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 September 30, 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 OF (I.R.S. EMPLOYER I.D. NO.)
INCORPORATION OR ORGANIZATION)
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 September 30, 1995, there were outstanding:
19,781,270 shares of common stock
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
PEACHES ENTERTAINMENT CORPORATION
BALANCE SHEETS
September 30, 1995 and April 1, 1995
September 30, April 1,
ASSETS 1995 1995
---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 581,088 1,537,293
Inventories 4,953,136 5,578,737
Prepaid expenses and other current assets 227,682 289,413
Land held for sale -- 300,000
Refundable income taxes 257,860 257,229
------------ ------------
Total current assets 6,019,766 7,962,672
Property and equipment, net 2,522,585 3,072,869
Other assets 146,397 189,348
------------ ------------
$ 8,688,748 11,224,889
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations 58,913 110,028
Accounts payable 3,251,604 4,130,530
Accrued liabilities 1,242,253 1,663,930
------------ ------------
Total current liabilities 4,552,770 5,904,488
Long-term obligations 944,589 929,654
Accrued rent 529,497 500,470
------------ ------------
6,026,856 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, 2,500 shares 250,000 250,000
Common stock, $.01 par value. Authorized, 40,000,000 shares; issued
20,107,850 shares; outstanding 19,781,270 shares at September 30,
1995 and April 1, 1995 201,079 201,079
Capital in excess of par 1,284,471 1,284,471
Retained earnings 736,237 1,964,622
------------ ------------
2,721,787 3,950,172
Less stock held in treasury, at cost (note 5) (59,895) (59,895)
------------ ------------
Commitments (note 4) 2,661,892 3,890,277
------------ ------------
$ 8,688,748 11,224,889
============ ============
</TABLE>
See accompanying notes to financial statements.
- 1 -
<PAGE>
<TABLE>
<CAPTION>
PEACHES ENTERTAINMENT CORPORATION
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Six months ended September 30, 1995 and October 1, 1994
(Unaudited)
September 30, October 1,
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
Net sales $ 11,595,216 15,009,793
------------ ------------
Costs and expenses:
Cost of sales 7,382,051 9,345,857
Selling, general and administrative 4,988,530 5,799,704
Management fee 375,000 524,386
------------ ------------
12,745,581 15,669,947
------------ ------------
Loss from operations (1,150,365) (660,154)
------------ ------------
Other (charges) credits:
Interest expense (57,417) (41,140)
Interest income 9,397 24,095
------------ ------------
(48,020) (17,045)
------------ ------------
Loss before benefit for income taxes (1,198,385) (677,199)
Benefit for income taxes (note 3) -- (191,000)
------------ ------------
Net loss (1,198,385) (486,199)
Retained earnings, beginning of period 1,964,622 4,020,030
Preferred stock dividend (30,000) (30,000)
------------ ------------
Retained earnings, end of period $ 736,237 3,503,831
============ ============
Net loss per common share (note 2) $ (.03) (.02)
============ ============
</TABLE>
See accompanying notes to financial statements.
- 2 -
<PAGE>
<TABLE>
<CAPTION>
PEACHES ENTERTAINMENT CORPORATION
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Three months ended September 30, 1995 and October 1, 1994
(Unaudited)
September 30, October 1,
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
Net sales $ 5,326,936 7,392,232
----------- ---------
Costs and expenses:
Cost of sales 3,384,239 4,579,270
Selling, general and administrative 2,448,843 2,936,904
Management fee 187,500 258,583
----------- ---------
6,020,582 7,774,757
----------- ---------
Loss from operations (693,646) (382,525)
----------- ---------
Other (charges) credits:
Interest expense (36,685) (20,524)
Interest income 7,788 9,393
----------- ---------
(28,897) (11,131)
----------- ---------
Loss before benefit for income taxes (722,543) (393,656)
Benefit for income taxes (note 3) -- (96,000)
----------- ---------
Net loss (722,543) (297,656)
Retained earnings, beginning of period 1,473,780 3,816,487
Preferred stock dividend (15,000) (15,000)
----------- ---------
Retained earnings, end of period $ 736,237 3,503,831
=========== =========
Net loss per common share (note 2) $ (.04) (.01)
=========== =========
</TABLE>
See accompanying notes to financial statements.
- 3 -
<PAGE>
<TABLE>
<CAPTION>
PEACHES ENTERTAINMENT CORPORATION
STATEMENTS OF CASH FLOWS
Six months ended September 30, 1995 and October 1, 1994
(Unaudited)
September 30, October 1,
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,198,385) (486,199)
----------- ----------
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 244,898 244,692
Changes in assets and liabilities affecting cash flows from
operating activities:
(Increase) decrease in:
Inventories 625,601 (792,883)
Prepaid expenses and other current assets 61,731 (131,775)
Other assets 42,951 95,423
Refundable income taxes (631) (244,000)
Increase (decrease) in:
Accounts payable (878,926) 411,149
Accrued liabilities (298,292) (96,969)
Accrued rent 29,027 30,195
Long-term obligations 73,848 --
----------- ----------
Total adjustments (99,793) (484,168)
----------- ----------
Net cash used in operating activities (1,298,178) (970,367)
----------- ----------
Cash flows from investing activities:
Purchase of property and equipment (133,242) (513,262)
Proceeds from property and equipment 615,243 --
Purchase of marketable investment securities -- (350,455)
----------- ----------
Net cash (used in) provided by investing
activities 482,001 (863,717)
----------- ----------
Cash flows from financing activities:
Repayment of long-term debt (110,028) (125,168)
Dividends paid (30,000) (30,000)
----------- ----------
Net cash used in financing activities (140,028) (155,168)
----------- ----------
Net decrease in cash (956,205) (1,989,252)
Cash, beginning of period 1,537,293 3,610,205
----------- ----------
Cash, end of period $ 581,088 1,620,953
=========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 48,020 41,140
=========== ==========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
PEACHES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1995 and October 1, 1994
(Unaudited)
(1) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying 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 six months ended September 30, 1995,
are not necessarily indicative of the operating results to be expected
for the year ending March 30, 1996. The Company's business is seasonal.
Historically, approximately 22 percent of the Company's sales have
occurred in the second fiscal quarter.
Inventories, which consist of compact discs, tapes and accessories, are
stated at the lower of cost (principally average) or market.
Certain reclassifications have been made to the (unaudited) October 1,
1994 quarterly financial information to conform to the presentation
used in the (unaudited) September 30, 1995 financial information.
(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 (SFAS
109) "Accounting for Income 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.
- 5 -
(Continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
The aggregate minimum rental commitments provided for in such leases at
September 30, 1995, are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING AMOUNT
------------------ ------
<S> <C>
1996 $1,781,240
1997 1,664,207
1998 1,543,502
1999 1,340,440
2000 1,181,966
Thereafter 4,826,989
-----------
$12,338,344
===========
</TABLE>
Rent expense under operating leases amounted to $972,026 and $1,203,000
for the six months ended September 30, 1995 and October 1, 1994,
respectively.
(5) TREASURY STOCK
At September 30, 1995 and April 1, 1995, treasury stock consists of
326,580 shares of common stock.
- 6 -
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995,
COMPARED TO THE SIX MONTHS ENDED OCTOBER 1, 1994
RESULTS OF OPERATIONS
Net sales for the six months ended September 30, 1995 ("1995") decreased by
approximately 22.8% compared to the six months ended October 1, 1994 ("1994").
Such decrease is attributed to a decrease in comparable store sales (13.9%), and
a decrease in sales in those stores that closed during 1995 and 1994 (8.9%).
During the last few years, non-traditional music retailers such as appliance and
computer retailers and super bookstores have began 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 markers and will be expended 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 62.2%
in 1994 to 63.7% in 1995 due to a reduction in retail pricing in an effort to
meet the increase competition.
Selling, general and administrative ("SG&A") expenses in 1995 decreased by 15.1%
compared to 1994. Such decrease is attributable to a decrease in comparable
store expenses (5.0%), a decrease in store operating expenses of stores that
opened or closed during 1995 versus 1994 (9.4%) and a decrease in corporate
overhead (1.0%). SG&A expenses as a percentage of net sales increased from 38.6%
in 1994 to 43.0% 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 $1,198,000 in 1995 versus a net
loss of approximately $486,000 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 $1,466,996 at September 30, 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 September
30, 1995 compared to a current ratio of 1.35 to 1 at April 1, 1995.
At September 30, 1995, the Company had long-term obligations of $944,589.
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.
- 7 -
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Management anticipates that cash generated from operations and cash equivalent
on hand will provide sufficient liquidity to maintain adequate working capital
for operations. Management believes that the Company would be able to obtain
financing for 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.
- 8 -
<PAGE>
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 changes or credits to income during the
quarter, or reporting a change in independent accountants.
- 9 -
<PAGE>
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: November 13, 1995 /s/ Allan Wolk
------------------------------ ---------------------------------
Allan Wolk, Chairman of the Board
(PRINCIPAL EXECUTIVE OFFICER)
Date: November 13, 1995 /s/ Jason Wolk
------------------------------ ---------------------------------
Jason Wolk, Vice President
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH PERIOD ENDED
SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 581,088
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 4,953,136
<CURRENT-ASSETS> 6,019,766
<PP&E> 5,610,993
<DEPRECIATION> 3,088,408
<TOTAL-ASSETS> 8,688,748
<CURRENT-LIABILITIES> 4,552,770
<BONDS> 0
<COMMON> 201,079
0
500,000
<OTHER-SE> 1,960,813
<TOTAL-LIABILITY-AND-EQUITY> 8,688,748
<SALES> 11,595,216
<TOTAL-REVENUES> 11,595,216
<CGS> 7,382,051
<TOTAL-COSTS> 7,382,051
<OTHER-EXPENSES> 5,363,530
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,417
<INCOME-PRETAX> (1,198,385)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,198,385)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,198,385)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
