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 quarterly period ended June 30, 2003 |
| ¨ | 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 0-32613
EXCELLIGENCE LEARNING CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 77-0559897 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| 2 Lower Ragsdale Drive Monterey, CA |
93940 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (831) 333-2000
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 report(s)), 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 Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $.01 par value, 8,532,798 shares outstanding as of August 6, 2003.
EXCELLIGENCE LEARNING CORPORATION
| PART I: | FINANCIAL INFORMATION | 1 | ||
| Item 1. |
Financial Statements | 1 | ||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 15 | ||
| Item 4. |
Controls and Procedures | 16 | ||
| PART II: | OTHER INFORMATION | 16 | ||
| Item 1. |
Legal Proceedings | 16 | ||
| Item 2. |
Changes in Securities and Use of Proceeds | 16 | ||
| Item 3. |
Defaults Upon Senior Securities | 16 | ||
| Item 4. |
Submission of Matters to a Vote of Security Holders | 16 | ||
| Item 5. |
Other Information | 17 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 17 | ||
| 18 | ||||
| ITEM 1. | FINANCIAL STATEMENTS. |
EXCELLIGENCE LEARNING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for par value and share amounts)
(Unaudited)
| June 30, 2003 |
December 31, 2002* |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 2,986 | $ | 2,713 | ||||
| Accounts receivable, net |
9,245 | 5,018 | ||||||
| Inventories |
29,461 | 13,938 | ||||||
| Prepaid expenses and other current assets |
2,920 | 2,701 | ||||||
| Deferred income taxes |
1,672 | 1,672 | ||||||
| Total current assets |
46,284 | 26,042 | ||||||
| Property and equipment, net |
4,407 | 4,305 | ||||||
| Deferred income taxes |
2,613 | 1,998 | ||||||
| Other assets |
1,008 | 1,046 | ||||||
| Goodwill |
5,866 | 4,701 | ||||||
| Other intangible assets, net |
1,041 | 1,084 | ||||||
| Total assets |
$ | 61,219 | $ | 39,176 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Revolving line of credit |
$ | 10,151 | $ | — | ||||
| Accounts payable |
15,989 | 3,524 | ||||||
| Accrued expenses |
3,662 | 4,297 | ||||||
| Income tax liabilities |
199 | 216 | ||||||
| Other current liabilities |
735 | 529 | ||||||
| Total current liabilities |
30,736 | 8,566 | ||||||
| Redeemable common shares, 100,000 shares authorized, issued and outstanding at June 30, 2003 |
400 | — | ||||||
| Stockholders’ equity: |
||||||||
| Common stock, $0.01 par value; 15,000,000 shares authorized; 8,425,012 and 8,401,914 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively |
84 | 84 | ||||||
| Additional paid-in capital |
62,222 | 62,206 | ||||||
| Deferred stock compensation |
(1,197 | ) | (1,482 | ) | ||||
| Accumulated deficit |
(31,026 | ) | (30,198 | ) | ||||
| Total stockholders’ equity |
30,083 | 30,610 | ||||||
| Total liabilities and stockholders’ equity |
$ | 61,219 | $ | 39,176 | ||||
| * | Derived from audited consolidated financial statements filed in the Company’s 2002 Annual Report on Form 10-K. |
See accompanying notes to condensed consolidated financial statements.
1
EXCELLIGENCE LEARNING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for share and per share amounts)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| Revenues |
$ | 23,645 | $ | 22,091 | $ | 41,063 | $ | 37,665 | ||||||||
| Cost of goods sold |
14,913 | 13,836 | 26,203 | 23,788 | ||||||||||||
| Gross profit |
8,732 | 8,255 | 14,860 | 13,877 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling, general and administrative |
7,995 | 7,595 | 16,022 | 15,966 | ||||||||||||
| Amortization of other intangible assets |
72 | 72 | 147 | 144 | ||||||||||||
| Operating income (loss) |
665 | 588 | (1,309 | ) | (2,233 | ) | ||||||||||
| Other (income) expense: |
||||||||||||||||
| Interest expense |
109 | 160 | 141 | 263 | ||||||||||||
| Interest income |
(2 | ) | (5 | ) | (7 | ) | (17 | ) | ||||||||
| Income (loss) before income taxes (benefit) |
558 | 433 | (1,443 | ) | (2,479 | ) | ||||||||||
| Income tax (benefit) |
238 | — | (615 | ) | — | |||||||||||
| Net income (loss) |
$ | 320 | $ | 433 | $ | (828 | ) | $ | (2,479 | ) | ||||||
| Net income (loss) per share calculation: |
||||||||||||||||
| Net income (loss) per share—basic |
$ | 0.04 | $ | 0.05 | $ | (0.10 | ) | $ | (0.30 | ) | ||||||
| Net income (loss) per share—diluted |
$ | 0.04 | $ | 0.05 | $ | (0.10 | ) | $ | (0.30 | ) | ||||||
| Weighted average shares used in basic net income (loss) per share calculation |
8,524,664 | 8,364,260 | 8,489,149 | 8,364,260 | ||||||||||||
| Weighted average shares used in diluted net income (loss) per share calculation |
9,123,198 | 8,425,471 | 8,489,149 | 8,364,260 | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
2
EXCELLIGENCE LEARNING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six Months Ended June 30, |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (828 | ) | $ | (2,479 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
840 | 766 | ||||||
| Provision for losses on accounts receivable |
10 | 77 | ||||||
| Equity-based compensation |
285 | 286 | ||||||
| Deferred income taxes |
(615 | ) | — | |||||
| Changes in operating assets and liabilities, net of assets and liabilities assumed in acquisitions: |
||||||||
| Accounts receivable |
(4,237 | ) | (4,229 | ) | ||||
| Inventories |
(15,523 | ) | (6,852 | ) | ||||
| Prepaid expenses and other current assets |
(219 | ) | (11 | ) | ||||
| Other assets |
38 | 28 | ||||||
| Accounts payable |
12,465 | 8,258 | ||||||
| Accrued expenses |
(635 | ) | (1,114 | ) | ||||
| Income tax liabilities |
(17 | ) | — | |||||
| Other current liabilities |
206 | 115 | ||||||
| Net cash used in operating activities |
(8,230 | ) | (5,155 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Purchase of property and equipment |
(795 | ) | (445 | ) | ||||
| Acquisition of Marketing Logistics, Inc. |
(869 | ) | — | |||||
| Net cash used in investing activities |
(1,664 | ) | (445 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Borrowings on line of credit |
41,453 | 42,939 | ||||||
| Principal payments on line of credit |
(31,302 | ) | (37,381 | ) | ||||
| Issuance of equity, net of fees |
16 | — | ||||||
| Principal payments on notes payable |
— | (14 | ) | |||||
| Net cash provided by financing activities |
10,167 | 5,544 | ||||||
| Net increase (decrease) in cash and cash equivalents |
273 | (56 | ) | |||||
| Cash and cash equivalents at beginning of period |
2,713 | 1,623 | ||||||
| Cash and cash equivalents at end of period |
$ | 2,986 | $ | 1,567 | ||||
| Supplemental disclosures of cash flow information: |
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