SECURITY 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 September 30, 1995 or Transition report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the transition period _____________ to ______________
Commission file number: 1-10340
Allou Health & Beauty Care, Inc.
_________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 11-2953972
(State or other jurisdiction) (IRS Employer Identification No.)
of incorporation or organization)
50 Emjay Boulevard, Brentwood, NY 11717
________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 273-4000.
________________________________________________________________________
(Former name, former address and former fiscal year, if changed since
last report)
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 twelve 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class November 6, 1995
______________________________________ ________________
Class A Common Stock, $.001 par value 4,461,725
=========
Class B Common Stock, $.001 par value 1,200,000
=========
<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
INDEX
PAGE
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet 3
Consolidated Statement of Income & Retained
Earnings For the Six Months Ended September 30,
1995 and 1994 4
Consolidated Statement of Income & Retained
Earnings For the Three Months Ended September 30,
1995 and 1994 5
Consolidated Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7-13
Item 2. Managements' discussion and analysis of
financial condition and results of operations 14-17
Part II. Other Information 18-19
Signatures 20<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
September 30, March 31,
1995 1995
---- ----
<S> <C> <C>
Current Assets
Cash $ 685,675 $ 126,237
Accounts Receivable (less allowance
for doubtful accounts of $442,165
at September 30, 1995 and $286,165 at
March 31, 1995 (Note 5) 34,823,147 28,473,020
Inventories (Notes 1 & 5) 67,857,621 57,270,710
Other Current Assets (Note 2) 14,870,449 15,546,524
---------- ----------
Total Current Assets $118,236,892 $101,416,491
Fixed Assets, Less Accumulated
Depreciation (Notes 1 & 3) 2,867,625 2,186,968
Other Assets (Note 4) 3,195,018 2,610,504
--------- ---------
TOTAL ASSETS $124,299,535 $106,213,963
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Amounts Due Bank (Note 5) $ 69,122,198 $ 54,128,480
Current Portion of Long-Term
Debt (Note 6) 234,808 245,116
Accounts Payable and Accrued
Expenses (Note 7) 12,283,265 10,326,065
Income Taxes Payable (Note 10) - 0 - 524,187
---------- ----------
Total Current Liabilities $ 81,640,271 $ 65,223,848
Long Term Liabilities
Long-Term Debt, Less Current
Portion (Note 6) 587,531 751,783
Deferred Income Taxes (Note 1) 62,122 62,122
--------- ----------
Total Long Term Liabilities 649,653 813,905
--------- ----------
TOTAL LIABILITIES $ 82,289,924 $ 66,037,753
============ ============
Commitments & Contingencies
(Note 8)
Stockholders' Equity (Notes 1 & 9)
Preferred Stock, $.001 par value,
1,000,000 shares authorized, none
issued and outstanding.
Class A Common Stock, $.001 par
value; 10,000,000 shares authorized
and 4,461,725 issued and outstanding
at September 30, 1995
and March 31, 1995, $4,462 $4,462
Class B Common Stock, $.001 par value;
1,700,000 authorized, 1,200,000 issued
and outstanding at September 30,1995
and March 31, 1995 1,200 1,200
Additional Paid-In Capital 23,241,098 23,241,098
Retained Earnings 18,762,851 16,929,450
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 42,009,611 40,176,210
---------- ----------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $124,299,535 $106,213,963
============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 3 -<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
For The Six Months Ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Revenues $131,345,758 $ 112,814,358
Costs of Revenues 116,899,966 99,184,308
----------- -----------
Gross Profit 14,445,792 13,630,050
----------- ----------
Operating Expenses
Warehouse & Delivery 3,423,722 3,107,633
Selling, General &
Administrative 5,359,875 5,651,309
---------- ----------
Total Expenses 8,783,957 8,758,942
---------- ----------
Income From Operations 5,662,195 4,871,108
---------- ----------
Other Charges (Credits)
Interest 2,640,581 1,708,583
Other ( 21,787) ( 1,300)
---------- ---------
Total 2,618,794 1,707,283
---------- ---------
Income Before
Income Taxes 3,043,401 3,163,825
Provision for Income
Taxes (Note 10) 1,210,000 1,208,000
---------- ---------
NET INCOME 1,833,401 1,955,825
RETAINED EARNINGS -
BEGINNING 16,929,450 12,248,149
----------- ----------
RETAINED EARNINGS -
ENDING $ 18,762,851 $ 14,203,974
=========== ============
Net Income Per Common Share: (Note 1)
Primary and Fully Diluted $.32 $.34
==== ====
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 4 -<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
For The Three Months Ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Revenues $ 66,913,389 $57,469,223
Costs of Revenues 59,693,510 50,247,330
---------- ----------
Gross Profit 7,219,879 7,221,893
---------- ----------
Operating Expenses
Warehouse & Delivery 1,824,236 1,646,173
Selling, General & Administrative 2,865,541 3,038,255
---------- ----------
Total Expenses 4,689,777 4,684,428
---------- ----------
Income From Operations 2,530,102 2,537,465
---------- ----------
Other Charges (Credits)
Interest 1,380,320 943,657
Other ( 14,790) 534
---------- ----------
Total 1,365,530 944,191
---------- ----------
Income Before Income Taxes 1,164,572 1,593,274
Provision for Income Taxes (Note 10) 488,000 610,000
---------- ----------
NET INCOME 676,572 983,274
RETAINED EARNINGS - BEGINNING 18,086,279 13,220,700
---------- ----------
RETAINED EARNINGS - ENDING $18,762,851 $14,203,974
========== ==========
Net Income Per Common Share: (Note 1)
Primary and Fully Diluted $.12 $.17
=== ===
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 5 -<PAGE>
ALLOU HEALTH & BEAUTY CARE INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For The Six Months Ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Cash Flows From Operating
Activities
Net Income $ 1,833,401 $ 1,955,825
Adjustments to Reconcile Net
Income to Net Cash Used
in Operating Activities:
Depreciation and Amortization 205,751 171,827
Decrease (Increase) In Assets:
Accounts Receivable ( 6,350,127) (10,781,029)
Inventory (10,586,911) ( 5,989,450)
Prepaid Purchases and
Other Assets 91,560 ( 139,188)
Increase (Decrease) In Liabilities:
Accounts Payable and Accrued
Expenses 1,957,200 ( 906,330)
Income Taxes Payable ( 524,187) ( 129,000)
---------- ----------
Net Cash Used In Operating
Activities (13,373,313) (15,817,345)
---------- ----------
Cash Flows Used in Investing
Activities
Acquisition of Fixed Assets ( 886,407) ( 555,534)
---------- ----------
Cash Flows From Financing Activities
Net Increase in Amounts
Due Bank 14,993,718 14,833,226
Repayment of Debt ( 174,560) ( 44,587)
Net Proceeds From Exercise
of Warrants - 0 - 1,467,998
---------- ---------
Net Cash Provided By
Financing Activities 14,819,158 16,256,637
---------- ----------
INCREASE (DECREASE)
IN CASH ( 559,438) ( 116,242)
----------
CASH AT BEGINNING
OF PERIOD 126,237 351,047
--------- ---------
CASH AT END OF PERIOD $ 685,675 $ 234,805
======== =========
Supplemental Disclosures
of Cash Flow Information:
Cash Paid For:
Interest $2,444,996 $1,608,079
Income Taxes $1,881,260 $1,374,174
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 6 -<PAGE>
<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. Organization:
Allou Health & Beauty Care, Inc. (the "Company") was incorporated
on January 20, 1989 under the laws of the state of Delaware, on
which date it acquired all of the outstanding shares of Allou
Distributors, Inc. in exchange for 2,400,000 shares of (1,200,000
post-split) its Class B common stock, thus making it a wholly-owned
subsidiary.
Effective April 1, 1993, the Company acquired all of the
outstanding shares of M. Sobol, Inc., a wholesaler of pharmaceutical
products in a transaction accounted for under the purchase method.
The price for the stock was $1,472,382. The fair market value of
the assets acquired and liabilities assumed were as follows:
<TABLE>
<S> <C>
Cash $ 63,768
Accounts Receivable (net of
allowance for doubtful
accounts of $108,620) 1,483,925
Inventory 2,078,324
Other Current Assets 28,695
Accounts Payable (1,613,035)
Due to Bank
(subsequently paid off) (2,100,000)
</TABLE>
These financial statements include the consolidated operations of
the Company and its subsidiaries. All intercompany transactions
have been eliminated.
B. Description of Operations:
The Company is engaged in the business of distributing brand name
and Allou Brands health and beauty aids, cosmetics, fragrances,
grocery products and pharmaceuticals to independent retailers
primarily in the New York metropolitan area, as well as in the
Pennsylvania and Florida areas.
C. Revenue Recognition:
The Company recognizes revenue on its entire product line at the
time the products are shipped to the customer.
D. Inventories:
Inventories, which consist of cosmetics, fragrances, health and
beauty aids and pharmaceuticals, are stated at the lower of average
cost or market.
E. Fixed Assets:
Property and equipment are stated at cost. Depreciation is
provided for over the estimated useful lives of the assets by use of
straight-line and accelerated methods.
F. Deferred Taxes:
Deferred taxes represent the amount due on the cumulative effect
of change of inventory valuation from LIFO to Average Cost Method.
As permitted by applicable tax regulations, this amount can be
included in income for tax purposes ratably over six years.
</PAGE> - 7 -
<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
G. Earnings Per Share:
Primary and fully diluted earnings per share are computed on
weighted average number of shares actually outstanding, plus the
shares that would be outstanding assuming the exercise of the
Company's outstanding stock warrants and stock options, which are
considered to be common stock equivalents, in accordance with the
treasury stock method.
H. Accounts receivable and inventory at September 30, 1995 include
$4,706,807 and $7,965,873, respectively, attributable to M. Sobol
Inc., the Company's wholly-owned subsidiary.
2. OTHER CURRENT ASSETS:
Included in other current assets at September 30, 1995 are
$12,670,547 of prepayments on merchandise and $147,075 of estimated
tax payments in excess of current provision.
3. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
September 30, March 31, Estimated
1995 1995 Useful Lives
<S> <C> <C> <C>
Machinery & Equipment $1,046,882 $ 954,380 5 years
Furniture, Fixtures &
Office Equipment 1,960,733 1,782,192 5-10 years
Transportation Equipment 96,750 96,750 3-5 years
Leasehold Improvements 1,985,459 1,370,095 10 years
--------- ---------
5,089,824 4,203,417
Less: Accumulated
Depreciation
& Amortization 2,222,199 2,016,449
--------- ---------
$2,867,625 $2,186,968
========= =========
</TABLE>
Depreciation and amortization expense for the six months ended
September 30, 1995 and 1994 amounted to $205,751 and $171,827,
respectively. Depreciation and amortization expense for the three
months ended September 30, 1995 and 1994 amounted to $102,759 and
$86,355, respectively.
4. OTHER ASSETS:
Included in other assets is $1,419,939 of goodwill, net of
amortization, created upon the purchase of the shares of M. Sobol
Inc., the Company's wholly-owned subsidiary (see note 1-A), and
$1,461,960 of officers' loans bearing interest at the effective rate
being charged to the Company by its bank. The goodwill is being
amortized over forty years.
- 8 -
</PAGE>
<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. AMOUNTS DUE BANK:
The Company has a secured line of credit with a consortium of
banks. The financing agreement provides for advances of up to 85%
of eligible receivables and 60% of eligible inventory with aggregate
maximum advances of up to $85,000,000, including a $4,500,000
sublimit for overadvances. Interest on the loan balance is payable
monthly at 3/8% above the prime rate or 2 1/8% above the Eurodollar
rate, at the option of the Company. The loan is collateralized by
the Company's accounts receivable and inventory and the overadvances
are guaranteed by the Company's principal stockholders. In
addition, the Company is required to abide by certain financial
covenants. The effective interest rate charged to the Company at
September 30, 1995 was 8.19%, which was based on a combination of 2
1/8% above the Eurodollar rate and 3/8% above the prime rate.
6. LONG-TERM DEBT:
Long-term debt consists of:
(a) notes collateralized by certain of the Company's equipment,
payable in aggregate monthly installments of approximately $13,000,
which include interest at rates varying from 1% above the prime rate
to 11.5%, for the six months ended September 30, 1995.
(b) a loan payable to the previous stockholder of M. Sobol, Inc.
(see note 1-A). Interest payable on the declining principal balance
has been calculated at 5.45% per annum, through April 1, 2000.
The aggregate long-term debt is payable as follows:
<TABLE>
Year Ended
March 31,
<C> <C>
1996 (6 months) $ 70,556
1997 222,393
1998 154,230
1999 140,332
2000-2001 234,828
-------
$822,339
=======
</TABLE>
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
<TABLE>
<CAPTION>
September 30, March 31,
1995 1995
<S> <C> <C>
Cost of Revenues $10,833,877 $ 9,016,485
Selling, General & Administrative 835,722 621,734
Interest - Bank 386,259 313,525
Payroll 227,407 374,321
---------- ----------
$12,283,265 $10,326,065
========== ==========
</TABLE>
- 9 -<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES:
A. Operating Leases:
Effective April 1995, the Company's lease was renegotiated to
include additional space and the lease term was extended to May
2005. As of September 30, 1995, the minimum annual rentals,
excluding additional payments for real estate taxes and certain
expenses, are as follows:
<TABLE>
<CAPTION>
Year Ended
March 31,
<C> <C>
1996 (6 months) $ 273,399
1997 546,797
1998 546,797
1999 546,797
2000-2005 3,742,443
</TABLE>
Rent expense for the six months ended September 30, 1995 and 1994
amounted to $343,128 and $228,279, respectively.
Rent expense for the three months ended September 30, 1995 and
1994 amounted to $188,960 and $119,404, respectively.
B. The Company uses an entity for its deliveries using the
Company's leased trucks and is charged on a per load basis. The
Company assigned the truck lease to this non-affiliated entity,
however, the Company has guaranteed payment and performance on all
terms of the lease through its expiration in 1997.
The Company owns a trailer truck which has been assigned to an
entity in exchange for such entity assuming the loan payments for
such truck, which remain an obligation of the Company.
C. Union:
The Company has an agreement with the National Organization of
Industrial Trade Unions which terminates on December 14, 1997. The
agreement covers all warehouse and receiving employees, excluding
supervisory personnel.
D. Stock Option Plans:
The Company has adopted Stock Option Plans which provide for the
granting of stock options to certain key employees and directors.
An aggregate of 1,300,000 shares of common stock are reserved for
issuance under the Plans. Incentive stock options are granted at no
less than fair market value of the shares on the date of grant.
Options granted to individuals owning more than 10% of the voting
power of the Company's capital stock are granted at no less than
110% of the fair market value at the date of grant. As of September
30, 1995, the Company had 1,176,950 outstanding options at prices
ranging from $2.50 to $10.00.
- 10 -<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
E. The Company's three year employment agreements with four of
its officers, which expired on August 1, 1995, provided for annual
salaries of $150,000 each for three of the officers and $225,000 for
the fourth. In addition, three of the officers received bonuses
based on the Company's earnings before interest and taxes. For the
six months ended September 30, 1994, officers' bonus expense
amounted to $534,132.
The Company is currently negotiating new employment agreements
which will be effective for a three year period which commenced
August 1, 1995. These agreements will provide for three of the
officers each to receive annual salaries of $300,000 and a bonus
based on the increase over the prior year earnings before interest
and taxes. The fourth officer will receive an annual salary of
$225,000 with a bonus based on performance and other terms. For the
six months ended September 30, 1995, the fourth officer received a
bonus of $75,000.
F. Letter of Credit:
The Company has an irrevocable standby letter of credit in the
sum of $100,000 expiring on June 8, 1996.
9. STOCKHOLDERS' EQUITY:
During the year ended March 31, 1994, the stockholders of the
Company voted to reduce the number of shares of authorized Class A
common stock from 15,000,000 to 10,000,000 shares and increase the
number of authorized Class B common stock from 1,200,000 to
1,700,000 shares, both $.001 par value per share. The Company is
also authorized to issue 1,000,000 shares of preferred stock.
Holders of Class A and Class B common stock share pro rata in all
dividends declared by the Board of Directors. The holders of Class
A and Class B common stock are entitled to one and five votes per
share, respectively, for every matter on which the stockholders of
the Company are entitled to vote. Each share of Class B common
stock is convertible at the option of the holder into one share of
Class A common stock. Additionally, each share of Class B common
stock shall be automatically converted into one share of Class A
common stock upon its sale or transfer (including its transfer upon
the death of the holder thereof), except if such sale or transfer is
to one or more other holders of Class B common stock, certain family
members of the holders of Class B common stock or certain trusts for
their benefit.
During the year ended March 31, 1990, the Company's public
offering became effective, whereby 460,000 units, which included
60,000 units allotted to the underwriters, each consisting of three
shares of the Company's Class A common stock and three redeemable
Class A warrants were sold. Additionally, the underwriters were
granted 40,000 units of purchase warrants, each consisting of three
shares Class A common stock and three redeemable Class A and Class B
warrants. Each Class A warrant entitled the holder to purchase one
share of Class A common stock and one Class B warrant at an exercise
price of $5.00. Each Class B warrant entitles the holder to
purchase for $7.50 one share of common stock. The Class A and Class
B warrants expired five years from the date of issuance.
- 11 -<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During the years ended March 31, 1992 and 1993, 1,367,726 Class A
warrants and 3,800 Class B warrants were exercised and 12,274 Class
A warrants were redeemed and cancelled.
During the year ended March 31, 1994, 1,351,716 Class B warrants
were exercised and the remaining 12,200 of unexercised Class B
warrants were redeemed and cancelled. The Company also issued
36,000 warrants which were exercised for 36,000 shares of Class A
common stock. In connection with the purchase of its wholly-owned
subsidiary M. Sobol, Inc., the Company issued 15,000 shares of Class
A common stock.
During the year ended March 31, 1995, the underwriters exercised
their 40,000 unit purchase warrants which consisted of 120,000
shares of Class A common stock, 120,000 Class A warrants and 42,483
Class B warrants. The remaining 77,517 of unexercised Class B
warrants expired and were cancelled on July 11, 1994.
10. PROVISION FOR INCOME TAXES:
<TABLE>
<CAPTION>
September 30,
1995 1994
<S> <C> <C>
Income Before Income Taxes $3,043,401 $3,163,825
Federal Income Tax $ 996,000 $ 992,000
State Income Taxes 214,000 216,000
---------- ----------
Total Provision for Income Taxe $1,210,000 $1,208,000
========== ==========
</TABLE>
The following is a reconciliation of the statutory income
tax rate to the total effective tax rates:
<TABLE>
<CAPTION>
September 30,
1995 1994
<S> <C> <C>
Federal Statutory Income Tax Rate 34% 34%
Increase in Tax Rates Resulting from:
State Income Taxes, Net of Federal Tax
Benefits 5.8% 5.6%
Net Operating Loss Carryforward from
subsidiary - 0 - ( 1.4%)
----- -----
Total Effective Tax Rates 39.8% 38.2%
===== =====
</TABLE>
11. RELATED PARTY TRANSACTIONS:
For the six months ended September 30, 1995 and 1994, the
purchases from related parties amounted to $687,199 and $574,826
respectively, with $1,941 and $0 outstanding amounts payable at the
end of each period, respectively.
- 12 -<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SUBSEQUENT EVENTS
On October 2, 1995, the Company purchased certain assets of Russ
Kalvin Inc., a company which filed for reorganization under Chapter
XI of the U.S. Bankruptcy Code for $2,200,000. These assets include
accounts receivable, inventory, equipment and intellectual property.
A wholly-owned subsidiary has been incorporated, named Russ
Kalvin Personal Care Corp. which will act as the sales and marketing
subsidiary for the distribution of Russ Kalvin's personal hair care
products. A second subsidiary was created, named Stanford Personal
Care Manufacturing, Inc. which is the wholly-owned manufacturing
subsidiary of Russ Kalvin Personal Care Corp.
Both of the above are based in Saugus, California.
- 13 -<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995 AND 1994.
Revenues for the six months ended September 30, 1995 were
$131,345,758, representing a 16% increase over revenues of
$112,814,358 for the six months ended September 30, 1994.
This increase in revenues is attributable to an increase in
sales volume for each segment of the Company's business, an
expanded customer base and an increase in same store sales,
which has together caused an increase in the volume of
products sold.
Contributions to this increase in revenues by product
segment is as follows:
Health and beauty aids increased 2.2% when compared to
the same period in the previous year. This increase in
revenue is due to an increase in same store sales.
Prestige designer fragrances grew 11.5% when compared
to the same period in the prior year due to an expanded
customer base and increases in same store sales.
Nationally advertised non-perishable branded food
products grew 5.9% when compared to the same period in
the prior year due to an increase in the volume of
products sold.
Sales of prescription pharmaceuticals, generated by the
Company's wholly-owned subsidiary, M. Sobol, Inc.,
increased 93% when compared to the same period in the
prior year due to an expanded customer base.
For the period ended September 30, 1995, cost of revenues
increased by $1.8 million as compared to the period ended
March 31, 1995. This increase represents increased unpaid
purchases of inventory resulting from greater sales for the
period.
Gross profit as a percentage of revenues decreased to 10.9%
for the six months ended September 30, 1995 when compared to
12.1% for the same period in the previous year. This
decrease was due to lower profit margins associated with the
sales of the Company's fragrance products due to increased
competition.
Warehouse, delivery, selling, general and administrative
expenses decreased as a percentage of sales to 6.7% for the
six months ended September 30, 1995 from 7.8% for the same
period in the prior year. This decrease is due, in part, to
three officers of the Company waiving their rights to
receive a bonus during this period, as provided in their
employment agreements, while selling, general and
administrative expenses during the six months ended
September 30, 1994 included $274,085 for bonuses paid to
such officers. The Company also benefited from increased
revenues during this period without a proportional increase
in operating expenses. This is attributable to cost cuts
- 14 -<PAGE>
and improved operating efficiencies that have enabled the
Company's food business to impact favorably on income from
operations despite the lower gross profit margins
contributed by this segment of the business. Because the
Company pre-sells food products and then combines the food
products with orders for the Company's other products, which
are delivered as one shipment, the Company incurs minimum
overhead expenses and realizes operating profit margins
comparable to other segments of its business. Operating
efficiencies are further aided by a computerized data base
management system which enables the Company to better manage
its inventories and more closely align inventory purchases
to sales of its products.
Interest expense for the six months ended September 30, 1995
increased to 2.0% from 1.5% when compared to the six months
ended September 30, 1994. This increase is due to higher
borrowing costs.
Net income for the six months ended September 30, 1995 was
$1,833,401 representing a 0.6% decrease over net income of
$1,955,825 for the comparable period in 1994. The decrease
in net income is due to the above factors.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994.
Revenues for the three months ended September 30, 1995 were
$66,913,389 representing a 16% increase over revenues of
$57,469,223 for the three months ended September 30, 1994.
This increase in revenues is attributable to an increase in
sales volume for each segment of the Company's business, an
expanded customer base and increases in same store sales
which has resulted in an increase in the volume of products
sold.
Contributions to this increase in revenues by product
segment is as follows:
Health and beauty aids increased 3.6% when compared to
the same period in the previous year. This increase is
due to the increase in same store sales volume.
Prestige designer fragrances grew 16% when compared to
the same period in the prior year due to an expanded
customer base and increases in same store sales.
Nationally advertised non-perishable branded food
products grew 7.1% when compared to the same period in
the prior year due to an increase in the volume of
products sold.
Sales of prescription pharmaceuticals grew 49% when
compared to the same period in the prior year. This
growth is due to an expanded customer base and the
addition of generic pharmaceuticals resulting in an
increase in the volume of products sold.
Gross profit as a percentage of sales decreased to 10.8% for
the three months ended September 30, 1995 from 12.6% as
compared to the three months ended September 30, 1994. This
- 15 -<PAGE>
decrease is principally attributable to lower profit margins
associated with the Company's fragrance products.
Warehouse, delivery, selling, general and administrative
expenses as a percentage of sales for the three months ended
September 30, 1995 decreased to 7.0% from 8.2% for the same
period in the prior year. This decrease is due to reasons
as discussed above under the caption "For the Six Months
Ended September 30, 1995 and 1994."
Interest expense for the three months ended September 30,
1995 increased to 2.0% from 1.6% when compared to the
comparable period in the prior year, representing higher
borrowings at an increased rate.
Net income for the three months ended September 30, 1995 was
$676,572 representing a 31% decrease over net income of
$983,274 for the comparable period in 1993. The decrease in
net income is due to the above factors.
LIQUIDITY AND CAPITAL RESOURCES
The Company meets its working capital requirements from
internally generated funds and from a financing agreement
with a consortium of banks led by the First National Bank of
Boston for financing the Company's accounts receivable and
inventory. As of September 30, 1995, the Company had
$69,122,198 outstanding under its $85,000,000 bank line of
credit. The loan in collaterized by the Company's inventory
and accounts receivable. Interest on the loan balance is
payable monthly at 3/8% above the price rate or 2 1/8% above
the Eurodollar rate at the option of the Company. The
effective interest rate charged to the Company at September
30, 1995 was 8.19% which was based on a combination of 2
1/8% above the Eurodollar rate and 3/8% above the prime
rate. The Company utilizes cash generated from operations
to reduce short-term borrowings, which in turn acts to
increase loan availability consistent with the Company's
financing agreement.
The Company's accounts receivable has increased from
$34,728,643 at September 30, 1994 to $34,823,147 at
September 30, 1995. This increase in accounts receivable is
due to increased sales for the period which was offset in
part from customers which had previously paid the Company in
an average of 54 days at September 30, 1994 have been paying
the Company in an average of 47 days at September 30, 1995.
The Company has minimal capital investment requirements and
any significant capital expenditures are financed through
long term lease agreements that would not adversely impact
cash flow. The Company believes that its internally
generated funds and bank line of credit will be sufficient
to meet its currently anticipated cash and capital needs
through the fiscal year ended March 31, 1996.
- 16 -<PAGE>
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
On September 11, 1995, the Company's annual meeting of
stockholders was held and, at such meeting, the stockholders
approved the following matter:
Election of the following individuals as directors of the
Company for a term of one year, which constitutes the entire
Board of Directors of the Company:
Victor Jacobs, Herman Jacobs, Jack Jacobs,
Ramon Montes, David Shamilzadeh, Jeffrey Berg
and Sol Naimark
Set forth below are the votes for and against the above:
<TABLE>
<CAPTION>
Votes For Votes Against
<S> <C> <C>
Victor Jacobs 9,956,106 83,520
Herman Jacobs 9,953,756 85,870
Jack Jacobs 9,953,856 85,770
Ramon Montes 9,958,756 80,870
David Shamilzadeh 9,959,256 80,370
Jeffrey Berg 9,949,431 90,195
Sol Naimark 9,930,931 108,695
</TABLE>
Item 6(a) Exhibits
None.
All other items required in Part II have been previously filed or
are not applicable for the quarter ended September 30, 1995.
</PAGE>
EXHIBIT XI
ALLOU HEALTH & BEAUTY CARE, INC.
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
For the Six Months For the Three Months
Ended September 30, Ended September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Reconciliation of net
income per consolidated
statement of operations
to amount used in
earnings per share calculation:
Net Income $1,833,401 $1,955,825 $ 676,592 $ 983,274
========= ========= ======== =========
Reconciliation of weighted
average number of shares
outstanding to amount used
in earnings per share
calculation:
Weighted average number of
shares outstanding 5,661,725 5,503,759 5,661,725 5,646,392
Add: Shares issuable from
assumed exercise of
options and warrants 127,592 280,377 20,690 230,268
--------- --------- --------- ---------
Total Common Stock And
Equivalents 5,789,317 5,784,136 5,682,415 5,876,660
========== ========= ========= =========
Earnings per common share $.32 $.34 $.12 $.17
==== ==== ==== ====
</TABLE>
- 18 -<PAGE>
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.
/s/ Herman Jacobs
Herman Jacobs
(President and Chief Operating Officer)
/s/ David Shamilzadeh
David Shamilzadeh
(Chief Financial Officer)
Dated: November 6, 1995
- 19 -<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000846538
<NAME> ALLOU HEALTH & BEAUTY CARE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> SEP-30-1995
<CASH> 685,675
<SECURITIES> 0
<RECEIVABLES> 35,265,312
<ALLOWANCES> 442,165
<INVENTORY> 67,857,621
<CURRENT-ASSETS> 118,236,892
<PP&E> 5,089,824
<DEPRECIATION> 2,222,199
<TOTAL-ASSETS> 124,299,535
<CURRENT-LIABILITIES> 81,640,271
<BONDS> 0
<COMMON> 5,662
0
0
<OTHER-SE> 23,241,098
<TOTAL-LIABILITY-AND-EQUITY> 124,299,535
<SALES> 131,345,758
<TOTAL-REVENUES> 131,345,758
<CGS> 116,899,966
<TOTAL-COSTS> 8,783,957
<OTHER-EXPENSES> (21,787)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,640,581
<INCOME-PRETAX> 3,043,401
<INCOME-TAX> 1,210,000
<INCOME-CONTINUING> 1,833,401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,833,401
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
