998 $ 382 $ 176,743 $110,069 $(2,198) ======== ========== ========= ======== See notes to condensed consolidated financial statements.
GLOBAL DIRECTMAIL CORP Condensed Statements of Consolidated Cash Flows (IN THOUSANDS)
THREE-MONTH PERIOD ENDED MARCH 31, 1998 1997 ----------------------- (UNAUDITED) CASH FLOWS PROVIDED BY OPERATING ACTIVITIES: Net income $ 12,865 $ 12,088 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization, net 1,882 1,081 Provision for returns and doubtful accounts 1,943 (703) Changes in certain assets and liabilities: Accounts receivable (18,254) (13,023) Inventories (2,631) 4,704 Prepaid expenses and current assets (3,499) 739 Accounts payable and accrued expenses 22,867 2,043 --------- --------- Net cash provided by operating activities 15,173 6,929 --------- --------- CASH FLOWS USED IN INVESTING ACTIVITIES: Net change in short term instruments 922 (5,293) Investments in property, plant and equipment (3,089) (1,504) Acquisition of net assets of business acquired (895) - ---------- ---------- Net cash used in investing activities (3,062) (6,797) ---------- ---------- CASH FLOWS USED IN FINANCING ACTIVITIES: Net repayments of short-term bank debt - (467) --------- ---------- Net cash used in financing activities - (467) --------- ---------- EFFECTS OF EXCHANGE RATES ON CASH 418 607 --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 12,529 272 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 43,432 35,211 --------- --------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 55,961 $ 35,483 ========= ========= See notes to condensed consolidated financial statements.
GLOBAL DIRECTMAIL CORP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS The accompanying consolidated financial statements include the accounts of Global DirectMail Corp and its wholly-owned subsidiaries (collectively, the "Company" or "Global"). The Company is involved in the marketing and sale of personal computers (PCs), notebook computers, computer related products, office products and industrial products in North America and Europe. Global markets those products through the distribution of mail order catalogs, a network of major account sales representatives and the Internet. 2. BASIS OF PRESENTATION Net income per common share - basic was calculated based upon the weighted average number of common shares outstanding during the respective periods presented. Net income per common share - diluted was calculated based upon the weighted average number of common shares outstanding and included the equivalent shares for dilutive options outstanding during the respective periods. All intercompany accounts have been eliminated in consolidation. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the financial position of the Company as of March 31,1998 and the results of operations for the three months ended March 31, 1998 and 1997, cash flows for the three months ended March 31, 1998 and 1997 and changes in stockholders' equity for the three months ended March 31, 1998. The December 31, 1997 consolidated balance sheet has been extracted from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements as of December 31, 1997 and for the period then ended. The results for the three months ended March 31, 1998 are not necessarily indicative of the results for an entire year. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997 Net sales for the quarter increased by $84.8 million or 31% to $358.4 million compared to $273.5 in the year ago quarter. The increase was attributable primarily to the inclusion of Midwest Micro, which had net sales of $63 million in the quarter, and an increase in average order value. Total orders increased to 1,029,000 compared to 939,000 in the year ago quarter. Catalogs mailed increased by 9% to 46 million compared to 43 million in the year ago quarter. Sales during the quarter attributable to North American operations increased 37% to $279.0 million compared to $203.2 million in the first quarter of 1997. European sales increased 13% to $79.4 million compared to $70.4 million in the year ago quarter. On a currency adjusted basis, European sales for the quarter increased 20%. Gross profit, which consists of net sales less product and certain shipping and distribution center costs, increased by $6.0 million or 9% to $75.4 million compared to $69.4 million in the year ago quarter. Gross profit as a percentage of net sales was 21.0% compared to 21.2% in the prior quarter and 25.4% in year ago quarter. The change in the gross profit percentage from the year ago quarter was primarily due to the shift in the Company's overall product mix. This shift was attributable to large increases in the sales of PCs, notebook computers and brand name products which generally have a lower gross profit percentage. These sales increases were obtained principally through the efforts of the Company's major account sales force which experienced over a 100% sales increase over the year ago quarter and now accounts for 30% of total sales compared to 19% in the year ago quarter Selling, general and administrative expenses for the quarter increased by $4.5 million or 9% to $55.3 million compared to $50.8 million in the first quarter of 1997. This increase was the result of the inclusion of Midwest Micro and the Company's continuing investment in its major account sales force principally in North America. This was partially offset by an increased level of vendor supported advertising, continued expense control primarily in Europe, and the overall leveraging of selling, general and administrative expenses over a larger sales base. As a result, selling, general and administrative expenses as a percentage of sales was 15.4% compared to 18.6% in the year ago quarter. Income from operations for the quarter increased by $1.4 million or 8% to $20.1 million from $18.6 million in the year ago quarter. Income from operations as a percentage of net sales decreased to 5.6% from 6.8% in the year ago quarter. Income from North American operations decreased by 12% to $16.3 million from $18.6 million in the year ago quarter. Income from European operations increased to $3.8 million from a small profit in the year ago quarter. The effective tax rate for the first quarter of 1998 increased to 38.5% compared to 37.5% for the first quarter of 1997. The increase in the rate was due primarily to a higher anticipated proportion of U.S. income compared to the prior year. Net income for the quarter was $12.9 million, or $.34 per basic and diluted share, compared to $12.1 million, or $.32 per basic and diluted share in the first quarter of 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's primary capital needs are to fund the working capital requirements necessitated by its sales growth, investments in property, equipment and information technology, acquisition of the Company's stock and acquisitions. The Company's primary sources of financing have been cash from operations, equity offerings, and, to a lesser extent, bank borrowings. For the quarter ended March 31, 1998, the Company generated free cash flow of $12.1 million compared to $5.4 million for the year ago quarter, which was a result of improved inventory and other asset management. Free cash flow is defined as cash generated from operating activities net of additions to property and equipment. FORWARD LOOKING STATEMENTS This report contains forward looking statements within the meaning of that term in the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Additional written or oral forward looking statements may be made by the Company from time to time, in filings with the Securities Exchange Commission or otherwise. Statements contained herein that are not historical facts are forward looking statements made pursuant to the safe harbor provisions referenced above. Forward looking statements may include, but are not limited to, projections of revenue, income or loss and capital expenditures, statements regarding future operations, financing needs, compliance with financial covenants in loan agreements, plans for acquisition or sale of assets or businesses and consolidation of operations of newly acquired businesses, and plans relating to products or services of the Company, assessments of materiality, predictions of future events and the effects of pending and possible litigation, as well as assumptions relating to the foregoing. In addition, when used in this discussion, the words "anticipates", "believes", "estimates", "expects", "intends", "plans" and variations thereof and similar expressions are intended to identify forward looking statements. Forward looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified based on current expectations. Consequently, future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward looking statements contained in this report. Statements in this report, particularly in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations", and the Notes to Consolidated Financial Statements describe certain factors, among others, that could contribute to or cause such differences. Other factors that could contribute to or cause such differences include, but are not limited to, unanticipated developments in any one or more of the following areas: (i) the Company's ability to manage rapid growth as a result of internal expansion and strategic acquisitions, (ii) the effect on the Company of volatility in the price of paper and periodic increases in postage rates, (iii) the operation of the Company's management information systems including the costs and effects associated with the year 2000 date change problem, (iv) the general risks attendant to the conduct of business in foreign countries, including currency fluctuations associated with sales not denominated in United States dollars, (v) significant changes in the computer products retail industry, especially relating to the distribution and sale of such products, (vi) competition in the PC, notebook computer, computer related products, office products and industrial products markets from superstores, direct response (mail order) distributors, mass merchants, value added resellers, the Internet and other retailers, (vii) the potential for expanded imposition of state sales taxes, use taxes, or other taxes on direct marketing companies, (viii) the continuation of key vendor relationships including the ability to continue to receive vendor supported advertising, (ix) timely availability of existing and new products, (x) risks due to shifts in market demand and/or price erosion of owned inventory, (xi) borrowing costs, (xii) changes in taxes due to changes in the mix of U.S. and non-U.S. revenue, (xiii)pending or threatened litigation and investigations and (xiv) the availability of key personnel, as well as other risk factors which may be detailed from time to time in the Company's Securities and Exchange Commission filings. Readers are cautioned not to place undue reliance on any forward looking statements contained herein, which speak only as of the date hereof. The Company undertakes no obligation to publicly release the result of any revisions to these forward looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. The Company is exposed to market risks, which include changes in U.S. and international interest rates as well as changes in currency exchange rates as measured against the U.S. dollar and each other. Global attempts to reduce these risks by utilizing certain derivative financial instruments. The value of the U.S. dollar affects the Company's financial results. Changes in exchange rates may positively or negatively affect Global's sales (as expressed in U.S. dollars), gross margins, operating expenses and retained earnings. The Company engages in hedging programs aimed at limiting in part the impact of certain currency fluctuations. Using primarily forward exchange and foreign currency option contracts, Global, from time to time, hedges certain of its assets that, when remeasured according to generally accepted accounting principles, may impact the Statement of Consolidated Income. These hedging activities provide only limited protection against currency exchange risks. Factors that could impact the effectiveness of the Company's hedging programs include accuracy of sales forecasts, volatility of the currency markets, availability of hedging instruments and the credit-worthiness of the parties which have entered into such contracts with the Company. All currency contracts that are entered into by Global are for the sole purpose of hedging an existing or anticipated currency exposure, not for speculative or trading purposes. In spite of Global's hedging efforts to reduce the effect of changes in exchange rates against the U.S. dollar, the Company sales or costs could still be adversely affected by changes in those exchange rates. As of March 31,1998, the Company had outstanding forward exchange contracts in the amount of 2.0 million Pounds Sterling, 41.0 million French Francs and 700.0 million Italian Lire. PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION. On May 12, 1998 the Company announced that its Board of Directors approved a stock buyback plan for up to 1,350,000 shares of the Company's common stock. The shares will be purchased periodically in the open market and will be used to meet requirements relating to the Company's stock option plans. Item 6. EXHIBITS (a) Exhibits. 3.1 Certificate of Incorporation. (Incorporated herein by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1, File No. 33-92052). 3.2 By-Laws. (Incorporated herein by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1, File No. 33-92052). 4.1 Stockholders Agreement. (Incorporated herein by reference to the Company's quarterly report on Form 10-Q for the quarterly period ended June 30, 1995). 4.2 Specimen Stock Certificate. (Incorporated herein by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-1, File No. 33-92052). 27 Financial Data Schedule. Reports on Form 8-K. No reports on Form 8-K were filed by the Company during the three months ended March 31, 1998. 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. GLOBAL DIRECTMAIL CORP Date: May 14, 1998 By: /S/ RICHARD LEEDS ------------------------------------ Richard Leeds Chairman and Chief Executive Officer By: /S/ STEVEN GOLDSCHEIN Steven Goldschein Senior Vice President and Chief Financial Officer EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEETS AT MARCH 31, 1998 (UNAUDITED) AND THE CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED) OF GLOBAL DIRECTMAIL CORP AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 55,961 8,095 148,693 0 105,382 347,084 30,999 0 435,801 148,799 2,006 0 0 382 284,614 435,801 358,358 358,358 282,989 282,989 55,291 0 (842) 20,920 8,055 12,865 0 0 0 12,865 .34 .34
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