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 October 31, 1997
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 1-6370
FRENCH FRAGRANCES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-0914138
(State of incorporation) (IRS Employer
Identification No.)
14100 N.W. 60th Avenue, Miami Lakes, Florida 33014
(Address of principal executive offices) (zip code)
(305) 818-8000
(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 [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date:
Outstanding at
Class December 1, 1997
---------------------------- -----------------
Common stock, $.01 par value 13,580,064 shares
<PAGE>
<PAGE>
FRENCH FRAGRANCES, INC.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
January 31, 1997 and October 31, 1997
Consolidated Statements of Income -
Three and Nine Months Ended October 31, 1996 and 1997
Consolidated Statements of Cash Flows -
Nine Months Ended October 31, 1996 and 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
<PAGE>
<TABLE>
FRENCH FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
January 31, October 31,
1997 1997
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 855,969 $ 3,460,142
Accounts receivable, net 33,762,541 83,406,167
Inventories 67,989,322 94,075,083
Advances on inventory purchases 3,441,020 7,230,697
Prepaid expenses and other assets 2,167,790 6,053,523
------------ ------------
Total current assets 108,216,642 194,225,612
------------ ------------
Investment in unconsolidated affiliate 2,104,218 --
------------ ------------
Restricted cash and investments 1,314,602 --
------------ ------------
Property and equipment, net 13,817,203 18,518,055
------------ ------------
Other assets:
Exclusive brand licenses and trademarks, net 45,126,465 43,615,604
Senior note offering costs, net -- 3,752,098
Deferred income taxes, net 955,805 1,030,403
Other intangibles and other assets 843,109 512,668
------------ ------------
Total other assets 46,925,379 48,910,773
------------ ------------
Total assets $172,378,044 $261,654,440
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 39,631,301 $ 15,180,134
Accounts payable - trade 37,329,059 37,309,516
Other payables and accrued expenses 10,600,000 16,056,709
Current portion of capital lease,
installment loans, mortgage and term note 1,308,370 2,226,797
Due to affiliates, net 1,613,989 294,136
------------ ------------
Total current liabilities 90,482,719 71,067,292
------------ ------------
Long-term liabilities:
Secured subordinated debentures 10,435,035 --
Subordinated debentures 11,080,000 7,080,000
Convertible subordinated debentures 5,460,000 5,460,000
Mortgage note 5,824,231 5,738,341
Term notes 3,285,915 1,000,000
Senior notes -- 115,000,000
Capital lease and installment loans 1,130,000 1,040,000
------------ ------------
Total liabilities 127,697,900 206,385,633
------------ ------------
<PAGE>
Commitments
Shareholders' equity:
Convertible, redeemable preferred stock,
Series B, $.01 par value (liquidation
preference of $.01 per share); 350,000
shares authorized; 316,005 and 279,877
shares issued and outstanding, respectively 3,160 2,799
Convertible, redeemable preferred stock,
Series C, $.01 par value (liquidation
preference of $.01 per share); 571,429
shares authorized; 571,429 and 544,485
shares issued and outstanding, respectively 5,714 5,445
Common stock, $.01 par value, 50,000,000
shares authorized; 13,249,152 and 13,533,321
shares issued and outstanding, respectively 132,492 135,333
Additional paid-in capital 29,185,161 30,173,270
Retained earnings 15,353,617 24,951,960
------------ ------------
Total shareholders' equity 44,680,144 55,268,807
------------ ------------
Total liabilities and shareholders' equity $172,378,044 $261,654,440
============ ============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
FRENCH FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
October 31 October 31,
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $60,819,795 $89,389,852 $103,938,394 $160,127,122
Cost of Sales 40,106,595 61,457,574 68,799,941 108,660,426
----------- ----------- ------------ ------------
Gross Profit 20,713,200 27,932,278 35,138,453 51,466,696
Operating Expenses
Warehouse and shipping 1,372,317 2,302,631 3,182,041 5,050,395
Selling, general and
administrative 7,508,249 8,714,735 14,662,464 19,392,164
Depreciation and
amortization 1,055,395 1,182,963 2,582,631 3,445,765
----------- ----------- ------------ ------------
Total operating
expenses 9,935,961 12,200,329 20,427,136 27,888,324
----------- ----------- ------------ ------------
Income from Operations 10,777,239 15,731,949 14,711,317 23,578,372
Other Income (Expense)
Interest expense, net (1,876,540) (3,756,256) (4,885,931) (8,575,198)
Other income (expense) 427,662 25,673 753,372 228,122
----------- ----------- ------------ ------------
Other income
(expense), net (1,448,878) (3,730,583) (4,132,559) (8,347,076)
----------- ----------- ------------ ------------
Income Before Equity in
Earnings of
Unconsolidated Affiliate
and Provisions for Income
Taxes 9,328,361 12,001,366 10,578,758 15,231,296
Equity in Earnings of
Unconsolidated Affiliate,
50% Owned 87,107 -- 329,542 134,508
----------- ----------- ------------ ------------
Income Before Income
Taxes 9,415,468 12,001,366 10,908,300 15,365,804
Provision for Income
Taxes 3,376,850 4,516,058 3,900,699 5,767,461
----------- ----------- ------------ ------------
Net Income $ 6,038,618 $ 7,485,308 $ 7,007,601 $ 9,598,343
=========== =========== ============ ============
<PAGE>
Earnings per common
share equivalent:
Primary $0.40 $0.47 $0.54 $0.61
===== ===== ===== =====
Fully diluted $0.39 $0.46 $0.53 $0.61
===== ===== ===== =====
Weighted average number
of common share
equivalents:
Primary 15,482,717 15,914,390 12,980,052 15,663,046
========== ========== ========== ==========
Fully diluted 15,636,768 16,301,230 13,134,639 15,857,689
========== ========== ========== ==========
See Notes to Consolidated Financial Statements
/TABLE
<PAGE>
<PAGE>
<TABLE>
FRENCH FRAGRANCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
October 31,
1996 1997
------------ ------------
<S> <C> <C>
Cash Flow From Operating Activities
Net Income $ 7,007,601 $ 9,598,343
Adjustments to reconcile net income to
cash provided by (used in) operating
activities:
Depreciation and amortization 2,582,631 3,445,765
Amortization of senior note offering
costs -- 180,232
Equity in earnings of unconsolidated
affiliate (329,542) (134,508)
Change in assets and liabilities, net of
effects from the acquisitions:
Increase in accounts receivable (38,299,003) (48,881,421)
Increase in inventories (34,903,284) (23,280,123)
Increase in advances on inventory
purchases (1,612,030) (3,789,677)
Decrease (increase) in prepaid expenses
and other current assets 1,045,855 (2,651,282)
Increase (decrease) in accounts payable 22,120,772 (537,040)
Increase in other payables and accrued
expenses 5,699,676 4,553,106
Decrease in due to affiliate, net (747,666) (14,507)
------------ ------------
Net cash used in operating activities (37,434,990) (61,511,112)
------------ ------------
Cash Flows From Investing Activities
Cash payment for acquisition of
unconsolidated affiliate, net of cash
acquired -- (1,745,768)
Receipt of restricted cash for capital
improvements -- 1,314,602
Cash portion of purchase of exclusive brand
license (18,997,935) --
Additions to property and equipment,
net of disposals (1,138,229) (5,627,389)
------------ ------------
Net cash used in investing activities (20,136,164) (6,058,555)
Cash Flows From Financing Activities
Proceeds from stock offering 18,014,626 --
Proceeds from the grant of stock purchase
warrants 40,000 --
Proceeds from the issuance of preferred
stock 5,714 --
Proceeds from the issuance of secured
subordinated debentures 3,000,035 --
Proceeds from the issuance of senior
notes, net -- 111,550,000
<PAGE>
Payments to retire subordinated debentures -- (14,394,475)
Proceeds from conversion of preferred stock -- 949,761
Advances from (payments to) unconsolidated
affiliate, net (19,459) 798,894
Proceeds from term loans 8,960,000 --
Payments on term loans (10,333,333) (4,333,333)
Net proceeds from (payments on) short-term
debt 35,256,649 (24,186,962)
Payments on capital lease and installment
loans (160,972) (111,144)
Payment of loans from shareholders (410,000) --
Proceeds from bridge and inventory loans 7,000,000 --
Payment of bridge and inventory loans (7,000,000) --
Proceeds from mortgage 4,000,000 --
Payments on mortgage (27,638) (98,901)
------------ ------------
Net cash provided by financing
activities 58,325,622 70,173,840
------------ ------------
Net Increase in Cash And Cash Equivalents 754,468 2,604,173
Cash And Cash Equivalents at
Beginning of Period 123,960 855,969
------------ ------------
Cash And Cash Equivalents at
End of Period $ 878,428 $ 3,460,142
============ ============
Supplemental Disclosure of Cash Flow
Information:
Interest paid during the period $ 3,919,136 $ 3,106,996
============ ============
Income taxes paid during the period $ 1,963,441 $ 7,987,622
============ ============
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<PAGE>
FRENCH FRAGRANCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS AND BASIS OF PRESENTATION
French Fragrances, Inc. (the "Company") is a manufacturer,
distributor and marketer of prestige designer fragrances and
related cosmetic products, primarily to mass-market retailers in
the United States.
The consolidated financial statements included herein have
been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission (the
"Commission") for interim financial information. As such
financial statements do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements, they should be read in
conjunction with the financial statements and related footnotes
included in the Company's Annual Report on Form 10-K for the year
ended January 31, 1997, filed with the Commission.
The consolidated balance sheet of the Company as of
January 31, 1997 is audited. The other consolidated financial
statements are unaudited, but in the opinion of management
contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the consolidated balance
sheet of the Company as of October 31, 1997, the consolidated
statements of income of the Company for the three and nine
months ended October 31, 1997 and 1996, and the consolidated
statements of cash flow for the nine months ended October 31,
1997 and 1996. Operating results for the three and nine months
ended October 31, 1997 are not necessarily indicative of the
results for the full fiscal year.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Earnings per Share - Earnings per share is based on the
weighted average number of common shares outstanding as
calculated under the treasury stock method and includes the
effect of the issuance of shares in connection with the assumed
exercise of dilutive stock options and warrants and the assumed
conversion of dilutive convertible preferred stock. Fully
diluted earnings per share reflects additional dilution due to
the use of the market price at the end of the period when higher
than the average market price for the period, including the
assumed conversion of the convertible subordinated debentures
with corresponding adjustments for interest expense, net of tax.
<PAGE>
<PAGE>
FRENCH FRAGRANCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards Number 128
"Earnings per Share" ("SFAS 128") which changes the method of
calculating earnings per share. SFAS 128 requires the
presentation of "basic" earnings per share and "diluted" earnings
per share on the face of the income statement. Basic earnings
per share is computed by dividing the net income available to
common shareholders by the weighted average shares of outstanding
common stock. The calculation of diluted earnings per share is
similar to basic earnings per share except that the denominator
includes dilutive common stock equivalents such as stock options
and warrants. The statement is effective for financial
statements for periods ending after December 15, 1997. The
Company will adopt SFAS 128 in the fourth quarter of fiscal 1998,
as early adoption is not permitted. The pro forma basic earnings
per share and diluted earnings per share calculated in accordance
with SFAS 128 for the three and nine months ended October 31,
1996 and 1997, are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
1996 1997 1996 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Pro forma basic earnings
per share $0.46 $0.56 $0.63 $0.72
Pro forma diluted earnings
per share $0.39 $0.45 $0.54 $0.60
</TABLE>
Segments of an Enterprise - In June 1997, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131 ("SFAS No. 131"), Disclosure about
Segments of an Enterprise and Related Information. The statement
is effective for financial statements for periods beginning after
December 15, 1997, and requires information about operating
segments in annual financial statements and selected information
about operating segments in interim financial reports issued to
shareholders. It also demands for related disclosure about
products and services, geographical areas, and major customers.
Management is in the process of evaluating the impact of SFAS No.
131 on its consolidated financial statements.
<PAGE>
<PAGE>
FRENCH FRAGRANCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. INVESTMENT IN UNCONSOLIDATED AFFILIATE
Investment in unconsolidated affiliate at January 31, 1997
represents the shareholder's equity (adjusted for the unamortized
exclusive distribution agreements relating to the brands
described below) corresponding to the Company's then 49.99%
interest in Fine Fragrances, Inc. ("Fine Fragrances"), a
fragrance distribution company which distributed on an exclusive
basis in the Unites States and Canada the Salvador Dali, Laguna,
Dalissime, Salvador, Dalimix, Taxi, Cafe and Watt brands
manufactured by COFCI, S.A. ("COFCI"). Prior to May 1997, the
Company's investment in Fine Fragrances was accounted for under
the equity method.
In May 1997, the Company used approximately $4,226,000 of
the net proceeds from a private placement (the "Offering") of
$115,000,000 principal amount of 10-3/8% Senior Notes Due 2007,
Series A (the "Series A Senior Notes") to acquire the 50.01%
interest of Fine Fragrances that the Company did not own (the
"Fine Fragrances Interest") from an unaffiliated third party and
to repay Fine Fragrances' credit line (see Note 10). The
purchase price for the Fine Fragrances Interest was $2,000,000,
plus an additional $1,000,000 which is to be paid over time based
on 5% of the net sales of COFCI products sold by Fine Fragrances
or the Company, with any unpaid balance due 30 days after the
third anniversary of the consummation of the transaction. As a
result of this acquisition, since May 1997, Fine Fragrances
became a wholly-owned subsidiary of the Company. The brands
manufactured by COFCI are distributed by the Company under new
ten year agreements.
NOTE 4. CURRENT LIABILITIES
In May 1997, the Company used approximately $48,595,000 of
the net proceeds from the Offering to repay all amounts
outstanding under its credit facility and terminated such
facility. Concurrently with the closing of the Offering, the
Company entered into a new stand-by credit facility (the "New
Credit Facility") with the same lender which provides for
borrowings on a revolving basis of up to $40,000,000, with a
$3,000,000 sublimit for letters of credit. Borrowings under the
New Credit Facility are limited to eligible accounts receivable
and inventories. Borrowings under the New Credit Facility will
be secured by a first priority lien on all of the Company's
accounts receivable and inventory. The Company's obligations
under the new credit facility will rank pari passu in right of
payment with the Senior Notes. The New Credit Facility contains
<PAGE>
<PAGE>
FRENCH FRAGRANCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. CURRENT LIABILITIES - Continued
several covenants, the more significant of which are that the
Company maintain a minimum level of equity and meet certain
debt-to-equity, interest coverage and liquidity ratios. The New
Credit Facility also includes a prohibition on the payment of
dividends and other distributions to shareholders and
restrictions on the incurrence of additional non-trade
indebtedness. At October 31, 1997, approximately $15,180,000 was
outstanding under the New Credit Facility.
In September 20, 1997, the Company informed Halston
Borghese, Inc. ("HBI"), the Holder of a $2,000,000 promissory
note (the "Term Note") which the Company issued in connection
with the March 1996 acquisition of the Halston brands, that it
was setting off the amounts due on the Term Note against the
amount of the Company's indemnification claim against HBI and its
affiliates for breach of the asset purchase agreement relating to
such acquisition. Since the amount of the Company's claim
exceeds any amounts which would be due under the Term Note absent
the claim, no payments under the note have been made. The amount
of the Term Note is reflected in Current portion of capital
lease, installment loans, mortgage and term note in the
Consolidated Balance Sheet at October 31, 1997.
NOTE 5. SUBORDINATED DEBENTURES
In May 1997, the Company used approximately $10,428,000 of
the net proceeds from the Offering to redeem its outstanding 8%
Secured Subordinated Debentures Due 2005 Series I and Series II
(plus accrued interest) which were issued in connection with the
March 1995 acquisition of a long-term license for the Geoffrey
Beene brands and the March 1996 acquisition of the Halston
brands. The Company also used approximately $3,982,000 of the
net proceeds from such offering to pay accrued interest and
purchase, at a discount, an 8.5% Subordinated Debenture Due 1999
in the principal amount of $4,000,000 which was issued in
connection with the acquisition of the assets of Fragrance
Marketing Group, Inc. in May 1996.
NOTE 6. INCOME TAXES
The provision for income taxes for the three and nine months
ended October 31, 1997 was calculated based upon the estimated
tax rate of 37.5% for the full fiscal year ending January 31,
1998.
<PAGE>
<PAGE>
FRENCH FRAGRANCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. RELATED PARTY TRANSACTIONS
At October 31, 1997, the Company had approximately $294,000
outstanding in advances from National Trading Manufacturing,
Inc., a company which is wholly-owned by the Chairman of the
Company ("National Trading"), which advances are reflected on the
balance sheet as Due to affiliates, net. Due to affiliates, net
at January 31, 1997 includes advances from Fine Fragrances, net
of repayments and management fees, of $1,095,345 and advances
from National Trading of $518,644. As a result of the
acquisition in May 1997 of the Fine Fragrances Interest, the
management agreement pursuant to which the Company was performing
management services on behalf of Fine Fragrances was terminated,
Fine Fragrances credit facility was terminated and advances from
Fine Fragrances to the Company were canceled. Accordingly, there
were no related party transactions between the Company and Fine
Fragrances for the three months ended October 31, 1997. See Note
3.
In April 1997, the Company terminated various monitoring
agreements it had with affiliates of the Company. Pursuant to
these agreements, the affiliates provided financial advisory
services to the Company for annual fees totaling $275,000. These
agreements were replaced by a consulting agreement (the
"Consulting Agreement") with E.S.B. Consultants, Inc. ("ESB"), a
Company wholly-owned by the President of the Company, pursuant to
which ESB provides financial advisory and management services for
a fee of $300,000. In November 1997, the Consulting Agreement
was terminated and the President became an employee of the
Company.
NOTE 8. STOCK OPTION PLANS
During the nine months ended October 31, 1997, the Company
granted options for 30,000 shares at an exercise price of $8.38
per share, options for 10,000 shares at an exercise price of
$8.75 per share and options for 7,500 shares at an exercise price
of $9.38 under the Company's 1995 Stock Option Plan. In
addition, the Company granted options for 30,000 shares at an
exercise price of $9.38 per share under the Company's
Non-Employee Director Stock Option Plan.
<PAGE>
<PAGE>
FRENCH FRAGRANCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. SHAREHOLDERS' EQUITY
A schedule of the transactions in the common stock
and the preferred stock of the Company and the additional paid-in
capital accounts during the nine months ended October 31, 1997 is
as follows:
<TABLE>
<CAPTION>
Preferred Stock Additional
Series B Series C Common Stock Paid-in
Shares Amount Shares Amount Shares Amount Capital
---------------- ---------------- --------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 31, 1997 316,005 $3,160 571,429 $5,714 13,249,152 $132,492 $29,185,161
Issuance of
Common Stock
upon conversion
of Series B and
Series C
convertible
preferred stock (36,128) (361) (26,944) (269) 284,169 2,841 988,109
------- ------ ------- ------ ---------- -------- -----------
Balance at
October 31, 1997 279,877 $2,799 544,485 $5,445 13,533,321 $135,333 $30,173,270
======= ====== ======= ====== ========== ======== ===========
</TABLE>
NOTE 10. SENIOR NOTE OFFERING
In May 1997, the Company consummated the private placement
of $115,000,000 principal amount of 10-3/8% Senior Notes, due
2007, Series A. Approximately $48,595,000 of the net proceeds
from the sale of the Series A Senior Notes was used to repay all
of the outstanding indebtedness under the Company's credit
facility and approximately $14,410,000 of the net proceeds was
used to repay subordinated debentures of the Company (see Notes 4
and 5). In addition, the Company applied approximately
$4,226,000 to the acquisition of the Fine Fragrances Interest and
the repayment of all of the outstanding indebtedness under
Fine Fragrances' credit facility (see Note 3). The balance of
the net proceeds from the Offering was used to provide the
Company with additional working capital support, as well as new
product distribution arrangements and other buying opportunities.
In July 1997, the Series A Senior Notes were exchanged for an
equivalent principal amount of 10-3/8% Senior Notes due 2007,
Series B (the "Series B Senior Notes") which contain identical
<PAGE>
<PAGE>
FRENCH FRAGRANCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. SENIOR NOTE OFFERING - Continued
terms to the Series A Senior Notes but have been registered under
the Securities Act of 1933, as amended.
The Indenture pursuant to which the Series A Senior Notes
(and the Series B Senior Notes following their exchange for the
Series A Senior Notes) were issued (the "Indenture") provides
that such notes will be senior unsecured obligations of the
Company and will rank senior in payment to all existing and
future subordinated indebtedness of the Company and pari passu in
right of payment with all existing and future senior indebtedness
of the Company, including indebtedness under the New Credit
Facility. The Indenture generally limits the ability of the
Company to (i) incur additional indebtedness, (ii) pay any
dividend or make any distribution on account of its capital stock
or other equity interest, (iii) purchase or redeem any capital
stock or equity interest of the Company, (iv) make any principal
payment, purchase or redeem subordinated indebtedness except at
scheduled maturities, or (v) make certain investments; in each
case subject to the satisfaction of a fixed charge coverage ratio
and, in certain cases, also a net income test. In addition, the
Indenture generally limits the ability of the Company to create
liens, merge or transfer or sell assets. The Indenture also
provides that the holders of the Series B Senior Notes have the
option to require the Company to repurchase their notes in the
event there is a change of control in the Company (as defined in
the Indenture).
The following unaudited information presents the Company's
pro forma operating data for the fiscal year ended January 31,
1997 and the nine months ended October 31, 1997 as if the
Offering of the Series A Senior Notes and the acquisition of the
Fine Fragrances Interest had been consummated at the beginning
of the period presented and include certain adjustments to the
historical consolidated statement of income of the Company to
give effect to the Offering and the use of proceeds relating
thereto. The unaudited pro forma financial data are not
indicative of the results of operations that would have been
achieved had the Offering been consummated prior to the period in
which it was completed, or that might be attained in the future.
<PAGE>
<PAGE>
FRENCH FRAGRANCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. SENIOR NOTE OFFERING - Continued
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS
JANUARY 31, 1997 OCTOBER 31, 1997
<S> <C> <C>
Net sales $147,762,000 $162,077,000
Cost of sales 98,495,000 109,711,000
------------ ------------
Gross profit 49,267,000 52,366,000
Operating expenses 29,680,000 28,305,000
------------ ------------
Income from operations 19,587,000 24,061,000
Interest expense, net (13,572,000) (10,379,000)
Other income and equity in
earnings of unconsolidated
affiliate 1,213,000 348,000
------------ ------------
Income before income taxes 7,228,000 14,030,000
Provision for income taxes 2,711,000 5,261,000
------------ ------------
Net income $ 4,517,000 $ 8,769,000
============ ============
<PAGE>
<PAGE>
FRENCH FRAGRANCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND
INVESTING ACTIVITIES
FFI incurred the following non-cash financing and investing
activities for the nine months ended October 31, 1996 and 1997.
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
1996 1997
<S> <C> <C>
Term Note issued in connection with
the Halston Acquisition $ 2,000,000
===========
7.5% Convertible Debentures issued in
connection with the Exchange Offer $ 5,460,000
===========
Redemption of 8% Debentures used to
pay for conversion of preferred stock $ 403,982 $ 40,559
=========== ==========
Note issued in connection with
acquisition of unconsolidated affiliate $1,000,000
==========
Acquisition of FMG assets:
Fair value of assets acquired excluding
inventory $14,552,489
===========
8.5% Debentures issued, net of discount $11,080,000
===========
Warrants issued $ 20,000
===========
Liabilities assumed $ 3,107,328
===========
Discharge of receivable and inventory
transferred $ 1,544,489
===========
Inventory acquired for other than cash $ 1,199,332
===========
Acquisition of unconsolidated affiliate:
Book value of assets acquired, excluding
inventory $2,296,051
==========
Liabilities assumed $3,156,895
==========
Inventory acquired $2,805,638
==========
</TABLE>
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
In connection with the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"), the
Company is hereby providing cautionary statements identifying
important factors that could cause the Company's actual results
to differ materially from those projected in forward-looking
statements (as such term is defined in the Reform Act) made
herein. Any statements that express, or involve discussions as
to, expectations, beliefs, plans, objectives, assumptions or
future events or performance (often, but not always, through the
use of words or phrases such as "will likely result," "are
expected to," "will continue," "is anticipated," "estimated,"
"intends," "plans" and "projection") are not historical facts and
may be forward-looking and, accordingly, such statements involve
estimates, assumptions, and uncertainties which could cause
actual results to differ materially from those expressed in the
forward-looking statements. Accordingly, any such statements are
qualified in their entirety by reference to, and are accompanied
by, the following key factors that have a direct bearing on the
Company's results of operations: the absence of contracts with
customers or certain suppliers; the Company's ability to
successfully integrate acquired businesses or new brands into the
Company; the impact of competitive products and pricing; the
substantial indebtedness and debt service obligations of the
Company; changes in the retail industry; and general economic and
business conditions. The Company cautions that the risk factors
described herein could cause actual results or outcomes to differ
materially from those expressed in any forward-looking statements
of the Company and that investors should not place undue reliance
on any such forward-looking statements. Further, any
forward-looking statement speaks only as of the date on which
such statement is made, and the Company undertakes no obligation
to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or
to reflect the occurrence of unanticipated events. New factors
emerge from time to time, and it is not possible for management
to predict all of such factors. Further, management cannot
assess the impact of each such factor on the Company's business
or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in
any forward-looking statements.
GENERAL
This discussion should be read in conjunction with the Notes
to Consolidated Financial Statements contained herein and
Management's Discussion and Analysis of Financial Condition and <PAGE>
<PAGE>
Results of Operations appearing in the Company's Form 10-K for
the year ended January 31, 1997. The results of operations for
an interim period may not give a true indication of results for
the year. In the following discussions, all comparisons are with
the corresponding items in the prior year.
RESULTS OF OPERATIONS
Three Months Ended October 31, 1997 Compared to the Three Months
Ended October 31, 1996
- -----------------------------------------------------------------
Net sales. Net sales increased $28.6 million, or 47%, to
$89.4 million for the three months ended October 31, 1997 from
$60.8 million for the three months ended October 31, 1996. The
increase in net sales was primarily attributable to the increase
in sales of prestige fragrance brands that are distributed by the
Company on a non-exclusive basis through direct purchase
relationships with manufacturers or other sources ("Distributed
Brands"), including through an increased selection of Distributed
Brands. The increase in net sales represents both an increase in
the volume of products sold to existing customers, as well as
sales to new customers. Management believes that increased sales
during the three months ended October 31, 1997, resulted
primarily from the Company's ability to provide its customers
with a larger selection of products and a continuous, direct
supply of products.
Gross Profit. Gross profit increased $7.2 million, or
34.9%, to $27.9 million for the three months ended October 31,
1997 from $20.7 million for the three months ended October 31,
1996. The increase in gross profit was primarily attributable to
the increase in net sales, particularly of the Distributed
Brands. Gross margins decreased from 34.1% to 31.2% primarily as
a result of the proportionally larger increase in sales of
Distributed Brands, which typically sell at lower margins than
the Company's owned or licensed brands such as the Halston and
Geoffrey Beene brands (collectively, the "Controlled Brands").
Warehouse and Shipping Expense. Warehouse and shipping
expenses increased $930,000, or 67.8%, to $2.3 million for the
three months ended October 31, 1997 from $1.4 million for the
three months ended October 31, 1996. The increase resulted
primarily from the increase in labor, warehouse lease and
freight costs, all of which were associated with the increase in
net sales.
<PAGE>
<PAGE>
SG&A. Selling, general and administrative expenses
increased $1.2 million, or 16.1%, to $8.7 million for the three
months ended October 31, 1997 from $7.5 million for the three
months ended October 31, 1996. Of the increase in selling,
general and administrative expenses, approximately $120,000
represented an increase in selling expenses largely as a result
of steps taken by the Company to increase the sell through
of its products through salary support programs with retailers
and market specialists which are generally less costly than
through commissioned sales representatives, and to shift
advertising and promotional expenses into market and retailer
specific advertising and promotions, which are generally less
costly than through the use of national media. The increase in
general and administrative expenses was primarily a result of the
termination of the management fees derived from Fine Fragrances,
Inc. ("Fine Fragrances") following the May 1997 acquisition (the
"Fine Acquisition") of the 50.01% interest in Fine Fragrances
that the Company did not own (which had reduced general and
administrative expenses in the prior year's period), the addition
of administrative personnel, the reserve for management incentive
compensation resulting from the increase in pre-tax income and
increased insurance costs. See Note 7 to Notes to Consolidated
Financial Statements.
Depreciation and Amortization. Depreciation and
amortization increased $128,000, or 12.1%, to $1.2 million for
the three months ended October 31, 1997 from $1.1 million for the
three months ended October 31, 1996. The increase was primarily
attributable to the depreciation of costs related to (i)
improvements to the Miami Lakes facility, (ii) new machinery and
equipment, and (iii) new tools and molds necessary for the
manufacture of products, including gift sets, and the
amortization of the new license agreement for the distribution of
the brands manufactured by COFCI S.A. ("COFCI") following the
Fine Acquisition. See Note 3 to Notes to Consolidated Financial
Statements.
Interest Expense, Net. Interest expense, net of interest
income, increased $1.9 million, or 100.2% to $3.8 million for the
three months ended October 31, 1997 from $1.9 million for the
three months ended October 31, 1996. This increase was primarily
due to the increase in average debt outstanding resulting from
the May 1997 offering (the "Debt Offering") of $115,000,000
principal amount of 10-3/8% Senior Notes Due 2007, Series A (the
"Series A Senior Notes"). During the three months ended October
31, 1997, the Company had approximately $191,000 of interest
income resulting from the investment of the excess proceeds from
the Debt Offering. See "Financial Condition."
<PAGE>
<PAGE>
Net Income. Net income increased $1.5 million, or 24.0%, to
$7.5 million for the three months ended October 31, 1997 from
$6.0 million for the three months ended October 31, 1996, as a
result of the increase in net sales and EBITDA, partially offset
by the increase in interest expense.
Net Income Per Share. Net income per share on a primary
basis increased to $0.47 for the three months ended October 31,
1997, compared to $.40 per share for the three months ended
October 31, 1996 as a result of the increase in net income.
EBITDA. EBITDA (operating income, plus depreciation and
amortization) increased $5.1 million, or 43%, to $16.9 million
for the three months ended October 31, 1997 from $11.8 million
for the three months ended October 31, 1996. The EBITDA margin
decreased to 18.9% for the three months ended October 31, 1997
from 19.5% for the three months ended October 31, 1996. The
increase in EBITDA is primarily attributable to the increase in
gross profit and the decrease in selling, general and
administrative expenses as a percentage of net sales. The
decrease in EBITDA margin is primarily attributable to the
decrease in gross margin discussed above, partially offset by the
decrease in selling, general and administrative expenses
as a percentage of net sales.
Nine Months Ended October 31, 1997 Compared to the Nine Months
Ended October 31, 1996
- -----------------------------------------------------------------
Net sales. Net sales increased $56.2 million, or 54.1%, to
$160.1 million for the nine months ended October 31, 1997 from
$103.9 million for the nine months ended October 31, 1996. The
increase in net sales was primarily attributable to (i) increased
sales of Distributed Brands, (ii) increased sales of the Halston
fragrance brands following their acquisition in March 1996 (the
"Halston Acquisition"), and (iii) the addition of the net sales
of the COFCI fragrance products following the Fine Acquisition in
May 1997 (which was previously accounted for under equity in
earnings of unconsolidated affiliate, 50% owned). See Note 3 to
Notes to Consolidated Financial Statements. The increase in net
sales represents both an increase in the volume of products sold
to existing customers, as well as sales to new customers.
Management believes that increased sales have resulted from the
Company's ability to provide its customers with a larger
selection of products and a continuous, direct supply of
products, and the growth in sales of customized gift sets.
<PAGE>
<PAGE>
Gross Profit. Gross profit increased $16.3 million, or
46.5%, to $51.4 million for the nine months ended October 31,
1997 from $35.1 million for the nine months ended October 31,
1996. The increase in gross profit was primarily attributable to
the product sales from the Halston, Geoffrey Beene, COFCI brands
and the brands formerly distributed by Fragrance Marketing Group,
Inc. ("FMG") following the May 1996 acquisition of the assets of
FMG (the "FMG Acquisition") and the increased sales of
Distributed Brands. Gross margins decreased from 33.8% to 32.1%
primarily as a result of a proportionally larger increase in
sales of Distributed Brands, which typically sell at lower
margins than sales of the Controlled Brands.
Warehouse and Shipping Expense. Warehouse and shipping
expenses increased $1.9 million, or 58.7%, to $5.1 million for
the nine months ended October 31, 1997 from $3.2 million for the
nine months ended October 31, 1996. The increase resulted
primarily from the increase in labor, warehouse lease,
shipping materials and freight costs, all of which were
associated with the increase in net sales, and an increase in
inventory reserve for shrinkage and obsolescence.
SG&A. Selling, general and administrative expenses
increased $4.7 million, or 32.3%, to $19.4 million for the nine
months ended October 31, 1997 from $14.7 million for the nine
months ended October 31, 1996. Of the increase in selling,
general and administrative expenses, approximately $2.6 million
represented an increase in selling expenses, primarily as a
result of increased advertising and promotional expenses, the
addition of sales and marketing personnel and salary support
programs with retailers, partially offset by the decrease in
sales commissions and national media advertising costs. The
increase in general and administrative expenses was primarily a
result of the addition of administrative personnel, the
termination of the management fees derived from Fine Fragrances
following the Fine Acquisition (which had reduced general and
administrative expenses in the prior year's period), the reserve
for management incentive compensation resulting from the increase
in pre-tax income, increased insurance costs and an increase in
the provision for bad debt.
Depreciation and Amortization. Depreciation and
amortization increased $860,000, or 33.4%, to $3.4 million for
the nine months ended October 31, 1997 from $2.6 million for the
nine months ended October 31, 1996. The increase was primarily
attributable to increased amortization of trademarks and
exclusive license agreements resulting from the Halston
Acquisition and the FMG Acquisition and the depreciation of costs
related to (i) improvements to the Miami Lakes facility, (ii) new
machinery and equipment, and (iii) tools and molds used in
connection with the manufacture of products, including gift sets.
<PAGE>
<PAGE>
Interest Expense, Net. Interest expense, net of interest
income, increased $3.7 million, or 75.5% to $8.6 million for the
nine months ended October 31, 1997 from $4.9 million for the nine
months ended October 31, 1996. This increase was primarily due
to the increase in average debt outstanding resulting from the
Offering of the Series A Senior Notes. During the nine months
ended October 31, 1997, the Company had approximately $415,000 of
interest income resulting from the investment of the excess
proceeds from the Debt Offering.
Net Income. Net income increased $2.6 million, or 37.0%, to
$9.6 million for the nine months ended October 31, 1997 from $7.0
million for the nine months ended October 31, 1996, primarily as
a result of the increase in net sales, which were partially
offset by higher interest, selling, general and administrative
and amortization expenses.
Net Income Per Share. Net income per share on a primary
basis increased to $0.61 for the nine months ended October 31,
1997, compared to $0.54 per share for the nine months ended
October 31, 1996, primarily as a result of the increase in net
income, which was partially offset by the increased number of
outstanding shares to give effect to the Company's public
offering of 3,364,000 shares of common stock in July 1996.
EBITDA. EBITDA (operating income, plus depreciation and
amortization) increased $9.7 million, or 56.3%, to $27.0 million
for the nine months ended October 31, 1997 from $17.3 million for
the nine months ended October 31, 1996. The EBITDA margin
increased to 16.9% for the nine months ended October 31, 1997
from 16.6% for the nine months ended October 31, 1996. The
increases in EBITDA and EBITDA margin were primarily attributable
to the decrease in selling, general and administrative expenses
as a percentage of net sales.
Financial Condition
In May 1997, the Company consummated the Debt Offering of
$115,000,000 principal amount of the Series A Senior Notes. See
Note 10 to Notes to Consolidated Financial Statements. In July
1997, the Series A Senior Notes were exchanged for an equivalent
principal amount of 10-3/8% Senior Notes due 2007, Series B (the
"Series B Senior Notes") which contain identical terms to the
Series A Senior Notes but have been registered under the
Securities Act of 1933, as amended. Approximately $48,595,000 of
the net proceeds from the sale of the Series A Senior Notes was
used to repay all of the outstanding indebtedness under the
Company's credit facility (including amounts outstanding under a
term loan issued in connection with the acquisition of a
long-term license for the Geoffrey Beene fragrance brands in
March 1995 (the "Geoffrey Beene Acquisition") and such credit <PAGE>
<PAGE>
facility was terminated. Approximately $10,428,000 of the net
proceeds was used to repay the Company's 8% Secured Subordinated
Debentures Series I and II (plus accrued interest) which were
issued in connection with the Geoffrey Beene Acquisition and the
Halston Acquisition. Approximately $3,982,000 of the net
proceeds was used to pay accrued interest and purchase, at a
discount, an 8.5% Subordinated Debenture due 1999 which was
issued in connection with the FMG Acquisition. In addition,
approximately $4,226,000 of the net proceeds was used for the
Fine Acquisition and to repay Fine Fragrances' bank credit line.
The balance of the net proceeds from the Debt Offering has been
used during the three months ended October 31, 1997 for inventory
purchases of Distributed Brands on favorable terms (including
through new distribution arrangements or other buying
opportunities) and for working capital support. At October 31,
1997, the Company had utilized all of the net proceeds from the
Debt Offering, although the Company retains the flexibility to
access the New Credit Facility for working capital support and
general corporate purposes as discussed below.
The Indenture pursuant to which the Series A Senior Notes
(and the Series B Senior Notes following their exchange for the
Series A Senior Notes) were issued (the "Indenture") provides
that such notes will be senior unsecured obligations of the
Company and will rank senior in payment to all existing and
future subordinated indebtedness of the Company and pari passu in
right of payment with all existing and future senior indebtedness
of the Company, including indebtedness under the New Credit
Facility. The Indenture generally limits the ability of the
Company to (i) incur additional indebtedness, (ii) pay any
dividend or make any distribution on account of its capital stock
or other equity interest, (iii) purchase or redeem any capital
stock or equity interest of the Company, (iv) make any principal
payment, purchase or redeem subordinated indebtedness except at
scheduled maturities, or (v) make certain investments, in each
case, subject to the satisfaction of a fixed charge coverage
ratio and, in certain cases, also a net income test. In
addition, the Indenture generally limits the ability of the
Company to create liens, merge or transfer or sell assets. The
Indenture also provides that the holders of the Series B Senior
Notes have the option to require the Company to repurchase their
notes in the event there is a change of control in the Company.
Concurrently with the closing of the Debt Offering, the
Company entered into a new stand-by credit facility (the "New
Credit Facility") with Fleet National Bank ("Fleet") which
provides for borrowings on a revolving basis of up to $40 million
(including up to $3 million in commercial letters of credit) for
general corporate purposes, including working capital needs and
acquisitions, subject to certain borrowing base limitations.
Amounts borrowed on the revolving portion of the New Credit <PAGE>
<PAGE>
Facility mature on May 31, 1999. Loans under the revolving credit
portion of the Credit Facility will bear interest, payable
monthly, at a floating rate ranging from, at the option of the
Company, either (i) 1.75% over LIBOR to 2.25% over LIBOR or (ii)
the prime rate as quoted by Fleet to 0.5% over such prime rate,
and combinations thereof, in each case depending on the ratio of
the Company's total funded debt to its shareholders equity base.
The Company's borrowing availability under the New Credit
Facility is limited to the sum of between 80 to 85% of eligible
accounts receivable and 50% of eligible inventory (up to a
maximum of $20 million). The Company's obligations under the New
Credit Facility will rank pari passu in right of payment with the
Series B Senior Notes and senior in right of payment to all
existing and future subordinated indebtedness of the Company.
In addition, borrowings under the New Credit Facility are secured
by a first priority lien on all of the Company's accounts
receivable and inventory. See Note 4 to Notes to Consolidated
Financial Statements.
The New Credit Facility: restricts the Company's ability to
incur additional non-trade debt (with certain exceptions,
including indebtedness not exceeding $50 million for a fiscal
year issued in connection with certain asset purchases), and to
enter into certain acquisitions, mergers, investments and
affiliated transactions; and prohibits the declaration or payment
of dividends on, or the redemption of, the Company's capital
stock, certain payments on the subordinated debt and the sale of
the Company's interest in its subsidiaries. The New Credit
Facility also contains covenants requiring the Company to
maintain a minimum shareholders' equity, a maximum leverage
ratio, and minimum debt service and interest coverage ratios.
Including the effect of outstanding letters of credit, at October
31, 1997, the Company had approximately $24.1 million available
under the New Credit Facility for additional working capital
support and general corporate purposes.
During the nine months ended October 31, 1997, accounts
receivable increased significantly as a result of the increase of
net sales for the holiday season. During the nine months ended
October 31, 1997, the Company continued to increase its
inventories primarily as a result of the inventory purchases of
Distributed Brands through new arrangements and other buying
opportunities which the Company has made to increase its market
share with certain of its larger customers. During the nine
months ended October 31, 1997, the Company incurred approximately
$5.6 million in capital expenditures, primarily for the
renovation of the facility in Miami Lakes, a new software system
which it plans to implement in February 1998, a new racking
system, a pick/conveyor system, and furniture and fixtures. The
increase in capital expenditures was the primary factor
accounting for the increase in other payables during the nine
months ended October 31, 1997.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------- --------------------------------------------------
3.1 Amended and Restated Articles of Incorporation of
the Company dated March 6, 1996 (incorporated
herein by reference to Exhibit 3.1 filed as a part
of the Company's Form 10-K for the fiscal year
ended January 31, 1996 (Commission File
No. 1-6370)).
3.2 Amendment dated September 19, 1996 to the Amended
and Restated Articles of Incorporation of the
Company (incorporated by reference to Exhibit 4.4
filed as part of the Company's Form 10-Q for the
quarter ended October 31, 1996 (Commission
File No. 1-6370)).
3.3 By-Laws of the Company (incorporated herein by
reference to Exhibit 3.2 filed as a part of the
Company's Form 10-K for the fiscal year ended
January 31, 1996 (Commission File No. 1-6370)).
4.1 Indenture, dated as of May 13, 1997, between the
Company and Marine Midland Bank, as trustee
(incorporated herein by reference to Exhibit 4.1
filed as a part of the Company's Form 8-K dated
May 13, 1997 (Commission File No. 1-6370)).
4.2 Credit Agreement, dated as of May 13, 1997,
between the Company and Fleet National Bank
(incorporated herein by reference to Exhibit 4.3
filed as a part of the Company's Form 8-K dated
May 13, 1997 (Commission File No. 1-6370)).
10.1 Registration Rights Agreement dated as of
November 30, 1995, among the Company, Bedford
Capital Corporation ("Bedford"), Fred Berens,
Rafael Kravec and Eugene Ramos (incorporated
herein by reference to Exhibit 10.1 filed as a
part of the Company's Form 10-K for the fiscal
year ended September 30, 1995 (Commission File
No. 1-6370)).
<PAGE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Continued
Exhibit
Number Description
------- --------------------------------------------------
10.2 Amendment dated as of March 20, 1996 to
Registration Rights Agreement dated as of
November 30, 1995, among the Company, Bedford,
Fred Berens, Rafael Kravec and Eugene Ramos
(incorporated herein by reference to Exhibit 10.2
filed as a part of the Company's Form 10-K for the
year ended January 31, 1996 (Commission File
No. 1-6370)).
10.3 Second Amendment dated as of July 22, 1996 to
Registration Rights Agreement dated as of
November 30, 1995, among the Company, Bedford,
Fred Berens, Rafael Kravec and the Estate of
Eugene Ramos (incorporated by reference to Exhibit
10.3 filed as part of the Company's Form 10-Q for
the quarter ended July 31, 1996 (Commission File
No. 1-6370)).
10.4 Employment Agreement dated as of April 1, 1997,
between the Company and Rafael Kravec
(incorporated herein by reference to Exhibit 10.4
filed as a part of the Company's Form 10-K for the
fiscal year ended January 31, 1997 (Commission
File No. 1-6370)).
10.5 Non-Employee Director Stock Option Plan
(incorporated herein by reference to Exhibit 10.4
filed as a part of the Company's Form 10-K for the
fiscal year ended September 30, 1995 (Commission
File No. 1-6370)).
10.6 1995 Stock Option Plan (incorporated herein by
reference to Exhibit 10.5 filed as a part of the
Company's Form 10-K for the fiscal year ended
September 30, 1995 (Commission File No. 1-6370)).
10.7 Lease Agreement, dated as of July 2,1992, between
FFI and National Trading (incorporated herein by
reference to Exhibit 10.13 filed as a part of the
Company's Form 10-K for the fiscal year ended
September 30, 1995 (Commission File No. 1-6370)).
<PAGE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Continued
Exhibit
Number Description
------- --------------------------------------------------
10.8 Option Agreement, dated July 2, 1992, between FFI
and National Trading and Memorandum of Lease and
Option Agreement related thereto (incorporated
herein by reference to Exhibit 10.14 filed as a
part of the Company's Form 10-K for the fiscal
year ended September 30, 1995 (Commission File No.
1-6370)).
10.9 Amended and Restated Exclusive Trademark License
Agreement, dated February 29, 1980, between
Geoffrey Beene, Inc., and Epocha Distributors,
Inc. (now known as Sanofi Beaute, Inc.) as
amended July 29, 1992 and February 13, 1995
(incorporated herein by reference to Exhibit 10.15
filed as a part of the Company's Form 10-K for the
fiscal year ended September 30, 1995 (Commission
File No. 1-6370)).
10.10 Asset Purchase Agreement dated as of February 1,
1996, by and between the Company and
Halston-Borghese, Inc. and its affiliates
(incorporated herein by reference to Exhibit 2.1
filed as a part of the Company's Form 8-K dated
March 20, 1996 (Commission File No. 1-6370)).
10.11 Asset Purchase Agreement dated as of April 17,
1996, by and between the Company and Fragrance
Marketing Group, Inc. and Rene Garcia and
Jose Miguel Norona, including the forms of
Debentures and Seller's Warrant related thereto
(incorporated herein by reference to Exhibit
10.21(a) filed as a part of the Company's
Registration Statement on Form S-1 dated May 3,
1996 (Registration Statement No. 333-4588)).
10.12 Amendment to Asset Purchase Agreement dated as of
May 14, 1996, by and between the Company and
Fragrance Marketing Group, Inc. and Rene Garcia
and Jose Miguel Norona (incorporated herein by
reference to Exhibit 2.2 filed as a part of the
Company's Form 8-K dated May 14, 1996 (Commission
File No. 1-6370)).
<PAGE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Continued
Exhibit
Number Description
------- --------------------------------------------------
10.13 Amendment to Asset Purchase Agreement dated as of
July 1, 1996, by and between the Company and
Fragrance Marketing Group, Inc. and Rene Garcia
and Jose Miguel Norona (incorporated by reference
to Exhibit 4.4 filed as part of the Company's Form
10-Q for the quarter ended October 31, 1996
(Commission File No. 1-6370)).
27.1 Financial Data Schedule.
- ------------------
The foregoing list omits instruments defining the rights of
holders of long term debt of the Company where the total amount
of securities authorized thereunder does not exceed 10% of the
total assets of the Company. The Company hereby agrees to
furnish a copy of each such instrument or agreement to the
Commission upon request.
(b) Reports on Form 8-K.
None.
<PAGE>
<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.
FRENCH FRAGRANCES, INC.
Date: December 3, 1997 /s/ Rafael Kravec
---------------- ----------------------------
Rafael Kravec
Chairman and Chief Executive
Officer
(Principal Executive Officer)
Date: December 3, 1997 /s/ William J. Mueller
---------------- ----------------------------
William J. Mueller
Vice President-Operations, Chief
Financial Officer
(Principal Financial and Accounting
Officer)
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