VICTORIA CREATIONS INC
10-Q, 1995-05-18
COSTUME JEWELRY & NOVELTIES
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                    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 March 31, 1995 



                      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 May 10, 1995, there were 7,800,000 shares of the registrant's Common 
Stock, Par Value $0.01 a share, outstanding.






                                     1

<PAGE>








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

<PAGE>


    VICTORIA CREATIONS, INC.

    Part I - Financial information





    VICTORIA CREATIONS, INC.
    Statement of Operations (000 omitted)

                                   THREE MONTHS ENDED   NINE MONTHS ENDED
                                        MARCH 31            MARCH 31
                                  ------------------- -------------------
                                     1995      1994      1995      1994
                                  --------- --------- --------- ---------

    Net sales.....................  $11,204   $10,593   $38,661   $31,317

    Cost of goods sold............    6,388     5,668    21,574    17,697
                                  --------- --------- --------- ---------
                     GROSS PROFIT    $4,816    $4,925   $17,087   $13,620

    Selling, general and
      administrative expenses.....    4,705     4,499    14,805    14,099
                                  --------- --------- --------- ---------
          OPERATING INCOME (LOSS)      $111      $426    $2,282     ($479)

    Other income (expense):
      Interest expense............     (759)     (365)   (2,626)   (1,138)
      Amortization of goodwill....     (180)     (180)     (540)     (540)
      Royalty and other income....       69        27       173       176
                                  --------- --------- --------- ---------
         LOSS BEFORE INCOME TAXES     ($759)     ($92)    ($711)  ($1,981)

    Provision for income taxes....        7         8        20        20
                                  --------- --------- --------- ---------
                         NET LOSS     ($766)    ($100)    ($731)  ($2,001)
                                  ========= ========= ========= =========

    Average common shares
      outstanding.................    7,800     7,800     7,800     7,800

               NET LOSS PER SHARE    ($0.10)   ($0.01)   ($0.09)   ($0.26)


    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 increased 6% in the three months and 23% in the 
nine months ended March 31, 1995 from the net sales for the comparable 
periods ended March 31, 1994.  Sales of both the Company's branded label 
business and private label business increased for both the current three 
and nine month periods compared with the same periods last year.  Sales 
increases were also posted in both the domestic and the international 
markets.  The Company attributes the increases to strong product 
performance at retail, improvement in service levels, technological 
advances and development of new customers.  Unit sales for the current 
year's three and nine month periods increased; offset somewhat by slightly 
lower average unit selling prices as total volume of private label 
merchandise increased relative to total volume of branded merchandise 
which is sold at higher average unit prices. 

Cost of goods sold, as a percentage of net sales, increased 4 percentage 
points for the current quarter and remained approximately the same for the 
current nine months from those of the three and nine month periods ended 
March 31, 1994.  The increased cost in the current quarter reflects the 
increased sales of private label merchandise mentioned above.  The 
resulting gross profit decreased by 2% for the quarter but increased by 
25% for the nine months ended March 31, 1995 compared with those of the 
prior year's same quarter and nine months.  The Company's sales of 
out-of-season merchandise (which is sold at lower than the Company's 
normal margins) for the current quarter and nine months were slightly less 
than in the prior year's comparable three and nine month periods.

Selling, general and administrative expenses increased 5% during both the 
current year's quarter and nine months compared to those of the three and 
nine months ended March 31, 1994 as a result of efforts to control such 
costs through strict budgetary and spending restraints.  As a percentage 
of net sales, selling, general and administrative expenses for the three 
months ended March 31, 1995 were approximately the same at last year's 
same quarter.  For the 1995 nine months, such expenses decreased by 
7 percentage points.

Although average borrowings, other than from the Parent Company, were 
lower during the current quarter and nine months, interest expense 
increased $394,000 for the three months and $1,488,000 for the nine months 
ended March 31, 1995 from that of the prior year's comparable quarter and 
nine months.  The increases were due to the significantly higher interest 
rate during the current periods on the secured loans.  The Parent Company 
waived the interest on the amount due to it for all the periods shown in 
the financial statements.
                                     4


<PAGE>


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 are currently being borrowed under a 
revolving loan from the new lender.  The Company does not anticipate 
substantial increased needs for long-term borrowings other than to repay 
the current lender.  The Company cannot continue to operate indefinitely 
under the terms, particularly the high interest rate, of its agreement 
with the current lender.  Subsequent to March 31, 1995, the Company 
reached an understanding with the current lender whereby the current 
lender will increase the Company's credit line and reduce the interest 
rate on the debt.  There can be no assurance that this understanding will 
evolve into a definitive agreement.  Therefore, the Company continues to 
aggressively explore alternative financing methods in order to repay the 
current lender.  Such alternative financing arrangements may include 
borrowing from another financial institution at reasonable market terms, 
raising additional equity or a combination of debt and equity financing.  
There can be no assurance that such refinancing is attainable.

Working capital was $22.3 million at March 31, 1995 and 23.9 million at 
June 30, 1994.  The Company's current ratio of 5.6 to 1 at March 31, 1995 
is deemed adequate for the Company's present financial position and 
needs.   




























                                     5

<PAGE>


    VICTORIA CREATIONS, INC.
    Balance Sheet
                                                           (000 omitted)
                                                        -------------------
                                                          MAR 31   JUNE 30
                                                           1995      1994
                                                        --------- ---------
                           ASSETS
    Current Assets:
     Cash...............................................   $1,042       $72
     Receivables, net of allowances of $1,501,000 at
      March 31, 1995 and $990,000 at June 30, 1994...       7,891     8,359
     Inventories........................................   17,329    17,994
     Other current assets...............................      960       916
                                                        --------- ---------
                                   Total Current Assets   $27,222   $27,341
    Plant and Equipment:
     Machinery and equipment............................   $3,317    $3,239
     Leasehold improvements.............................    1,910     1,889
                                                        --------- ---------
                                                           $5,227    $5,128
     Less accumulated depreciation......................    4,021     3,812
                                                        --------- ---------
                                Net Plant and Equipment    $1,206    $1,316
    Other Assets:
     Goodwill...........................................  $20,889   $21,430
     Other..............................................      916       586
                                                        --------- ---------
                                     Total Other Assets   $21,805   $22,016
                                                        --------- ---------
                                                          $50,233   $50,673
                                                        ========= =========

            LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities:
     Accounts payable...................................   $3,183    $2,315
     Accrued expenses and other liabilities.............    1,715     1,129
                                                        --------- ---------
                              Total Current Liablilties    $4,898    $3,444

    Long-term debt......................................   12,506    13,391

    Due to Parent Company...............................   24,215    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)........................  (24,442)  (23,711)
                                                        --------- ---------
                             Total Stockholders' Equity    $8,614    $9,345
                                                        --------- ---------
                                                          $50,233   $50,673
                                                        ========= =========
    See notes to financial statements.

                                     6








    VICTORIA CREATIONS, INC.
    Statement of Cash Flows (000 omitted)

                                                          NINE MONTHS ENDED
                                                              MARCH 31
                                                        --------------------
                                                           1995      1994
                                                        --------- ---------

    Cash Provided by Operating Activities:
      Net loss..........................................    ($731)  ($2,001)
      Add back item not requiring
        cash in the current period:
          Depreciation and amortization.................      750       765
      Decrease (Increase) in Current Assets:
        Accounts receivable.............................      468       678
        Inventories.....................................      665     1,111
        Other current assets............................      (44)      (42)
      Increase (Decrease) in Current Liabilities:
        Accounts payable................................      868        23
        Accrued expenses and other liabilities..........      586       257
      Other - net.......................................     (330)       61
                                                        --------- ---------
              NET CASH PROVIDED BY OPERATING ACTIVITIES    $2,232      $852

    Investing Activities:
      Additions to plant and equipment..................     ($99)    ($107)
                                                        --------- ---------
                 NET CASH USED FOR INVESTING ACTIVITIES      ($99)    ($107)


    Financing Activities:
      Increase (decrease) in:
        Notes Payable...................................       $0   ($1,185)
        Long-term debt..................................     (885)
        Due to Parent Company...........................     (278)      366
                                                        --------- ---------
                 NET CASH USED FOR FINANCING ACTIVITIES   ($1,163)    ($819)
                                                        --------- ---------

                        NET INCREASE (DECREASE) IN CASH      $970      ($74)


    Cash at beginning of period.........................       72       148
                                                        --------- ---------
                                  Cash at End of Period    $1,042       $74
                                                        ========= =========

    ----------
    Supplemental disclosure:
      Cash payments for:
        Interest........................................   $2,626    $1,138
        Income taxes....................................       20        20

    See notes to financial statements.


                                       7











VICTORIA CREATIONS, INC.


Part II - Other Information

Item 6.  Exhibits and Reports on Form 8-K

    (a)  Exhibits:

         (27) Financial Data Schedule - filed herewith.

    (b)  Reports on Form 8-K - None

                                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: May 18, 1995                  by /S/ Norman R. Forson        
                                       Norman R. Forson
                                       Senior Vice President
                                         and Treasurer





















                                    10


<PAGE>


                         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 March 31, 
         1995 is filed herewith.






































                                    E-1

<PAGE>

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<ARTICLE> 5
<CIK> 0000796812
<NAME> VICTORIA CREATIONS, INC.
<MULTIPLIER> 1000
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          JUN-30-1995
<PERIOD-END>                               MAR-31-1995
<CASH>                                            1042
<SECURITIES>                                         0
<RECEIVABLES>                                     9392
<ALLOWANCES>                                      1501
<INVENTORY>                                      17329
<CURRENT-ASSETS>                                 27222
<PP&E>                                            5227
<DEPRECIATION>                                    4021
<TOTAL-ASSETS>                                   50233
<CURRENT-LIABILITIES>                             4898
<BONDS>                                          12506
<COMMON>                                            58
                                0
                                          0
<OTHER-SE>                                        8556
<TOTAL-LIABILITY-AND-EQUITY>                     50233
<SALES>                                          38661
<TOTAL-REVENUES>                                 38661
<CGS>                                            21574
<TOTAL-COSTS>                                    21574
<OTHER-EXPENSES>                                 14805
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                2626
<INCOME-PRETAX>                                  (711)
<INCOME-TAX>                                        20
<INCOME-CONTINUING>                              (731)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     (731)
<EPS-PRIMARY>                                   (0.09)
<EPS-DILUTED>                                   (0.09)
        

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