<PAGE>
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, 1996.
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, 1996 there were 9,871,981 shares of common stock, par value $.001 per
share, outstanding.
<PAGE>
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, 1996 (unaudited)
and December 31, 1995 (audited) 2
Consolidated Statements of
Income for the Three Months Ended
March 31, 1996 (unaudited) and
March 31, 1995 (unaudited) 3
Consolidated Statements of
Cash Flows for the Three Months
Ended March 31, 1996 (unaudited) and
March 31, 1995 (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
Signatures
<PAGE>
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,
1995 included in the Company's annual report filed on Form 10-K.
The results of operations for the three months ended March 31, 1996 are
not necessarily indicative of the results to be expected for the entire fiscal
year.
Page 1
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1996 1995
---- ----
Current assets:
Cash and cash equivalents $14,359,895 $14,203,713
Accounts receivable, net 25,362,377 22,884,355
Inventories 26,949,337 26,093,106
Receivables, other 2,371,483 970,468
Other 1,300,636 987,017
Deferred tax benefit 1,773,058 2,400,935
----------- -----------
Total current assets 72,116,786 67,539,594
Equipment and leasehold improvements, net 2,070,465 1,970,126
Other assets 1,339,522 1,313,694
Deferred tax benefit 0 581,507
Intangible assets, net 10,151,989 12,596,322
----------- -----------
$85,678,762 $84,001,243
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable, banks $8,600,994 $9,921,881
Accounts payable 18,099,109 15,012,125
Income taxes payable 817,568 1,241,933
----------- -----------
Total current liabilities 27,517,671 26,175,939
----------- -----------
Long-term debt, less current portion 562,313 596,092
----------- -----------
Minority interests 5,413,162 5,252,979
----------- -----------
Shareholders' equity:
Common stock, $.001 par; authorized
30,000,000 shares; outstanding 9,871,981 and
10,009,981 shares at March 31, 1996 and
December 31, 1995, respectively 9,872 10,010
Additional paid-in capital 20,609,985 20,609,985
Retained earnings 34,337,918 32,565,096
Foreign currency translation adjustment 1,201,229 1,681,305
Treasury stock, at cost, 948,503 and
810,503 shares at March 31, 1996 and
December 31, 1995, respectively (3,973,388) (2,890,163)
----------- -----------
52,185,616 51,976,233
----------- -----------
$85,678,762 $84,001,243
=========== ===========
See notes to financial statements.
Page 2
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
1996 1995
---- ----
(unaudited) (unaudited)
Net sales $23,302,276 $21,612,397
Cost of sales 12,209,683 10,659,705
----------- -----------
Gross margin 11,092,593 10,952,692
Selling, general and administrative 7,872,021 7,848,366
----------- -----------
Income from operations 3,220,571 3,104,326
----------- -----------
Other charges (income):
Interest 210,307 242,463
Loss on foreign currency 20,243 238,716
Interest and dividend (income) (141,112) (68,690)
----------- -----------
89,438 412,489
----------- -----------
Income before income taxes 3,131,133 2,691,837
Income taxes 1,055,120 1,038,977
----------- -----------
Net income before minority interest 2,076,013 1,652,860
Minority interest in net income
of consolidated subsidiary 303,191 32,276
----------- -----------
Net income $1,772,822 $1,620,584
=========== ===========
Net income per common and
common equivalent share $ 0.18 $ 0.16
=========== ===========
Number of common and common
equivalent shares outstanding 10,083,757 10,429,287
=========== ===========
See notes to financial statements.
Page 3
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
March 31,
1996 1995
---- ----
Operating activities:
Net income $1,772,822 $1,620,584
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 450,024 328,074
Minority interest in net income 303,192 32,276
Increase (decrease) in cash from changes in:
Accounts receivable (2,816,022) (1,333,371)
Inventories (1,168,231) (2,649,763)
Other assets (1,370,082) 1,327,267
Deferred tax benefit 1,174,684 229,729
Accounts payable 3,294,984 3,424,399
Income taxes payable (468,365) (330,170)
----------- ----------
Net cash provided by operating
activities 1,173,006 2,649,025
----------- ----------
Investing activities:
Purchase of equipment and leasehold improvements (268,163) (185,597)
Trademark and license acquisitions (6,733) (7,375)
Proceeds from sale of trademark 1,575,000
----------- ----------
Net cash provided by (used in)
investing activities 1,300,104 (192,972)
----------- ----------
Financing activities:
Increase (decrease) in loan payable, bank (1,138,887) 1,635,989
Repayment of long-term debt (48,638)
Purchase of treasury stock (1,083,363) (1,704,554)
----------- ----------
Net cash (used in) financing activities (2,222,250) (117,203)
----------- ----------
Effect of exchange rate changes on cash (94,678) (27,828)
----------- ----------
Increase in cash and cash equivalents 156,182 2,311,022
Cash and cash equivalents at beginning of
period 14,203,713 5,275,142
----------- ----------
Cash and cash equivalents at end of period $14,359,895 $7,586,164
=========== ==========
Supplemental disclosure of cash flows information:
Cash paid during the period for:
Interest $210,000 $201,000
Income taxes 883,000 1,213,000
---------- ----------
See notes to financial statements.
Page 4
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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, 1995.
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,
1996 1995
---- ----
Raw materials and component parts $13,083,107 $10,981,751
Finished goods 13,866,230 15,111,355
----------- -----------
$26,949,337 $26,093,106
=========== ===========
Page 5
<PAGE>
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 strategic
acquisition opportunities, and pursuing expansion in international markets, has
resulted in another record for quarterly sales and earnings.
Three Months Ended March 31, 1996 Compared to March 31, 1995
Net sales increased 8% to $23.3 million, as compared to $21.6 million in 1995.
This increase is the result of continued growth of the Company's Alternative
Designer Fragrance lines along with the continued success of new product
development by the Company's international operations. Sales generated by the
Company's core Alternative Designer Fragrance lines increased 16% and sales by
the Company's French subsidiaries increased 27%; at comparable foreign currency
exchange rates, sales by the Company's French subsidiaries increased 24%. The
overall sales increase was achieved despite a significant decline in net sales
of Cutex products caused in part by the recent discontinuance of the Cutex Color
Splash lip line and an unusually strong first quarter of 1995, which included
the launch of the Cutex Fresh Color lip and nail lines.
Gross margin for 1996 decreased to 48% of sales from 51% in 1995. The decline in
Cutex sales for the three months ended March 31, 1996, as compared to the
corresponding period of the prior year, had a direct impact on gross margin as
Cutex sales provide the Company with a higher gross margin than the Company's
other product lines. The Company's business lines, excluding Cutex, generated a
46% gross margin in 1996 and 1995.
Selling, general and administrative expenses decreased to 34% of net sales in
1996 as compared to 36% in 1995 reflecting our successful efforts in controlling
such expenditures.
Interest expense decreased to $210,000 in 1996 from $242,000 in 1995. The
Company's French subsidiaries used a portion of the proceeds of its November
1995 public offering to reduce short term borrowings. The Company continues to
use its available credit lines, as needed, to finance its working capital needs.
Page 6
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
In 1996, the Company incurred a loss on foreign currency of $20,000 as compared
to a loss of $239,000 in 1995. The 1995 loss was the result of the steep decline
of the U.S. dollar relative to the French franc.
The Company's effective income tax rate decreased to 34% in 1996 from 39% in
1995. Such decline is due to the utilization of net operating loss carryforwards
made available to the Company's foreign subsidiaries as a result of the March
1996 sale of the Bal a Versailles trademarks.
Net income for the three months ended March 31, 1996 increased 9% to $1.8
million compared to $1.6 million for the corresponding quarter of the prior
year. Earnings per share increased 13% to $0.18 per share compared to $0.16 per
share for the corresponding quarter of the prior year.
The weighted average number of shares outstanding was 10,083,757 in 1996 and
10,429,287 in 1995 as a result of the Company's ongoing stock buyback program.
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,
1996, working capital aggregated $44.6 million and the Company had cash and cash
equivalents on hand of approximately $14.4 million. The Company's Board of
Directors has authorized the repurchase of up to 1,000,000 shares of the
Company's common stock and as of March 31, 1996, 462,305 shares had been
purchased at an average price per share of $8.60.
The Company's short-term financing requirements are expected to be met by
available cash at March 31, 1996, cash generated by operations and short-term
credit lines provided by domestic and foreign banks. The principal credit
facilities for 1996 are a $12.0 million unsecured revolving line of credit
provided by a domestic commercial bank and $6.0 million in credit lines provided
by a consortium of international financial institutions. Borrowings under the
domestic revolving line of credit are due on demand and bear interest at the
prime 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.
Page 7
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Operating activities provided $1.2 million of net cash in the three months ended
March 31, 1996. The Company continues to closely monitor credit limits and
collection of outstanding receivables. Improved techniques in forecasting and
materials requisition planning continue to improve the Company's 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, 1996.
Page 8
<PAGE>
JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES
Part II. Other Information
Items 1, 2, 3, 4, 5 and 6 are omitted as they are either not
applicable or have been included in Part I.
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 13th day of May 1996.
JEAN PHILIPPE FRAGRANCES, INC.
By: /s/ Russell Greenberg
Russell Greenberg,
Executive Vice President and
Chief Financial Officer
Page 9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 14,359,895
<SECURITIES> 0
<RECEIVABLES> 25,362,377
<ALLOWANCES> 0
<INVENTORY> 26,949,337
<CURRENT-ASSETS> 72,116,786
<PP&E> 2,070,465
<DEPRECIATION> 0
<TOTAL-ASSETS> 85,678,762
<CURRENT-LIABILITIES> 27,517,671
<BONDS> 0
0
0
<COMMON> 16,646,469
<OTHER-SE> 35,539,147
<TOTAL-LIABILITY-AND-EQUITY> 85,678,762
<SALES> 23,302,276
<TOTAL-REVENUES> 23,302,276
<CGS> 12,209,683
<TOTAL-COSTS> 20,081,704
<OTHER-EXPENSES> 89,438
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 210,307
<INCOME-PRETAX> 3,131,133
<INCOME-TAX> 1,055,120
<INCOME-CONTINUING> 2,076,013
<DISCONTINUED> 0
<EXTRAORDINARY> 303,191
<CHANGES> 0
<NET-INCOME> 1,772,822
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
