-----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, Osu1lrFpPJ7Nd6IxlJHZoF7sCyPm4MtUFWy7OkesScATZc6CobWXK6eCwUWgmjG8 iUxIxb27VrTh9eJttQnZ8A== 0000927016-97-002316.txt : 19970814 0000927016-97-002316.hdr.sgml : 19970814 ACCESSION NUMBER: 0000927016-97-002316 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEERLINGS & WADE INC CENTRAL INDEX KEY: 0000922810 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 042935863 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24048 FILM NUMBER: 97659674 BUSINESS ADDRESS: STREET 1: 960 TURNPIKE ST CITY: CANTON STATE: MA ZIP: 02021 BUSINESS PHONE: 6178214152 MAIL ADDRESS: STREET 1: 960 TURNPIKE ST CITY: CANTON STATE: MA ZIP: 02021 10-Q 1 QUARTERLY REPORT 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 JUNE 30, 1997 OR [ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 0-24048 GEERLINGS & WADE, INC. (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-2935863 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 960 TURNPIKE STREET, CANTON, MA 02021 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code): (617) 821-4152 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 [ ] 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 practicable date:
Par Value Date Number of Shares --------- --------------- ---------------- Common Stock $ .01 August 13, 1997 3,779,380
GEERLINGS & WADE, INC. INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets at December 31, 1996 and June 30, 1997 (Unaudited)............................ 2 Statements of Operations for the Quarters Ended June 29, 1996 and June 30, 1997 (Unaudited)............... 3 Statements of Cash Flows for the Six Months Ended June 29, 1996 and June 30, 1997 (Unaudited).......... 4 Notes to Financial Statements........................ 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................ 6 PART II. OTHER INFORMATION Item 4. Submissions of Matters to a Vote of Security Stockholders......................................... 9 Item 6. Exhibits and Reports on Form 8-K..................... 9 SIGNATURES............................................................ 10 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GEERLINGS & WADE, INC. BALANCE SHEETS (Unaudited)
December 31, June 30, 1996 1997 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 774,514 $ 2,707,601 Accounts receivable 307,409 395,562 Inventory 8,359,765 7,413,634 Prepaid mailing costs 813,208 595,287 Prepaid expenses 312,158 441,955 Refundable income taxes 14,241 8,024 Deferred income taxes 500,000 372,762 ------------ ------------ Total Current Assets 11,081,295 11,934,825 ------------ ------------ PROPERTY AND EQUIPMENT, AT COST 2,531,660 2,725,088 Less--Accumulated Depreciation 910,112 1,101,160 ------------ ------------ 1,621,548 1,623,928 ------------ ------------ OTHER ASSETS 249,425 129,689 ------------ ------------ $ 12,952,268 $ 13,688,442 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Line of credit $ 939,019 $ - Accounts payable 1,114,413 2,615,245 Deferred revenue 542,305 405,590 Accrued expenses 440,148 377,841 ------------ ------------ Total Current Liabilities 3,035,885 3,398,676 ------------ ------------ DEFERRED REVENUE, LESS CURRENT PORTION 390,868 506,060 ------------ ------------ STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value - Authorized-1,000,000 shares Outstanding-none Common stock, $.01 par value- Authorized-10,000,000 shares- Issued and outstanding-3,777,525 and 3,779,380 shares in 1996 and 1997, respectively 37,774 37,794 Additional paid-in capital 9,716,256 9,722,740 Retained earnings (deficit) (228,515) 23,172 ------------ ------------ Total Stockholders' Equity 9,525,515 9,783,706 ------------ ------------ $ 12,952,268 $ 13,688,442 ============ ============
The accompanying notes are an integral part of these financial statements. 2 GEERLINGS & WADE, INC. STATEMENTS OF OPERATIONS (Unaudited)
Quarter Ended Six Months Ended June 29, June 30, June 29, June 30, 1996 1997 1996 1997 ------------- -------------- ------------ ------------ Sales $ 7,189,882 $ 8,402,370 $ 14,859,989 $ 15,522,169 Cost of Sales 3,857,028 4,580,651 8,067,096 8,342,446 ------------- -------------- ------------ ------------ Gross Profit 3,332,854 3,821,719 6,792,893 7,179,723 Selling, general and administrative expenses 3,484,825 3,396,548 7,068,213 6,773,920 ------------- -------------- ------------ ------------ Income (loss) from operations (151,971) 425,171 (275,320) 405,803 Interest income --- 19,485 --- 19,486 Interest expense (57,844) --- (132,650) (5,602) ------------- -------------- ------------ ------------ Income (loss) before income taxes (209,815) 444,656 (407,970) 419,687 Provision (benefit) for income taxes (84,000) 178,720 (163,000) 168,000 ------------- -------------- ------------ ------------ Net income (loss) $ (125,815) $ 265,936 $ (244,970) $ 251,687 ============= ============== ============ ============ Net income (loss) per share $ (0.03) $ 0.07 $ (0.06) $ 0.07 ============= ============== ============ ============ Weighted average common shares and equivalents outstanding 3,775,555 3,779,391 3,775,555 3,793,686 =============== =============== ============ ============
The accompanying notes are an integral part of these financial statements. 3 GEERLINGS & WADE, INC. STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 29, June 30, 1996 1997 --------------- --------------- CASH FLOW FROM OPERATING ACTIVITIES: Net Income (Loss) $ (244,970) $ 251,687 Adjustments to reconcile net income (loss) to net cash provided by operating activities -- Depreciation and amortization 279,814 272,662 Deferred income taxes (163,000) 128,150 Loss from disposition of fixed asset --- 20,770 Changes in current assets and liabilities -- Accounts receivable (277,709) (88,153) Inventory 1,224,477 946,130 Prepaid mailing costs (37,505) 217,921 Prepaid expenses 6,049 (140,415) Refundable income taxes 594,041 6,217 Accounts payable (776,445) 1,500,833 Deferred revenue (146,500) (21,524) Accrued expenses 9,522 (62,307) ------------ ------------- Net cash provided by operating activities 467,774 3,031,971 ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment, net (380,509) (267,731) Proceeds from the sale of property and equipment --- 3,550 Change in other assets (20,194) 97,812 ------------ ------------- Net cash used in investing activities (400,703) (166,369) ------------ ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings on line of credit 4,980,431 --- Repayments on line of credit (5,457,500) (939,019) Proceeds from stock purchase plan 4,046 6,504 ------------ ------------- Net cash used in financing activities (473,023) (932,515) ------------ ------------- NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (405,952) 1,933,087 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 809,828 774,514 ------------ ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 403,876 $ 2,707,601 ============ ============= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period - Interest $ 139,432 $ 5,691 ============ =============
The accompanying notes are an integral part of these financial statements. 4 NOTES TO FINANCIAL STATEMENTS 1. Basis of Presentation --------------------- The interim period 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 Geerlings & Wade, Inc. (the "Company") for the interim periods presented. The operating results for the quarter ended June 30, 1997 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 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 December 31, 1996. Certain information in these footnote disclosures normally included in financial statements has been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. 2. Net Income (Loss) per Share Data -------------------------------- Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Common stock equivalents, which are calculated using the treasury stock method, are included in the computation of weighted average common shares outstanding when their effect upon earnings per share is dilutive. The weighted average number of shares used in the computation for the quarter ended June 30, 1997 was 3,779,000 and for the quarter ended June 29, 1996 was 3,776,000. The weighted average number of shares used in the computation for the six months ended June 30, 1997 was 3,794,000 and for the six months ended June 29, 1996 was 3,776,000. 3. Certain Relationships and Related Transactions ---------------------------------------------- The Company has a credit facility (the "Credit Facility") with The First National Bank of Boston ("Bank of Boston"). One of the Company's outside directors is employed as a senior executive with Bank of Boston. The Company believes that the Credit Facility provides terms no more or less favorable than terms that may otherwise be offered by other lending institutions. This director announced that he would not stand for re-election as a director at the May 13, 1997 Annual Meeting of Stockholders, in view of business and personal reasons. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Geerlings & Wade, Inc. (the "Company") is a direct marketer of premium wines and wine- and cigar-related merchandise to retail consumers. The Company currently maintains licensed facilities in fourteen states. Federal, state and local laws strictly govern the sale of wine in each market served by the Company. IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS The Company may occasionally make forward-looking statements and estimates such as forecasts and projections of the Company's future performance or statements of management's plans and objectives. These forward-looking statements may be contained in SEC filings, press releases and oral statements, among others, made by the Company. Actual results could differ materially from those in such forward-looking statements. Therefore, no assurance can be given that the results in such forward-looking statements will be achieved. Important factors could cause the Company's actual results to differ from those contained in such forward-looking statements, including, among other things, the factors mentioned in the Company's Annual Report on Form 10-K for the year ended December 31, 1996 on file with the U.S. Securities and Exchange Commission. QUARTERS ENDED JUNE 29, 1996 AND JUNE 30, 1997 Sales Sales increased $1,212,000, or 16.9%, from $7,190,000 in the quarter June 29, 1996 to $8,402,000 in the quarter ended June 30, 1997. The increase in sales from the prior year in large part resulted from additional sales generated by higher response rates to house mailings, the introduction of a spring catalog offering wines and wine accessories and the recognition of sales of Bordeaux futures in the second quarter of 1997 which were not sold in the second quarter of 1996. The spring catalog sales were approximately $385,000 and Bordeaux futures sales were approximately $283,000. Sales increased 14.4% in markets in which the Company has been open since 1994, while sales increased 30.4% in markets opened in 1995. The number of twelve-bottle equivalent cases ("cases") sold by the Company increased by 15,511, or 24.2%, from 64,002 in the quarter ended June 29, 1996 to 79,513 in the quarter ended June 30, 1997. The average case price decreased by $14.77, or 13.1%, from $113.00 in the quarter ended June 29, 1996 to $98.23 in the quarter ended June 30, 1997. The average case price decreased principally as a result of offering a new product mix with overall lower prices and due to reducing prices of older inventory to promote the sale of this older product. The average number of cases purchased per customer order was 1.16 in the quarter ended June 30, 1997 compared to 1.13 in the comparable fiscal quarter of 1996. Gross Profit Gross profit increased $489,000, or 14.7%, from $3,333,000 in the quarter ended June 29, 1996 to $3,822,000 in the quarter ended June 30, 1997. Gross profit as a percentage of sales decreased from 46.4% in the quarter ended June 29, 1996 to 45.5% in the quarter ended June 30, 1997. Gross profit per case decreased $6.32, or 12.2%, from $52.00 in the quarter ended June 29, 1996 to $45.68 in the quarter ended June 30, 1997. The decrease in gross margin percentage and average gross profit resulted primarily from sales of older inventory at reduced pricing and sales of lower priced wines that generally produced lower gross margin dollars per case. Selling, General and Administrative Expenses Selling, general and administrative expenses decreased $88,000, or 2.5%, from $3,485,000 in the quarter ended June 29, 1996 to $3,397,000 in the quarter ended June 30, 1997, while decreasing as a percentage of sales from 48.5% in the quarter ended June 29, 1996 to 40.4% in the quarter ended June 30, 1997. The net decrease in selling, general and administrative expenses is largely attributable to a) lower net delivery costs due to charging $5.95 per case in first quarter 1997 whereas in the same period of 1996 shipping and handling was $3.95 and b) continued cost reduction efforts; this benefit was partially offset by increased salary expense necessary to fulfill a greater number of orders and increased marketing expenses primarily reflecting the cost to launch the spring catalog. Interest Interest expense was eliminated in the quarter ended June 30, 1997 because the Company made no borrowings under the Company's line of credit in the second quarter, as compared to interest expense of $58,000 in the quarter ended June 29, 1996. The Company earned interest income of $20,000 in the quarter ended June 30, 1997 as a result of maintaining positive cash positions during the quarter. In the quarter ended June 29, 1996, the Company had no interest income. 6 SIX MONTH PERIODS ENDED JUNE 29, 1996 AND JUNE 30, 1997 Sales Sales increased $662,000, or 4.5%, from $14,860,000 in the six months ended June 29, 1996 to $15,522,000 in the six months ended June 30, 1997. The increase in sales from the comparable period for the prior year resulted primarily from increased response rates to house mailings, the introduction of a spring catalog offering wines and wine accessories and the recognition of sales of Bordeaux futures in the second quarter of 1997 which were not sold in the second quarter of 1996. Sales increased 1.0% in markets in which the Company has been open since 1994, while sales increased 30.0% in markets opened in 1995. The number of cases sold by the Company increased by 15,449, or 11.7%, from 132,307 in the six months ended June 29, 1996 to 147,756 in the six months ended June 30, 1997. The average case price decreased by $9.50, or 8.7%, from $109.42 in the six months ended June 29, 1996 to $99.92 in the six months ended June 30, 1997. The average case price decreased primarily as a result of offering a new product mix with overall lower prices in the period and reducing prices on older inventory. The average number of cases purchased per customer order was 1.13 in the six months ended June 30, 1997 compared to 1.10 in the comparable fiscal period of 1996. Gross Profit Gross profit increased $387,000, or 5.7%, from $6,793,000 in the six months ended June 29, 1996 to $7,180,000 in the six months ended June 30, 1997. Gross profit as a percentage of sales increased from 45.7% in the six months ended June 29, 1996 to 46.3% in the six months ended June 30, 1997. Gross profit per case decreased $2.33, or 4.7%, from $49.40 in the six months ended June 29, 1996 to $47.07 in the six months ended June 30, 1997. The increase in gross profit percentage resulted from selling lower priced wines that bear higher margins but was offset in the second quarter by price reductions on older inventory to promote its sale. Average gross profit per case fell because the average price per case decreased and this had a greater effect than the increase of gross profit as a percentage of sales. Selling, General and Administrative Expenses Selling, general and administrative expenses decreased $294,000, or 4.2%, from $7,068,000 in the six months ended June 29, 1996 to $6,774,000 in the six months ended June 30, 1997. As a percentage of sales, these expenses decreased from 47.6% in the six months ended June 29, 1996 to 43.6% in the six months ended June 30, 1997. The net decrease in selling, general and administrative expenses is attributable to a) lower net delivery costs due to charging $5.95 per case for this period in 1997 whereas in the first quarter of 1996 shipping was free and in the second quarter of 1996 shipping was $3.95 per case and b) continued cost reduction efforts; this benefit was partially offset by increased salary expense necessary to fulfill a greater number of orders and increased marketing expenses primarily reflecting the cost to launch the spring catalog. Interest Interest expense decreased $127,000 from $133,000 in the six months ended June 29, 1996 to $6,000 in the six months ended June 30, 1997, as a result of a decrease in average borrowings under the Company's line of credit. The Company earned interest income of $20,000 in the six months ended June 30, 1997 compared to none in the six months ended June 29, 1997. This increase is due to the Company's improved cash position. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) PROVISION FOR INCOME TAXES The Company's provision for income taxes for the quarter ended June 30, 1997 reflects an approximate 40% effective income tax rate anticipated for the full year ended December 31, 1997. During the quarter ended June 30, 1997, the Company recorded a provision for income taxes of $179,000 and $168,000 for the six months ended June 30, 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's primary working capital needs include purchases of inventory and the cost of prospect mailings and other expenses associated with promoting sales. As of June 30, 1997, the Company had cash and cash equivalents totaling $2,708,000. In addition, the Company has a credit facility with Bank of Boston comprised of a revolving, discretionary, demand line of credit in the maximum principal amount equal to the lesser of 50% of qualifying inventory or $5.0 million (the "Line of Credit"). The Line of Credit bears interest at the Bank of Boston's base rate (which approximates the prime rate) plus one-quarter percent and is collateralized by substantially all of the assets of the Company. As of June 30, 1997, the Company had no outstanding balance under the Line of Credit. During the six months ended June 30, 1997, net cash of $3,032,000 was provided by operating activities, resulting principally from reductions of inventory and deferred prospecting and an increase in accounts payable, which reductions were offset by an increase in prepaid expenses. Net cash of $166,000 was used for investing activities, representing primarily investments in computer systems. At December 31, 1996 and June 30, 1997, the Company had working capital of $8,045,000 and $8,536,000, respectively. The increase in working capital was primarily due to a decrease in accounts receivable, inventory, deferred prospecting, accounts payable and accrued expenses. The Company presently believes that cash flows from operations and current cash balances, together with the Line of Credit, will be sufficient to meet the Company's working capital and capital expenditure requirements for the foreseeable future. EXCHANGE RATES The Company engages, from time to time, in currency-hedging activities related to firm commitments for the purchase of inventories in an effort to fix costs and manage the impact of exchange rate fluctuations. The Company has two foreign exchange lines of credit, which allow the Company to enter into forward currency exchange contracts of up to $1,000,000 maturing on any one day. As of June 30, 1997, the Company had no obligations with respect to forward currency exchange contracts. 8 PART II. OTHER INFORMATION Item 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS - -------------------------------------------------------------------------------- (a) The Company held its annual meeting on May 13, 1997. (b) At the annual meeting, stockholders reelected Mr. Huib E. Geerlings as a director. Messrs. James C. Curvey, Phillip D. Wade and Robert Webb continued serving their terms of office after the annual meeting. (c) Results of annual meeting votes:
------------------------------------------------------------------------------------------------------- Proposal For Against Withheld Abstentions Broker Non-votes ------------------------------------------------------------------------------------------------------- To elect Huib E. Geerlings as director 3,580,801 104,854 ------------------------------------------------------------------------------------------------------- To approve an increase of 150,000 shares for issuance under the Company's Stock option Plan 2,615,996 162,125 5,500 902,034 ------------------------------------------------------------------------------------------------------- To ratify the appointment of Arthur Andersen LLP as independent auditors of the Company 3,666,750 12,900 6,005 ------------------------------------------------------------------------------------------------------- Item 6. EXHIBITS AND REPORTS ON FORM 8-K - -------------------------------------------------------------------------------------------------------------- (a) No reports on Form 8-K were filed during the quarter ended June 30, 1997.
9 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GEERLINGS & WADE, INC. (Registrant) By: /s/ Jay L. Essa ---------------------------------- Name: Jay L. Essa Title: President and Chief Executive Officer By: /s/ David R. Pearce ---------------------------------- Name: David R. Pearce Title: Vice President and Chief Financial Officer Dated: August 13, 1997 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 APR-01-1997 JUN-30-1997 2,707,601 0 395,562 0 7,413,634 11,934,825 2,725,088 1,101,160 13,688,442 3,398,676 0 0 0 37,794 9,745,912 13,688,442 8,402,370 8,402,370 4,580,651 4,580,651 0 0 0 444,656 178,720 265,936 0 0 0 265,936 .07 .07
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