SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1997.
-------------
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ 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
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 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 August 12, 1997
----------- ---------------
Class A Common Stock, $.001 par value 4,555,350
=========
Class B Common Stock, $.001 par value 1,200,000
=========
<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements......................................3
Consolidated Balance Sheet as of June 30, 1997
(unaudited) and March 31, 1997............................4
Consolidated Statement of Income & Retained
Earnings (unaudited) For the Three Month Periods
Ended June 30, 1997 and 1996..............................5
Consolidated Statement of Cash Flows (unaudited)
for the Three Month Periods Ended June 30, 1997
and 1996..................................................6
Notes to Consolidated Financial Statements (unaudited)....7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..........................18
SIGNATURES....................................................................19
EXHIBIT INDEX.................................................................20
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<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
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<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
June 30, March 31,
1997 1997
------------ ------------
<S> <C> <C>
Current Assets
Cash $ 359,696 $ 76,531
Accounts Receivable (less allowance for doubtful accounts of
$950,682 at June 30, 1997 and $555,682 at March 31, 1997
(Notes 1 & 5) 45,076,832 48,424,882
Inventories (Notes 1 & 5) 101,560,964 96,661,103
Other Current Assets (Note 2) 9,873,473 8,168,603
------------ ------------
Total Current Assets $156,870,965 $153,331,119
Fixed Assets, Less Accumulated Depreciation
(Notes 1 & 3) 3,556,295 3,642,758
Other Assets (Note 4) 4,315,954 4,373,918
------------ ------------
TOTAL ASSETS $164,743,214 $161,347,795
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Amounts Due Bank (Note 5) $ 95,314,201 $ 96,740,253
Current Portion of Long-Term Debt (Note 6) 492,409 540,500
Accounts Payable and Accrued Expenses (Note 7) 17,459,005 13,998,641
Income Taxes Payable 402,314 -0-
------------ ------------
Total Current Liabilities $113,667,929 $111,279,394
------------ ------------
Long Term Liabilities
Long-Term Debt, Less Current Portion (Note 6) 1,860,384 1,841,470
------------ ------------
Total Long Term Liabilities 1,860,384 1,841,470
------------ ------------
TOTAL LIABILITIES $115,528,313 $113,120,864
------------ ------------
Commitments & Contingencies (Note 8)
Stockholder's 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 4,552,225 issued and
outstanding at June 30, 1997 and March 31, 1997 $ 4,552 $ 4,552
Class B Common Stock, $.001 par value; 2,200,000
authorized at June 30, 1997 and March 31, 1997
respectively, 1,200,000 issued and outstanding at June 30,
1997 and March 31, 1997 1,200 1,200
Additional Paid-in Capital 23,476,508 23,476,508
Retained Earnings 25,732,641 24,744,671
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 49,214,901 48,226,931
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $164,743,214 $161,347,795
============ ============
</TABLE>
The accompanying notes are an integral part of
this financial statement.
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<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
For The Three Months Ended
June 30,
1997 1996
------------ ------------
Revenues $ 64,855,684 $ 68,958,061
Costs of Revenues 55,149,409 60,827,615
------------ ------------
Gross Profit 9,706,275 8,130,446
------------ ------------
Operating Expenses
Warehouse & Delivery 2,378,177 1,994,873
Selling, General & Administrative 3,714,771 3,356,081
------------ ------------
Total Expenses 6,092,948 5,350,954
------------ ------------
Income From Operations 3,613,327 2,779,492
------------ ------------
Other Charges (Credits)
Interest 1,978,738 1,489,809
Other (3,381) (10,984)
------------ ------------
Total 1,975,357 1,478,825
------------ ------------
Income Before Income Taxes 1,637,970 1,300,667
Provision for Income Taxes (Note 10) 650,000 498,000
------------ ------------
NET INCOME 987,970 802,667
RETAINED EARNINGS - BEGINNING 24,744,671 20,686,136
------------ ------------
RETAINED EARNINGS - ENDING $ 25,732,641 $ 21,488,803
============ ============
Net Income Per Common Share: (Note 1)
Primary and Fully Diluted $ .16 $ .14
============ ============
The accompanying notes are an integral part of
this financial statement.
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<PAGE>
ALLOU HEALTH & BEAUTY CARE INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For The Three Months Ended
June 30,
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities
- ------------------------------------
Net Income $ 987,970 $ 802,667
Adjustments to Reconcile Net Income to Net Cash Provided By
(Used in) Operating Activities:
Depreciation and Amortization 175,836 162,505
Decrease (Increase) In Assets:
Accounts Receivable 3,348,050 (7,739,408)
Inventory (4,899,861) (3,249,994)
Prepaid Purchases and Other Assets (1,663,622) 21,539
Increase (Decrease) In Liabilities:
Accounts Payable and Accrued Expenses 3,460,364 1,202,913
Income Taxes Payable 402,314 214,480
----------- -----------
Net Cash Provided By (Used In) Operating Activities 1,811,051 (8,585,298)
----------- -----------
Cash Flows Used in Investing Activities
- ---------------------------------------
Acquisition of Fixed Assets (72,657) (69,059)
----------- -----------
Cash Flows From Financing Activities
- ------------------------------------
Net Increase (Decrease) in Amounts Due Bank (1,426,052) 6,684,428
Borrowings 215,771 2,010,376
Repayment of Debt (244,948) (137,722)
----------- -----------
Net Cash Provided By (Used In) Financing Activities (1,455,229) 8,557,082
----------- -----------
INCREASE (DECREASE) IN CASH 283,165 (97,275)
CASH AT BEGINNING OF PERIOD 76,531 144,118
----------- -----------
CASH AT END OF PERIOD $ 359,696 $ 46,843
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash Paid For:
Interest $ 1,980,489 $ 1,496,925
Income Taxes $ 176,108 $ 0
</TABLE>
During the three months ended June 30, 1997 and 1996 the Company issued notes
for $215,771 and $2,010,376, respectively.
The accompanying notes are an integral part of Vthis financial statement.
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<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 (1,200,000 post-split) of 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.
On October 2, 1995, the Company purchased certain assets of Russ
Kalvin Inc., a manufacturer of hair care products located in southern California
for $2,296,735. These assets included accounts receivable, inventory, equipment
and intangibles. The Company has incorporated wholly-owned subsidiaries that
manufacture and distribute these products.
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
health and beauty aids, cosmetics, fragrances, grocery products and
pharmaceuticals. The Company also distributes generic brand health and beauty
aids and hair care products. The Company sells these products to retailers
throughout the United States.
C. Revenue Recognition:
The Company recognizes revenue on its entire product line at the time
the products are shipped to the customer.
D. Concentration of Credit Risk:
The Company extends credit based on an evaluation of the customer's
financial condition, generally without requiring collateral. Exposure to losses
on receivables is principally dependent on each customer's financial condition.
The Company monitors its exposure for credit losses and maintains allowances for
anticipated losses.
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ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
E. Inventories:
Inventories, which consist of finished goods, are stated at the lower
of average cost or market.
F. 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.
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. Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of the revenues and expenses during the
reported period. Actual results could differ from those estimates.
I. Stock Based Compensation:
The Company accounts for stock options as prescribed by APB opinion
No. 25 and includes pro forma information in the stock options footnote, as
permitted by statement of financial accounting standard No. 123.
2. OTHER CURRENT ASSETS:
Included in other current assets at June 30, 1997 are $8,794,618 of
prepayments on merchandise.
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<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT:
June 30, March 31, Estimated
1997 1997 Useful Lives
---- ---- ------------
Machinery & Equipment $1,780,984 $1,765,908 5 years
Furniture, Fixtures &
Office Equipment 2,333,005 2,295,084 5-10 years
Transportation Equipment 96,750 96,750 3-5 years
Leasehold Improvements 2,598,617 2,578,957 10-33 years
--------- ---------
6,809,356 6,736,699
Less: Accumulated Depreciation 3,253,061 3,093,941
--------- ---------
$3,556,295 $3,642,758
========= =========
Depreciation expense for the three months ended June 30, 1997 and
1996 amounted to $159,120 and $155,005, respectively.
4. OTHER ASSETS:
Included in other assets is $1,746,427 of goodwill, net of
amortization, created upon the purchase of the shares of M. Sobol Inc., the
Company's wholly-owned subsidiary, and the purchase of selected assets of Russ
Kalvin Inc. (see note 1-A), and $2,094,929 of interest-bearing officers' loans.
The goodwill is being amortized over forty years and fifteen years,
respectively. Amortization expense for the three months ended June 30, 1997 and
1996, amounted to $16,716 and $16,966, respectively.
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 inventories with aggregate maximum advances of
$110,000,000, including a $6,500,000 sublimit for overadvances. Interest on the
loan balance is payable monthly at 3/8% above the prime rate or 2% 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 June 30, 1997 was 7.74%, which was based on a combination of 2% above
the Eurodollar rate and 3/8% above the prime rate.
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<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT:
Long-term debt consists of:
(a) notes collateralized by certain of the Company's
equipment and leasehold improvements, payable in aggregate monthly installments
of approximately $52,282, which include interest at rates varying from 3/8%
above the prime rate to 3.36% above the treasury rate.
(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:
Year Ending
March 31,
---------
1998 (nine months) $ 353,198
1999 645,134
2000 677,138
2001 579,336
2002 97,987
----------
$ 2,352,793
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
June 30, March 31,
1997 1997
----------- -----------
Cost of Revenues $15,726,544 $12,066,836
Selling, General & Administrative 817,294 928,967
Interest - Bank 548,682 550,433
Payroll 366,485 452,405
----------- -----------
$17,459,005 $13,998,641
=========== ===========
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<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES:
A. Operating Leases:
The Company is obligated under a real property operating lease
expiring in May 2005. Additionally, commencing on October 2, 1995, in connection
with the operations of its wholly-owned hair care products subsidiaries, the
Company entered into a five year real property operating lease for space located
in California. As of June 30, 1997, total minimum annual rentals, excluding
additional payments for real estate taxes and certain expenses, are as follows:
Year Ending
March 31,
---------
1998 (nine months) $ 641,398
1999 852,797
2000 858,797
2001 768,749
2002 625,939
2003-2006 1,982,139
Rent expense for the three months ended June 30, 1997 and 1996
amounted to $216,722 and $218,386, 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.
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<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
D. Defined Contribution Plan
Effective April 1, 1996, the Company established a non-contributory
defined contribution plan (401K) for substantially all employees not covered
under collective bargaining agreements.
E. Stock Option Plans:
The Company has adopted Stock Option Plans which provide for the
granting of stock options to certain employees and directors. An aggregate of
2,677,150 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 110% of the
fair market value at the date of grant. As of June 30, 1997, the Company had
2,067,750 of outstanding options at prices ranging from $5.75 to $10.00. As of
June 30, 1996, the Company had 1,184,500 of outstanding options as prices
ranging from $5.75 the $10.00.
The Company has adopted the disclosure only provisions of SFAS No.
123 "Accounting for Stock-Based Compensation." If the Company had elected to
recognize compensation costs based on the fair value at the date of grant for
awards in the three months ended June 30, 1997 and 1996 consistent with the
provisions of SFAS No. 123, net income per common share would have been reduced
to the following pro forma amounts:
June 30, June 30,
1997 1996
-------- --------
Net Income - Pro Forma $718,386 $662,600
Earnings Per Common Share - Pro Forma $.12 $.11
The pro forma amounts are not indicative of anticipated future
disclosures because SFAS 123 does not apply to options granted before fiscal
1996.
The fair value of each option at date of grant for options granted
during the three months ended June 30, 1997 and 1996 was $1.50 and $2.07,
respectively, and were estimated using the Black-Scholes option pricing model.
The following assumptions were applied:
No dividend yield; expected volatility rates of 25% and 32%; Risk
free interest rates approximating 5% and expected lives of 3.3 years and 4.3
years, respectively.
F. The Company has three year employment agreements with three of its
officers which expire July 31, 1998. These agreements provide for each to
receive annual salaries of $300,000 and a bonus of 3% of the first $2,000,000,
2% on the next $1,000,000 and 1% on the remaining increase over the Company's
prior year earnings before interest and taxes. For the
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<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
three months ended June 30, 1997, these three officers received a total bonus of
$52,926. For the three months ended June 30, 1996, these three officers received
no bonus.
Effective June 30, 1996, the Company entered into a three year
employment agreement with a fourth officer, providing for an annual salary of
$225,000 and a $75,000 bonus.
G. Letters of Credit:
The Company has irrevocable standby letters of credits in the sum of
$425,000 expiring thru February 28, 1998.
H. Legal Proceedings:
The Company is a party to a number of legal proceedings as either
plaintiff or defendant, all of which are considered routine litigation
incidental to the business of the Company.
9. STOCKHOLDERS' EQUITY:
On September 11, 1996, the stockholders of the Company approved an
increase of the number of authorized shares of Class B Common Stock from
1,700,000 to 2,200,000 shares. The number of authorized shares of Class A Common
Stock is currently 10,000,000 shares. The Company is also authorized to issue
1,000,000 shares of preferred stock. Holders of Class A Common Stock and Class B
Common Stock share pro rata in all dividends declared by the Board of Directors.
The holders of Class A Common Stock 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. All outstanding shares of Class A Common Stock and Class B Common
Stock are freely transferable, subject to applicable law.
10. PROVISION FOR INCOME TAXES:
June 30,
1997 1996
---- ----
Income Before Income Taxes $1,637,970 $1,300,667
========== ==========
Federal Income Tax $ 545,000 $ 413,000
State Income Taxes 105,000 85,000
---------- ----------
Total Provision for Income Taxes $ 650,000 $ 498,000
========== ==========
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<PAGE>
ALLOU HEALTH & BEAUTY CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following is a reconciliation of the statutory income tax rate to
the total effective tax rates:
June 30,
1997 1996
---- ----
Federal Statutory Income Tax Rate 34% 34%
Increase in Tax Rates Resulting from:
State Income Taxes, Net of Federal Tax
Benefits 5.6% 4.3%
------- -------
Total Effective Tax Rates 39.6% 38.3%
======= =======
At June 30, 1997, net operating loss carryforwards of approximately
$140,000 are available to offset future earnings. These losses were generated by
the Company's subsidiary M. Sobol Inc., prior to its acquisition by the Company,
and as such are limited to $85,000 per year as per Internal Revenue Service
regulations.
11. RELATED PARTY TRANSACTIONS:
For the years ended June 30, 1997 and 1996, purchases from related
parties amounted to $329,828 and $73,156 respectively, and prepaid purchases of
$346,406 at June 30, 1996.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
A. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30,
1997 AND 1996.
Revenues for the three months ended June 30, 1997 were
$64,855,684 representing a 6% decrease over revenues of
$68,958,061 for the three months ended June 30, 1996.
This decrease in revenues is attributable to decreased
sales as described below. Contributions to revenues by
product segment is as follows:
Health and beauty aids increased 1.9% 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 15% 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 decreased 18.1% when compared to
the same period in the prior year due to
management's decision to eliminate a variety of
products from the Company's distribution mix
due to increased costs and lower gross profit
margins associated with those products. It is
management's expectation that the Company will
continue to focus its resources on those
non-perishable branded food products which
carry higher gross profit margins.
The 9.5% decrease in sales of pharmaceutical
items within the Company's wholly-owned
subsidiary. M. Sobol, Inc. when compared to the
same period in the prior year was a direct
result of management's decision to de-emphasize
sales of branded pharmaceuticals which are
characterized by limited operating margins. The
Company has required that all sales of its
branded pharmaceutical products to its
customers be combined with orders for generic
pharmaceuticals and over-the-counter health and
beauty aids products which historically are
marked by higher gross profit margins.
Gross profit as a percentage of revenues increased to 15%
for the three months ended June 30, 1997 when compared to
11.8% for the same period in the previous year. This
increase was primarily due to higher profit margins
associated with the increased sales of the Company's
fragrance products at higher unit prices.
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<PAGE>
Warehouse, delivery, selling, general and administrative
expenses increased as a percentage of sales to 9.4% for
the three months ended June 30, 1997, from 7.8% when
compared to the same period in the prior year. This
increase in operating expenses is due to reduced revenues
in the Company's non-perishable food and branded
pharmaceutical products without a proportional food and
branded pharmaceutical products without a proportional
reduction of expenses relating to these areas.
Additionally, the Company experienced increased expenses
associated with the development of its wholly-owned
subsidiary, Allou Personal Care Corporation, a
manufacturer and distributor of hair and skin care
products.
Interest expense for the three months ended June 30, 1997
increased to 3.0% from 2.1% when compared to the three
months ended June 30, 1996. This increase is due to higher
borrowing levels.
Net income for the three months ended June 30, 1997 was
$987,967 representing a 23% increase over net income of
$802,667 for the comparable period in 1996. This increase
in net income is due primarily to the reasons discussed
above.
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 June 30, 1997, the Company had
$95,314,201 outstanding under its $110,000,000 bank line
of credit. The loan is collaterized by the Company's
inventory and accounts receivable. Interest on the loan
balance is payable monthly at 3/8% above the prime rate or
2.0% above the Eurodollar rate, at the option of the
Company. The effective interest rate charged to the
Company at June 30, 1997 was 7.74% which was based on a
combination of 2.0% 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
$41,703,238 at June 30, 1996 to $45,076,832 at June 30,
1997, representing an increase of 8.1%. This increase in
accounts receivable is due to customers who had previously
paid the Company in an average of 54 days at June 30, 1996
have been paying the Company in an average of 65 days at
June 30, 1997. The Company believes the slowness in
collection of accounts receivable is primarily a symptom
of banks tightening credit provided to independent
retailers.
The Company has minimal capital investment requirements
and any significant capital expenditures are financed
through long term lease agreements that would
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<PAGE>
not adversely impact cash flow. The Company believes that
its internally-generated funds and its current and future
bank line of credit will be sufficient to meet its
anticipated cash and capital needs through the fiscal year
ending March 31, 1998.
INFLATION AND SEASONALITY
Inflation has not had any significant adverse effects on
the Company's business and the Company does not believe it
will have any significant affect on its future business.
The Company's fragrance business is seasonal, with greater
sales during the Christmas season than in other seasons.
The Company's other product lines are not seasonal.
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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
11.1 Computation of Primary and Fully Diluted Earnings per
Common Share for the three months ended June 30, 1997 and
1996
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during the period
ended June 30, 1997.
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<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: August 14, 1997
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<PAGE>
EXHIBIT INDEX
Exhibit Page
No. Description No.
- --- ----------- ---
11.1 Computation of Primary and Fully Diluted Earnings per
Common Share for the three months ended June 30, 1997 and
1996
27.1 Financial Data Schedule
-20-
EXHIBIT XI
ALLOU HEALTH & BEAUTY CARE, INC.
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER COMMON SHARE
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996
---- ----
Reconciliation of net income per consolidated
statement of operations to amount used in earnings
per share calculation:
Net Income $ 987,970 $ 802,667
========== ==========
Reconciliation of weighted average number of shares
outstanding to amount used in earnings per share
calculation:
Weighted average number of
shares outstanding 5,752,225 5,752,225
Add: Shares issuable from assumed
exercise of options and warrants 265,249 58,014
---------- ----------
Total Common Stock And Equivalents 6,017,474 5,810,239
========== ==========
Earnings per common share $ .16 $ .14
========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000846538
<NAME> Allou Health & Beauty Care, Inc.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 359,696
<SECURITIES> 0
<RECEIVABLES> 46,027,514
<ALLOWANCES> 950,682
<INVENTORY> 101,560,964
<CURRENT-ASSETS> 156,870,965
<PP&E> 6,809,356
<DEPRECIATION> 3,253,061
<TOTAL-ASSETS> 164,743,214
<CURRENT-LIABILITIES> 113,667,929
<BONDS> 0
0
0
<COMMON> 5,752
<OTHER-SE> 49,209,149
<TOTAL-LIABILITY-AND-EQUITY> 164,743,214
<SALES> 64,855,684
<TOTAL-REVENUES> 64,855,684
<CGS> 55,149,409
<TOTAL-COSTS> 55,149,409
<OTHER-EXPENSES> 6,089,567
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,978,738
<INCOME-PRETAX> 1,637,970
<INCOME-TAX> 650,000
<INCOME-CONTINUING> 987,970
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 987,970
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
