SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended July 1, 1995 Commission File No.0-12375
PEACHES ENTERTAINMENT CORPORATION
(Exact name of Registrant as Specified in Its Charter)
Florida 59-2166041
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) I.D. No.)
3451 Executive Way, Miramar, Florida 33025
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:(305) 432-
4200
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
and (2) has been subject to the filing requirements for at
least the past 90 days.
YES X NO _____
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date.
At July 1, 1995, there were outstanding:
19,781,270 shares of common stock
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<CAPTION>
PEACHES ENTERTAINMENT CORPORATION
Balance Sheets
July 1, 1995 and April 1, 1995
<S> <C> <C> <C>
ASSETS July 1, April 1,
1995 1995
(Unaudited)
Current Assets:
Cash and cash equivalents $ 938,999 1,537,293
Inventories 5,357,164 5,578,737
Prepaid expenses and other
current assets 276,817 289,413
Land held for sale 0 300,000
Refundable income taxes 257,229 257,229
_________ __________
Total current assets 6,830,209 7,962,672
Property and equipment, net 3,002,224 3,072,869
Other assets 159,727 189,348
_________ __________
$ 9,992,160 11,224,889
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 104,139 110,028
Accounts payable 3,730,142 4,130,530
Accrued liabilities 1,328,992 1,663,930
_________ __________
Total current liabilities 5,163,273 5,904,488
Long-term debt, less current portion 913,767 929,654
Accrued rent 515,685 500,470
_________ __________
6,592,725 7,334,612
Shareholders' equity:
Preferred stock (liquidating
value is par value plus all
accrued and unpaid dividends):
Series A, 11% cumulative, $100
par value
Authorized, 25,000 shares;
issued and outstanding,
2,500 shares 250,000 250,000
Series B, 13% cumulative, $100
par value
Authorized, 25,000 shares;
issued and outstanding, 250,000 250,000
2,500 shares
Common stock, $.01 par value.
Authorized, 40,000,000 shares;
issued, 20,107,850 shares;
outstanding, 19,781,270 shares
at July 1, 1995 and April 1, 201,079 201,079
1995
Capital in excess of par 1,284,471 1,284,471
Retained earnings 1,473,780 1,964,622
__________ __________
3,459,330 3,950,172
Less stock held in treasury, at
cost (note 5) (59,895) (59,895)
__________ __________
Commitments (note 4) 3,399,435 3,890,277
$ 9,992,160 11,224,889
<FN>
See accompanying notes to financial statements.
</TABLE>
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<CAPTION>
PEACHES ENTERTAINMENT CORPORATION
Statements of Operations and Retained Earnings
Three months ended July 1, 1995 and July 2, 1994
(Unaudited)
<S> <C> <C> <C>
July 1, July 2,
1995 1994
Net sales $ 6,268,280 7,617,561
__________ _________
Costs and expenses:
Cost of sales 3,997,811 4,766,587
Selling, general and 2,539,685 2,862,800
administrative
Management fee 187,500 265,803
__________ _________
6,724,996 7,895,190
__________ _________
Loss from operations (456,716) (277,629)
__________ _________
Other (charges) credits:
Interest expense (20,732) (20,616)
Interest income 1,606 14,702
__________ _________
(19,126) (5,914)
__________ _________
Loss before benefit for income
taxes (475,842) (283,543)
Benefit for income taxes (note 3) 0 (95,000)
__________ _________
Net loss (475,842) (188,543)
Retained earnings, beginning of
period 1,964,622 4,020,030
Preferred stock dividend (15,000) (15,000)
__________ _________
Retained earnings, end of period $ 1,473,780 3,816,487
Net loss per common share (note 2) $ (0.03) (0.01)
<FN>
See accompanying notes to financial statements.
</TABLE>
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<CAPTION>
PEACHES ENTERTAINMENT CORPORATION
Statements of Cash Flows
Three months ended July 1, 1995 and July 2, 1994
(Unaudited)
July 1, July 2,
1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (475,842) (188,543)
_______ ________
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 135,530 119,709
Changes in assets and
liabilities affecting cash
flows from operating
activities:
(Increase) decrease in:
Inventories 221,573 (238,723)
Prepaid expenses and other
current assets 12,596 (47,325)
Other assets 29,621 (412,171)
Refundable income taxes 0 (105,000)
Increase (decrease) in:
Accounts payable (400,388) 200,775
Accrued liabilities (334,938) (415,101)
Accrued rent 15,215 15,724
________ _________
Total adjustments (320,791) (882,112)
________ _________
Net cash used in
operating activities (796,633) (1,070,655)
________ _________
Cash flows from investing activities:
Purchase of property and equipment (64,885) (2,481)
Proceeds from sale of land 300,000 0
________ _________
Net cash provided by
(used in) investing
activities 235,115 (2,481)
________ _________
Cash flows from financing activities:
Repayment of long-term debt (21,776) (62,550)
Dividends paid (15,000) (15,000)
________ _________
Net cash used in
financing activities (36,776) (77,550)
_________ _________
Net decrease in cash (598,294) (1,150,686)
Cash, beginning of period 1,537,293 3,610,205
_________ _________
Cash, end of period $ 938,999 2,459,519
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 20,732 20,616
<FN>
See accompanying notes to financial statements.
</TABLE>
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PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
July 1, 1995 and July 2, 1994
(Unaudited)
(1) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial
statements have been prepared in accordance with the
instructions to Form 10-Q and, therefore, do not include
all footnotes and information necessary for a fair
presentation of financial position, results of operations,
and cash flows in conformity with generally accepted
accounting principles. However, in the opinion of
management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation have
been made.
The Company is an 87%-owned subsidiary of URT Industries,
Inc. (the "Parent").
The results of operations for the three months ended July
1, 1995, are not necessarily indicative of the operating
results to be expected for the year ending March 29, 1996.
The Company's business is seasonal. Historically,
approximately 23% of the Company's sales have occurred in
the first fiscal quarter.
Inventories, which consist of compact discs, tapes and
accessories, are stated at the lower of cost (principally
average) or market.
(2) LOSS PER COMMON SHARE
Net loss per common share was computed by dividing net
loss less preferred stock dividends, by the weighted
average number of total common shares outstanding during
the periods.
(3) INCOME TAXES
The Company follows Statement of Financial Accounting
Standard No. 109 (SFAS 109) "Accounting for Income Taxes".
The Company provides for income taxes currently payable
and, in addition, provides for deferred income taxes
resulting from timing differences between financial and
taxable income net of any valuation allowance. The
benefit of income taxes has been reduced by $176,000 for
the increase in the valuation allowance for deferred
taxes.
The Company files a consolidated tax return with its
Parent. Any applicable tax charge or credits are
allocated on a separate return basis.
The Company anticipates that for fiscal year 1996, its tax
rate will be approximately 37%.
(4) COMMITMENTS
The Company is a lessee under various operating leases.
Several of them contain escalation clauses principally
tied to the Consumer Price Index. Several of the leases
contain renewal options.
The aggregate minimum rental commitments provided for in
such leases at July 1, 1995, are as follows:
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<S> <C> <C>
Fiscal year ending Amount
1996 $ 1,274,805
1997 1,664,207
1998 1,543,502
1999 1,340,440
2000 1,181,966
Thereafter 5,799,015
__________
$ 12,803,935
</TABLE>
Rent expense under operating leases amounted to $506,435
and $597,000 for the three months ended July 1, 1995, and
July 2, 1994, respectively.
(5) Treasury Stock
At July 1, 1995 and April 1, 1995, treasury stock consists
of 326,580 shares of common stock.
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PEACHES ENTERTAINMENT CORPORATION
Item 7. Management's Discussions And Analysis Of Financial
Condition And Results Of Operations For The Three
months Ended July 1, 1995, Compared To The Three
months Ended July 2, 1994.
RESULTS OF OPERATIONS
Net sales for the three months ended July 1, 1995 ("1995")
decreased by approximately 17.7% compared to the three months
ended July 2, 1994 ("1994"). Such decrease is attributed to a
decrease in comparable store sales (11.4%), and a decrease in
sales in those stores that closed during 1995 versus 1994
(6.3%).
During the last few years, non-traditional music retailers such
as appliance and computer retailers and super bookstores have
begun to sell prerecorded music and video products. They have
adopted policies of selling music products at near or below
wholesale cost as a means of attracting customers to sell other
products. During the current fiscal year, the effect of this
competition was encountered in some of our markets and will be
expanded to some others in the future. The Company has reduced
prices which has resulted in lower sales and lower gross
profit. The Company believes that it will remain competitive
due to its locations, selection of product and superior
customer service.
The cost of sales for 1995 was lower than that for 1994 due to
the decrease in net sales. Cost of sales as a percentage of
net sales has increased from 62.6% in 1994 to 63.8% in 1995 due
to a reduction in retail pricing in an effort to meet the
increased competition.
Selling, general and administrative (SG&A) expenses in 1995
decreased by 11.3% compared to 1994. Such decrease is
attributable to a decrease in comparable store expenses (3.3%),
a decrease in store operating expenses of stores that opened or
closed during 1995 versus 1994 (6.5%) and a decrease in
corporate overhead (1.5%). SG&A expenses as a percentage of
net sales increased from 37.6% in 1994 to 40.5% in 1995 due to
the fixed nature of certain expenses and the decrease in net
sales in addition to the aforementioned items.
The Company incurred a net loss of approximately $476,000 in
1995 versus a net loss of approximately $188,000 in 1994 due to
the reduction in net sales and gross profit as described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $1,666,936 at July 1, 1995
compared to working capital of $2,058,184 at April 1, 1995 and
a current ratio (the ratio of total current assets to total
current liabilities) of 1.32 to 1 at July 1, 1995 compared to a
current ratio of 1.35 to 1 at April 1, 1995.
The Company has historically maintained a strong cash position
and management believes that this will continue in the future.
At July 1, 1995, the Company had long term obligations of
$913,767. Management anticipates that its ability to repay its
long term debt will be satisfied primarily through funds
generated from its operations.
Management believes that the Company has excellent
relationships with its banks and suppliers and does not
anticipate any significant difficulties in financing operations
at current levels.
Management anticipates that cash generated from operations and
cash equivalent on hand will provide sufficient liquidity to
maintain adequate working capital for operations and the
opening of any new stores during the next few years.
Inflation trends have not had an impact upon revenues because
increases in costs have been passed along to customers.
The Company's business is seasonal in nature, with the highest
sales and earnings occurring in the third fiscal quarter, which
includes the Christmas selling season.
The Company has 2,500 shares of $100 par, 11%, Series A
Cumulative Preferred Stock and 2,500 shares of $100 par 13%,
Series B Cumulative Preferred Stock, issued, and outstanding.
On an annual basis, the Company pays dividends of $60,000 to
its preferred shareholders based on its dividend requirements.
Subsequent to July 1, 1995 the Company sold its leasehold in
a store to the landlord for cash proceeds of $325,000.
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PEACHES ENTERTAINMENT CORPORATION
OTHER INFORMATION
PART II
Item 6. Exhibits and Reports on Form 8-K
In the opinion of the Company, no Form 8-K was required to be
filed during the quarter reporting any material unusual charges
or credits to income during the quarter, or reporting a change
in independent accountants.
PEACHES ENTERTAINMENT CORPORATION
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.
PEACHES ENTERTAINMENT CORPORATION
Registrant
Date: August 15, 1995 Allan Wolk
Allan Wolk, Chairman of the Board
(Principal Executive Officer)
Date: August 15, 1995 Jason Wolk
Jason Wolk, Vice President
(Chief Accounting Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> March 29 1996
<PERIOD-START> April 2, 1995
<PERIOD-END> July 1, 1995
<PERIOD-TYPE> 3-mos
<CASH> 938,999
<SECURITIES> 0
<RECEIVABLES> 0
<INVENTORY) 5,357,164
<CURRENT-ASSETS> 6,830,209
<PP&E> 3,002,224
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,992,160
<CURRENT-LIABILITIES> 5,163,273
<BONDS> 0
0
500,000
<COMMON> 201,079
<OTHER-SE> 2,698,356
<TOTAL-LIABILITY-AND-EQUITY> 9,992,160
<SALES> 6,268,280
<TOTAL-REVENUES> 6,268,280
<CGS> 3,997,811
<TOTAL-COSTS> 6,724,996
<OTHER EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,732
<INCOME-PRETAX> (475,842)
<INCOME-TAX> 0
<INCOME-CONTINUING> (475,842)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (475,842)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
