SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
______________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________
Commission file number 0-4465
Sirco International Corp.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
New York 13-2511270
- -------------------------------- -------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization Identification No.)
24 Richmond Hill Avenue, Stamford, Connecticut 06901
----------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 203-359-4100
------------
-------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if
Changed Since Last Report)
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 [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 1,309,700 shares of
Common Stock, par value $.10 per share, as of April 1, 1996.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Sirco International Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
Feb. 29, 1996 Nov. 30, 1995
------------- -------------
(Unaudited) (See note)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents .................... $ 508,328 $ 176,241
Accounts receivable .......................... 2,564,026 2,184,468
Inventories .................................. 6,011,066 5,762,828
Prepaid expenses ............................. 289,503 257,809
Other current assets ......................... 175,184 276,815
------------ ------------
Total current assets ........................... 9,548,107 8,658,161
Property and equipment at cost ................. 1,819,939 1,777,894
Less accumulated depreciation .................. 1,144,406 1,128,045
------------ ------------
Net property and equipment ..................... 675,533 649,849
------------ ------------
Other assets ................................... 241,109 154,233
Investment in and advances to subsidiary ....... 526,584 540,497
------------ ------------
Total assets ................................... $ 10,991,333 $ 10,002,740
============ ============
Liabilities and stockholders' equity
Current liabilities:
Loans payable to financial institutions ...... $ 1,945,554 $ 2,323,279
Short-term loans payable-other ............... 424,252 571,205
Current maturities of long-term debt ......... 373,370 222,119
Accounts payable ............................. 3,858,858 2,866,658
Accrued expenses ............................. 1,574,791 1,532,253
------------ ------------
Total current liabilities ...................... 8,176,825 7,515,514
Long-term debt, less current maturities ........ 413,839 590,298
<PAGE>
<CAPTION>
Sirco International Corp. and Subsidiaries
Condensed Consolidated Balance Sheets -- Continued
Feb. 29, 1996 Nov. 30, 1995
------------- -------------
(Unaudited) (See note)
<S> <C> <C>
Stockholders' equity:
Common stock, $.10 par value;
10,000,000 share authorized, 1,315,000
issued (1996), 1,215,000 issued (1995) ....... 131,520 121,520
Preferred stock, $.10 par value;
1,000,000 authorized, none issued
Capital in excess of par value ............... 4,267,534 4,027,534
Retained earnings (deficit) .................. (1,380,788) (1,641,603)
Treasury stock at cost ....................... (27,500) (27,500)
Accumulated foreign translation adjustment ... (590,097) (583,023)
------------ ------------
Total stockholders' equity ..................... 2,400,669 1,896,928
------------ ------------
Total liabilities and stockholders' equity ..... $ 10,991,333 $ 10,002,740
============ ============
</TABLE>
See notes to the condensed consolidated financial statements.
Note: The balance sheet at November 30, 1995 has been derived from the audited
financial statements at that date but does not included all the information and
footnotes required by generally accepted accounting principles.
<PAGE>
Sirco International Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
Feb. 29, 1996 Feb. 28, 1995
------------- -------------
<S> <C> <C>
Net sales ...................................... $ 6,578,047 $ 4,825,492
Cost of goods sold ............................. 4,676,216 3,822,341
----------- -----------
Gross profit ................................... 1,901,831 1,003,151
Selling, warehouse, and general and
administrative expenses ...................... 1,467,551 1,617,416
----------- -----------
434,280 (614,265)
Other (income) expense:
Interest expense ............................... 194,944 220,506
Interest income ................................ (24,103) (21,685)
Miscellaneous income, net ...................... (48,654) (23,954)
----------- -----------
122,187 174,867
----------- -----------
Net income (loss) before income taxes .......... 312,093 (789,132)
Provision for income taxes ..................... 51,278 0
----------- -----------
Net income (loss) .............................. $ 260,815 ($ 789,132)
=========== ===========
Net income (loss) per share of common stock:
Primary ...................................... $ 0.21 ($ 0.65)
=========== ===========
Fully diluted ................................ $ 0.20 ($ 0.65)
=========== ===========
Weighted average number of shares of
common stock outstanding ..................... 1,236,367 1,209,700
=========== ===========
</TABLE>
See notes to the condensed consolidated financial statements.
<PAGE>
Sirco International Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
Feb. 29, 1996 Feb. 28, 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................ $ 260,815 ($ 789,132)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization ................. 17,696 30,815
Provision for losses in accounts receivable ... 11,000 31,068
Changes in operating assets and liabilities:
Accounts receivable .......................... (400,672) 710,575
Inventories .................................. (255,463) (802,349)
Prepaid expenses ............................. (31,972) (40,273)
Other current assets ......................... 101,631 21,254
Other assets ................................. (72,963) 83,936
Accounts payable and accrued expenses ........ 1,039,851 375,285
----------- -----------
Net cash provided by (used in) operating
activities ..................................... 669,923 (378,821)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment ............... (42,027) (3,601)
----------- -----------
Net cash used in investing activities ............ (42,027) (3,601)
----------- -----------
Cash flows from financing activities:
(Decrease) increase in loans payable to
financial institutions and short-term
loans payable-other ............................ (369,811) 131,412
Proceeds from issuance of common stock ........... 250,000 0
Repayment of long-term debt ...................... (173,777) (22,159)
----------- -----------
Net cash (used in) provided by financing
activities ..................................... (293,588) 109,253
----------- -----------
Effect of exchange rate changes on cash .......... (2,221) (8,063)
----------- -----------
Increase (decrease) in cash and cash
equivalents .................................... 332,087 (281,232)
Cash and cash equivalents at beginning of
period ......................................... 176,241 955,869
----------- -----------
Cash and cash equivalents at the end of
period ......................................... $ 508,328 $ 674,637
=========== ===========
<PAGE>
<CAPTION>
Sirco International Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended
Feb. 29, 1996 Feb. 28, 1995
------------- -------------
<S> <C> <C>
Supplemental disclosures of cash flow
information
Cash paid during the period for:
Interest ...................................... $ 171,605 $ 179,137
Income taxes .................................. $ 0 $ 0
</TABLE>
See notes to the condensed consolidated financial statements.
<PAGE>
SIRCO INTERNATIONAL CORP.
Notes To Condensed Consolidated Financial Statements (Unaudited)
Note 1-Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended February 29,
1996 are not necessarily indicative of the results that may be expected for the
year ended November 30, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended November 30, 1995.
Note 2- Financing Arrangements
The Company has an agreement with a factor pursuant to which the Company sells
its accounts receivable to the factor on a pre-approved non-recourse basis.
Under the terms of the agreement, the factor advances funds to the Company on
the basis of invoice amounts. Interest on such advances is 1.75% per annum above
the prime rate. Additionally, the factor provides inventory financing to the
Company based on an advance rate of up to 50% of the inventory value. At
February 29, 1996, the factor had advanced the Company $1,700,000 for inventory
financing. Interest on such advances is 1.75% per annum above the prime rate.
The Company also pays a factoring commission of .75% of each invoice amount,
subject to a minimum of $96,000 per annum.
On August 1, 1995, the Company's Canadian subsidiary entered into a financing
agreement with a Canadian bank that provided for a revolving loan in the amount
of $525,000, with interest payable monthly at 1.25% above the Canadian prime
rate. The proceeds of this loan are utilized by the Canadian subsidiary for
purchasing inventory and financing day-to-day operations. As of February 29,
1996, approximately $212,000 was outstanding under this agreement. Additionally,
as of February 29, 1996, the Canadian subsidiary had outstanding letters of
credit totalling approximately $239,000. The bank extended two term loans to the
Canadian subsidiary, pursuant to the financing agreements, in amounts of
approximately $368,000 and $105,000, with interest payable monthly at 1.50% and
2.00%, respectively, above the Canadian prime rate. At February 29, 1996,
approximately $354,000 and $34,000, respectively, was outstanding under the two
term loans. Substantially all of the assets of the Canadian subsidiary have been
pledged as security for the revolving line of credit and the term loans.
Additionally, the Company has agreed to subordinate its loan to its Canadian
subsidiary to the amounts payable to the bank.
<PAGE>
In March 1995, the Company entered into an agreement with Yashiro Co., Inc.
("Yashiro"), pursuant to which Yashiro agreed to issue or cause to be issued,
until March 20, 1997, unsecured trade letters of credit in an aggregate amount
of up to the lesser of $1,200,000 or 35% of the book value of the Company's
inventory. Yashiro charges the Company a handling fee of 3% for each letter of
credit that is opened. Interest is payable to Yashiro monthly at 2% above the
prime rate. At February 29, 1996, approximately $424,000 was outstanding on the
line and the Company had outstanding letters of credit amounting to
approximately $535,000.
Current maturities of long-term debt, at February 29, 1996, included a $35,000
demand loan from the Company's Chairman of the Board and Chief Executive Officer
that bears interest at 6% per annum. The loan was paid in full in March 1996.
<PAGE>
Item 2. Management's Analysis and Discussion Of
Financial Condition and Results Of Operations
Three Months Ended February 29, 1996 vs February 28, 1995
Results of Operations
Net sales for the three months ended February 29, 1996 increased approximately
$1,753,000 to approximately $6,578,000 as compared to approximately $4,825,000
reported in the same period in 1995. Net sales for the Company's Luggage and
Backpack Divisions increased by approximately $1,949,000 in the first three
months of fiscal 1996, primarily due to significant increases in the net sales
of the Company's Backpack Division resulting from increased sales of FILA
products as discussed below. Net sales for the Company's Canadian subsidiary
increased by approximately $852,000 in the first three months of fiscal 1996,
due primarily to the continued strong sales of its Atlantic luggage line.
Included in the Company's net sales for the first three months of 1995 was
approximately $1,048,000 in net sales attributable to the Company's former
Handbag Division, which was sold in March 1995. The Company's overall gross
profit for the first three months of 1996 increased to approximately $1,902,000
from approximately $1,003,000 reported in the first three months of 1995, and
the related gross profit percentage increased to approximately 29% from
approximately 21% reported the year earlier. The gross profit for the Company's
Luggage and Backpack Divisions and Canadian subsidiary increased to
approximately $1,469,000 and $433,000, respectively, from approximately $806,000
and $130,000, respectively, reported in the first three months of 1995, and the
related gross profit percentage increased to approximately 27.8% and 33.5%,
respectively, from approximately 23.9% and 29.4% reported in the prior year.
Gross profit increases in the first three months of fiscal 1996 resulted
primarily from the increased net sales of the Company's Backpack Division, which
generally has higher profit margins than the Company's other product lines.
Included in the Company's gross profit for the first three months of 1995 was
approximately $67,000 attributable to the Company's former Handbag Division.
After extensive negotiations with FILA Sport S.P.A. ("FILA"), the Company and
FILA entered into an agreement in February 1996 pursuant to which the Company
will cease to ship product under the FILA license after June 30, 1996, subject
to certain rights with respect to the remaining inventory. The Company is no
longer accepting sales orders for its FILA products. Net sales of the FILA
product for the three months ended February 29, 1996 were approximately
$2,678,000 as compared to approximately $491,000 reported in the prior year. The
Company expects to ship approximately $6,000,000 of FILA product in fiscal 1996
prior to the June 30, 1996 expected cut off date. In order to maintain its sales
level in the future, the Company is currently pursuing new license agreements.
The Company has entered into several new licenses and expects to enter into
additional licenses in fiscal 1996; however, the Company's future net sales
could be negatively impacted if sales from new licenses or increases in sales
under existing licenses do not replace the lost FILA sales.
<PAGE>
Selling, warehouse, and general and administrative expenses decreased
approximately $149,000, to approximately $1,468,000 from approximately
$1,617,000 reported in the first three months of 1995. Selling, warehouse, and
general and administrative expenses for the Company's Luggage and Backpack
Divisions and Canadian subsidiary increased approximately $285,000 and $134,000,
respectively. This increase in expenses is due primarily to the corresponding
increase in the Company's first quarter sales. The major components of the
increase are: 1) increased commission expenses, 2) increased variable
warehousing costs, 3) increased salary expense, and 4) increased advertising
costs. Included in the Company's expenses reported in the first three months of
1995 was approximately $568,000 attributable to the Company's former Handbag
Division.
During the first three months of 1996, interest expense decreased by
approximately $26,000 over the same period in 1995. This decrease is primarily
attributable to lower interest rates.
Liquidity and Capital Resources
The Company had cash and cash equivalents of approximately $508,000, and working
capital of approximately $1,371,000, at February 29, 1996. During the first
quarter of 1996, the Company's operating activities provided approximately
$670,000 in cash flow as compared to the prior year when operating activities
used approximately $379,000 in cash.
The Company has an agreement with a factor pursuant to which the Company sells
its accounts receivable to the factor on a pre-approved non-recourse basis.
Under the terms of the agreement, the factor advances funds to the Company on
the basis of invoice amounts. Interest on such advances is 1.75% per annum above
the prime rate. Additionally, the factor provides inventory financing to the
Company based on an advance rate of up to 50% of the inventory value. At
February 29, 1996, the factor had advanced the Company $1,700,000 for inventory
financing. Interest on such advances is 1.75% per annum above the prime rate.
The Company also pays a factoring commission of .75% of each invoice amount,
subject to a minimum of $96,000 per annum.
On August 1, 1995, the Company's Canadian subsidiary entered into a financing
agreement with a Canadian bank that provided for a revolving loan in the amount
of $525,000, with interest payable monthly at 1.25% above the Canadian prime
rate. The proceeds of this loan are utilized by the Canadian subsidiary for
purchasing inventory and financing day-to-day operations. As of February 29,
1996, approximately $212,000 was outstanding under this agreement. Additionally,
as of February 29, 1996, the Canadian subsidiary had outstanding letters of
credit totalling approximately $239,000. The bank extended two term loans to the
Canadian subsidiary, pursuant to the financing agreements, in amounts of
approximately $368,000 and $105,000, with interest payable monthly at 1.50% and
2.00%, respectively, above the Canadian prime rate. At February 29, 1996,
approximately $354,000 and $34,000 was outstanding under the two term loans.
Substantially all of the assets of the Canadian subsidiary have been pledged as
security for the revolving line of credit and the term loans. Additionally, the
Company has agreed to subordinate its loan to its Canadian subsidiary to the
amounts payable to the bank.
<PAGE>
In March 1995, the Company entered into an agreement with Yashiro Co., Inc.
("Yashiro"), pursuant to which Yashiro agreed to issue or cause to be issued,
until March 20, 1997, unsecured trade letters of credit in an aggregate amount
of up to the lesser of $1,200,000 or 35% of the book value of the Company's
inventory. Yashiro charges the Company a handling fee of 3% for each letter of
credit that is opened. Interest is payable to Yashiro monthly at 2% above the
prime rate. At February 29, 1996, approximately $424,000 was outstanding on the
line and the Company had outstanding letters of credit amounting to
approximately $535,000.
There were approximately $42,000 in capital expenditures during the first three
months of 1996. The Company presently anticipates that it will expend an
additional $110,000 in capital improvements during fiscal 1996. A substantial
portion of capital expenditures are related to the Company's new showroom in New
York City.
Management believes that its cash and cash equivalents, lines of credit,
factoring of accounts receivable and cash flows generated from operations will
be sufficient to meet its liquidity and capital requirements for the next twelve
months.
<PAGE>
SIRCO INTERNATIONAL CORP.
PART II-OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27-- Financial Data Schedule.
(b) Reports on Form 8-K
None.
<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 hereunto duly authorized.
Sirco International Corp.
April 10, 1996 By: /s/ Joel Dupre
- --------------------- ---------------------------------
Date Joel Dupre
Chairman of the Board and
Chief Executive Officer
April 10, 1996 By: /s/ Gandolfo J. Verra
- --------------------- ---------------------------------
Date Gandolfo J. Verra
Controller and Assistant
Secretary
(Chief Accounting Officer)
<PAGE>
EXHIBIT INDEX
No. Description
- --- -----------
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial information extracted from the Balance
Sheet and Income Statement and is qualified in its entirety by reference to such
financial statements."
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> FEB-29-1996
<CASH> 503,328
<SECURITIES> 0
<RECEIVABLES> 3,610,944
<ALLOWANCES> 1,046,918
<INVENTORY> 6,011,066
<CURRENT-ASSETS> 9,548,107
<PP&E> 1,819,939
<DEPRECIATION> 1,144,406
<TOTAL-ASSETS> 10,991,333
<CURRENT-LIABILITIES> 8,590,664
<BONDS> 413,839
0
0
<COMMON> 131,520
<OTHER-SE> 2,269,149
<TOTAL-LIABILITY-AND-EQUITY> 10,991,333
<SALES> 6,578,047
<TOTAL-REVENUES> 6,626,699
<CGS> 4,676,216
<TOTAL-COSTS> 1,467,551
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 194,944
<INCOME-PRETAX> 312,091
<INCOME-TAX> 51,278
<INCOME-CONTINUING> 260,815
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 260,815
<EPS-PRIMARY> .21
<EPS-DILUTED> .20
</TABLE>
