-----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, KlMyu6TZrbSbzpMHNt2wAKXH63OSmuhrLCmO/lVLJ7GHVQmDiCLuQEi4HIvIwv75 Ux+r1Y1LKgy3q77fqifHnQ== 0000892569-96-002328.txt : 19961115 0000892569-96-002328.hdr.sgml : 19961115 ACCESSION NUMBER: 0000892569-96-002328 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERVISUAL BOOKS INC /CA CENTRAL INDEX KEY: 0000879813 STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731] IRS NUMBER: 952929217 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10916 FILM NUMBER: 96660340 BUSINESS ADDRESS: STREET 1: 2850 OCEAN PARK BLVD STREET 2: SUITE 225 CITY: SANTA MONICA STATE: CA ZIP: 90405 BUSINESS PHONE: 3103968708 MAIL ADDRESS: STREET 1: 2850 OCEAN PARK BLVD SUITE 225 CITY: SANTA MONICA STATE: CA ZIP: 90405 10-Q 1 QUARTERLY REPORT FOR THE PERIOD ENDED 9/30/96 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 September 30, 1996 / / TRANSITION REPORT PURSUANT OR TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period __________ to ___________. Commission File Number: 1-10916 INTERVISUAL BOOKS, INC. (Exact name of registrant as specified in its charter) California 95-2929217 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2850 Ocean Park Boulevard, Suite 225 Santa Monica, California 90405 Address of principal executive offices Zip Code Registrant's telephone number, including area code: (310) 396-8708 - ------------------------------------------------------------------------ Former name, former address and former fiscal year, if changed since last report. Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes_____ No_____ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. As of September 30, 1996, there were 4,782,798 shares of common stock outstanding. 2 INTERVISUAL BOOKS, INC. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements Balance Sheets - September 30, 1996, and December 31, 1995 1 Statements of Operations - Three months ended September 30, 1996 and 1995; Nine months ended September 30, 1996 and 1995 2 Statements of Cash Flows - Nine months ended September 30, 1996 and 1995 3 Notes to Financial Statements - September 30, 1996 4 Item 2. Management's Discussion and Analysis of Financial Condition 5 and Results of Operations PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders 7 Item 5. Other Information 8 Item 6. Exhibits and Reports on Form 8-K 8 SIGNATURES 8 i 3 INTERVISUAL BOOKS, INC. BALANCE SHEETS (In thousands)
ASSETS 9/30/96 12/31/95 - --------------- ------- -------- (Unaudited) Current Assets: Cash and cash equivalents $ 1,063 $ 915 Investment in marketable securities 2,348 1,928 Accounts receivable, less allowances of $204 and $158 5,574 6,941 Inventories 374 357 Prepaid expenses 900 541 ------- ------- Total Current Assets 10,259 10,682 Production costs, net of accumulated amortization $12,544 and $11,647 3,038 3,139 Property and equipment, less accumulated depreciation 234 231 ------- ------- $13,531 $14,052 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY - ---------------------------------------------- Current Liabilities: Accounts payable 4,709 5,030 Accrued royalties 592 709 Accrued expenses 181 198 Income taxes payable -- 38 Customer deposits 221 53 ------- ------- Total Current Liabilities 5,703 6,028 Deferred income taxes 466 466 ------- ------- TOTAL LIABILITIES 6,169 6,494 ------- ------- Stockholders' Equity: Common stock, no par value; shares authorized 10,000,000, shares issued and outstanding 4,782,798 at September 30, 1996 and December 31, 1995 4,044 4,044 Additional paid in capital 209 209 Retained earnings 3,109 3,305 ------- ------- TOTAL STOCKHOLDERS' EQUITY 7,362 7,558 ------- ------- $13,531 $14,052 ======= =======
See accompanying notes to financial statements. 1 4 INTERVISUAL BOOKS, INC. STATEMENTS OF OPERATIONS (In thousands except per share data) (Unaudited)
Quarter ended Nine Months ended September 30 September 30 1996 1995 1996 1995 ------ ------ -------- ------- Net Sales $5,771 $5,443 $ 12,397 $13,612 Cost of Sales 4,474 4,200 9,578 10,603 ------ ------ -------- ------- Gross Profit 1,297 1,243 2,819 3,009 Selling, General and Administrative 997 955 3,187 3,042 Expenses Other Income 0 153 0 154 Interest Income, Net 14 42 71 96 ------ ------ -------- ------- Income (Loss) Before Taxes 314 483 (297) 217 Income Tax (Benefit) 107 182 (101) 117 ------ ------ -------- ------- Net Income (Loss) $ 207 $ 301 $ (196) $ 100 ====== ====== ======== ======= Income (Loss) Per Share $ 0.04 $ 0.06 $ (0.04) $ 0.02 ====== ====== ======== ======= Weighted Average Number of Common Shares and Equivalents Outstanding 4,963 5,016 4,783 4,984 ====== ====== ======== =======
2 5 STATEMENTS OF CASH FLOWS Increase(Decrease) in Cash and Cash Equivalents (In thousands)
Nine Months ended September 30 1996 1995 ------- ------- (Unaudited) Cash flows from operating activities: Net income (loss) $ (196) $ 100 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 953 996 Provision for losses on accounts receivable 46 45 Provision for abandoned titles 32 32 Increase (decrease) from changes in: Accounts receivable 1,321 (1,370) Inventories (17) (108) Prepaid expenses (359) (147) Accounts payable (321) 1,414 Accrued royalties (117) (104) Accrued expenses (17) (3) Income taxes payable (38) (111) Customer deposits 168 32 Deferred revenue 0 (60) ------- ------- Net cash provided by operating activities 1,455 716 ------- ------- Cash flows from investing activities: Purchase (sale) of marketable securities (420) (394) Additions to property and equipment (59) (9) Additions to leasehold improvements 0 (2) Additions to production costs (828) (957) ------- ------- Net cash used in investing activities (1,307) (1,362) ------- ------- Net increase (decrease) in cash and cash equivalents 148 (646) Cash and cash equivalents, beginning of period 915 2,625 ------- ------- Cash and cash equivalents, end of period $ 1,063 $ 1,979 ======= ======= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 8 $ -- Income taxes $ 30 $ 1
See accompanying notes to financial statements. 3 6 NOTES TO FINANCIAL STATEMENTS September 30, 1996 (unaudited) Note 1 - Statement of Information Furnished In the opinion of management the accompanying unaudited financial statements contain all adjustments (consisting only of normal and recurring accruals) necessary to present fairly the financial position as of September 30, 1996, and the results of operations and cash flows for the three and nine month periods ended September 30, 1996 and 1995. These results have been determined on the basis of generally accepted accounting principles and practices applied consistently with those used in the preparation of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. The results of operations for the three and nine month periods ended September 30, 1996 are not necessarily indicative of the results to be expected for any other period or for the entire year. Certain information and footnote disclosures normally included in financial statements presented in accordance with generally accepted accounting principles have been condensed or omitted. The accompanying financial statements should be read in conjunction with the Company's audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. Note 2 - Earnings Per Share For the three months ended September 30, 1996 earnings per share amounts are computed based upon the weighted average number of common shares actually outstanding during the period plus the additional shares that would be outstanding assuming exercise of dilutive common stock options and purchase warrants, which are considered common stock equivalents. The number of shares that would be issued from the exercise of such options and warrants has been reduced by the number of common shares that could have been purchased from the assumed use of the proceeds at the average price of the Company's common stock during the period (treasury stock method). For the nine months ended September 30, 1996 earnings per common share amounts are computed based upon the weighted average number of common shares actually outstanding during the period. Common stock options and purchase warrants, which are considered common stock equivalents, are not considered in the average number of shares as their inclusion would be anti-dilutive. Fully diluted earnings per share for the three and nine months ended September 30, 1996 do not differ significantly from primary earnings per share. 4 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Net sales for the three and nine month periods ended September 30, 1996, were $5,771,000 and $12,397,000, respectively, as compared to $5,443,000 and $13,612,000 for the corresponding periods of the preceding year. The sales increase for the three month period of $328,000 was comprised of an increase of $731,000 in the sales of backlist titles and a decrease of $403,000 in the sales of new titles. The sales decrease for the nine month period of $1,215,000 included a decrease of $708,000 in the sales of backlist titles and a decrease of $507,000 in the sales of new titles. Sales backlog at September 30, 1996, was $4,628,000 compared to $5,743,000 at September 30, 1995. Foreign sales for the three and nine month periods ended September 30, 1996, were $2,657,000 and $4,973,000 or 46% and 40% of total sales, respectively, as compared to $3,376,000 and $6,760,000 or 62% and 50% of total sales for the corresponding periods of 1995. Most of the decline in sales can be attributed to reduced foreign sales, especially in the U.K. and Japan. In the U.K. the book trade has been adjusting to the elimination of the "net book agreement" which kept retailers from discounting. As a result some U.K. publishers have been slower in placing new book and backlist orders with the Company. Japan is implementing a new tax on books which goes into effect in 1997. There have been delays by the government in finalizing the actual rate; consequently, Japanese publishers are delaying orders until the final tax has been determined. Additionally, U.S. publishers seem to be placing a priority on purchases of the new titles and reluctant to reorder the backlist titles. Based on orders received to date, the Company expects that sales for the fourth quarter of 1996 will be less than sales in the fourth quarter of 1995. Gross profit margin for the three and nine month periods ended September 30, 1996, was 22.5% and 22.7%, respectively, as compared to 22.8% and 22.1% for the corresponding periods of 1995. Cost of sales consists primarily of manufacturing costs, book development amortization and royalties. Manufacturing costs for the three and nine month periods were $3,803,000, or 65.9% of sales, and $8,113,000 or 65.4% of sales, respectively, as compared to $3,659,000, or 67.2% of sales, and $9,138,000,or 67.1% of sales, in 1995, a decrease of 1.3% of sales for the quarter and 1.7% for the nine month period. Amortization for the three and nine months ended September 30, 1996, was $417,000 and $896,000, respectively, compared to $356,000 and $930,000 in 1995, resulting in an increase of approximately .5% of sales for both periods. Royalties for the three and nine months ended September 30, 1996, were $231,000 and $496,000 or 4% of sales for both periods, respectively, as compared to $160,000 and $470,000 or 2.9% and 3.5%, respectively, of sales for the same periods of 1995. The improvement in gross profit margin resulted from higher margins on mini-book sales and sales of first time titles plus an easing of paper prices partially offset by small increases in amortization and royalties as a percent of sales. Selling, general and administrative expenses for the three and nine month periods ended September 30, 1996, increased to $997,000 and $3,187,000, respectively, as compared to $955,000 and $3,042,000 for the corresponding periods of 1995. This represents increases of $42,000 and $145,000 for the three and nine month periods, respectively. These expenses comprised of personnel, selling and administrative are generally fixed and do not fluctuate with sales. Personnel expenses were $461,000 and $1,524,000, respectively, for the three month and nine month periods ended September 30, 1996, as compared to $503,000 and 5 8 $1,601,000 for the corresponding periods of 1995. Declines of $42,000 and $77,000 for the three and nine month periods were primarily attributable to the Company's measures taken in 1995 to reduce employees and related personnel expense partially offset by salary increases in the first quarter of 1996. Selling expenses were $195,000 and $564,000, respectively, for the three and nine month periods ended September 30, 1996, compared to $188,000 and $619,000 for the same periods in 1995. Selling expenses were up $7,000 for the quarter and down $55,000 for the nine months ended September 30, 1996. The nine month reduction as compared to the prior year included decreases in delivery, sample expenses, and U.K. office expense partially offset by increases in travel and show expenses. Administrative expenses were $341,000 and $1,099,000, respectively, for the three month and nine month periods ended September 30, 1996, compared to $264,000 and $822,000 for the same periods of 1995. Administrative expenses were up $77,000 and $277,000, respectively, for the three and nine month periods. The increase for the three and nine months is primarily related to increases in acquisition expenses, office expenses, other taxes and directors' expenses. The Company anticipates increased administrative expenses in the fourth quarter of 1996 because of severance and legal costs. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents were $1,063,000 at September 30, 1996, as compared to $915,000 at December 31, 1995. Net cash provided by operating activities was $1,455,000 as compared to $716,000 for the corresponding period of the previous year. The $739,000 increase was primarily attributable to a decrease of $1,321,000 in accounts receivable partially offset by a decrease of $321,000 in accounts payable and an increase in prepaid expenses of $359,000 and a net loss of $196,000 resulting from decreased sales for the nine month period and improved collections of the outstanding receivables. Net cash used in investing activities amounted to $1,307,000 as compared to $1,362,000 during the same period in 1995. Working capital at September 30, 1996 was $4,556,000 as compared to $4,654,000 at December 31, 1995. Under a letter agreement, the Company has an obligation to fund the Hunt Group $400,000 in 1996. This obligation is being paid at the rate of $33,333 per month. In June 1996 the Company renewed its $2,000,000 letter of credit line with City National Bank which expires on May 31, 1997. The letter of credit facility is available only for the issuance of letters of credit and as of September 30, 1996, the Company had $1,682,000 available under this letter of credit facility. As of November 1, 1996, the Company did not have any commitments for any material capital expenditures for 1996 or beyond. Management believes that the existing levels of funds, combined with the Company's ability to generate cash, are adequate to finance current and expected levels of activity as well as anticipated capital expenditures of the Company for at least the next twelve months. 6 9 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders The Annual Meeting of Shareholders of Intervisual Books, Inc. was held on August 21, 1996, and several matters were put to a vote. The issues and the results are as follows: (1) To elect six directors to serve until the next annual meeting of shareholders and until their successors are chosen. Abstentions Votes Cast For Votes Cast Against Withhold Authority -------------- ------------------ ------------------ Waldo H. Hunt By Proxy 3,769,921 0 225,000 In Person 0 0 0 Total 3,769,921 0 225,000 Charles E. Gates By Proxy 3,769,921 0 225,000 In Person 0 0 0 Total 3,769,921 0 225,000 Elgin Davis By Proxy 3,769,421 0 225,000 In Person 0 0 0 Total 3,769,421 0 225,000 Gordon Hearne By Proxy 3,769,421 0 225,000 In Person 0 0 0 Total 3,769,421 0 225,000 John J. McNaughton By Proxy 3,769,921 0 225,000 In Person 0 0 0 Total 3,769,921 0 225,000 Peter Seymour By Proxy 3,769,921 0 225,000 In Person 0 0 0 Total 3,769,921 0 225,000 (2) To ratify the selection of BDO Seidman, LLP, as independent auditors of the Company for 1996. By Proxy 3,995,671 4,470 1,710 In Person 0 0 0 Total 3,995,671 4,470 1,710 7 10 Item 5. Other Information On November 1, 1996, the Company announced the resignation of Charles E. Gates, the Company's President and Chief Executive Officer, effective November 15, 1996. Mr. Gates has agreed to provide consulting services to the Company for a period of approximately five (5) years. Mr. Hunt, the Company's Chairman of the Board, will temporarily assume the responsibilities of President and Chief Executive Officer until a successor for Mr. Gates is appointed. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits required by Item 601 of Regulation S-K 11. Computation of Earnings Per Common Share Schedule 27. Financial Data Schedule (b) Reports on Form 8-K None 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. INTERVISUAL BOOKS, INC. BY: /s/ Charles E. Gates ----------------------------------------------- Charles E. Gates President, Chief Executive Officer and Chief Financial Officer BY: /s/ Gail A. Thornhill ----------------------------------------------- Gail A. Thornhill Controller and Chief Accounting Officer Date: November 13, 1996 ------------------- 8 EX-11 2 COMPUTATION OF EARNINGS PER COMMON SHARE SCHEDULE 1 Exhibit 11 INTERVISUAL BOOKS, INC. COMPUTATION OF EARNINGS PER COMMON SHARE
Nine Months Ended Three Months Ended September 30 September 30 ----------------------------- --------------------------- 1996 1995 1996 1995 ----------- ---------- ---------- ---------- Ending Market Price Per Share $ 2.00 $ 2.44 $ 2.00 $ 2.44 =========== ========== ========== ========== Average Market Price Per Share $ 2.22 $ 2.14 $ 2.04 $ 2.29 =========== ========== ========== ========== PRIMARY EARNINGS PER SHARE: Net Income $ (195,547) $ 100,140 $ 207,316 $ 301,000 Weighted average number of shares outstanding 4,782,798 4,782,798 4,782,798 4,782,798 Contingent shares relating to: (1) Employment contract 217,947 201,623 179,082 233,182 Incentive stock options 5,096 0 1,082 0 Non-qualified stock options 5,150 0 204 0 Directors options 172 0 0 0 ----------- ---------- ---------- ---------- Adjusted weighted average number of shares outstanding 5,011,163 4,984,421 4,963,166 5,015,980 ----------- ---------- ---------- ---------- Primary earnings per share $ (0.04) $ 0.02 $ 0.04 $ 0.06 =========== ========== ========== ========== FULLY DILUTED EARNINGS PER SHARE: Net Income $ (195,547) $ 100,140 $ 207,316 $ 301,000 Weighted average number of shares outstanding 4,782,798 4,782,798 4,782,798 4,782,798 Contingent shares relating to: (1) Employment contract 217,947 259,615 179,082 259,615 Incentive stock options 5,096 0 1,082 0 Non-qualified stock options 5,150 0 204 0 Directors options 172 0 0 0 ----------- ---------- ---------- ---------- Adjusted weighted average number of shares outstanding 5,011,163 5,042,413 4,963,166 5,042,413 ----------- ---------- ---------- ---------- Fully diluted earnings per share (2) $ (0.04) $ 0.02 $ 0.04 $ 0.06 =========== ========== ========== ==========
(1) Contingent shares: Primary common stock equivalents are assumed to be repurchased at average market price. Fully diluted common stock equivalents are assumed to be repurchased at the greater of average or ending market price. (2) Fully diluted earnings per share for the three and nine month periods ended September 30, 1996 and 1995 do not differ significantly from primary earnings per share. 9 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1,063 2,348 5,778 204 374 10,259 1,063 829 13,531 5,703 0 0 0 4,044 3,318 13,531 12,397 12,397 9,578 9,578 0 45 8 (297) (101) (196) 0 0 0 (196) (.04) (.04)
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