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 quarterly period ended September 30, 1994
Commission File Number 0-15238
VICTORIA CREATIONS, INC.
(Exact name of registrant as specified in its charter)
Rhode Island 05-0301429
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 Jefferson Park Rd.
Warwick, Rhode Island 02888
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code 401-467-7150
Indicate by check mark whether the registrant (1) has filed all documents
and 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 [ ].
At November 11, 1994, there were 7,800,000 shares of the registrant's
Common Stock, Par Value $0.01 a share, outstanding.
1
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VICTORIA CREATIONS, INC.
INDEX
Page No.
--------
Part I - Financial Information
Statement of Operations.................................3
Management's Discussion and Analysis of
Financial Condition and Results of Operations.........4
Balance Sheet ..........................................6
Statement of Cash Flows.................................7
Notes to Financial Statements ..........................8
Part II - Other Information ................................10
2
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VICTORIA CREATIONS, INC.
Part I - Financial information
VICTORIA CREATIONS, INC.
Statement of Operations
(000 omitted)
-------------------
THREE MONTHS ENDED
SEPTEMBER 30
-------------------
1994 1993
--------- ---------
Net sales........................................... $14,744 $11,108
Cost of goods sold.................................. 7,630 5,718
--------- ---------
Gross Profit $7,114 $5,390
Selling, general and administrative expenses........ 4,957 4,671
--------- ---------
Operating Income $2,157 $719
Other income (expense):
Interest expense-Note C............................ (973) (396)
Amortization of goodwill........................... (180) (180)
Royalty income..................................... 14 29
--------- ---------
Earnings before Income taxes $1,018 $172
Provision for income taxes.......................... 6 7
--------- ---------
Net Earnings $1,012 $165
========= =========
Average common shares outstanding................... 7,800 7,800
Net Earnings per share.............................. $0.13 $0.02
See notes to financial statements.
3
VICTORIA CREATIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is a 79% owned subsidiary of United Merchants and
Manufacturers, Inc. ("UM&M" or "Parent Company").
RESULTS OF OPERATIONS
Net sales of the Company for the three months ended September 30, 1994 of
$14.7 million increased 33% over the $11.1 million reported for the
comparable period ended September 30, 1993. The increase in sales
resulted from both the Company's branded label merchandise, Givenchy,
Richelieu and Lagerfeld, and the Company's private label business.
Consumer interest continued strong for the branded label merchandise and
the Company continues to emphasize product development to provide new and
unique private label programs for its customers. Sales of out-of-season
merchandise (which is sold at lower than the Company's normal margin)
declined from that of the prior year's same three months reflecting the
Company's focus on forecasting and inventory control which reduced the
quantities of inventory available for such sales. Unit sales, excluding
out-of-season merchandise, for the current year's quarter increased 34%
over those of the comparable quarter last year while average unit prices
remained constant.
Cost of goods sold for the current quarter increased 33% from that of the
three months ended September 30, 1993 tracking the increase in net
sales.
The resulting gross profit for the quarter ended September 30, 1994
increased 32% over that of the prior year's same quarter. As a percentage
of net sales, gross profit for the current quarter was the same as that of
the three months ended September 30, 1993.
Selling, general and administrative expenses increased 6% in the current
year's quarter from those of the three months ended September 30, 1993.
The increase is primarily attributable to sales volume related expenses
such as commissions, advertising and royalties expenses.
Although average borrowings, other than from the Parent Company, were
lower during the current quarter, interest expense for the three months
ended September 30, 1994 increased $577,000 from that of the prior year's
same quarter. The increase was due the increased interest rate on the
secured loans. The Parent Company waived the interest on the amount due
to it for both of the three month periods ended September 30, 1994 and
1993. If that interest had not been waived, interest expense would have
been approximately $575,000 and $365,000 greater than that shown in the
statement of operations for the three months ended September 30, 1994 and
1993, respectively.
4
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LIQUIDITY AND CAPITAL RESOURCES
The Company has generally met its capital requirements from internally
generated funds and borrowings from its Parent Company and, until June 30,
1994, from its factor. On June 30, 1994, the Company repaid its
indebtedness to its factor by borrowing from another lender and its Parent
Company.
Short term needs for working capital will be borrowed under a revolving
loan from the new lender. The Company does not anticipate increased needs
for long-term borrowings other than to repay the current lender.
Working capital amounts to $28.3 million at September 30, 1994 and was
$23.9 million at June 30, 1994, an increase of $4.4 million. The
Company's current ratio of 6.4 to 1 at September 30, 1994 is deemed
adequate for the Company's present financial position and needs.
5
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VICTORIA CREATIONS, INC.
Balance Sheet (000 omitted)
-------------------
SEP 30 JUNE 30
1994 1994
--------- ---------
ASSETS
Current Assets:
Cash............................................... $232 $72
Receivables, net of allowances of $968,000 at
September 30, 1994 and $990,000 at June 30, 1994.. 11,781 8,359
Inventories........................................ 20,398 17,994
Other current assets............................... 1,053 916
--------- ---------
Total Current Assets $33,464 $27,341
Plant and Equipment:
Machinery and equipment............................ $2,907 $2,877
Leasehold improvements............................. 1,891 1,889
Capitalized equipment leases....................... 362 362
--------- ---------
$5,160 $5,128
Less accumulated depreciation...................... 3,881 3,812
--------- ---------
Net Plant and Equipment $1,279 $1,316
Other Assets:
Goodwill........................................... $21,249 $21,430
Other.............................................. 936 586
--------- ---------
Total Other Assets $22,185 $22,016
--------- ---------
$56,928 $50,673
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................... $3,752 $2,315
Accrued expenses and other liabilities............. 1,458 1,129
--------- ---------
Total Current Liablilties $5,210 $3,444
Long-term debt...................................... 17,167 13,391
Due to Parent Company............................... 24,194 24,493
Stockholders' Equity:
Common stock, $0.01 par value,
authorized 10 million shares,
outstanding 7.8 million shares.................... $58 $58
Additional paid-in capital......................... 32,998 32,998
Retained earnings (deficit)........................ (22,699) (23,711)
--------- ---------
Total Stockholders' Equity $10,357 $9,345
--------- ---------
$56,928 $50,673
========= =========
See notes to financial statements.
6
VICTORIA CREATIONS, INC.
Statement of Cash Flows (000 omitted)
-------------------
THREE MONTHS ENDED
SEPTEMBER 30
-------------------
1994 1993
--------- ---------
Cash Flows from Operating Activities:
Net earnings....................................... $1,012 $165
Add back items not requiring cash in the
current period:
Depreciation and amortization.................... 250 255
Decrease (Increase) in Current Assets:
Accounts receivable............................... (3,422) 1,060
Inventories....................................... (2,404) 53
Other current assets.............................. (137) (26)
Increase (Decrease) in Current Liabilities:
Accounts payable.................................. 1,437 (781)
Accrued expenses and other liabilities............ 329 37
Other - net........................................ (350) 10
--------- ---------
Net Cash Provided (Used) by Operating Activities ($3,285) $773
Cash Flows from Investing Activities:
Additions to plant and equipment................... (32) (21)
Cash Flows from Financing Activities:
Notes payable...................................... ($1,207)
Long-term debt..................................... $3,776
Due to Parent Company.............................. (299) 414
--------- ---------
Net Cash Provided (Used) by Financing Activities $3,477 ($793)
--------- ---------
Net Increase (Decrease)in Cash $160 ($41)
Cash at beginning of period......................... 72 148
--------- ---------
Cash at End of Period............................... $232 $107
========= =========
----------
Supplemental disclosures of cash flow Information:
Cash payments for:
Interest.......................................... $973 $396
Income taxes...................................... 6 7
See notes to financial statements.
7
VICTORIA CREATIONS, INC.
Notes to Financial Statements
Note A - Basis of Presentation
The accompanying financial statements of Victoria Creations, Inc.
(Company) have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. The results of operations of any interim period are
subject to year-end audit and adjustments, and are not necessarily
indicative of the results of operations for the fiscal year. For further
information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended
June 30, 1994.
The Company is a 79% owned subsidiary of United Merchants and
Manufacturers, Inc. (UM&M or Parent Company). UM&M is a publicly held
company whose stock is traded on the New York Stock Exchange.
Note B - Inventories
Inventories consist of:
(000 omitted)
----------------
Sep 30 June 30
1994 1994
------- -------
Raw materials ........................................ $ 7,018 $ 5,551
Work in process ...................................... 668 705
Finished goods ....................................... 12,712 11,738
------- -------
$20,398 $17,994
======= =======
Note C - Interest Expense
Interest expense includes interest on amounts due on notes payable (1993)
and long-term debt (1994). The Parent Company waived interest on the
amount due to it for each of the three month periods ended September 30,
1994 and 1993. If the Parent Company had not waived the interest due to
it, interest expense for the three month periods ended September 30, 1994
and 1993 would have been approximately $575,000 and $365,000,
respectively, greater than that reflected in the statement of
operations.
8
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VICTORIA CREATIONS, INC.
Notes to Financial Statements (continued)
Note D - Income Taxes
The provision for income taxes for the three months ended September 30,
1994 and 1993 varied from the expected relationship to earnings before
income taxes (and amortization of goodwill, which is not deductible for
income tax purposes) since the Company had net operating loss
carryforwards to offset the earnings and therefore, no provision for
Federal income taxes was required. The amounts shown as provision for
income taxes for the periods are for state and local taxes.
9
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VICTORIA CREATIONS, INC.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none
(b) Reports on Form 8-K -
As stated in the Registrant's Annual Reoprt on Form 10-K for the
year ended June 30, 1994, Registrant filed a report on Form 8-K
on July 14, 1994 regarding the Registrant's refinancing as of
June 30, 1994.
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.
VICTORIA CREATIONS, INC.
Date: November 11, 1994 by /S/ Norman R. Forson
Norman R. Forson
Senior Vice President
and Treasurer
10
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VICTORIA CREATIONS, INC.
FORM 10-Q
INDEX TO EXHIBIT
The following exhibit is being filed herewith:
Exhibit No.
(27) Financial Data Schedule as of and for the quarter ended September
30, 1994 is filed herewith as Exhibit EX-1.
E-1
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<CIK> 0000796812
<NAME> VICTORIA CREATIONS, INC.
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<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> SEP-30-1994
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<COMMON> 58
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0
<OTHER-SE> 10,299
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