UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1995.
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 No. 0-16469
JEAN PHILIPPE FRAGRANCES, INC.
( Exact name of registrant as specified in its charter )
Delaware 13-3275609
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
551 Fifth Avenue, New York, New York 10176
(Address of Principal Executive Offices) (Zip Code)
Registrants telephone number, including area code: (212) 983-2640.
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 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 __
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.
At August 10, 1995 there were 10,039,986 shares of common stock, par value
$.001 per share, outstanding.
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
INDEX
Page Number
Part I. Financial Information
Item I. Financial Statements 1
Consolidated Balance Sheets as
of June 30, 1995 (unaudited)
and December 31, 1994 (audited) 2
Consolidated Statements of
Income for the Three Month and
Six Month Periods Ended
June 30, 1995 (unaudited) and
June 30, 1994 (unaudited) 3
Consolidated Statements of
Cash Flows for the Six
Month Periods Ended
June 30, 1995 (unaudited) and
June 30, 1994 (unaudited) 4
Notes to Unaudited Financial
Statements 5
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 6
Part II. Other Information
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Part I. Financial Information
Item I. Financial Statements
In the opinion of management the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting only
of normal recurring adjustments) necessary to present fairly the
financial position of the Company and its results of operations and cash
flows for the interim periods presented. Such financial statements have
been condensed in accordance with the rules and regulations of the
Securities and Exchange Commission and therefore, do not include all
disclosures required by generally accepted accounting principles. These
financial statements should be read in conjunction with the Company's
audited financial statements for the year ended December 31, 1994
included in the Company's annual report filed on Form 10-K.
The results of operations for the six months ended June 30, 1995 are not
necessarily indicative of the results to be expected for the entire fiscal year.
Page 1
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1995 1994
-------- ------------
Current assets:
Cash and cash equivalents $ 6,108,058 $ 5,275,142
Accounts receivable, net 22,377,414 19,875,844
Inventories 32,201,438 24,640,795
Receivables, other 528,041 1,936,618
Other 1,719,441 1,785,755
Deferred tax benefit 709,598 992,730
----------- -----------
Total current assets 63,643,990 54,506,884
Equipment and leasehold improvements, net 1,339,535 1,201,739
Other assets 1,207,380 584,437
Deferred tax benefit 796,615 731,905
Intangible assets, net 11,954,794 12,427,031
----------- -----------
$78,942,314 $69,451,996
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable, banks $10,057,200 $ 6,680,524
Current portion of long-term debt 206,398 187,266
Accounts payable 19,952,618 14,646,998
Income taxes payable 806,450 1,764,892
----------- -----------
Total current liabilities 31,022,666 23,279,680
----------- -----------
Long-term debt, less current portion 751,548 862,601
----------- -----------
Minority interests 972,835 796,153
----------- -----------
Shareholders' equity:
Common stock, $.001 par; authorized
30,000,000 shares; outstanding 10,039,986
and 10,242,786 shares at June 30, 1995
and December 31, 1994, respectively 10,040 10,243
Additional paid-in capital 20,407,574 20,407,574
Retained earnings 26,776,160 23,527,569
Foreign currency translation adjustment 1,032,900 568,176
Treasury stock, at cost, 725,003 and
486,198 shares in 1995 and 1994,
respectively (2,031,409) 0
----------- -----------
46,195,265 44,513,562
----------- -----------
$78,942,314 $69,451,996
=========== ===========
See notes to financial statements.
Page 2
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
Net sales $22,152,130 $15,230,054 $43,764,527 $29,956,397
Cost of sales 11,187,095 8,167,904 21,846,800 16,166,842
----------- ----------- ----------- -----------
Gross margin 10,965,035 7,062,150 21,917,727 13,789,555
Selling, general and
administrative 7,977,722 4,711,843 15,826,088 9,334,877
----------- ----------- ----------- -----------
Income from operations 2,987,313 2,350,307 6,091,639 4,454,678
Other charges (income):
Interest 287,463 172,961 529,926 291,054
Loss (gain) on foreign
currency 19,932 (5,685) 258,648 86,531
Interest and dividend
(income) (56,862) (54,094) (125,552) (101,866)
(Gain) on sale of stock of
subsidiary (19,881) (22,093) (19,881) (112,955)
----------- ----------- ----------- -----------
230,652 91,089 643,141 162,764
----------- ----------- ----------- -----------
Income before income taxes 2,756,661 2,259,218 5,448,498 4,291,914
Income taxes 1,090,746 916,794 2,129,723 1,713,380
----------- ----------- ----------- -----------
Net income before minority
interest 1,665,915 1,342,424 3,318,775 2,578,534
Minority interest in net
income of consolidated
subsidiary 37,908 19,700 70,184 34,787
----------- ----------- ----------- -----------
Net income $1,628,007 $1,322,724 $3,248,591 $2,543,747
=========== ========== ========== ==========
Net income per common and
common equivalent share $0.16 $0.13 $0.31 $0.24
=========== ========== ========== ==========
Number of common and common
equivalent shares
outstanding 10,458,483 10,538,411 10,443,885 10,456,086
=========== ========== ========== ==========
See notes to financial statements.
Page 3
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended
June 30,
1995 1994
----------- -----------
Operating activities:
Net income $ 3,248,591 $ 2,543,747
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 669,386 348,989
Gain on sale of stock of subsidiary 19,881 (112,955)
Minority interest in net income 70,184 34,787
Increase (decrease) in cash from changes in:
Accounts receivable (1,531,570) (211,310)
Inventories (6,560,643) (4,859,404)
Other assets 874,320 (126,792)
Deferred tax benefit 292,422
Accounts payable 4,155,620 6,351,761
Income taxes payable (958,442) (1,138,083)
----------- -----------
Net cash provided by operating activites 279,749 2,830,740
----------- -----------
Investing activities:
Purchase of equipment and leasehold
improvements (339,279) (360,590)
Cash portion of trademark and license
acquisitions (96,099) (5,288,827)
Net cash (used in) investing activities (435,378) (5,649,417)
----------- -----------
Financing activities:
Increase (decrease) in loan payable, bank 3,026,676 679,629
Repayment of long-term debt (48,638) (231,314)
Proceeds from sale of stock of subsidiary 40,454 211,935
Proceeds from exercise of options and warrants 265,668
Purchase of treasury stock (2,031,612)
----------- -----------
Net cash provided by financing activities 986,880 925,918
----------- -----------
Effect of exchange rate changes on cash 1,665 10,294
----------- -----------
Increase (decrease) in cash and cash equivalents 832,916 (1,882,465)
Cash and cash equivalents at beginning of period 5,275,142 9,920,414
----------- -----------
Cash and cash equivalents at end of period $6,108,058 $8,037,949
=========== ===========
Supplemental disclosure of cash flows information:
Cash paid during the period for:
Interest $545,000 $275,000
Income taxes 3,038,000 2,541,000
See notes to financial statements.
Page 4
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Notes to Unaudited Financial Statements
1. Significant Accounting Policies:
The accounting policies followed by the Company are set forth in the notes
to the Company's financial statements included in its Form 10-K which was
filed with the Securities and Exchange Commission for the year ended
December 31, 1994.
2. Earnings Per Share:
Net income per common and common equivalent share is based on the weighted
average number of common and common equivalent shares outstanding during
each period. Common equivalent shares, which consist of unissued shares
under options and warrants, are included in the computation when the
results are dilutive.
3. Inventories:
Inventories consist of the following:
June 30, December 31,
1995 1994
----------- -----------
Raw materials and component parts $14,379,293 $10,537,381
Finished goods 17,822,145 14,103,414
----------- -----------
$32,201,43 $24,640,795
=========== ===========
Page 5
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's long-term business strategy of building core volume and
profitability, developing products in new categories, exploring and closing on
strategic acquisitions, and pursuing expansion in international markets, have
resulted in another record for quarterly growth in sales and earnings.
Three Months Ended June 30, 1995 Compared to June 30, 1994
Net sales increased 45% to $22.2 million, as compared to $15.2 million in 1994.
This increase reflects the Company's ability to integrate new product lines with
existing product offerings, thus, creating greater opportunities to serve the
needs of our customers. Sales generated by the Company's domestic operations
increased 56%. Such growth is primarily the result of our recently acquired
Cutex nail care and lip color product line which did not exist in the second
quarter of 1994.
Sales by the Company's foreign subsidiaries increased 33%; at comparable foreign
currency exchange rates, sales by the Company's foreign subsidiaries increased
14%. Such increase reflects new product introductions under the Ombre Rose and
Burberrys labels.
The Company's primary sales efforts are focused on capitalizing on its expanding
list of customer relationships both domestically and abroad. With efficient
product development and a strong national sales force, the Company can now offer
all customers its growing collection of fragrance, personal care and color
cosmetics products.
Gross profit margin for 1995 increased to 50% of sales from 46% in 1994. Sales
of Cutex products continue to enable the Company to improve overall gross
margin. However, as discussed below, such sales require additional selling
expenditures. The Company's business lines, excluding Cutex, generated a 46%
gross margin in both 1995 and 1994.
Selling, general and administrative expenses represented 36% of net sales in
1995 as compared to 31% in 1994. The increase is primarily the result of
promotion and advertising expenses required for certain new product lines. In
addition, most licensed product lines call for royalties to be paid based on
sales volume and some require minimum advertising expenditures. After 1995,
with a full year of sales for most new product lines, the Company believes it
will once again be in a position to leverage its selling, general and
administrative expenses with increased sales volume.
Page 6
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Interest expense increased to $287,000 in 1994 from $173,000 in 1993. The
Company uses its available credit lines, as needed, to finance its working
capital needs.
Net income for the three months ended June 30, 1995 increased 23% to $1.6
million compared to $1.3 million for the corresponding quarter of the prior
year. Earnings per share increased 23% to $0.16 per share compared to $0.13 per
share for the corresponding quarter of the prior year.
The weighted average number of shares outstanding was 10,458,483 in 1995 and
10,538,411 in 1994.
Six Months Ended June 30, 1995 Compared to June 30, 1994
Net sales increased 46% to $43.8 million, as compared to $30.0 million in 1994.
This increase reflects the Company's ability to integrate new product lines with
existing product offerings, thus, creating greater opportunities to serve the
needs of our customers. Sales generated by the Company's domestic operations
increased 51%. Such growth is primarily the result of our recently acquired
Cutex nail care and lip color product line which did not exist in the first half
of 1994.
Sales by the Company's foreign subsidiaries increased 40%; at comparable foreign
currency exchange rates, sales by the Company's foreign subsidiaries increased
23%. Such increase reflects new product introductions under the Ombre Rose and
Burberrys labels.
The Company's primary sales efforts are focused on capitalizing on its expanding
list of customer relationships both domestically and abroad. With efficient
product development and a strong national sales force, the Company can now offer
all customers its growing collection of fragrance, personal care and color
cosmetics products.
Gross profit margin for 1995 increased to 50% of sales from 46% in 1994. Sales
of Cutex products continue to enable the Company to improve overall gross
margin. However, as discussed below, such sales require additional selling
expenditures. The Company's business lines, excluding Cutex, generated a 46%
gross margin in both 1995 and 1994.
Selling, general and administrative expenses represented 36% of net sales in
1995 as compared to 31% in 1994. The increase is primarily the result of
promotion and advertising expenses required for certain new product lines. In
addition, most licensed product lines call for royalties to be paid based on
sales volume and some require minimum advertising expenditures. After 1995,
with a full year of sales for most new product lines, the Company believes it
will once again be in a position to leverage its selling, general and
administrative expenses with increased sales volume.
Page 7
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Interest expense increased to $530,000 in 1995 from $291,000 in 1994. The
Company uses its available credit lines, as needed, to finance its working
capital needs.
In 1995, as a result of the precipitous decline of the U.S. dollar relative to
the French franc, the Company incurred a loss on foreign currency of $259,000 as
compared to a loss of $87,000 in 1994. The Company, on occasion enters into
foreign currency forward exchange contracts as a hedge for short-term
intercompany borrowings. No material hedge transactions were entered into
during 1995.
The Company recognized a net gain on sale of stock of a subsidiary aggregating
$20,000 in 1995 and $113,000 in 1994. The 1995 gain resulted from the
conversion of debt into common stock of a consolidated subsidiary and the 1994
gain resulted from the sale of common stock of the consolidated subsidiary.
Such issuances of shares has been accounted for as a gain on sale of stock of a
subsidiary and is not part of a broader corporate reorganization contemplated by
the Company. Although additional shares may be issued in the future, the
Company has no plans to spin-off its subsidiary nor to repurchase the shares
previously issued.
The Company's effective income tax rate was 39% in 1995 and 40% in 1994.
Net income for the six months ended June 30, 1995 increased 28% to $3.2 million
compared to $2.5 million for the corresponding period of the prior year.
Results include a net gain from the sale of common stock of a subsidiary of
$20,000 in 1995 and $113,000 in 1994. Excluding such gain, net income increased
33% and earnings per share increased 35% to $0.31 per share compared to $0.23
per share for the corresponding period of the prior year.
The weighted average number of shares outstanding was 10,443,885 in 1995 and
10,456,086 in 1994.
Page 8
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Liquidity and Capital Resources
The Company's financial position continues to show solid strength as a result of
profitable operating results and positive operating cash flow. At June 30,
1995, working capital aggregated $32.6 million and the Company had cash and cash
equivalents on hand of approximately $6.1 million. The Company's Board of
Directors has authorized the repurchase of up to 500,000 shares of the Company's
common stock and as of June 30, 1995, 238,800 shares had been purchased at an
average price per share of $8.51.
The Company's short-term financing requirements are expected to be met by
available cash at June 30, 1995, cash generated by operations and short-term
credit lines provided by domestic and foreign banks. The principal credit
facility for 1995 is a $12.0 million unsecured revolving line of credit provided
by a domestic commercial bank. Borrowings under the domestic revolving line of
credit are due on demand and bear interest at the bank's prime lending rate.
Management of the Company believes that funds generated from operations,
supplemented by its available credit facilities, will provide it with sufficient
resources to meet all present and reasonably foreseeable future operating needs.
Operating activities provided $280,000 of net cash for the six months ended June
30, 1995. The Company continues to closely monitor and improve its procedures
with respect to collection of outstanding receivables and inventory levels
reflect the increase necessary to support the upcoming selling season and new
product introductions scheduled for shipment beginning in August of 1995.
Inflation rates in the U.S. and foreign countries in which the Company operates
have not had a significant impact on operating results for the period ended June
30, 1995.
Page 9
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Part II. Other Information
Item 1. Legal Proceedings
The Company previously reported that the Town of Kearney had commenced an
administrative proceeding against the fee owner and managing agent of a public
warehouse located at 100 Central Avenue, South Kearney, New Jersey ("the South
Kearney Warehouse"), where the Company is one of several lessees. Although the
Company had been provided with a copy of an administrative order directing that
the South Kearney Warehouse be vacated by January 13, 1995, the Town of Kearney
granted the Company's request to remain in the South Kearney Warehouse until
October 31, 1995.
In July 1995 the Company entered into a lease for warehouse space at 60
Stults Road, South Brunswick, New Jersey (the "South Brunswick Warehouse"). The
commencement date of the lease for the South Brunswick Warehouse is subject to
vacation by the existing tenant, and receipt by the Company of certain local
governmental approvals. Management believes that it will be able to vacate the
South Kearney Warehouse and move into the South Brunswick Warehouse prior to
October 31, 1995.
Items 2, 3, 4 and 5.
These items are omitted as they are either not applicable or have been
included in Part I.
Item 6. Exhibits and 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 on the 11th day of August 1995.
JEAN PHILIPPE FRAGRANCES, INC.
By: /s/ Russell Greenberg
---------------------------------
Russell Greenberg,
Executive Vice President and
Chief Financial Officer
Page 10
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<PERIOD-START> JAN-01-1995
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<CASH> 6,108,058
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<COMMON> 18,386,205
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