-----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, UBiRUqqh498o4h+bcsa8f+YH2Ubq+wKeal1yaMNd/uTHkvLmXS274+nmYsPYuPLU 3KIi24YLa9gcCdnfB5p4/A== 0000927760-97-000001.txt : 19970115 0000927760-97-000001.hdr.sgml : 19970115 ACCESSION NUMBER: 0000927760-97-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STROUDS INC CENTRAL INDEX KEY: 0000927760 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-HOME FURNITURE, FURNISHINGS & EQUIPMENT STORES [5700] IRS NUMBER: 954107241 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24904 FILM NUMBER: 97505187 BUSINESS ADDRESS: STREET 1: 780 SOUTH NOGALES ST CITY: CITY OF INDUSTRY STATE: CA ZIP: 91748 BUSINESS PHONE: 8189122866 MAIL ADDRESS: STREET 1: 780 SOUTH NOGALES ST CITY: CITY OF INDUSTRY STATE: CA ZIP: 91748 10-Q 1 As filed with the Securities and Exchange Commission on January 14, 1997 _____________________________________________________________________________ UNITED STATES 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 period ended November 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 0-24904 STROUDS, INC. (Exact name of registrant as specified in its charter) DELAWARE 95-4107241 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 780 SOUTH NOGALES STREET CITY OF INDUSTRY, CA 91748 (Address of principle executive offices) (818) 912-2866 (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 ---- ---- Number of shares of common stock outstanding at January 9, 1997: 8,535,812 STROUDS, INC. INDEX Page No. -------- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS: Condensed Balance Sheets as of November 30, 1996 (Unaudited) and March 2, 1996 3 Condensed Statements of Income for the Thirteen and Thirty-Nine Weeks Ended November 30, 1996 and November 25, 1995 (Unaudited) 4 Condensed Statements of Cash Flows for the Thirty-Nine Weeks Ended November 30, 1996 and November 25, 1995 (Unaudited) 5 Notes to Condensed Financial Statements 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14 SIGNATURES 16 2 PART I. FINANCIAL INFORMATION - --------------------------------- ITEM 1. FINANCIAL STATEMENTS STROUDS, INC. CONDENSED BALANCE SHEETS
November 30, March 2, (in thousands, except share data) 1996 1996 - --------------------------------- -------- -------- (Unaudited) ASSETS Current assets: Cash $ 419 $ 210 Accounts receivable, less allowance for doubtful accounts of $25 and $25, respectively 3,586 1,835 Merchandise inventory 73,278 60,167 Other 4,075 4,245 -------- -------- Total current assets 81,358 66,457 Property and equipment - at cost, net of accumulated depreciation and amortization 24,667 18,206 Excess of cost over net assets acquired, net of accumulated amortization 7,854 8,047 Other assets 841 1,297 -------- -------- Total assets $114,720 $ 94,007 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 573 $ 237 Accounts payable 19,550 14,367 Accrued expenses 10,554 8,974 -------- -------- Total current liabilities 30,677 23,578 Long-term debt 28,337 12,446 Other noncurrent liabilities 2,794 2,514 -------- -------- Total liabilities 61,808 38,538 Stockholders' equity: Preferred stock, $0.0001 par value; authorized 750,000 shares; no shares issued or outstanding -- -- Preferred stock, Series B, $0.0001 par value; authorized 250,000 shares; no shares issued or outstanding -- -- Common stock, $0.0001 par value; authorized 25,000,000 shares; issued and outstanding November 30, 1996, 8,522,817 shares; and March 2, 1996, 8,512,059 shares 1 1 Additional paid-in capital 38,982 38,946 Retained earnings 13,929 16,522 -------- -------- Total stockholders' equity 52,912 55,469 -------- -------- Total liabilities and stockholders' equity $114,720 $ 94,007 ======== ========
See accompanying notes to condensed financial statements. 3 STROUDS, INC. CONDENSED STATEMENTS OF INCOME (in thousands, except share data) (Unaudited)
13 WEEKS ENDED 39 WEEKS ENDED ---------------------- ---------------------- November 30, November 25, November 30, November 25, 1996 1995 1996 1995 --------- --------- --------- --------- Net sales $ 54,984 $ 48,666 $150,936 $134,528 Costs and expenses: Cost of sales, buying and occupancy 39,061 33,454 107,232 92,889 Selling and administrative expenses 17,671 13,980 46,496 39,277 Amortization of excess of cost over net assets acquired 65 65 194 194 --------- --------- --------- --------- 56,797 47,499 153,922 132,360 --------- --------- --------- --------- Operating income (loss) (1,813) 1,167 (2,986) 2,168 Other income 100 74 365 151 Interest expense, net (511) (127) (1,140) (470) --------- --------- --------- --------- Income (loss) before income taxes (2,224) 1,114 (3,761) 1,849 Income tax (expense) benefit 646 (445) 1,168 (744) --------- --------- --------- --------- Net income (loss) $ (1,578) $ 669 $ (2,593) $ 1,105 ========= ========= ========= ========= Net income (loss) per share $ (0.18) $ 0.08 $ (0.30) $ 0.13 ========= ========= ========= ========= Weighted average common and common equivalent shares outstanding 8,523 8,645 8,518 8,587 ========= ========= ========= =========
See accompanying notes to condensed financial statements. 4 STROUDS, INC. CONDENSED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
39 WEEKS ENDED ------------------------- November 30, November 25, 1996 1995 ------------ ------------ Cash flows from operating activities: Net income (loss) $ (2,593) $ 1,105 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization of property and equipment 3,238 2,934 Loss on abandonment of leasehold improvements -- 50 Amortization of excess of cost over net assets acquired 194 194 Increase in: Accounts receivable (1,751) (1,435) Merchandise inventory (13,111) (8,051) Increase in accounts payable and accrued expenses 8,315 3,295 Other 907 335 --------- --------- Net cash used in operating activities (4,801) (1,573) --------- --------- Cash flows from investing activities: Proceeds from sale of marketable securities -- 471 Capital expenditures (9,784) (5,574) Other 83 -- --------- --------- Net cash used in investing activities (9,701) (5,103) --------- --------- Cash flows from financing activities: Borrowings under long-term debt 39,350 34,203 Repayment of long-term debt (22,919) (25,472) Principal payments under capital lease obligations (205) (372) Decrease in overdraft (1,552) (308) Other equity transactions 37 458 --------- --------- Net cash provided by financing activities 14,711 8,509 --------- --------- Net increase in cash 209 1,833 Cash at beginning of period 210 179 --------- --------- Cash at end of period $ 419 $ 2,012 ========= ========= Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $ 1,066 $ 414 Income taxes 195 780 ========= =========
See accompanying notes to condensed financial statements. 5 STROUDS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) (1) INTERIM FINANCIAL STATEMENTS The accompanying Condensed Balance Sheet as of November 30, 1996 and the related Condensed Statements of Income for the 13 and 39 weeks ended November 30, 1996 and November 25, 1995 and Condensed Statements of Cash Flows for the 39 weeks ended November 30, 1996 and November 25, 1995 are unaudited. The unaudited operating results reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. Information pertaining to the year ended March 2, 1996 is derived from the audited financial statements included in the Company's 1995 Annual Report on Form 10-K. This information should be read in conjunction with the financial statements and notes thereto, together with management's discussion and analysis of financial condition and results of operations, contained in the Company's 1995 Annual Report filed with the Securities and Exchange Commission on Form 10-K. The results of operations for the 13 and 39 weeks ended November 30, 1996 may not be indicative of the results to be expected for the entire fiscal year. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Income Taxes Income tax (expense) benefit is based upon the estimated effective tax rate for the entire fiscal year. The Company revised its effective tax rate for the quarter ending November 30, 1996 due to changing conditions in the Company's business. The cumulative tax effect of the change was reflected in the quarter ending November 30, 1996. The effective rate is subject to ongoing review and evaluation by management. Net Income (Loss) per Share Net income (loss) per share is based on the weighted average number of common and common equivalent shares outstanding. Common stock equivalents, as determined by the treasury stock method, represent shares which would be issued assuming the exercise of common stock options and warrants reduced by the number of shares which could be purchased with the proceeds from the exercise of those options and warrants. Common stock equivalents are not included in the calculation of net income (loss) per share if their inclusion would be anti-dilutive. Fully diluted net income per share is not presented since the amounts do not differ significantly from the primary net income per share presented. Reclassifications Certain reclassifications have been made to the November 25, 1995 amounts to conform to the November 30, 1996 presentation. 6 STROUDS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) (3) PROPERTY AND EQUIPMENT Property and equipment is summarized as follows:
November 30, March 2, (in thousands) 1996 1996 - -------------- --------- --------- Furniture, fixtures and equipment $ 37,675 $ 30,915 Equipment held under capital leases 2,111 2,596 Leasehold improvements 8,579 5,687 --------- --------- 48,365 39,198 Less accumulated depreciation and amortization (23,698) (20,992) --------- --------- $ 24,667 $ 18,206 ========= =========
(4) LONG-TERM DEBT At November 30, 1996, the Company had outstanding borrowings of $25,950,000 under its $30,000,000 Revolving Credit Facility (the "Credit Facility"). Included in the Credit Facility is a $7,000,000 letter of credit sub-facility. As of November 30, 1996, the Company had outstanding letters of credit amounting to $353,000 for purchase commitments to foreign suppliers under this sub-facility. Effective June 1, 1996, the Company and the provider of the Credit Facility (the "Bank") amended certain terms and conditions of its $30 million Credit Facility. As part of such amendment, the Credit Facility was extended to August 31, 1998 and the financial covenants were modified to provide for a lower initial debt coverage ratio subject to quarterly increases thereafter and a minimum inventory turnover ratio during the term of the agreement. In addition, interest was payable at the Bank's prime rate or LIBOR plus a spread ranging from 1.25% to 2.00%. The applicable LIBOR interest spread was based on the debt coverage ratio achieved and determined on a quarterly basis. On November 30, 1996, the Company converted $10 million of borrowings under its Credit Facility to a fixed rate of interest (8.29%) expiring April 6, 1999. This conversion increased to $20 million the amount of fixed rate borrowings under its International Swap Dealers Association, Inc. Master Agreement with the Bank. At November 30, 1996, the Company was in breach of its debt coverage ratio covenant. The Bank has waived the minimum debt coverage requirement as of November 30, 1996. In July 1996, the Company signed a $3 million promissory note payable to a financial institution, secured by equipment, fixtures and leasehold improvements at two store locations. Interest is payable at the rate of 9.58% per annum. The note is for five years, payable in monthly installments beginning September 1, 1996. 7 STROUDS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) (4) LONG-TERM DEBT (Continued) On January 13, 1997, the Company entered into a new Revolving Credit Agreement (the "New Credit Agreement") with an affiliate of the Bank secured by inventory, certain other assets and the proceeds therefrom for the purposes of replacing its existing $30 million Credit Facility, increasing its borrowing limits and obtaining terms and conditions reflective of the Company's current operating performance. The borrowing limit under the New Credit Agreement is $40 million not to exceed 60% of eligible inventory except, borrowings may be increased to 65% of eligible inventory for a period of 105 consecutive days commencing January 1 each year. Interest is payable at the bank's prime rate plus 0.375% or LIBOR plus 2.25%. Included in the New Credit Agreement is a $6 million letter of credit sub-facility. The New Credit Agreement expires on January 10, 2000. On January 13, 1997, borrowings under the New Credit Agreement will commence and concurrently, the Company's current revolving credit facility will terminate. The provisions of the New Credit Agreement contain various restrictive covenants pertaining to the payment of cash dividends, incurrence of additional indebtedness, acquisitions, capital expenditures, investments and the disposition of assets. In addition, the New Credit Agreement requires the Company to meet minimum net earnings levels, as defined, determined on a quarterly basis. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Overview The following sets forth certain factors that management believes have affected the Company's results of operations in recent periods, and that may continue to affect the Company in the future. NEW MARKETS. The Company's expansion strategy has focused principally on the development of the greater Chicago and Minneapolis markets (the "Midwest"). The Company has opened 10 superstores in the Midwest and believes it has achieved the critical mass necessary for advertising in these new markets. To date, sales volumes have been below expectations resulting in higher store occupancy, operating, administrative and advertising costs as a percent of sales than experienced in its California markets. Though the Company believes it has made progress in building sales volume over the past nine months, it has not yet achieved per store sales volumes comparable to its California markets. The Company anticipates increasing its advertising expenditures for the remainder fiscal 1996 in order to further its effort to improve consumer recognition and sales performance. The Company anticipates continued downward pressure on earnings for the remainder of the year due to lower sales volume and increased advertising support in its Midwest markets. The rate at which the Company is able to improve sales in these markets will be a primary factor affecting the Company's earnings in fiscal 1996. 13 WEEKS ENDED NOVEMBER 30, 1996 COMPARED TO THE 13 WEEKS ENDED NOVEMBER 25, 1995 - ----------------------------------------------------------------------------- Net sales for the 13 weeks ended November 30, 1996 increased $6.3 million, or 13.0%, to $55.0 million versus $48.7 million in the same period last year. Comparable store sales increased $0.1 million, or 0.3%, for the period. Sales from new stores and expanded or replacement stores increased by $6.2 million. Management believes the increase in comparable store sales is attributable to increased customer traffic and to a lesser extent, a smaller negative impact related to competitive openings for the third quarter of 1996 versus the same period a year ago. Approximately 23% of the comparable stores were affected by new competitive openings for the third quarter of fiscal 1996 compared to approximately 30% for the same period last year. Cost of sales, buying and occupancy for the 13 weeks ended November 30, 1996 was $39.1 million versus $33.5 million for the same period a year ago, a $5.6 million increase. This dollar increase was attributable, primarily, to new stores and expanded stores. As a percent of net sales, cost of sales, buying and occupancy increased to 71.0% from 68.7% for the same period a year ago. The reduced gross margin was due to a higher level of markdown volume versus a year ago and higher occupancy costs associated with new and expanded stores, where average store sales were lower. Selling and administrative expenses for the 13 weeks ended November 30, 1996 increased $3.7 million, as a result of new and expanded stores, to $17.7 million versus $14.0 million for the same period in fiscal 1995 and increased 9 as a percentage of net sales from 28.7% to 32.1%. The increase as a percent of net sales was primarily due to new stores and increased advertising costs to further develop the company's Midwest markets. General and administrative expense as a percent of net sales was 6.0% versus 5.9% a year ago. Operating loss for the 13 weeks ended November 30, 1996 was $1.8 million versus operating income of $1.2 million for the same period a year ago, a $3.0 million decrease. The operating loss resulted in a margin deficit of 3.3% for the 13 weeks ended November 30, 1996 versus an operating income margin of 2.4% for the same period a year ago. Operating income margin declined due to the reasons discussed above. Interest expense net, increased $0.4 million to $0.5 million for the 13 weeks ended November 30, 1996 versus $0.1 million for the same period in fiscal 1995. Interest expense grew as a result of increased borrowings to finance the development of new stores. Income tax benefit for the 13 week period ended November 30, 1996 was $0.6 million versus income tax expense of $0.4 million for the same period a year ago, a $1.0 million increase. The Company's effective tax rate decreased as a result of certain non-deductible expenses for tax purposes becoming less significant in relation to the Company's pretax loss and a result of reflecting the cumulative effect of a revision in the Company's effective tax rate in the 13 week period ended November 30, 1996. The estimated effective tax rate is subject to continuing evaluation and modification by management. 39 WEEKS ENDED NOVEMBER 30, 1996 COMPARED TO THE 39 WEEKS ENDED NOVEMBER 25, 1995 - ----------------------------------------------------------------------------- Net sales for the 39 weeks ended November 30, 1996 increased $16.4 million, or 12.2%, to $150.9 million versus $134.5 million in the same period last year. Comparable store sales increased $1.7 million, or 1.4%, for the period. Sales from new stores and expanded or replacement stores increased by $14.7 million. Management believes the increase in comparable store sales is primarily attributable to increased customer traffic and a smaller negative impact related to competitive openings for the first three quarters of 1996 versus the same period a year ago. Comparable store sales were positively impacted due to an increase in advertising frequency versus a year ago. Approximately 16% of the comparable stores were affected by new competitive openings for the first three quarters of 1996 compared to approximately 30% for the same period last year. Cost of sales, buying and occupancy for the 39 weeks ended November 30, 1996 was $107.2 million versus $92.9 million for the same period a year ago, a $14.3 million increase. This dollar increase was attributable, primarily, to new stores and expanded stores. As a percent of net sales, cost of sales, buying and occupancy increased to 71.0% from 69.0% for the same period a year ago. The reduced gross margin was primarily due to higher occupancy costs associated with new and expanded stores where average store sales were lower. Additionally, merchandise margins eroded somewhat due to a higher level of markdown volume versus a year ago. 10 Selling and administrative expenses for the 39 weeks ended November 30, 1996 increased $7.2 million to $46.5 million versus $39.3 million for the same period in fiscal 1995 and increased as a percentage of net sales from 29.2% to 30.8%. The dollar increase was principally due to new and expanded stores, increased adverting expenditures to further develop the Company's Midwest markets and increased operating expenditures related to the comparable stores sales growth. The increase as a percent of net sales was primarily due to higher advertising costs to further develop the Company's presence in its new Midwest markets and new and expanded stores. General and administrative expense as a percent of net sales was 6.2% versus 6.3% a year ago. The slight decline as a percent of net sales was the result of the sales increase over the same period a year ago. Operating loss for the 39 weeks ended November 30, 1996 was $3.0 million versus operating income of $2.2 million for the same period a year ago, a $5.2 million decrease. The operating loss resulted in a margin deficit of 2.0% for the 39 weeks ended November 30, 1996 versus an operating income margin of 1.6% for the same period a year ago. Operating income margin declined due to the reasons discussed above. Interest expense net, increased $0.6 million to $1.1 million for the 39 weeks ended November 30, 1996 versus $0.5 million for the same period in fiscal 1995. Interest expense grew as a result of increased borrowings to finance the development of new stores and store remodels. The net loss for the 39 week period ended November 30, 1996 resulted in a tax benefit of $1.2 million versus income tax expense of $0.7 million on net earnings for the same 39 week period a year ago. The Company's effective tax rate decreased as a result of certain non-deductible expenses for tax purposes becoming less significant in relation to the Company's pretax loss. The estimated effective tax rate is subject to continuing evaluation and modification by management. LIQUIDITY AND CAPITAL RESOURCES The Company's cash needs are primarily to support its inventory requirements and for store expansion. The Company has historically financed its operations primarily with internally generated funds and its credit facilities. At November 30, 1996 the Company's working capital was $50.7 million, while advances from its Revolving Credit Facility were $26.0 million. At November 30, 1996 the Company had $2.7 million available for borrowings under its credit facility as determined by the Company's eligible "borrowing base." On January 13, 1997, the Company entered into a new Revolving Credit Agreement (the "New Credit Agreement") with an affiliate of the Bank secured by inventory, certain other assets and the proceeds therefrom for the purposes of replacing its existing $30 million Credit Facility, increasing its borrowing limits and obtaining terms and conditions reflective of the Company's current operating performance. The borrowing limit under the New Credit Agreement is $40 million not to exceed 60% of eligible inventory except, borrowings may be increased to 65% of eligible inventory for a period of 105 consecutive days commencing January 1 each year. Interest is payable at the bank's prime rate plus 0.375% or LIBOR plus 2.25%. Included in the New Credit Agreement is a $6 million letter of credit sub-facility. The New Credit Agreement expires on January 10, 2000. On January 13, 1997, borrowings under the New Credit Agreement will commence and concurrently, the Company's current revolving credit facility will terminate. 11 The provisions of the New Credit Agreement contain various restrictive covenants pertaining to the payment of cash dividends, incurrence of additional indebtedness, acquisitions, capital expenditures, investments and the disposition of assets. In addition, the New Credit Agreement requires the Company to meet minimum net earnings levels, as defined, determined on a quarterly basis. In July 1996, the Company signed a $3 million promissory note payable to a financial institution, secured by equipment, fixtures and leasehold improvements at two store locations. Interest is payable at the rate of 9.58% per annum. The note is for five years, payable in monthly installments beginning September 1, 1996. Cash used in operating activities for the 39 weeks ended November 30, 1996 and November 25, 1995 was $4.8 million and $1.6 million, respectively. During the 39 week period ended November 30, 1996, inventory increased $13.1 million and accounts payable and accrued expenses increased $8.3 million as a result of the Company's expansion program. Net cash used in investing activities for the 39 weeks ended November 30, 1996 and November 25, 1995 was $9.7 million and $5.1 million, respectively. These funds were used for capital expenditures supporting the Company's store expansion program. In the first three quarters of fiscal 1996, the Company opened six new superstores and expanded one superstore. Cash provided by financing activities for the 39 weeks ended November 30, 1996 and November 25, 1995 was $14.7 million and $8.5 million, respectively. The Company had net borrowings of $16.4 million primarily to fund expansion and to meet working capital needs for the 39 weeks ended November 30, 1996. Currently, the Company has committed to open three new superstores, including one which is expected to open during the remainder of fiscal 1996. In addition, the Company will expand one original store into a superstore. The Company anticipates capital expenditures of approximately $5.7 million (not including the cost of inventory, estimated to be an additional $6.3 million) in order to fulfill the Company's current commitments for new store development. The Company believes it can meet its committed capital expenditure needs and working capital requirements over the next 12 months through cash flow from operations, borrowings under its Revolving Credit Facility and use of trade credit. SEASONALITY AND QUARTERLY RESULTS The Company's business is subject to seasonal and quarterly fluctuations. Historically, the Company has realized a higher portion of its net sales and an even greater proportion of its profits in the months of November, December and January. Additionally, the timing of promotional events may affect the Company's results in different fiscal quarters from period to period. CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR PROVISIONS" OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations that are not related to historical results are forward looking statements. Actual results may differ 12 materially from those projected or implied in the forward looking statements. Further, certain forward looking statements are based upon assumptions of future events which may not prove to be accurate. These forward looking statements involve risks and uncertainties which are more fully described in Item 1, Part I of the Company's Annual Report on Form 10-K for the Fiscal Year Ended March 2, 1996. 13 PART II. OTHER INFORMATION - ----------------------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: The exhibits on the accompanying Index to Exhibits are filed as part of, or incorporated by reference into, this report. EXHIBIT NO. DESCRIPTION - ----------- ----------- 3.1 Form of Restated Certificate of Incorporation of the Company. Incorporated herein by reference to Amendment No. 1 to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on September 13, 1994. 3.2 Restated By-laws of the Company. Incorporated herein by reference to Amendment No. 1 to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on September 13, 1994. 4 Rights Agreement, dated as of November 17, 1995, between Strouds, Inc. and American Stock Transfer & Trust Company. Incorporated herein by reference to the Company's Form 8-K, as filed with the Commission on December 1, 1995. 10.1 Stock Option Plan for Executive and Key Employees of the Company, including the form of the individual option agreement thereunder. Incorporated herein by reference to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on July 29, 1994. 10.2 Form of Amendment to Stock Option Plan for Executive and Key Employees of the Company, including the form of the amendment to the individual option agreement thereunder. Incorporated herein by reference to Amendment No. 1 to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on September 13, 1994. 10.3 Amended and Restated 1994 Equity Participation Plan of the Company, including the forms of the individual option agreements thereunder. Incorporated herein by reference to Amendment No. 1 to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on September 13, 1994. 10.4 Form of the Company's Employee Qualified Stock Purchase Plan. Incorporated herein by reference to Amendment No. 1 to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on September 13, 1994. 10.5 Amendment to the Strouds, Inc. Employee Qualified Stock Purchase Plan, January 5, 1995. Incorporated herein by reference to the Company's Form 10-K for the fiscal year ended February 25, 1995, as filed with the Commission on May 25, 1995. 10.6 Warrant Agreement (Warrant 1), dated as of November 20, 1992, between the Company and BT Capital. Incorporated herein by reference to the Company's Form S-1, as filed with the Commission on July 29, 1994. 14 EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.7 Warrant Agreement (Warrant 2), dated as of November 20, 1992, between the Company and BT Capital. Incorporated herein by reference to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on July 29, 1994. 10.8 Credit Agreement between Bank of America National Trust and Savings Association and Strouds, Inc., dated September 22, 1995. Incorporated herein by reference to the Company's Form 10-Q for the period ended August 22, 1995, as filed with the Commission on September 26, 1995. 10.9 International Swap Dealers Association, Inc. Master Agreement between Bank of America National Trust and Savings Association and Strouds, Inc., dated March 6, 1996. Incorporated herein by reference to the Company's Form 10-K for the period ended March 2, 1996, as filed with the Commission on May 24, 1996. 10.10 Registration Rights Agreement dated as of January 2, 1996 by and between the Company and BT Capital. Incorporated herein by reference to the Company's Form 10-K for the period ended March 2, 1996, as filed with the Commission on May 24, 1996. 10.11 First Amendment to Credit Agreement between Bank of America National Trust and Savings Association and Strouds, Inc., dated March 5, 1996. Incorporated herein by reference to the Company's Form 10-Q for the period ended August 31, 1996, as filed with the Commission on October 11, 1996. 10.12 Second Amendment to Credit Agreement between Bank of America National Trust and Savings Association and Strouds, Inc., dated June 1, 1996. Incorporated herein by reference to the Company's Form 10-Q for the period ended August 31, 1996, as filed with the Commission on October 11, 1996. 10.13 Security Agreement between Lyon Credit Corporation and Strouds, Inc., dated July, 1996. Incorporated herein by reference to the Company's Form 10-Q for the period ended August 31, 1996, as filed with the Commission on October 11, 1996. * 11 Statement re: Computation of Per Share Earnings. * 27 Financial Data Schedule __________________________________ * Filed herewith electronically b) Reports on Form 8-K: No reports on Form 8-K were filed by the Company during the quarter ended November 30, 1996. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: January 9, 1997 STROUDS, INC. (Registrant) /s/ Wayne P. Selness -------------------- Wayne P. Selness President and Chief Executive Officer (Principal Executive Officer) /s/ Jonathan W. Spatz --------------------- Jonathan W. Spatz Senior Vice President and Chief Financial Officer (Principal Financial Officer) 16 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- 3.1 Form of Restated Certificate of Incorporation of the Company. Incorporated herein by reference to Amendment No. 1 to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on September 13, 1994. 3.2 Restated By-laws of the Company. Incorporated herein by reference to Amendment No. 1 to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on September 13, 1994. 4 Rights Agreement, dated as of November 17, 1995, between Strouds, Inc. and American Stock Transfer & Trust Company. Incorporated herein by reference to the Company's Form 8-K, as filed with the Commission on December 1, 1995. 10.1 Stock Option Plan for Executive and Key Employees of the Company, including the form of the individual option agreement thereunder. Incorporated herein by reference to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on July 29, 1994. 10.2 Form of Amendment to Stock Option Plan for Executive and Key Employees of the Company, including the form of the amendment to the individual option agreement thereunder. Incorporated herein by reference to Amendment No. 1 to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on September 13, 1994. 10.3 Amended and Restated 1994 Equity Participation Plan of the Company, including the forms of the individual option agreements thereunder. Incorporated herein by reference to Amendment No. 1 to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on September 13, 1994. 10.4 Form of the Company's Employee Qualified Stock Purchase Plan. Incorporated herein by reference to Amendment No. 1 to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on September 13, 1994. 10.5 Amendment to the Strouds, Inc. Employee Qualified Stock Purchase Plan, January 5, 1995. Incorporated herein by reference to the Company's Form 10-K for the fiscal year ended February 25, 1995, as filed with the Commission on May 25, 1995. 10.6 Warrant Agreement (Warrant 1), dated as of November 20, 1992, between the Company and BT Capital. Incorporated herein by reference to the Company's Form S-1, as filed with the Commission on July 29, 1994. 10.7 Warrant Agreement (Warrant 2), dated as of November 20, 1992, between the Company and BT Capital. Incorporated herein by reference to the Company's Form S-1, Registration No. 33-82090, as filed with the Commission on July 29, 1994. 10.8 Credit Agreement between Bank of America National Trust and Savings Association and Strouds, Inc., dated September 22, 1995. Incorporated herein by reference to the Company's Form 10-Q for the period ended August 22, 1995, as filed with the Commission on September 26, 1995. EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.9 International Swap Dealers Association, Inc. Master Agreement between Bank of America National Trust and Savings Association and Strouds, Inc., dated March 6, 1996. Incorporated herein by reference to the Company's Form 10-K for the period ended March 2, 1996, as filed with the Commission on May 24, 1996. 10.10 Registration Rights Agreement dated as of January 2, 1996 by and between the Company and BT Capital. Incorporated herein by reference to the Company's Form 10-K for the period ended March 2, 1996, as filed with the Commission on May 24, 1996. 10.11 First Amendment to Credit Agreement between Bank of America National Trust and Savings Association and Strouds, Inc., dated March 5, 1996. Incorporated herein by reference to the Company's Form 10-Q for the period ended August 31, 1996, as filed with the Commission on October 11, 1996. 10.12 Second Amendment to Credit Agreement between Bank of America National Trust and Savings Association and Strouds, Inc., dated June 1, 1996. Incorporated herein by reference to the Company's Form 10-Q for the period ended August 31, 1996, as filed with the Commission on October 11, 1996. 10.13 Security Agreement between Lyon Credit Corporation and Strouds, Inc., dated July, 1996. Incorporated herein by reference to the Company's Form 10-Q for the period ended August 31, 1996, as filed with the Commission on October 11, 1996. * 11 Statement re: Computation of Per Share Earnings. * 27 Financial Data Schedule __________________________________ * Filed herewith electronically EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED BALANCE SHEETS AND STATEMENTS OF INCOME FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS MAR-01-1997 MAR-03-1996 NOV-30-1996 419 0 3,611 25 73,278 81,358 48,365 23,698 114,720 30,677 0 0 0 1 52,911 114,720 150,936 150,936 107,232 107,232 46,690 0 1,140 (3,761) (1,168) (2,593) 0 0 0 (2,593) (0.30) (0.30)
EX-11 3 EXHIBIT 11 STROUDS, INC. COMPUTATION OF PER SHARE EARNINGS
13 WEEKS ENDED 39 WEEKS ENDED ---------------------- ---------------------- November 30, November 25, November 30, November 25, 1996 1995 1996 1995 (in thousands, except share data) --------- --------- --------- --------- - --------------------------------- Weighted average number of common shares outstanding 8,523 8,432 8,518 8,374 Common Stock equivalents: Shares applicable to Warrants based on average market for period -- 213 -- 213 --------- --------- --------- --------- Weighted average number of common and common equivalent shares outstanding, assuming full dilution 8,523 8,645 8,518 8,587 ========= ========= ========= ========= Net income (loss) $ (1,578) $ 669 $ (2,593) $ 1,105 ========= ========= ========= ========= Net income (loss) per common and common equivalent shares $ (0.18) $ 0.08 $ (0.30) $ 0.13 ========= ========= ========= =========
Fully diluted net income (loss) per share is not presented since the amounts do not differ significantly from the primary net income per share presented. -----END PRIVACY-ENHANCED MESSAGE-----