-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vddau0a37T7X8MYx7fPMmcFeHjqphyvWOvzQL4spvVqN6K0ON2ZxyFdKwR3pDq4a ewfOB7EvIhkB0Hc9tjzFzQ== 0000889812-97-001708.txt : 19970814 0000889812-97-001708.hdr.sgml : 19970814 ACCESSION NUMBER: 0000889812-97-001708 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: JEAN PHILIPPE FRAGRANCES INC CENTRAL INDEX KEY: 0000822663 STANDARD INDUSTRIAL CLASSIFICATION: PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS [2844] IRS NUMBER: 133275609 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16469 FILM NUMBER: 97658891 BUSINESS ADDRESS: STREET 1: 551 FIFTH AVE STE 1500 CITY: NEW YORK STATE: NY ZIP: 10176 BUSINESS PHONE: 2129832640 MAIL ADDRESS: STREET 1: 551 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10176 10-Q 1 QUARTERLY REPORT UNITED STATES 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 June 30, 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 No. 0-16469 JEAN PHILIPPE FRAGRANCES, INC. (Exact name of registrant as specified in its charter) Delaware 13-3275609 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 551 Fifth Avenue, New York, New York 10176 (Address of Principal Executive Offices) (Zip Code) Registrants telephone number, including area code: (212) 983-2640. 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 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 issuers classes of common stock, as of the latest practicable date. At August 12, 1997 there were 9,184,781 shares of common stock, par value $.001 per share, outstanding. JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES INDEX Page Number Part I. Financial Information Item I. Financial Statements 1 Consolidated Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996 (audited) 2 Consolidated Statements of Income for the Three Month and Six Month Periods Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited) 3 Consolidated Statements of Cash Flows for the Six Month Periods Ended June 30, 1997 (unaudited) and June 30, 1996 (unaudited) 4 Notes to Unaudited Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Part II. Other Information 9 Signatures 9 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Part I. Financial Information Item I. Financial Statements In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented. Such financial statements have been condensed in accordance with the rules and regulations of the Securities and Exchange Commission and therefore, do not include all disclosures required by generally accepted accounting principles. These financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 1996 included in the Company's annual report filed on Form 10-K. The results of operations for the six months ended June 30, 1997 are not necessarily indicative of the results to be expected for the entire fiscal year. Page 1 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS June 30, December 31, 1997 1996 ------------ ------------ Current assets: Cash and cash equivalents $ 20,725,527 $ 20,205,393 Accounts receivable, net 25,425,420 25,136,555 Inventories 24,930,963 23,327,815 Receivables, other 948,708 1,124,160 Other 1,052,862 1,057,092 Deferred tax benefit 1,651,361 1,875,218 ------------ ------------ Total current assets 74,734,841 72,726,233 Equipment and leasehold improvements, net 1,786,413 1,734,554 Other assets 1,586,720 1,859,837 Intangible assets, net 8,421,686 9,264,585 ------------ ------------ $ 86,529,660 $ 85,585,209 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Loans payable, banks $ 7,984,746 $ 9,467,954 Accounts payable 19,007,660 14,740,145 Due to broker 1,984,000 Income taxes payable 2,041,428 1,950,619 ------------ ------------ Total current liabilities 31,017,834 26,158,718 ------------ ------------ Long-term debt, less current portion 432,143 484,924 ------------ ------------ Minority interests 5,278,571 5,575,954 ------------ ------------ Shareholders' equity: Common stock, $.001 par; authorized 30,000,000 shares; outstanding 9,184,781 and 9,602,481 shares at June 30, 1997 and December 31, 1996, respectively 9,185 9,602 Additional paid-in capital 20,685,873 20,685,873 Retained earnings 39,669,568 38,223,179 Foreign currency translation adjustment (1,995,368) 390,032 Treasury stock, at cost, 1,653,703 and 1,236,003 shares at June 30, 1997 and December 31, 1996, respectively (8,568,146) (5,943,073) ------------ ------------ 49,801,112 53,365,613 ------------ ------------ $ 86,529,660 $ 85,585,209 ============ ============ See notes to financial statements. Page 2 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Net sales $21,847,174 $22,582,754 $42,816,263 $45,885,030 Cost of sales 11,596,403 12,588,684 22,518,951 24,798,367 ----------- ----------- ----------- ----------- Gross margin 10,250,771 9,994,070 20,297,312 21,086,663 Selling, general and administrative 8,366,747 8,039,478 16,456,288 15,911,499 Loss on relinquishment of license 1,300,000 ----------- ----------- ----------- ----------- Income from operations 1,884,024 1,954,592 2,541,024 5,175,164 ----------- ----------- ----------- ----------- Other charges (income): Interest 152,027 197,519 334,088 407,826 Loss on foreign currency 27,599 125,895 61,423 146,138 Interest and dividend (income) (138,082) (122,190) (346,534) (263,302) (Gain) on sale of stock of subsidiary, net (13,752) (13,752) ----------- ----------- ----------- ----------- 41,544 187,472 48,977 276,910 ----------- ----------- ----------- ----------- Income before income taxes 1,842,480 1,767,120 2,492,047 4,898,254 Income taxes 561,613 374,314 725,235 1,429,434 ----------- ----------- ----------- ----------- Net income before minority interest 1,280,867 1,392,806 1,766,812 3,468,820 Minority interest in net income of consolidated subsidiary 175,262 115,185 320,423 418,376 ----------- ----------- ----------- ----------- Net income $ 1,105,605 $ 1,277,621 $ 1,446,389 $ 3,050,444 =========== =========== =========== =========== Net income per common and common equivalent share $0.12 $0.13 $0.15 $0.30 =========== =========== =========== =========== Number of common and common equivalent shares outstanding 9,545,285 10,148,168 9,575,345 10,115,963 =========== =========== =========== ===========
See notes to financial statements. Page 3 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended June 30, 1997 1996 ----------- ----------- Operating activities: Net income $ 1,446,389 $ 3,050,444 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 633,381 709,055 Noncash portion of loss on relinquishment of license 1,200,731 Gain on sale of stock of subsidiary (13,672) Minority interest in net income 320,423 416,045 Increase (decrease) in cash from changes in: Accounts receivable (2,235,228) (4,036,793) Inventories (3,046,892) (1,902,104) Other assets 130,040 (1,839,341) Deferred tax benefit 145,707 1,510,016 Accounts payable 5,267,201 4,101,180 Income taxes payable 229,842 (758,917) ----------- ----------- Net cash provided by operating activities 4,091,594 1,235,913 ----------- ----------- Investing activities: Purchase of equipment and leasehold improvements (487,001) (291,132) Trademark and license acquisitions (1,010,700) (10,825) Proceeds from sale of equipment 50,000 Proceeds from sale of trademark 1,575,000 ----------- ----------- Net cash provided by (used in) investing activities (1,447,701) 1,273,043 ----------- ----------- Financing activities: (Decrease) in loan payable, bank (639,789) (645,594) Purchase of treasury stock (641,491) (1,083,363) ----------- ----------- Net cash (used in) financing activities (1,281,280) (1,728,957) ----------- ----------- Effect of exchange rate changes on cash (842,476) (220,900) ----------- ----------- Increase in cash and cash equivalents 520,137 559,099 Cash and cash equivalents at beginning of period 20,205,391 14,203,713 ----------- ----------- Cash and cash equivalents at end of period $20,725,528 $14,762,812 =========== =========== Supplemental disclosure of cash flows information: Cash paid during the period for: Interest $329,000 $405,000 Income taxes 350,000 883,000 See notes to financial statements. Page 4 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Notes to Unaudited Financial Statements 1. Significant Accounting Policies: The accounting policies followed by the Company are set forth in the notes to the Company's financial statements included in its Form 10-K, which was filed with the Securities and Exchange Commission for the year ended December 31, 1996. 2. Earnings Per Share: Net income per common and common equivalent share is based on the weighted average number of common and common equivalent shares outstanding during each period. Common equivalent shares, which consist of unissued shares under options, are included in the computation when the results are dilutive. 3. Inventories: Inventories consist of the following: June 30, December 31, 1997 1997 ----------- ----------- Raw materials and component parts $10,756,475 $10,738,100 Finished goods 14,174,488 12,589,715 ----------- ----------- $24,930,963 $23,327,815 =========== =========== Page 5 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's business strategy of building core volume and profitability, developing products in new categories, exploring strategic acquisition opportunities, and pursuing expansion in international markets, remains as management's primary long-term focus. The Company's decision to relinquish its Cutex(R) license was an integral part of a planned restructuring of the Company's domestic operations. As a result, the Company has now more efficiently focused its resources on its profitable core fragrance business in the United States and around the world. Three and Six Months Ended June 30, 1997 Compared to the June 30, 1996 Periods Net sales for the three months ended June 30, 1997 aggregated $21.8 million, as compared to $22.6 million for the corresponding quarter of the prior year. Net sales for the six months ended June 30, 1997 aggregated $42.8 million, as compared to $45.9 million for the corresponding period of the prior year. On April 30, 1997, the Company closed on its agreement with Carson, Inc., whereby the Company relinquished its Cutex nail and lip products license. As such, the 1997 periods only include sales of Cutex products through April 30, 1997. The Company's Alternative Designer Fragrance lines continued to be affected in 1997 by heavy discounting by certain competitors, which commenced in the fourth quarter of 1996. In January 1997, the Company matched the competition's pricing structure and has regained much of the market share initially lost as a result of such price competition. The Company lowered its selling prices after completion of its newly developed program of product value analysis, which assured the Company that gross margins would not be affected in the long-term. The positive impact of the measures taken is expected to be realized in the second half of 1997. Sales generated by the Company's French subsidiaries increased 50% for the three months ended June 30, 1997 and 21% for the six months ended June 30, 1997, as compared to the corresponding periods of the prior year. At comparable foreign currency exchange rates, sales by the Company's French subsidiaries increased 67% and 35% for the three and six month periods ended June 30, 1997, respectively, as compared to the corresponding periods of the prior year. Recent new product introductions and product line enhancements with respect to the Company's Burberrys line have been very successful and continue to achieve substantial growth. Page 6 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Gross profit margins were 47% of sales for both the three and six month periods ended June 30, 1997, as compared to 44% and 46% for the three and six month periods ended June 30, 1996, respectively. As previously mentioned, in response to heavy discounting by certain competitors in the Alternative Designer Fragrance lines, the Company developed a program of product value analysis, which enabled the Company to match the competition's pricing structure without affecting gross margin in the long-term. Gross margin in the first and second quarters of 1997 has been affected by the lower selling prices put into effect in January 1997. The positive impact of the measures taken is expected to be realized in the second half of 1997. However, the effect of the aforementioned lower selling prices was offset during the six months ended June 30, 1997 by increased margins from the Company's French subsidiaries. Such increased margins resulted from the sale of products to customers outside of France in US dollars, thereby benefitting from the substantial rise of the US dollar relative to the French franc. Selling, general and administrative expenses aggregated $8.4 million and $16.5 million for the three and six month periods ended June 30, 1997, respectively, as compared to $8.0 million and $15.9 million for the three and six month periods ended June 30, 1996, respectively. Such increases resulted from selling expenses incurred by the Company's French subsidiaries to support new product line introductions and build specific brand awareness. Such promotional activity has enabled the Company's French subsidiaries to achieve excellent revenue growth and should provide support for future revenue growth. As a result of the April 30, 1997 relinquishment of the Cutex license, the Company has restructured its domestic operations and reduced its domestic work force in excess of 20%. In addition, the Company has taken a pre-tax charge against earnings of $1.3 million in the first quarter of 1997 to write-off intangible assets and other expenses relating to the relinquishment of the Cutex license. Domestically, selling general and administrative expenses declined, both in the aggregate and as a percentage of sales, during the three and six month periods ending June 30, 1997, as compared to the corresponding periods of the prior year. Interest expense aggregated $152,000 and $334,000 for the three and six month periods ended June 30, 1997, respectively, as compared to $198,000 and $408,000 for the corresponding periods of the prior year. The Company uses its available credit lines, as needed, to finance its working capital needs. The Company's effective income tax rate was 29% for both the six months ended June 30, 1997 and 1996. Both the 1997 and 1996 rates were favorably impacted by reductions of valuation reserves on deferred tax assets, relating to the utilization of net operating loss carryforwards, made available to the Company's foreign subsidiaries as a result of the March 1996 sale of the Bal a Versailles trademarks. Page 7 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Net income was $1.1 million or $0.12 per share for the three months ended June 30, 1997, as compared to $1.3 million or $0.13 per share for the three months ended June 30, 1996. Net income was $1.4 million or $0.15 per share for the six months ended June 30, 1997, as compared to $3.1 million or $0.30 per share for the six months ended June 30, 1996. Results for the six months ended June 30, 1997 include a nonrecurring charge of $800,000, on an after tax basis, relating to the relinquishment of the Cutex license. Excluding the nonrecurring charge, net income was $2.2 million or $0.24 per share for the six months ended June 30, 1997. The weighted average number of shares outstanding was 9.5 million and 9.6 million for the three and six months ended June 30, 1997, respectively, and 10.1 million for both corresponding periods of the prior year. Such decline is the result of the Company's ongoing stock buy back program. Liquidity and Capital Resources The Company's financial position continues to show solid strength as a result of profitable operating results. At June 30, 1997, working capital aggregated $43.7 million and the Company had cash and cash equivalents on hand aggregating $21.0 million. The Company's book value per share aggregated $5.42 per share as of June 30, 1997. The Board of Directors of the Company has authorized the repurchase of up to 1,500,000 shares of the Company's common stock and as of June 30, 1997, 1,167,505 shares have been purchased at an average price per share of $7.34. The Company's short-term financing requirements are expected to be met by available cash at June 30, 1997, cash generated by operations and short-term credit lines provided by domestic and foreign banks. The principal credit facilities for 1997 are a $12.0 million unsecured revolving line of credit provided by a domestic commercial bank and $12.0 million in credit lines provided by a consortium of international financial institutions. Operating activities provided $4.1 million of net cash from operations for the six months ended June 30, 1997 as compared to $1.2 million for the six months ended June 30, 1996. The nonrecurring charge of $1.3 million, taken in the first quarter of 1997, is primarily a noncash charge relating to the write-off of intangible assets associated with the relinquishment of the Company's Cutex license. On April 30, 1997, such transaction closed and all current inventory was purchased and certain liabilities were assumed by Carson Products Company. Page 8 JEAN PHILIPPE FRAGRANCES, INC. AND SUBSIDIARIES Management of the Company believes that funds generated from operations, supplemented by its available credit facilities, will provide it with sufficient resources to meet all present and reasonably foreseeable future operating needs. Inflation rates in the U.S. and foreign countries in which the Company operates have not had a significant impact on operating results for the period ended June 30, 1997. Part II. Other Information Items 1,2,3,4,5 and 6 are omitted as they are either not applicable or have been included in Part I. 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 on the 13th day of August 1997. JEAN PHILIPPE FRAGRANCES, INC. By: /s/ Russell Greenberg Russell Greenberg, Executive Vice President and Chief Financial Officer Page 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 20725527 0 25425420 0 24930963 74734841 1786413 0 86529660 31017834 0 0 0 12126912 37674200 86529660 42816263 42816263 22518951 40275239 48977 0 334088 2492047 725235 1766812 0 320423 0 1446389 0.15 0.15
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