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 March 31, 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 May 8, 1995 there were 10,024,981 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
March 31, 1995 (unaudited) and
December 31, 1994 (audited) 2
Consolidated Statements of Income
for the Three Months Ended March
31, 1995 (unaudited) and March
31, 1994 (unaudited) 3
Consolidated Statements of Cash
Flows for the Three Months Ended
March 31, 1995 (unaudited) and
March 31, 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 9
Item 6. Exhibits and Reports on Form 8-K
Signatures
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 three months ended March 31, 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
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $7,586,164 $5,275,142
Accounts receivable, net 22,179,215 19,875,844
Inventories 28,290,558 24,640,795
Receivables, other 491,348 1,936,618
Other 1,817,641 1,785,755
Deferred tax benefit 960,559 992,730
------------ ------------
Total current assets 61,325,485 54,506,884
Equipment and leasehold improvements, net 1,305,348 1,201,739
Other assets 825,554 584,437
Deferred tax benefit 608,347 731,905
Intangible assets, net 12,220,828 12,427,031
------------ ------------
$76,285,562 $69,451,996
============ ============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Loans payable, banks $8,666,513 $6,680,524
Current portion of long-term debt 207,039 187,266
Accounts payable 19,221,397 14,646,998
Income taxes payable 1,434,722 1,764,892
------------ ------------
Total current liabilities 29,529,671 23,279,680
------------ ------------
Long-term debt, less current portion 922,022 862,601
------------ ------------
Minority interests 917,422 796,153
------------ ------------
Shareholders' equity:
Common stock, $.001 par; authorized
30,000,000 shares; outstanding 10,039,986 and
10,242,786 shares at March 31, 1995 and
December 31, 1994, respectively 10,040 10,243
Additional paid-in capital 20,407,574 20,407,574
Retained earnings 25,148,153 23,527,569
Foreign currency translation adjustment 1,055,031 568,176
Treasury stock, at cost, 688,998 and 486,198
shares in 1995 and 1994, respectively (1,704,351) 0
------------ ------------
44,916,447 44,513,562
------------ ------------
$ 76,285,562 $ 69,451,996
============ ============
</TABLE>
See notes to financial statements.
Page 2
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
1995 1994
------------ ------------
(unaudited) (unaudited)
Net sales $ 21,612,397 $ 14,726,343
Cost of sales 10,659,705 7,998,938
------------ ------------
Gross margin 10,952,692 6,727,405
Selling, general and administrative 7,848,366 4,623,034
------------ ------------
Income from operations 3,104,326 2,104,371
------------ ------------
Other charges (income):
Interest 242,463 118,093
Loss on foreign currency 238,716 92,216
Interest and dividend (income) (68,690) (47,772)
(Gain) on sale of stock of subsidiary 0 (90,862)
------------ ------------
412,489 71,675
------------ ------------
Income before income taxes 2,691,837 2,032,696
Income taxes 1,038,977 796,586
------------ ------------
Net income before minority interest 1,652,860 1,236,110
Minority interest in net income
of consolidated subsidiary 32,276 15,087
------------ ------------
Net income $1,620,584 $1,221,023
============ ============
Net income per common and
common equivalent share $0.16 $0.12
============ ============
Number of common and common
equivalent shares outstanding 10,429,287 10,373,760
============ ============
See notes to financial statements.
Page 3
<TABLE>
<CAPTION>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
March 31,
1995 1994
----------- -----------
<S> <C> <C>
Operating activities:
Net income $1,620,584 $1,221,023
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 328,074 141,382
Gain on sale of stock of subsidiary (90,862)
Minority interest in net income 32,276 15,087
Increase (decrease) in cash from changes in:
Accounts receivable (1,333,371) (1,312,092)
Inventories (2,649,763) (921,330)
Other assets 1,327,267 (126,222)
Deferred tax benefit 229,729
Accounts payable 3,424,399 3,265,108
Income taxes payable (330,170) (329,758)
----------- -----------
Net cash provided by operating activites 2,649,025 1,862,336
----------- -----------
Investing activities:
Purchase of equipment and leasehold improvements (185,597) (259,115)
Cash portion of trademark and license acquisitions (7,375) (4,637,278)
----------- -----------
Net cash (used in) investing activities (192,972) (4,896,393)
Financing activities:
Increase (decrease) in loan payable, bank 1,635,989 61,014
Repayment of long-term debt (48,638) (203,243)
Proceeds from sale of stock of subsidiary 151,592
Proceeds from exercise of options and warrants 69,184
Purchase of treasury stock (1,704,554)
----------- -----------
Net cash provided by (used in)
financing activities (117,203) (78,547)
----------- -----------
Effect of exchange rate changes on cash (27,828) 9,452
----------- -----------
Increase (decrease) in cash and cash equivalents 2,311,022 (2,946,058)
Cash and cash equivalents at beginning of period 5,275,142 9,920,414
----------- -----------
Cash and cash equivalents at end of period $ 7,586,164 $ 6,974,356
=========== ===========
Supplemental disclosure of cash flows information:
Cash paid during the period for:
Interest $ 201,000 $ 117,000
Income taxes 1,213,000 838,000
</TABLE>
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 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:
March 31, December 31,
1995 1994
----------- -----------
Raw materials and component parts $12,839,501 $10,537,381
Finished goods 15,451,057 14,103,414
----------- -----------
$28,290,558 $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 March 31, 1995 Compared to March 31, 1994
Net sales increased 47% to $21.6 million, as compared to $14.7 million in 1994.
This increase is reflective of the Company's success in integrating new product
lines with pre-existing product offerings, and creating greater opportunities
to serve the needs of our customers. Sales generated by the Company's domestic
operations increased 46%. 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 quarter of 1994.
Sales by the Company's foreign subsidiaries increased 49%; at comparable foreign
currency exchange rates, sales by the Company's foreign subsidiaries increased
31%. Such increase reflects recent new product introductions under the Ombre
Rose and Burberrys labels.
In connection with recent acquisitions and license agreements, the Company has
restructured its retail sales force and has added additional experienced
salespeople. The Company's primary efforts are now focused on capitalizing on
its expanding list of customer relationships. 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 51% 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 $242,000 in 1995 from $118,000 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 $239,000 as
compared to a loss of $92,000 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.
In 1994, the Company recognized a net gain on sale of stock of a subsidiary
aggregating $91,000. No such gain was recognized in 1995. The 1994 gain resulted
from the sale by Inter Parfums, S.A., a consolidated subsidiary of the Company,
of 10,000 shares of its common stock to enable the stock of Inter Parfums, S.A.
to commence trading on the over-the-counter Paris Stock Exchange. This issuance
of shares by Inter Parfums, S.A. 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 both 1995 and 1994.
Net income for the three months ended March 31, 1995 increased 33% to $1.6
million compared to $1.2 million for the corresponding quarter of the prior
year. Results for the prior year included a net gain from the sale of common
stock of a subsidiary of $91,000 or $0.01 per share. Excluding such gain, net
income increased 43% and earnings per share increased 45% to $0.16 per share
compared to $0.11 per share for the corresponding quarter of the prior year.
The weighted average number of shares outstanding was 10,429,287 in 1995 and
10,373,760 in 1994.
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 March 31,
1995, working capital aggregated $31.8 million and the Company had cash and cash
equivalents on hand of approximately $7.6 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 March 31, 1995, 202,800 shares had been purchased at an
average price per share of $8.40.
Page 7
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
The Company's short-term financing requirements are expected to be met by
available cash at March 31, 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 $2.6 million of net cash in the three months ended
March 31, 1995. The Company continues to closely monitor and improve its
procedures with respect to collection of outstanding receivables and its
purchasing and production activities. Inventory levels reflect anticipated needs
for the upcoming selling season and new product introductions.
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
March 31, 1995.
Page 8
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Part II. Other Information
Items 1, 2, 3, 4 and 5 are omitted as they are either not
applicable or have been included in Part I.
Item 6. Exhibits and Reports on Form 8-K
(b) During the quarter for which this report on Form
10-Q is filed, the Company filed: (i) a current Report
on Form 8-K, date of report - January 9, 1995, reporting
Item 5; (ii) a current Report on Form 8-K, date of
report - March 30, 1995, reporting Items 5 and 7.
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 10th day of May 1995.
JEAN PHILIPPE FRAGRANCES, INC.
By: /s/ Russell Greenberg
----------------------------
Russell Greenberg,
Executive Vice President and
Chief Financial Officer
Page 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 7,586,164
<SECURITIES> 0
<RECEIVABLES> 22,179,215
<ALLOWANCES> 0
<INVENTORY> 28,290,558
<CURRENT-ASSETS> 61,325,485
<PP&E> 1,305,348
<DEPRECIATION> 0
<TOTAL-ASSETS> 76,285,562
<CURRENT-LIABILITIES> 29,529,671
<BONDS> 0
0
0
<COMMON> 18,713,263
<OTHER-SE> 26,203,184
<TOTAL-LIABILITY-AND-EQUITY> 76,285,562
<SALES> 21,612,397
<TOTAL-REVENUES> 21,612,397
<CGS> 10,659,705
<TOTAL-COSTS> 18,508,071
<OTHER-EXPENSES> 412,489
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 242,463
<INCOME-PRETAX> 2,691,837
<INCOME-TAX> 1,038,977
<INCOME-CONTINUING> 1,652,860
<DISCONTINUED> 0
<EXTRAORDINARY> 32,276
<CHANGES> 0
<NET-INCOME> 1,620,584
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
