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, 2002
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 ___
-----
On August 14, 2002, there were 3,727,589 shares outstanding of the Registrant's
common stock, 6-2/3 cents par value.
THE MIDDLETON DOLL COMPANY
FORM 10-Q INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2002
(Unaudited) and December 31, 2001. . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations - For the
Three and Six Months . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statement of Changes in Shareholders'
Equity - For the Six Months Ended June 30, 2002 and 2001
(Unaudited) . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 7
Consolidated Statements of Cash Flows - For the Three and Six
Months Ended June 30, 2002 and 2001 (Unaudited) . . . . . . . . . . 8
Notes to the Consolidated Financial Statements (Unaudited) . . . . . 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . .11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 18
Item 2. Changes in Securities . . . . . . . . . . . . . .. . . . . . 18
Item 3. Defaults Upon Senior Securities . . . . . . . . . . .. . . . 18
Item 4. Submission of Matters to a Vote of Security Holders . . . .. 18
Item 5. Other Information . . . . . . . . . . . . . .. . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . .. . . . . . 19
Signatures . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 20
Exhibit Index . . . . . . . . . . . . . . . . . .. . . . . 21
2
THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2002 December 31, 2001
-------------- -----------------
(Unaudited)
ASSETS
Consumer Products
Cash $ 159,390 $ 681,267
Accounts receivable, net of allowance of
$322,197 and $326,389 as of June 30, 2002
and December 31, 2001, respectively 2,648,203 3,954,444
Inventory 7,018,816 6,093,822
Prepaid inventory 336,129 676,943
Prepaid corporate taxes 100,699 798,262
Other prepaid expenses 400,075 296,065
------------ ------------
Total current assets 10,663,312 12,500,803
Property and equipment, net of accumulated
depreciation of $2,635,236 and $2,240,331 as of
June 30, 2002 and December 31, 2001, respectively 4,114,998 4,150,695
Loan -- 621,968
Prepaid expenses and other assets 953,518 725,432
Licensing agreement, net of accumulated 416,666 666,666
amortization of $2,083,334 and $1,833,334
as of June 30, 2002 and December 31, 2001,
respectively
Goodwill, net of accumulated amortization of
$113,608 as of June 30, 2002 and
December 31, 2001, respectively 506,145 506,145
------------ ------------
Total Consumer Products Assets 16,654,639 19,171,709
------------ ------------
Financial Services
Cash 700,890 229,506
Interest receivable 511,119 431,284
Rent receivable, net of allowance of $150,000
as of June 30, 2002 and December 31, 2001 266,550 136,939
Loans 85,629,725 99,218,367
Leased properties:
Buildings, net of accumulated depreciation of
$2,135,035 and $1,976,037 as of June 30,
2002 and December 31, 2001, respectively 27,867,858 30,375,142
Land 4,398,861 4,501,344
Construction in progress 1,400 --
------------ ------------
Total leased properties 32,268,119 34,876,486
Property and equipment, net of accumulated
depreciation of $645,622 and $610,192 as of
June 30, 2002 and December 31, 2001, respectively 105,910 141,340
Investment in swap contracts at fair value 1,527,868 1,704,170
Other assets 1,180,154 1,356,617
------------ ------------
Total Financial Services Assets 122,190,335 138,094,709
------------ ------------
Total Assets $138,844,974 $157,266,418
============ ============
3
THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
June 30, 2002 December 31, 2001
------------- -----------------
LIABILITIES, MINORITY INTEREST, (Unaudited)
PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Consumer Products
Short-term borrowings $ 2,370,000 $ 3,400,000
Accounts payable 657,396 794,179
Accrued salaries 174,823 217,078
Accrued liabilities 445,462 753,826
------------- -------------
Total current liabilities 3,647,681 5,165,083
Long-term debt 13,759 16,518
------------- -------------
Total Consumer Products Liabilities 3,661,440 5,181,601
------------- -------------
Financial Services
Commercial paper 60,674,627 62,806,903
Lines of credit 3,880,000 8,200,000
Direct pay letter of credit obligation 9,030,000 9,250,000
State of Wisconsin Investment Board notes payble 10,333,333 11,000,001
Loan participations with repurchase options 18,344,182 28,123,907
Other borrowings 59,141 62,317
Accrued liabilities 1,972,923 1,484,405
------------- -------------
Total Financial Services Liabilities 104,294,206 120,927,533
------------- -------------
Minority Interest and Preferred Stock
Minority interest in subsidiaries 68,054 255,260
Redeemable Preferred stock, 1 cent par value,
3,000,000 shares authorized, 690,000 shares issued 17,250,000 17,250,000
Redeemable Preferred Treasury stock 15,809 shares, at cost (395,225) (395,225)
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 2,266,368 2,170,816
Treasury stock, 674,010 shares, at cost (6,725,922) (6,725,922)
Accumulated other comprehensive income 1,527,868 1,704,170
------------- -------------
Total Shareholders' Equity 13,966,499 14,047,249
------------- -------------
Total Liabilities, Minority Interest,
Preferred Stock and Shareholders' Equity $ 138,844,974 $ 157,266,418
============= =============
4
THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Consumer Products
Net sales $ 4,932,191 $ 5,531,143 $ 10,516,297 $ 12,289,366
Cost of goods sold 2,946,227 3,128,261 6,088,222 6,517,456
------------ ------------ ------------ ------------
Gross profit 1,985,964 2,402,882 4,428,075 5,771,910
Operating expenses
Sales and marketing 925,474 1,319,264 2,087,152 2,448,602
New product development 208,514 243,600 434,050 483,060
General and administrative 894,099 1,357,587 2,022,086 2,607,379
------------ ------------ ------------ ------------
Total operating expenses 2,028,087 2,920,451 4,543,288 5,539,041
Net operating income (loss) (42,123) (517,569) (115,213) 232,869
Other income (expenses)
Interest expense (41,299) (62,866) (84,113) (104,154)
Other income, net 15,404 7,822 22,859 15,362
------------ ------------ ------------ ------------
Net other expenses (25,895) (55,044) (61,254) (88,792)
Income (loss) before income taxes,
minority interest and intercompany charges (68,018) (572,613) (176,467) 144,077
Income tax benefit (expense) 27,207 229,045 70,587 (57,631)
Minority interest in earnings
of subsidiaries (63,022) (34,024) (74,932) (58,476)
------------ ------------ ------------ ------------
Income (Loss) Before Intercompany
Charges - Consumer Products (103,833) (377,592) (180,812) 27,970
------------ ------------ ------------ ------------
Financial Services
Revenues
Interest on loans 1,290,213 2,095,551 2,659,396 4,415,126
Rental income 962,144 985,629 1,938,320 1,948,534
Gain on sale of leased properties 1,035,355 131,467 1,036,248 131,467
Other income 22,411 93,687 157,761 221,374
------------ ------------ ------------ ------------
Total revenues 3,310,123 3,306,334 5,791,725 6,716,501
------------ ------------ ------------ ------------
Expenses
Interest expense 967,928 1,836,507 2,003,649 4,193,973
Depreciation expense 211,758 191,104 427,951 389,804
Management fee expense 250,272 257,711 511,279 499,076
Other operating expenses 192,245 192,543 398,337 413,591
------------ ------------ ------------ ------------
Total expenses 1,622,203 2,477,865 3,341,216 5,496,444
------------ ------------ ------------ ------------
Income before income taxes and
intercompany revenue 1,687,920 828,469 2,450,509 1,220,057
Less: Applicable income tax expense 364,776 -- 364,776 --
------------ ------------ ------------ ------------
Income Before Intercompany Revenue
- Financial Services $ 1,323,144 $ 828,469 $ 2,085,733 $ 1,220,057
------------ ------------ ------------ ------------
5
THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - (Continued)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Total Company
Income (loss) before income taxes,
minority interest and intercompany activity
Consumer products $ (68,018) $ (572,613) $ (176,467) $ 144,077
Financial services 1,687,920 828,469 2,450,509 1,220,057
------------ ------------ ------------ -----------
Total company 1,619,902 255,856 2,274,042 1,364,134
Income tax benefit (expense) (283,002) 377,611 (164,738) 280,067
Minority interest in earnings of
subsidiaries (63,022) (34,024) (74,932) (58,476)
------------ ------------ ------------ -----------
Net income 1,273,878 599,443 2,034,372 1,585,725
Preferred stock dividends (359,428) (359,428) (718,856) (718,856)
------------ ------------ ------------ -----------
Net income available to common
shareholders $ 914,450 $ 240,015 $ 1,315,516 $ 866,869
============ ============ ============ ===========
Basic Earnings Per Common Share $ 0.25 $ 0.06 $ 0.35 $ 0.23
============ ============ ============ ===========
Diluted Earnings Per Common Share $ 0.25 $ 0.06 $ 0.35 $ 0.23
============ ============ ============ ===========
Weighted average shares
outstanding (diluted) 3,727,589 3,727,589 3,727,589 3,727,589
============ ============ ============ ===========
Segment Reconciliation
Consumer Products
Income (loss) before intercompany charges $ (103,833) $ (377,592) $ (180,812) $ 27,970
Interest/rental expense to parent (118,978) (302,740) (301,091) (715,000)
Management fees to parent (113,985) (105,750) (217,843) (208,169)
Applicable income tax benefit related to
intercompany charges and other items 54,567 148,566 129,451 337,698
------------ ------------ ------------ -----------
Total segment net loss (282,229) (637,516) (570,295) (557,501)
Financial Services
Income before intercompany revenue 1,323,144 828,469 2,085,733 1,220,057
Interest/rental income from subsidiary 118,978 302,740 301,091 715,000
Management fees from subsidiary 113,985 105,750 217,843 208,169
------------ ------------ ------------ -----------
Total segment net income 1,556,107 1,236,959 2,604,667 2,143,226
Net Income $ 1,273,878 $ 599,443 $ 2,034,372 $ 1,585,725
============ ============ ============ ===========
6
THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
Accumulated
Additional Common Other
Common Paid-In Retained Treasury Comprehensive
Stock Capital Earnings Stock Income Total
------------ ------------ ------------ ------------ ------------- ------------
BALANCES,
December 31, 2000 $ 293,441 $ 16,604,744 $ 2,965,814 $ (6,725,922) $ -- $ 13,138,077
Net income six months
ended June 30, 2001 -- -- 1,585,725 -- -- 1,585,725
Cash dividends on
preferred stock -- -- (718,856) -- -- (718,856)
Cash dividends on
common stock -- -- (1,219,964) -- -- (1,219,964)
------------ ------------ ------------ ------------ ------------ ------------
BALANCES,
June 30, 2001 $ 293,441 $ 16,604,744 $ 2,612,719 $ (6,725,922) $ -- $ 12,784,982
============ ============ ============ ============ ============ ============
BALANCES,
December 31, 2001 $ 293,441 $ 16,604,744 $ 2,170,816 $ (6,725,922) $ 1,704,170 $ 14,047,249
------------
Comprehensive income
Net income six months
ended June 30, 2002 -- -- 2,034,372 -- -- 2,034,372
Change in fair market
value of interest rate
swap agreement -- -- -- -- (176,302) (176,302)
------------
Total Comprehensive
Income 1,858,070
------------
Cash dividends on
preferred stock -- -- (718,856) -- -- (718,856)
Cash dividends on
common stock -- -- (1,219,964) -- -- (1,219,964)
------------ ------------ ------------ ------------ ------------ ------------
BALANCES,
June 30, 2002 $ 293,441 $ 16,604,744 $ 2,266,368 $ (6,725,922) $ 1,527,868 $ 13,966,499
============ ============ ============ ============ ============ ============
7
THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months For the Six Months
Ended June 30, 2002 Ended June 30, 2001
------------------- -------------------
Consumer Financial Consumer Financial
Products Services Products Services
------------- -------------- ------------- -------------
Cash Flows from Operating Activities:
Segment income (loss) $ (570,295) $ 2,604,667 $ (557,501) $ 2,143,226
Adjustments to reconcile segment net income to
net cash flows from operating activities
Depreciation and amortization 644,905 427,951 98,216 434,578
Provision for losses on accounts receivable 53,109 -- 322,669 --
Provision for inventory reserve (107,733) -- 51,318 --
Change in appreciation on investments -- 926 -- (108,238)
Gain on sale of leased properties -- (1,036,248) -- (131,467)
Change in minority interest in subsidiaries (187,206) -- 58,477 --
Net change in:
Accounts receivable 1,253,132 -- 851,104 --
Inventory (140,318) -- (996,303) --
Interest receivable -- (79,835) -- 241,778
Rent receivable -- (129,611) -- (200,264)
Other assets 29,338 175,537 (2,229,099) 227,189
Accounts payable (136,783) -- 810,598 --
Other liabilities (350,619) 488,518 55,310 (158,987)
------------ ------------ ------------ ------------
Net Cash Flows from Operating Activities 487,530 2,451,905 (1,535,211) 2,447,815
------------ ------------ ------------ ------------
Cash Flows from Investing Activities:
Net loan repayments received 621,968 13,588,642 -- 5,838,245
Proceeds from sale of leased properties -- 3,338,030 -- 243,316
Purchase or construction of leased property -- (85,936) -- (8,351)
Capital expenditures (359,208) -- (414,311) --
------------ ------------ ------------ ------------
Net Cash Flows from Investing Activities 262,760 16,840,736 (414,311) 6,073,210
------------ ------------ ------------ ------------
Cash Flows from Financing Activities:
Net change in short term borrowings (1,030,000) -- 1,906,074 --
Net change in commercial paper -- (2,132,276) -- (1,639,657)
Net change in lines of credit -- (4,320,000) -- --
Net payments on letter of credit -- (220,000) -- (265,000)
Repayment of SWIB notes -- (666,668) -- (666,666)
Repayment of loan participations with
repurchase options -- (9,779,725) -- (3,841,222)
Net change in other notes payable (2,759) (3,176) (3,479) (2,919)
Preferred stock dividends paid -- (718,856) -- (718,856)
Common stock dividends paid -- (1,219,964) -- (1,219,964)
Net intercompany transactions (239,408) 239,408 (22,380) 22,380
------------ ------------ ------------ ------------
Net Cash Flows from Financing Activities (1,272,167) (18,821,257) 1,880,215 (8,331,904)
------------ ------------ ------------ ------------
Net change in cash and cash equivalents (521,877) 471,384 (69,307) 189,121
Cash and equivalents beginning of period 681,267 229,506 628,418 85,276
------------ ------------ ------------ ------------
Cash and equivalents end of period $ 159,390 $ 700,890 $ 559,111 $ 274,397
============ ============ ============ ============
Supplemental Cash Flow Disclosures
Cash paid for interest $ 84,113 $ 2,154,419 $ 105,399 $ 4,090,879
============ ============ ============ ============
Cash paid for income taxes $ -- $ 64,970 $ 190,002 $ --
============ ============ ============ ============
8
THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. NATURE OF BUSINESS
The consolidated financial statements of The Middleton Doll Company (the
"Company") include two segments of business: financial services and consumer
products. The consolidated financial statements as of and for the periods
presented include the accounts of the Company and Bando McGlocklin Small
Business Lending Corporation ("BMSBLC") as financial services companies and Lee
Middleton Original Dolls, Inc. ("LMOD"), License Products, Inc. ("LPI") and
Middleton (HK) Limited ("MHK") as consumer product companies. All significant
intercompany accounts and transactions have been eliminated in consolidation.
NOTE 2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America for interim financial information and the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management of the Company, all
adjustments necessary to present fairly the financial position as of June 30,
2002 and December 31, 2001 and the results of operations for the three months
and six months ended June 30, 2002 and 2001 and cash flows for the six months
ended June 30, 2002 and 2001 have been made. Such adjustments consisted only of
normal recurring items. Operating results for the periods ended June 30, 2002
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2002. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. The accounting policies followed by the Company are set
forth in Note 1 to the Company's consolidated financial statements contained in
the Company's 2001 Annual Report on Form 10-K. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001.
The balance sheet for consumer products is classified due to its normal business
cycle being less than twelve months. Financial services' balance sheet is not
classified as its normal business cycle is greater than twelve months.
In preparing consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the determination
of the allowance for doubtful accounts, valuation of inventories and deferred
tax assets.
NOTE 3. INTEREST RATE SWAPS
The Company has adopted FAS 133, "Accounting for Derivative Instruments and
Hedging Activities" as amended by FAS 137 "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement 133",
and FAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities". These statements require the Company to designate all derivative
instruments as either fair value hedges or cash flow hedges and to record the
hedge on the balance sheet at its fair market value. The net gain/loss on
instruments classified as cash flow hedges are reported as changes in other
comprehensive income. The net gain/loss on instruments classified as fair value
hedges are reported as increases/decreases in current year earnings.
As part of the Company's asset/liability management, the Company uses interest
rate swap agreements to hedge various exposures or to modify interest rate
characteristics of various balance sheet accounts. Derivatives that are used as
part of the asset/liability management process are linked to specific assets or
liabilities and have high
9
correlation between the contract and the underlying item being hedged, both at
inception and throughout the hedge period. Under the terms of the swap
agreements, the parties exchange interest payment streams calculated on the
notional principal amount. The swap agreements are accounted for on the
"accrual" method. Under that method, the interest component associated with the
contract is recognized over the life of the contract in net interest income.
Although these swaps reduce interest rate risk, the potential for profit or loss
on interest rate swaps still exists depending upon fluctuations in interest
rates. The Company may be susceptible to risk with respect to interest rate swap
agreements to the extent of nonperformance by the financial institutions
participating in the interest rate swap agreements. However, the Company does
not anticipate nonperformance by these institutions.
Contracts that do not meet the hedging criteria are classified as trading
activities and are recorded at fair value with changes in fair value recorded in
earnings.
NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107, "Disclosures About Fair
Value of Financial Instruments", requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet, for
which it is practicable to estimate that value. In cases where quoted market
prices are not available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement No. 107 excludes certain
financial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Company.
NOTE 5. INVENTORY
Inventories of LMOD and LPI are valued at the lower of cost or market and
utilize the first-in, first-out (FIFO) method to determine cost. The components
of inventory are as follows:
June 30, 2002 December 31, 2001
---------------------- ---------------------
Raw materials $ 2,137,744 $ 2,116,694
Work in process 121,695 113,163
Finished goods 4,934,984 4,147,305
---------------------- ---------------------
7,194,423 6,377,162
Less: reserve for obsolete inventory (175,607) (283,340)
---------------------- ---------------------
$ 7,018,816 $ 6,093,822
====================== =====================
NOTE 6. INCOME TAXES
The Company and its qualified REIT subsidiary, BMSBLC, qualify as a real estate
investment trust under the Internal Revenue Code. Accordingly, the REIT is not
subject to income tax on taxable income that is distributed to shareholders.
However, the REIT may retain capital gains from the sale of real estate and pay
income tax on that gain. Currently, the REIT has accrued $364,776 in income tax
expense based on the sale of leased property. The income tax expense (benefit)
recorded by the Company that is attributable to the Consumers Product segment is
calculated on net income before the elimination of intercompany expenses.
NOTE 7. EARNINGS PER SHARE
See Exhibit 11 for the computation of the net income per common share.
10
NOTE 8. COMMITMENTS
Undisbursed construction loan commitments and lines of credit totaled $1.98
million at June 30, 2002.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
Amounts presented as of June 30, 2002 and December 31, 2001, and for the six
months and three months ended June 30, 2002 and June 30, 2001 include the
consolidation of two segments. The financial services segment includes The
Middleton Doll Company (the "Company") and Bando McGlocklin Small Business
Lending Corporation ("BMSBLC"), a 100% owned subsidiary of the Company. The
consumer products segment includes Lee Middleton Original Dolls, Inc. ("LMOD"),
a 99% owned subsidiary of the Company, Middleton (HK) Limited ("MHK"), a 51%
owned subsidiary of LMOD and License Products, Inc. ("LPI"), a 100% owned
subsidiary of LMOD.
Results of Operations
For the three months ended June 30, 2002 and June 30, 2001
Net income increased when comparing the second quarter of 2002 to the second
quarter of 2001. The Company's total net income available to common shareholders
for the quarter ended June 30, 2002 was $0.91 million or $0.25 per share
(diluted) as compared to $0.24 million or $0.06 per share (diluted) for the
quarter ended June 30, 2001, a 279% increase. The consumer products segment's
net loss decreased due to expense reductions. The financial services segment's
net income increased due to the sale of a leased property.
Consumer Products
After income taxes and minority interest, the consumer products segment had a
net loss of $0.10 million for the quarter ended June 30, 2002 compared to a net
loss of $0.38 million for the quarter ended June 30, 2001. After giving effect
to interest, rental and management fees paid to the Company, the consumer
products segment's net loss was $0.28 million for the three months ended June
30, 2002, as compared to a net loss of $0.64 million for the three months ended
June 30, 2001.
Net sales from consumer products for the quarter ended June 30, 2002 decreased
11% to $4.93 million from $5.53 million in the corresponding prior year period.
This was due to decreased sales of $0.86 million at LMOD offset by increased
sales of $0.26 million at LPI. LMOD's decrease was mainly due to a $1.59 million
decrease in the artist studio collection sold to dealers which was offset by
$0.49 million of closeout sales of play dolls and increased outlet store sales.
Cost of sales decreased 6% to $2.95 million for the quarter ended June 30, 2002
compared to $3.13 million for the prior year quarter. LMOD's cost of sales
decreased to $2.02 million from $2.32 million while LPI's cost of sales
increased to $0.93 million from $0.81 million. Total gross profit margin
decreased to 40% from 43% in the prior year. LMOD's gross profit margin
decreased to 43% from 47% and LPI's increased to 34% from 29%. The decrease in
the gross profit margin at LMOD was due to the liquidation at cost of slow
moving inventory and the discounting of outdated inventory from the artist
studio collection.
Total operating expenses of consumer products for the quarter ended June 30,
2002 were $2.03 million compared to $2.92 million for the quarter ended June 30,
2001, a 30% decrease. LMOD's total operating expenses decreased $1.02 million
and LPI's operating expenses increased $0.13 million. Sales and marketing
expense and new product development decreased $0.43 million to $1.13 million for
the quarter ended June 30, 2002 compared to $1.56 million for the quarter ended
June 30, 2001. LMOD's sales and marketing expenses decreased $0.41 million while
LPI's increased $0.02 million. New product development decreased $0.06 million
at LMOD and increased $0.02 million at LPI. General and administrative expenses
increased $0.09 million at LPI and decreased $0.55 million at LMOD when
comparing the quarter ended June 30, 2002 to the same quarter in 2001.
11
Other expenses, net, decreased $0.03 million due to a decrease in interest
expense because of lower interest rates in 2002. The minority interest in
earnings of subsidiaries increased for the quarter ended June 30, 2002 due to a
liquidation of all MHK sourced inventory and the resulting recognition of
intercompany gross margin. Consumer products recorded an income tax benefit of
$0.08 million for the quarter ended June 30, 2002 as compared to $0.38 million
for the quarter ended June 30, 2001. Income tax benefit for the second quarter
of 2002 is composed of tax benefit on net loss before intercompany charges of
$0.03 million and the tax benefit attributable to intercompany charges and other
miscellaneous items of $0.05 million. Intercompany charges were $0.23 million
for the quarter ended June 30, 2002 and $0.41 million for the quarter ended June
30, 2001. The decrease in the intercompany expenses was due to a decrease in
interest expense due to lower interest rates.
Financial Services
Net income from financial services for the quarter ended June 30, 2002 was $1.32
million compared to $0.83 million for the quarter ended June 30, 2001, a 59%
increase. The increase resulted from the sale of a leased property, which
resulted in income, net of related taxes, of $0.67 million and from improved net
interest margins as the Company's cost of funds decreased more rapidly than
revenues decreased. The net interest margin for the quarter ended June 30, 2002
was 4.16% compared to 3.52% for the quarter ended June 30, 2001. Net interest
margin is determined by dividing the total of interest income on loans and
rental income less interest expense by the total of average loans and leased
properties. The financial services segment net income was $1.56 million after
including interest, rental and management fees received from the consumer
products segment for the quarter ended June 30, 2002 and $1.24 million for the
quarter ended June 30, 2001.
Total revenues were $3.31 million for the quarter ended June 30, 2002 and for
the quarter ended June 30, 2001. Interest on loans decreased 39% to $1.29
million for the quarter ended June 30, 2002 from $2.10 million for the
comparative quarter. The large decrease in interest income from loans was
primarily due to the 35% decrease in the prime rate. The average prime rate was
4.75% for the quarter ended June 30, 2002 compared to 7.35% for the quarter
ended June 30, 2001.
Average loans under management decreased $18.27 million when comparing the
second quarter of 2002 to the second quarter of 2001. This decrease was
primarily due to maturing loans and the inability to replace them with the
Company's current funding sources. The Company's ability to make additional
loans depends on the ability of the Company to obtain additional sources of
funding.
Rental income decreased $0.03 million to $0.96 million for the quarter ended
June 30, 2002 as compared to $0.99 million for the quarter ended June 30, 2001
due to less rental income from one leased property. At June 30, 2002 the Company
had $32.27 million in leased properties, net of accumulated depreciation,
compared to $34.93 million at June 30, 2001.
Other income for the three months ending June 30, 2002 was composed of $0.03
million of miscellaneous income. For the three months ending June 30, 2001,
other income included an unrealized gain on hedging activities of $0.05 million
and $0.04 million of miscellaneous income.
Interest expense decreased 47% to $0.97 million for the quarter ended June 30,
2002 as compared to $1.84 million for the quarter ended June 30, 2001 primarily
due to lower rates for the Company's cost of funds. The Company's debt cost is
based primarily on variable interest rates which were significantly lower due to
the decrease in interest rates set by the Federal Reserve. The average prime
rate decreased 260 basis points between the second quarter of 2002 and the
second quarter of 2001. The average debt balance also decreased $20.40 million
in the second quarter of 2002 compared to the second quarter of 2001, which was
the result of the decrease in loans noted above. As a result of interest rate
swaps, the Company recognized a reduction in interest expense of $0.17 million
for the quarter ended June 30, 2002 and $0.21 million for the quarter ended June
30, 2001.
Depreciation expense increased $0.02 million for the second quarter of 2002 as
compared to the second quarter of 2001. Management fees and other operating
expenses remained the same for the comparative quarters.
The Company and its qualified REIT subsidiary, BMSBLC, qualify as a real estate
investment trust under the Internal Revenue Code. Accordingly, they are not
subject to income tax on taxable income that is distributed to
12
shareholders. However, the REIT may retain capital gains from the sale of real
estate and pay income tax on that gain. Currently, the REIT has accrued $0.36
million in income tax expense based on the sale of leased property.
For the six months ended June 30, 2002 and June 30, 2001
Net income increased when comparing the first six months of 2002 to the first
six months of 2001. The Company's total net income available to common
shareholders for the six months ended June 30, 2002 was $1.32 million or $0.35
per share (diluted) as compared to $0.87 million or $0.23 per share (diluted)
for the six months ended June 30, 2001, a 52% increase. The consumer products
segment's net income decreased due to lower than expected sales as a result of
the overall slowdown in the retail sector and the general economy. The financial
services segment's net income increased due to the sale of a leased property.
Consumer Products
After income taxes and minority interest, the consumer products segment had a
net loss of $0.18 million for the six months ended June 30, 2002 compared to net
income of $0.03 million for the six months ended June 30, 2001. After giving
effect to interest, rental and management fees paid to the Company, the consumer
products segment's net loss was $0.57 million for the six months ended June 30,
2002, as compared to $0.56 million for the six months ended June 30, 2001.
Net sales from consumer products for the six months ended June 30, 2002
decreased 14% to $10.52 million from $12.29 million in the corresponding prior
year period. This was due to decreased sales of $2.10 million at LMOD offset by
increased sales of $0.33 million at LPI. LMOD's decrease was mainly due to a
$2.11 million decrease in the artist studio collection sold to dealers and a
$0.36 million decrease due to the end of a Disney program which was offset by
closeout sales of $0.37 million of play dolls. Cost of sales decreased 7% to
$6.09 million for the six months ended June 30, 2002 compared to $6.52 million
for the prior year six months period. LMOD's cost of sales decreased to $4.44
million from $5.06 million while LPI's cost of sales increased to $1.65 million
from $1.46 million. Total gross profit margin decreased to 42% from 47% in the
prior year. LMOD's gross profit margin decreased to 45% from 50% and LPI's
increased to 33% from 32%. The decrease in the gross profit margin at LMOD was
due to the liquidation at cost of slow moving inventory in the amount of $0.37
million and discounting of outdated inventory from the artist studio collection.
Total operating expenses of consumer products for the six months ended June 30,
2002 were $4.54 million compared to $5.54 million for the six months ended June
30, 2001, an 18% decrease. LMOD's total operating expenses decreased $1.22
million and LPI's operating expenses increased $0.22 million. Sales and
marketing expense and new product development decreased $0.41 million to $2.52
million for the six months ended June 30, 2002 compared to $2.93 million for the
six months ended June 30, 2001. LMOD's sales and marketing expenses decreased
$0.41 million while LPI's increased $0.05 million. New product development
decreased $0.10 million at LMOD and increased $0.05 million at LPI. General and
administrative expenses increased $0.12 million at LPI and decreased $0.71
million at LMOD when comparing the six months ended June 30, 2002 to the same
period in 2001.
Other expenses, net, decreased $0.03 million due to a decrease in interest
expense because of lower interest rates in 2002. The minority interest in
earnings of subsidiaries increased for the six months ended June 30, 2002 due to
a liquidation of all MHK sourced inventory and the resulting recognition of
intercompany gross margin. Consumer products recorded an income tax benefit of
$0.20 million for the six months ended June 30, 2002 as compared to $0.28
million for the six months ended June 30, 2001. Income tax benefit is composed
of tax benefit on net loss before intercompany charges of $0.07 million and the
tax benefit attributable to intercompany charges and other miscellaneous items
of $0.13 million. Intercompany charges were $0.52 million for the six months
ended June 30, 2002 and $0.92 million for the six months ended June 30, 2001.
The decrease in the intercompany expenses was due to a decrease in interest
expense due to lower interest rates.
Financial Services
Net income from financial services for the six months ended June 30, 2002 was
$2.09 million compared to $1.22 million for the six months ended June 30, 2001,
a 71% increase. The increase resulted from the sale of two leased properties,
which resulted in income, net of related taxes, of $0.67 million and from
improved net interest margins
13
as the Company's cost of funds decreased more rapidly than revenues decreased.
The net interest margin for the six months ended June 30, 2002 was 4.13%
compared to 3.06% for the six months ended June 30, 2001. Net interest margin is
determined by dividing the total of interest income on loans and rental income
less interest expense by the total of average loans and leased properties. The
financial services segment net income was $2.60 million after including
interest, rental and management fees received from the consumer products segment
for the six months ended June 30, 2002 and $2.14 million for the six months
ended June 30, 2001.
Total revenues were $5.79 million for the six months ended June 30, 2002
compared to $6.72 million for the six months ended June 30, 2001, a 14%
decrease. Interest on loans decreased 40% to $2.66 million for the six months
ended June 30, 2002 from $4.42 million for the comparative quarter. The large
decrease in interest income from loans was primarily due to the 41% decrease in
the prime rate. The average prime rate was 4.75% for the six months ended June
30, 2002 compared to 7.99% for the six months ended June 30, 2001.
Average loans under management decreased $16.57 million when comparing the first
six months of 2002 to the first six months of 2001. This decrease was primarily
due to maturing loans and the inability to replace them with the Company's
current funding sources. The Company's ability to make additional loans depends
on the ability of the Company to obtain additional sources of funding.
Rental income decreased $0.01 million to $1.94 million for the six months ended
June 30, 2002 as compared to $1.95 million for the six months ended June 30,
2001 due to less rental income from one leased property. At June 30, 2002 the
Company had $32.27 million in leased properties, net of accumulated
depreciation, compared to $34.88 million at June 30, 2001.
Other income for the six months ended June 30, 2002 included loan prepayment
penalties of $0.11 million and $0.04 million of miscellaneous income. For the
six months ended June 30, 2001, other income included an unrealized gain on
hedging activities of $0.12 million, $0.05 million of fees from letters of
credit and $0.05 million of miscellaneous income.
Interest expense decreased 52% to $2.00 million for the six months ended June
30, 2002 as compared to $4.19 million for the six months ended June 30, 2001
primarily due to lower rates for the Company's cost of funds. The Company's debt
cost is based primarily on variable interest rates which were significantly
lower due to the decrease in interest rates set by the Federal Reserve. The
average prime rate decreased 324 basis points between the first six months of
2002 and the first six months of 2001. The average debt balance also decreased
$17.96 million in the first six months of 2002 compared to the first six months
of 2001, which was the result of the decrease in loans noted above. As a result
of interest rate swaps, the Company recognized a reduction in interest expense
of $0.33 million for the six months ended June 30, 2002 and $0.22 million for
the six months ended June 30, 2001.
Depreciation expense increased $0.04 million for the first six months of 2002 as
compared to the first six months of 2001. The total of management fees and other
operating expenses remained the same for the comparative quarters.
The Company and its qualified REIT subsidiary, BMSBLC, qualify as a real estate
investment trust under the Internal Revenue Code. Accordingly, they are not
subject to income tax on taxable income that is distributed to shareholders.
However, the REIT may retain capital gains from the sale of real estate and pay
income tax on that gain. Currently, the REIT has accrued $0.36 million in income
tax expense based on the sale of leased property.
Financial Condition
Consumer Products
Total assets of consumer products were $16.65 million as of June 30, 2002 and
$19.17 million as of December 31, 2001, a 13% decrease.
Cash decreased to $0.16 million at June 30, 2002 from $0.68 million at December
31, 2001.
Accounts receivable, net of the allowance, decreased to $2.65 million at June
30, 2002 from $3.95 million at December 31, 2001. A decrease of $1.18 million is
attributable to LMOD, and a decrease of $0.12 million is
14
attributable to LPI. The decrease in accounts receivable is attributable to the
slowdown in sales due to the economy and due to the seasonality of LMOD's sales.
Inventory was $7.02 million at June 30, 2002 compared to $6.09 million at
December 31, 2001. LMOD's inventory increased $0.24 million while License
Products' inventory increased $0.69 million due to its growth in 2002.
Inventories are valued at lower of cost or market using the first-in, first-out
(FIFO) method.
Property and equipment, net of accumulated depreciation, decreased by $0.04
million and prepaid inventory decreased $0.34 million. Loans decreased by $0.62
million due to a loan payoff. Other assets and prepaid expenses decreased by
$0.37 million due to refunds of income tax payments that were received and due
to a timing difference in tradeshow and catalog expenses. The licensing
agreement decreased $0.25 million due to amortization.
Goodwill was recorded when the Company purchased the remaining interest in the
stock from the estate of Lee Middleton, the founder of LMOD, on April 30, 1998.
The purchase price exceeded book value by $0.62 million which was being
amortized over 20 years. As of December 31, 2001, the balance of the goodwill,
net of accumulated amortization was $0.51 million. The Financial Accounting
Standards Board issued Statement 142, Goodwill and Other Intangible Assets,
effective for fiscal years beginning after December 15, 2001 (i.e., January 1,
2002 for calendar year companies). This statement provides that goodwill and
indefinite lived intangible assets are no longer amortized against income but
are reviewed at least annually for impairment. An impairment review is designed
to determine whether the fair value, and the related recorded goodwill, of a
reporting unit is below its carrying value. In the year of adoption, any
impairment loss will be recorded as a cumulative effect of a change in
accounting principle. Thereafter, goodwill impairment losses will be charged to
operations. For the quarter ended June 30, 2002, no impairment loss was
recorded.
LMOD decreased its short-term borrowings by $1.03 million under a line of credit
with a related bank. Accounts payable and other liabilities decreased by $0.49
million as of June 30, 2002 compared to December 31, 2001.
Financial Services
Total assets of financial services were $122.19 million as of June 30, 2002 and
$138.09 million as of December 31, 2001, a 12% decrease.
Cash increased to $0.70 million at June 30, 2002 from $0.23 million at December
31, 2001.
Interest and rent receivable increased to $0.78 million from $0.57 million.
Interest income is accrued on the unpaid principal balance of loans. The accrual
of interest income on impaired loans is discontinued when, in the opinion of
management, there is reasonable doubt as to the borrower's ability to meet
payments of interest or principal when they become due. Loans are returned to
accrual status when the principal and interest amounts contractually due are
brought current and future payments are reasonably assured. Rent is accrued on a
monthly basis based on lease agreements. If it is determined by management that
the lessee will not be able to make rent payments as required by the lease
agreement, the accrual of rent is discontinued until management determines the
rent to be collectible. The rent receivable is shown net of an allowance of
$150,000.
Property and equipment and other assets decreased by $0.21 million.
The Company has adopted FAS 133, "Accounting for Derivative Instruments and
Hedging Activities" as amended by FAS 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement 133", and FAS 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities". These statements require the Company to designate
all derivative instruments as either fair value hedges or cash flow hedges and
to record the hedge on the balance sheet at its fair market value. The net
gain/loss on instruments classified as cash flow hedges are reported as changes
in other comprehensive income. The net gain/loss on instruments classified as
fair value hedges are reported as increases/decreases in current year earnings.
All derivatives are marked to market on the balance sheet. The Company's
interest rate swaps are cash flow hedges and had a marked to market value of
$1.53 million at June 30, 2002 and $1.70 million at December 31, 2001.
Total loans decreased by $13.59 million, or 14%, to $85.63 million at June 30,
2002, from $99.22 million at December 31, 2001, with a corresponding decrease in
liabilities. This decrease was primarily due to maturing loans
15
and the inability to replace them with the Company's current funding sources.
The Company's ability to make additional loans depends on the ability of the
Company to obtain additional sources of funding. Loans that management has the
intent and ability to hold for the foreseeable future or until maturity or
payoff are reported at the amount of unpaid principal, reduced by the allowance
for loan losses. Management reviews the value of the collateral securing each
loan to determine if an allowance for loan losses is necessary. In management's
opinion no loan loss reserve was required at June 30, 2002 or at December 31,
2001.
Leased properties decreased $2.61 million due to the sales of leased property
and depreciation. Leased properties are recorded at cost and are depreciated
using the straight-line method. The costs of normal repairs and maintenance are
charged to expense as incurred.
The financial services' total liabilities at June 30, 2002 decreased $16.63
million. At June 30, 2002, financial services has $37.77 million outstanding in
long-term debt and $64.56 million outstanding in short-term borrowings compared
to $48.44 million outstanding in long-term debt and $71.01 million outstanding
in short-term borrowings as of December 31, 2001. BMSBLC's short-term debt
facility consists of commercial paper and drawn letters of credit backed by a
$70 million line of credit that is required to be reduced by $10.0 million as of
October 31, 2002 and again by $5.0 million as of February 28, 2003. The facility
is being reduced at the request of one of the participating banks. The Company
is attempting to replace the loss of funding sources. The Company anticipates
that it will make the necessary payments on its short-term facility on or before
the dates by which the reductions are required to occur by applying the proceeds
from the payment of loan balances to the facility. Such payments will result in
a reduction of the Company's loan portfolio unless the Company is able to make
additional loans with other funding sources. The facility matures on June 27,
2003. If commercial paper would become unavailable, BMSBLC would have to draw
upon its back-up line of credit which would have higher interest rates and would
result in a reduction of net income. BMSBLC expects to renew its line of credit
at its June 27, 2003 maturity. However, if the line of credit is not renewed,
BMSBLC would have to seek other financing sources. There is no guarantee that
any such alternative financing sources could be obtained. Accrued liabilities
increased $0.49 million from December 31, 2001 to June 30, 2002.
Other significant accounting policies
In preparing consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the determination
of the allowance for doubtful accounts, valuation of inventories and deferred
tax assets.
Financial Accounting Standards Board Statement No. 107, "Disclosures About Fair
Value of Financial Instruments", requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet, for
which it is practicable to estimate that value. In cases where quoted market
prices are not available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement No. 107 excludes certain
financial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Company (See Note 21).
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934. The Company intends such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995,
and is including this statement for purposes of these safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe
future plans, strategies and expectations of the Company, are generally
identifiable by use of the words "may", "will", "could", "believe", "expect",
"intend", "anticipate", "estimate", "project", or similar expressions. The
Company's ability to
16
predict results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse effect on the operations
and future prospects of the Company and the subsidiaries include, but are not
limited to, changes in: interest rates, general economic conditions, including
the condition of the local real estate market, legislative/regulatory changes,
monetary and fiscal policies of the U.S. Government, including policies of the
U.S. Treasury and the Federal Reserve Board, the quality or composition of the
loan or investment portfolios, demand for loan products, competition, demand for
financial services in the Company's market area, demand for the Company's
consumer products, payment when due of principal and interest on loans made by
the Company, payment of rent by lessees on Company properties and the necessity
to make additions to the Company's loan loss reserve. These risks and
uncertainties should be considered in evaluating forward-looking statements and
undue reliance should not be placed on such statements.
17
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is not a defendant in any material pending legal
proceeding and no such material proceedings are known to be
contemplated.
Item 2. CHANGES IN SECURITIES
No material changes have occurred in the securities of the
Registrant.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 2, 2002, the annual meeting of shareholders was held.
At the meeting Salvatore L. Bando and David A. Geraldson were
elected by the holders of Preferred Stock, voting as a
separate class, to serve as Directors of the Company until the
next annual meeting of the shareholders. Peter A. Fischer and
George R. Schonath were elected by the holders of the
Preferred Stock and the Common Stock, voting together, to
serve as Directors of the Company until the next annual
meeting of shareholders. The Common Stock and Preferred Stock
shareholders also ratified the appointment of Virchow Krause &
Company, LLP as the Company's independent public accountants
for the year ending December 31, 2002.
There were 3,727,589 issued and outstanding shares of Common
Stock and 674,191 issued and outstanding shares of Preferred
Stock at the time of the annual meeting. The voting on each
item presented at the annual meeting was as follows:
For Withheld
Election of Directors
Preferred Stock votes:
Salvatore L. Bando 653,792 11,260
David A. Geraldson 653,792 10,860
Preferred and Common Stock votes:
Peter A. Fischer 3,975,202 65,540
George R. Schonath 3,975,902 64,840
For Against Abstain Total
Ratification of Accountants 3,984,392 35,726 20,624 4,040,742
Item 5. OTHER INFORMATION
None.
18
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
The Exhibits to this Quarterly Report on Form 10-Q
are identified on the Exhibit Index hereto.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company
during the quarter ended June 30, 2002.
19
SIGNATURE
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 thereunder duly authorized.
THE MIDDLETON DOLL COMPANY
(Registrant)
Date: August 14, 2002 /s/ George R. Schonath
----------------------
George R. Schonath
President and Chief Executive Officer
Date: August 14, 2002 /s/ Susan J. Hauke
-------------------
Susan J. Hauke
Vice President Finance
20
THE MIDDLETON DOLL COMPANY AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
EXHIBIT INDEX
Exhibit
Number Exhibit
4.1 Sixth Amendment to Credit Agreement between The Middleton Doll
Company and US Bank National Association (formerly Firstar Bank,
N.A.) dated June 28, 2002.
4.2 Fifth Amendment to Amended and Restated Credit Agreement among
Bando McGlocklin Small Business Lending Corporation, the financial
institutions party thereto and US Bank National Association
(formerly Firstar Bank, N.A.) dated June 28, 2002.
11 Statement Regarding Computation of Per Share Earnings
99.1 Chief Executive Officer Certification
99.2 Chief Financial Officer Certification
21