<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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. 0-20802
CELEBRITY, INC.
(Exact name of registrant as specified in its charter)
Texas 75-1289223
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification
organization) No.)
Physical Delivery Address:
4520 Old Troup Road
Tyler, Texas 75707
Mailing Address:
P.O. Box 6666
Tyler, Texas 75711
(903) 561-3981
(Address, including zip code, of principal executive
offices and registrant's telephone number, including
area code)
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 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 [ ]
The registrant had 6,307,419 shares of Common Stock, par value $.01 per share,
outstanding as of March 31, 1998.
<PAGE> 2
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS Page
----
<S> <C> <C>
Condensed Consolidated Balance Sheets at
March 31, 1998 and June 30, 1997
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . 2
Condensed Consolidated Statements of Operations
for the three months ended
March 31, 1998 and 1997 (Unaudited) . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
for the nine months ended March 31, 1998
and 1997 (Unaudited) . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash
Flows for the nine months ended
March 31, 1998 and 1997 (Unaudited) . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) . . . . . . . . . . . . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
CELEBRITY, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
March 31, June 30,
1998 1997
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,214 $ 530
Accounts receivable, net 20,461 15,620
Inventories 26,180 30,619
Other current assets 2,831 3,493
---------- ----------
Total current assets 51,686 50,262
Property, plant and equipment, net 10,606 11,522
Other assets 5,305 5,669
---------- ----------
Total assets $ 67,597 $ 67,453
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,312 $ 10,405
Accrued expenses and income taxes payable 4,914 3,952
Current portion of notes payable 2,931 27,067
---------- ----------
Total current liabilities 17,157 41,424
Notes payable, net of current portion 32,352 4,877
---------- ----------
Total liabilities 49,509 46,301
---------- ----------
Redeemable common stock 175 175
Shareholders' equity:
Common stock 63 63
Paid-in capital 22,505 22,353
Subscriptions receivable (572) (442)
Accumulated deficit (3,556) (469)
Treasury stock, at cost (525) (525)
Cumulative translation adjustment (2) (3)
---------- ----------
Total shareholders' equity 17,913 20,977
---------- ----------
Commitments and contingencies
Total liabilities, redeemable common stock and
shareholders' equity $ 67,597 $ 67,453
========== ==========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
-2-
<PAGE> 4
CELEBRITY, INC.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
------------------------
1998 1997
-------- --------
<S> <C> <C>
Net sales $ 31,519 $ 26,883
-------- --------
Costs and operating expenses:
Cost of goods sold 25,426 20,636
Selling 1,209 1,285
General and administrative 4,846 3,805
Depreciation and amortization 482 503
-------- --------
Total expenses 31,963 26,229
-------- --------
Operating income (loss) (444) 654
Interest expense, net (852) (713)
Other, net 9 (14)
-------- --------
Loss before income taxes (1,287) (73)
Provision (benefit) for income taxes 130 (245)
-------- --------
Net income (loss) $ (1,417) $ 172
======== ========
Basic and diluted earnings (loss) per share $ (.22) $ .03
======== ========
Average common and potentially dilutive
common shares outstanding 6,307 6,310
======== ========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
-3-
<PAGE> 5
CELEBRITY, INC.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended March 31,
------------------------
1998 1997
-------- --------
<S> <C> <C>
Net sales $ 91,581 $ 92,982
-------- --------
Costs and operating expenses:
Cost of goods sold 70,999 70,470
Selling 3,801 4,155
General and administrative 15,355 13,142
Depreciation and amortization 1,539 1,686
-------- --------
Total expenses 91,694 89,453
-------- --------
Operating income (loss) (113) 3,529
Interest expense, net (2,567) (2,481)
Other, net 8 4
-------- --------
Income (loss) before income taxes (2,672) 1,052
Provision (benefit) for income taxes 415 (206)
-------- --------
Net income (loss) $ (3,087) $ 1,258
======== ========
Basic and diluted earnings (loss) per share $ (.49) $ .20
======== ========
Average common and potentially dilutive
common shares outstanding 6,307 6,310
======== ========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
-4-
<PAGE> 6
CELEBRITY, INC.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended March 31,
--------------------------
1998 1997
--------- ---------
<S> <C> <C>
Operating activities:
Net income (loss) $ (3,087) $ 1,258
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,539 1,686
Deferred income taxes (599)
Loss on sale of assets 7
Changes in operating assets and liabilities:
Accounts receivable (4,841) (3,327)
Inventories 4,439 4,619
Other assets, net 753 511
Accounts payable and accrued expenses (131) (3,649)
--------- ---------
Net cash provided by (used in) operating activities (1,321) 499
--------- ---------
Investing activities:
Proceeds from sales of assets 55
Additions to property and equipment (412) (1,116)
Other (407)
--------- ---------
Net cash used in investing activities (357) (1,523)
--------- ---------
Financing activities:
Proceeds from (payments on) long term debt 119 (1,005)
Net proceeds from (payments on) old credit
facility (26,163) 1,046
Original proceeds under new credit facility 27,319
Net proceeds from new credit facility 2,064
Proceeds on subscriptions receivable 23 15
Redemption of common stock (175)
--------- ---------
Net cash provided by (used in) financing activities 3,362 (119)
--------- ---------
Increase (decrease) in cash 1,684 (1,143)
Cash and cash equivalents, at beginning of period 530 1,166
--------- ---------
Cash and cash equivalents, at end of period $ 2,214 $ 23
========= =========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
-5-
<PAGE> 7
CELEBRITY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. THE BUSINESS AND BASIS OF PRESENTATION
Description of Business
Celebrity, Inc. ("Celebrity" or the "Company") is a supplier of high
quality artificial flowers, foliage, flowering bushes and other decorative
accessories to craft store chains and other retailers and to wholesale florists
throughout North America and Europe. Celebrity imports and/or produces
approximately 9,000 home accent, decorative accessory and giftware items,
including artificial floral arrangements, floor planters and trees, a wide
range of decorative brass and textile products and a broad line of seasonal
items such as Christmas trees, wreaths, garlands and other ornamental products.
Basis of Presentation
The Condensed Consolidated Financial Statements include the accounts of
Celebrity (referred to herein as "Celebrity Silk") and its wholly-owned
subsidiaries, Celebrity Exports International Limited ("Celebrity Hong Kong"),
The Cluett Corporation ("Cluett"), India Exotics, Inc. ("India Exotics"),
Magicsilk, Inc. ("Magicsilk"), Star Wholesale Florist, Inc. ("Star Wholesale")
and Value Florist Supplies, Inc. ("Value Florist"). All intercompany accounts
and transactions have been eliminated.
The accompanying Condensed Consolidated Financial Statements are
unaudited and, in the opinion of management, reflect all adjustments that are
necessary for a fair presentation of the financial position and results of
operations for the periods presented. All of such adjustments are of a normal
and recurring nature. The results of operations for the periods presented are
not necessarily indicative of the results to be expected for the entire year.
The Condensed Consolidated Financial Statements should be read in conjunction
with the financial statement disclosures contained in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1997.
2. INVENTORY
The composition of inventories is as follows (in thousands):
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
---------- ----------
<S> <C> <C>
Raw materials $ 8,246 $ 8,707
Finished goods 17,934 21,912
---------- ----------
$ 26,180 $ 30,619
========== ==========
</TABLE>
-6-
<PAGE> 8
3. REDEEMABLE COMMON STOCK
At March 31, 1998, the Company was obligated to repurchase
approximately 13,461 shares of its common stock, par value $.01 per share
("Common Stock"), for an aggregate consideration of $175,000. The repurchase
obligation was pursuant to certain put options issued in connection with the
Magicsilk acquisition in 1992. The holders of such put options have notified
the Company of their intent to exercise of the put options with respect to such
shares. In April 1998, the Company repurchased such shares through issuance of
six month notes payable.
4. EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" effective December 31, 1997. For all periods
presented there were no differences between basic and diluted earnings per
share.
5. CREDIT FACILITY
On January 30, 1998, the Company entered into a new three-year
revolving credit facility for its Celebrity, Cluett, India Exotics, Star
Wholesale and Value Florist operations in a maximum amount of $31.5 million.
This revolving credit facility replaces the Company's prior revolving line of
credit with another bank. Borrowing limits under the revolving credit facility
are based on specified percentages of eligible accounts receivable and
inventories. As a result of such limits, the maximum amount the Company was
eligible to borrow at March 31, 1998, was $27.2 million, and the amount
outstanding under the revolving credit facility was $25.9 million. In addition
to the revolving credit facility, the lender has made a term loan to the Company
in the original principal amount of $3.5 million. The term loan is payable in
monthly installments of principal of $200,000 scheduled to commence May 1, 1998,
and the remaining outstanding principal balance under the term loan is due and
payable upon the earlier of (i) September 1, 1999, or (ii) the termination of
the revolving credit facility. The outstanding balance under the revolving
credit facility bears interest at a reference bank's prime rate of interest plus
1.5% per annum, and the term loan bears interest at a rate of 12.5% per annum.
Interest is payable monthly. On February 3, 1998, the Company issued to the
lender a five-year warrant to purchase 100,000 shares of Common Stock at $1.00
per share. Amounts borrowed under the revolving credit facility and the term
loan are secured by accounts receivable, inventory, equipment, certain interests
in real property, and general intangibles (including intellectual property) of
Celebrity and its subsidiary borrowers. In addition, substantially all of the
capital stock of the Company's subsidiaries has been pledged to the lender. The
revolving credit facility and the term loan are subject to certain covenants
limiting the incurrence of indebtedness, prohibiting the payment of dividends
and requiring the Company to maintain certain financial ratios.
The Company was not in compliance with certain covenants contained in
its previous revolving line of credit at June 30, 1997, and it had not
obtained waivers for all such violations.
-7-
<PAGE> 9
Accordingly, the debt was classified as a current liability at June 30, 1997.
As this debt has now been refinanced on a long-term basis, classification of
the debt as a current liability is no longer required.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE
RESULTS
This Quarterly Report on Form 10-Q contains forward-looking statements
about the business, financial condition and prospects of Celebrity. The actual
results of Celebrity could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties,
including without limitation (i) changes in customer demand for the Company's
products at the retail level, (ii) trends in the retail and wholesale
decorative accessories industries, (iii) inventory risks attributable to
possible changes in customer demand, compounded by extended lead times in
ordering the Company's products from overseas suppliers and the Company's
strategy of maintaining a high merchandise in stock percentage, (iv) the
effects of economic conditions, (v) supply and/or shipment constraints or
difficulties, (vi) the impact of competitors' pricing, (vii) the effects of the
Company's accounting policies, (viii) changes in foreign trade regulations,
including changes in duty rates, possible trade sanctions, import quotas and
other restrictions imposed by U.S. and foreign governments, (ix) the effects of
the assumption of control over Hong Kong by the People's Republic of China (the
"PRC") on July 1, 1997, (x) the effects of the current uncertainties in Asian
financial markets and (xi) other risks detailed in the Company's Securities and
Exchange Commission filings. These risks and uncertainties are beyond the
ability of the Company to control, and in many cases, the Company cannot
predict the risks and uncertainties that could cause its actual results to
differ materially from those indicated by the forward-looking statements. When
used herein, the words "believes", "expects", "plans" and similar expressions
as they relate to the Company or its management generally are intended to
identify forward-looking statements.
-8-
<PAGE> 10
RESULTS OF OPERATIONS
The following table sets forth certain items in the condensed
consolidated statements of operations of Celebrity expressed as a percentage of
net sales for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
--------------------------- ---------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales 100% 100% 100% 100%
--------- --------- --------- ---------
Costs and operating expenses:
Cost of goods sold 80% 77% 77% 76%
Selling 4% 4% 4% 4%
General and administrative 15% 14% 17% 14%
Depreciation and amortization 2% 2% 2% 2%
--------- --------- --------- ---------
Total expenses 101% 97% 100% 96%
--------- --------- --------- ---------
Operating income (loss) (1)% 3% 0% 4%
Interest expense, net (3)% (3)% (3)% (3)%
--------- --------- --------- ---------
Income (loss) before income taxes (4)% 0% (3)% 1%
Provision (benefit) for income taxes 0% (1)% 0% 0%
--------- --------- --------- ---------
Net income (loss) (4)% 1% (3)% 1%
========= ========= ========= =========
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998, COMPARED WITH THREE MONTHS ENDED MARCH 31,
1997
Net sales increased 17% from $26.9 million in fiscal 1997 to $31.5
million in fiscal 1998. The increase was primarily attributable to higher sales
in Celebrity Hong Kong and Cluett.
Cost of goods sold increased from $20.6 million in fiscal 1997 to
$25.4 million in fiscal 1998. The increase was primarily attributable to
higher sales volume in fiscal 1998. Cost of goods sold as a percentage of net
sales increased from 77% in fiscal 1997 to 80% in fiscal 1998. The increase in
the cost of goods sold percentage is attributable to more aggressive
discounting related to the Company's inventory reduction program.
-9-
<PAGE> 11
Selling expenses decreased from $1.3 million in fiscal 1997 to $1.2
million in fiscal 1998. The decrease was attributable to expense reductions
realized from consolidating the sales activities of India Exotics with those of
the Company. Selling expenses as a percentage of net sales remained unchanged
at 4% in fiscal 1998 and 1997.
General and administrative expenses increased from $3.8 million in
fiscal 1997 to $4.8 million in fiscal 1998. The increase was primarily
attributable to higher costs of operating the Star Wholesale location in
Dallas, Texas, which opened in May 1997, and higher facility and operating
expenses at Cluett that were related to additional inventory storage and
handling requirements. General and administrative expenses as a percentage of
net sales increased from 14% in fiscal 1997 to 15% in fiscal 1998.
Depreciation and amortization expense decreased from $503,000 in
fiscal 1997 to $482,000 in fiscal 1998.
NINE MONTHS ENDED MARCH 31, 1998, COMPARED WITH NINE MONTHS ENDED MARCH 31,
1997
Net sales decreased 2% from $93.0 million in fiscal 1997 to $91.6
million in fiscal 1998. The decrease was primarily attributable to lower sales
by India Exotics.
Cost of goods sold increased from $70.5 million in fiscal 1997 to
$71.0 million in fiscal 1998. Cost of goods sold as a percentage of net sales
increased from 76% in fiscal 1997 to 77% in fiscal 1998. The increase in the
cost of goods sold as a percentage of net sales is primarily attributable to
more aggressive discounting in the third quarter related to the Company's
inventory reduction program.
Selling expenses decreased from $4.2 million in fiscal 1997 to $3.8
million in fiscal 1998. The decrease was attributable to the lower sales
volume in fiscal 1998 and expense reductions resulting from consolidating
certain sales activities. Selling expenses as a percentage of net sales
remained unchanged at 4% in fiscal 1998 and 1997.
General and administrative expenses increased from $13.1 million in
fiscal 1997 to $15.4 million in fiscal 1998. The increase was primarily
attributable to higher costs of operating the Star Wholesale location in
Dallas, Texas, which opened in May 1997, and higher facility and operating
expenses at Cluett that were related to additional inventory storage and
handling requirements. General and administrative expenses as a percentage of
net sales increased from 14% in fiscal 1997 to 17% in fiscal 1998.
Depreciation and amortization expense decreased from $1.7 million in
fiscal 1997 to $1.5 million in fiscal 1998.
-10-
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
Celebrity's sales and marketing strategy and the growth of its
business have required a significantly increased investment in inventory.
Additionally, the Company follows the industry practice of offering extended
terms to qualified customers for sales of Christmas merchandise. These sales
generally take place between the months of June and October on terms not
requiring payment until December 1. The Company has traditionally relied on
borrowings under its revolving line of credit and cash flows from operations to
fund these and other working capital needs.
In January 1998, the Company entered into a new three-year revolving
credit facility for its Celebrity, Cluett, India Exotics, Star Wholesale and
Value Florist operations in a maximum amount of $31.5 million. This revolving
credit facility replaces the Company's prior revolving line of credit with
another bank. Borrowing limits under the revolving credit facility are based on
specified percentages of eligible accounts receivable and inventories. As a
result of such limits, the maximum amount the Company was eligible to borrow at
March 31, 1998, was $27.2 million, and the amount outstanding under the
revolving credit facility was $25.9 million. In addition to the revolving
credit facility, the lender has made a term loan to the Company in the original
principal amount of $3.5 million. The term loan is payable in monthly
installments of principal of $200,000 commencing May 1, 1998, and the remaining
outstanding principal balance under the term loan is due and payable upon the
earlier of (a) September 1, 1999, or (b) the termination of the revolving credit
facility. Interest on the outstanding balance under the revolving credit
facility bears interest at a reference bank's prime rate of interest plus 1.5%
per annum, and interest on the term loan bears interest at a rate of 12.5% per
annum. Interest on both the revolving credit facility and the term loan is
payable monthly. Amounts borrowed under the revolving credit facility and the
term loan are secured by accounts receivable, inventory, equipment, certain
interests in real property, and general intangibles (including intellectual
property) of Celebrity and its subsidiary borrowers. In addition, substantially
all of the capital stock of the Company's subsidiaries has been pledged to the
lender. The revolving credit facility and the term loan are subject to certain
covenants limiting the incurrence of indebtedness, prohibiting the payment of
dividends and requiring the Company to maintain certain financial ratios.
Celebrity Hong Kong generally makes full cash payments for products
ordered for Celebrity's account or for direct shipment to customers after the
manufacturers deliver products in Hong Kong for export. Celebrity Hong Kong
finances cash payments to its vendors through a credit facility with a Hong
Kong bank. Generally, under the terms of this facility the bank finances, with
recourse, export bills for specific shipments by Celebrity Hong Kong to its
customers. The bank is reimbursed when payment for these shipments is
received. At March 31, 1998, $4.1 million of export bills were financed by the
bank, of a $4.5 million maximum amount under the credit facility. All of these
bills were related to direct shipments to customers and Celebrity Hong Kong's
related potential recourse liability was accounted for as a contingent
obligation.
In June 1997, the Company entered into a new revolving credit facility
with an additional bank, which matures in June 2004. At March 31, 1998, the
outstanding balance under this facility was approximately $4.8 million.
Interest accrues on the principal amount outstanding under the
-11-
<PAGE> 13
facility at the rate of LIBOR plus 2.65% per annum. Amounts borrowed under the
facility are secured by certain real estate owned by the Company, and the
facility contains covenants requiring the Company to maintain certain financial
ratios.
In September 1997, Celebrity borrowed $500,000 from RHP Management,
LLC, ("RHP"), an entity controlled by Robert H. Patterson, Jr., President and
Chief Executive Officer of the Company. In December 1997, the parties amended
the promissory note to extend the repayment date to June 10, 1998, subject to
repayment restrictions under the credit facility. The principal amount
outstanding accrues interest at a fluctuating rate per annum equal to RHP's
cost of borrowing, which is currently the prime rate of a reference bank plus
1.5% per annum. The proceeds from this loan were used to pay certain
intercompany accounts payable to Celebrity Hong Kong.
The Company does not plan to make any significant capital expenditures
in fiscal 1998 other than those incurred in the normal course of business for
replacement of transportation and warehouse equipment and those incurred in
connection with the Company's continuing program to upgrade its management
information systems.
The Company's business is subject to U.S. law relating to imports,
including those imposing import duties. If the U.S. government were to
terminate most favored nation treatment for the PRC or impose punitive tariff
rates on products imported by the Company in retaliation for market access
barriers in the PRC, the duty on products imported by the Company from the PRC
would increase significantly. If the Company were to face an increase in tariff
rates on the products it imports into the U.S., it would (i) attempt to increase
the prices charged to its customers, (ii) ask its suppliers to reduce the prices
charged to the Company and (iii) seek to identify more favorable sources;
however, unless and until these efforts were successful, the Company's results
of operations could be affected adversely.
The Company believes that its current financial position, credit
facilities and cash flows from operations will be adequate to fund its
operations and expansion plans for the foreseeable future. There is no
assurance, however, that these sources will be sufficient to fund its
operations or that any necessary additional financing will be available, if at
all, in amounts required or on terms satisfactory to the Company.
YEAR 2000 ISSUES
The Company has undertaken various initiatives intended to ensure that
the computer equipment and software used by the Company will function properly
with respect to dates in the Year 2000 and thereafter. Based upon its
assessments to date, the Company believes that certain of the computer
equipment and software it currently uses will require replacement or
modification. In addition, in the ordinary course of replacing computer
systems, the Company attempts to utilize replacement systems that are Year 2000
compliant. Utilizing both internal and external resources to identify needs
for Year 2000 modifications, the Company currently anticipates that the
modification and conversion efforts will be completed no later than December
1998, which is prior to any currently anticipated impact on its management
information systems.
-12-
<PAGE> 14
The Company has initiated communications with its significant
suppliers and customers to determine the extent to which interfaces with such
entities are vulnerable to Year 2000 issues.
The Company believes that the costs to modify its management
information systems to be Year 2000 compliant, as well as the currently
anticipated costs with respect to Year 2000 issues of third parties, will not
exceed $100,000, which expenditures will be funded from operating cash flows.
The Company presently believes that the Year 2000 issue will not pose
significant operational problems for the Company. However, if modifications and
conversions are not made as they are identified, or not completed timely, there
can be no assurance that Year 2000 issues will not have a material adverse
effect on the Company or adversely affect the Company's relationships with
customers, suppliers, or others. Additionally, there can be no assurance that
the Year 2000 issues of other entities will not materially adversely affect the
Company's management information systems or business.
The costs of the efforts to be expended by the Company and the date on
which the Company believes it will complete the Year 2000 modifications are
based upon management's best estimates, which are derived utilizing numerous
assumptions regarding future events. There can be no assurance that these
estimates will be achieved, and actual results could differ materially from
those currently anticipated.
-13-
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27. Financial Data Schedule (filed only with EDGAR version)
(b) Reports of Form 8-K:
None.
-14-
<PAGE> 16
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.
CELEBRITY, INC.
Dated: May 12, 1998 By /s/ Robert H. Patterson, Jr.
---------------------------------------
Robert H. Patterson, Jr., Chairman
of the Board,
President and Chief Executive
Officer
(Authorized Officer)
Dated: May 12, 1998 By /s/ Lynn Skillen
---------------------------------------
Lynn Skillen
Vice President - Finance
(Principal Financial and Accounting
Officer)
-15-
<PAGE> 17
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Page
------ ---------------------- ----
<S> <C>
27 Financial Data Schedule (filed only with EDGAR version)
</TABLE>
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,214
<SECURITIES> 0
<RECEIVABLES> 20,461
<ALLOWANCES> 0
<INVENTORY> 26,180
<CURRENT-ASSETS> 51,686
<PP&E> 10,606
<DEPRECIATION> 0
<TOTAL-ASSETS> 67,597
<CURRENT-LIABILITIES> 17,157
<BONDS> 0
0
0
<COMMON> 63
<OTHER-SE> 17,850
<TOTAL-LIABILITY-AND-EQUITY> 67,597
<SALES> 91,581
<TOTAL-REVENUES> 91,581
<CGS> 70,999
<TOTAL-COSTS> 70,999
<OTHER-EXPENSES> (8)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,567
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