| [X] | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2004 |
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: 0-22663
| THE MIDDLETON DOLL COMPANY |
| (Exact name of registrant as specified in its charter) |
| Wisconsin | 39-1364345 |
| (State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) |
W239 N1700 Busse Road | |
| Waukesha, Wisconsin | 53188-1160 |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (262) 523-4300
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes ___ No X
On May 14, 2004, there were 3,727,589 shares outstanding of the Registrant’s common stock, 6-2/3 cents par value.
| PART 1. | FINANCIAL INFORMATION | |
Item 1. |
Financial Statements | |
| Consolidated Balance Sheets as of March 31, 2004 (Unaudited) and | ||
| December 31, 2003 | 3 | |
| Consolidated Statements of Operations - For the Three Months | ||
| Ended March 31, 2004 and 2003 (Unaudited) | 5 | |
| Consolidated Statement of Changes in Shareholders' Equity - For the Three | ||
| Months Ended March 31, 2004 and 2003 (Unaudited) | 7 | |
| Consolidated Statements of Cash Flows - For the Three Months Ended | ||
| March 31, 2004 and 2003 (Unaudited) | 8 | |
| Notes to the Consolidated Financial Statements (Unaudited) | 9 | |
Item 2. |
Management's Discussion and Analysis of Financial Condition and | |
| Results of Operations | 10 | |
Item 3. |
Quantitative and Qualitative Disclosure About Market Risk | 18 |
Item 4. |
Controls and Procedures | 19 |
PART II. |
OTHER INFORMATION | |
Item 1. |
Legal Proceedings | 20 |
Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 20 |
Item 3. |
Defaults Upon Senior Securities | 20 |
Item 4. |
Submission of Matters to a Vote of Security Holders | 20 |
Item 5. |
Other Information | 20 |
Item 6. |
Exhibits and Reports on Form 8-K | 20 |
| Signatures | 21 | |
| Exhibit Index | 22 |
2
| March 31, 2004 |
December 31, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Consumer Products | ||||||||
| Cash and cash equivalents | $ | 206,546 | $ | 697,558 | ||||
| Accounts receivable, net of allowance of | ||||||||
| $550,985 and $555,738 as of March 31, 2004 | ||||||||
| and December 31, 2003, respectively | 855,808 | 2,168,935 | ||||||
| Inventory, net | 5,147,589 | 5,419,216 | ||||||
| Prepaid inventory | 364,994 | 142,695 | ||||||
| Prepaid corporate taxes | 29,389 | 36,219 | ||||||
| Other prepaid expenses | 229,722 | 285,034 | ||||||
| Total current assets | 6,834,048 | 8,749,657 | ||||||
| Property and equipment, net of accumulated | ||||||||
| depreciation of $3,885,177 and $3,670,257 as of | ||||||||
| March 31, 2004 and December 31, 2003, respectively | 3,518,845 | 3,677,998 | ||||||
| Deferred income taxes | 2,685,224 | 2,685,224 | ||||||
| Goodwill | 506,145 | 506,145 | ||||||
| Total Consumer Products Assets | 13,544,262 | 15,619,024 | ||||||
Financial Services | ||||||||
| Cash and cash equivalents | 299,788 | 654,846 | ||||||
| Interest receivable | 251,682 | 252,268 | ||||||
| Rent receivable, net of allowance of $150,000 | ||||||||
| as of March 31, 2004 and December 31, 2003 | 116,773 | 112,055 | ||||||
| Loans | 48,465,980 | 52,285,926 | ||||||
| Leased properties: | ||||||||
| Buildings, net of accumulated depreciation of | ||||||||
| $2,970,948 and $2,796,495 as of March 31, | ||||||||
| 2004 and December 31, 2003, respectively | 26,770,691 | 26,945,144 | ||||||
| Land | 3,862,730 | 3,862,730 | ||||||
| Total leased properties | 30,633,421 | 30,807,874 | ||||||
| Property and equipment, net of accumulated | ||||||||
| depreciation of $742,147 and $736,003 as of | ||||||||
| March 31, 2004 and December 31, 2003, respectively | 9,384 | 15,529 | ||||||
| Other assets | 816,185 | 2,456,815 | ||||||
| Total Financial Services Assets | 80,593,213 | 86,585,313 | ||||||
Total Assets | $ | 94,137,475 | $ | 102,204,337 | ||||
3
| March 31, 2004 |
December 31, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| (Unaudited) | ||||||||
| LIABILITIES, MINORITY INTEREST, | ||||||||
| AND SHAREHOLDERS' EQUITY | ||||||||
| Consumer Products | ||||||||
| Accounts payable | 712,397 | 599,024 | ||||||
| Accrued salaries | 266,279 | 219,608 | ||||||
| Accrued liabilities | 375,126 | 647,471 | ||||||
| Total Consumer Products Liabilities | 1,353,802 | 1,466,103 | ||||||
Financial Services | ||||||||
| Commercial paper | 38,654,162 | 34,002,000 | ||||||
| Lines of credit | 14,325,000 | 19,225,000 | ||||||
| Direct pay letter of credit obligation | 2,545,000 | 2,600,000 | ||||||
| State of Wisconsin Investment Board notes payble | 6,166,667 | 8,333,333 | ||||||
| Loan participations with repurchase options | 2,314,601 | 6,289,827 | ||||||
| Other borrowings | 1,320,000 | 1,320,000 | ||||||
| Accrued liabilities | 724,973 | 1,131,103 | ||||||
| Total Financial Services Liabilities Other Than Shares | 66,050,403 | 72,901,263 | ||||||
| Preferred shares subject to mandatory redemption, net | 16,854,775 | 16,854,775 | ||||||
| Total Financial Services Liabilities | 82,905,178 | 89,756,038 | ||||||
MINORITY INTEREST | ||||||||
| Minority interest in subsidiaries | 18,777 | 28,786 | ||||||
SHAREHOLDERS' EQUITY | ||||||||
| Common stock, 6 2/3 cents par value, | ||||||||
| 15,000,000 shares authorized, 4,401,599 shares issued | 293,441 | 293,441 | ||||||
| Additional paid-in capital | 16,604,744 | 16,604,744 | ||||||
| Retained earnings | (312,545 | ) | 781,147 | |||||
| Treasury stock, 674,010 shares, at cost | (6,725,922 | ) | (6,725,922 | ) | ||||
| Total Shareholders' Equity | 9,859,718 | 10,953,410 | ||||||
Total Liabilities, Minority Interest, | ||||||||
| and Shareholders' Equity | $ | 94,137,475 | $ | 102,204,337 | ||||
4
| For the Three Months | ||||||||
|---|---|---|---|---|---|---|---|---|
| Ended March 31, | ||||||||
| 2004 |
2003 | |||||||
| Consumer Products | ||||||||
| Net sales | $ | 2,824,048 | $ | 3,911,868 | ||||
| Cost of goods sold | 1,915,243 | 2,207,399 | ||||||
| Gross profit | 908,805 | 1,704,469 | ||||||
Operating expenses | ||||||||
| Sales and marketing | 482,462 | 818,188 | ||||||
| New product development | 183,179 | 205,135 | ||||||
| General and administrative | 1,032,132 | 1,166,073 | ||||||
| Total operating expenses | 1,697,773 | 2,189,396 | ||||||
Net operating loss | (788,968 | ) | (484,927 | ) | ||||
Other income (expense) | ||||||||
| Interest expense | (108 | ) | (4,136 | ) | ||||
| Other income, net | 82,841 | 9,349 | ||||||
| Net other income | 82,733 | 5,213 | ||||||
Loss before income taxes, minority interest | ||||||||
| and intercompany charges | (706,235 | ) | (479,714 | ) | ||||
| Income tax benefit | -- | 191,886 | ||||||
| Minority interest in losses of subsidiaries | 10,008 | 4,872 | ||||||
| Loss Before Intercompany | ||||||||
| Charges - Consumer Products | (696,227 | ) | (282,956 | ) | ||||
Financial Services | ||||||||
| Revenues | ||||||||
| Interest on loans | 663,222 | 927,372 | ||||||
| Rental income | 715,459 | 811,454 | ||||||
| Gain on sale of leased properties | -- | 303,570 | ||||||
| Gain on termination of interest rate swaps | -- | 484,304 | ||||||
| Other income | 12,545 | 12,973 | ||||||
| Total revenues | 1,391,226 | 2,539,673 | ||||||
Expenses | ||||||||
| Interest expense | 600,708 | 797,957 | ||||||
| Depreciation expense | 174,453 | 189,117 | ||||||
| Management fee expense | 226,557 | 246,443 | ||||||
| Other operating expenses | 187,942 | 207,941 | ||||||
| Total expenses | 1,189,660 | 1,441,458 | ||||||
Income before income taxes and | ||||||||
| intercompany revenue | 201,566 | 1,098,215 | ||||||
| Income tax expense | -- | (107,499 | ) | |||||
Income Before Intercompany Revenue | ||||||||
| - Financial Services | $ | 201,566 | $ | 990,716 | ||||
5
| For the Three Months | ||||||||
|---|---|---|---|---|---|---|---|---|
| Ended March 31, | ||||||||
| 2004 |
2003 | |||||||
| Total Company | ||||||||
Loss before income taxes, | ||||||||
| minority interest and intercompany activity | ||||||||
| Consumer products | $ | (706,235 | ) | $ | (479,714 | ) | ||
| Financial services | 201,566 | 1,098,215 | ||||||
| Total company | (504,669 | ) | 618,501 | |||||
| Income tax benefit | -- | 217,300 | ||||||
| Minority interest in losses of subsidiaries | 10,008 | 4,872 | ||||||
Net income (loss) | (494,661 | ) | 840,673 | |||||
| Preferred stock dividends | (226,275 | ) | (359,428 | ) | ||||
| Net income (loss) available to common | ||||||||
| shareholders | $ | (720,936 | ) | $ | 481,245 | |||
Basic earnings (loss) per common share | $ | (0.19 | ) | $ | 0.13 | |||
Diluted earnings (loss) per common share | $ | (0.19 | ) | $ | 0.13 | |||
Weighted average shares | ||||||||
| outstanding (diluted) | 3,727,589 | 3,727,589 | ||||||
Segment Reconciliation | ||||||||
Consumer Products | ||||||||
| Loss before intercompany charges | $ | (696,227 | ) | $ | (282,956 | ) | ||
| Interest/rental expense to parent | (185,948 | ) | (217,661 | ) | ||||
| Management fees to parent | (114,000 | ) | (120,000 | ) | ||||
| Applicable income tax benefit related to | ||||||||
| intercompany charges and other items | -- | 132,913 | ||||||
| Total segment net loss | (996,175 | ) | (487,704 | ) | ||||
Financial Services | ||||||||
| Income before intercompany revenue | 201,566 | 990,716 | ||||||
| Interest/rental income from subsidiary | 185,948 | 217,661 | ||||||
| Management fees from subsidiary | 114,000 | 120,000 | ||||||
| Total segment net income | 501,514 | 1,328,377 | ||||||
Net Income (Loss) | $ | (494,661 | ) | $ | 840,673 | |||
6
| Common Stock |
Additional Paid-In Capital |
Retained Earnings |
Common Treasury Stock |
Accumulated Other Comprehensive Income |
Total | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| BALANCES, | ||||||||||||||||||||
| December 31, 2002 | $ | 293,441 | $ | 16,604,744 | $ | 2,933,904 | $ | (6,725,922 | ) | $ | 512,316 | $ | 13,618,483 | |||||||
| Comprehensive income | ||||||||||||||||||||
| Net income three months | ||||||||||||||||||||
| ended March 31, 2003 | -- | -- | 840,673 | -- | -- | 840,673 | ||||||||||||||
| Change in fair market | ||||||||||||||||||||
| value of interest rate | ||||||||||||||||||||
| swap agreement | -- | -- | -- | -- | (512,316 | ) | ||||||||||||||