-----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, Kv6OwTV9j+rJtqAOEkMJIjsnch33VrxEZt0HoSaO+/kb46AyTFYX57kXdNcfW5z3 tG/F8/QP18GU6nQi3VigcA== 0000891554-97-000574.txt : 19970617 0000891554-97-000574.hdr.sgml : 19970617 ACCESSION NUMBER: 0000891554-97-000574 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970616 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANDIES INC CENTRAL INDEX KEY: 0000857737 STANDARD INDUSTRIAL CLASSIFICATION: FOOTWEAR, (NO RUBBER) [3140] IRS NUMBER: 112481930 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10593 FILM NUMBER: 97624750 BUSINESS ADDRESS: STREET 1: 2975 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9146948600 MAIL ADDRESS: STREET 1: 2975 WESTCHESTER AVE CITY: PURCHASE STATE: NY ZIP: 10577 FORMER COMPANY: FORMER CONFORMED NAME: MILLFELD TRADING CO INC DATE OF NAME CHANGE: 19920703 10-Q 1 QUARTERLY REPORT U.S. 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 April 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 Number 0-10593 CANDIE'S, INC. (Exact name of registrant as specified in its charter) Delaware 11-2481903 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2975 Westchester Avenue, Purchase, New York 10577 (Address of principal executive offices)(Zip code) (914)694-8600 (Registrant's telephone number, including area code) ________________________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check 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 ___ APPLICABLE ONLY TO CORPORATE ISSUERS: As of June 16, 1997, 11,678,061 shares of Common Stock, par value $.001 per share were outstanding. CANDIE'S, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q FOR THE PERIOD ENDED April 30, 1997 PAGE ---- PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Condensed Consolidated Balance Sheets at April 30, 1997 3-4 (unaudited)and January 31, 1997 Condensed Consolidated Statements of Operations for the 5 Three Months Ended April 30, 1997 and 1996 (unaudited) Condensed Consolidated Statement of Stockholders' Equity 6 for the Three Months Ended April 30, 1997 (unaudited) Condensed Consolidated Statements of Cash Flows for 7-8 the Three Months Ended April 30, 1997 and 1996 (unaudited) Notes to Condensed Consolidated Financial Statements(unaudited) 9-10 ITEM 2 Management's Discussion and Analysis of Financial 11 Condition and Results of Operations PART II. OTHER INFORMATION 12 SIGNATURES 13 2 Candie's, Inc. and Subsidiaries Condensed Consolidated Balance Sheets PART I. ITEM 1. April 30, January 31, 1997 1997 ------------------------- Assets (unaudited) Current assets: Cash and cash equivalents $ 196,685 $ 389,517 Accounts receivable, net 1,411,466 1,328,814 Inventories 5,873,437 5,251,091 Deferred taxes 928,000 1,300,000 Due from factor 2,964,970 -- Prepaid expenses and other current assets 1,159,504 769,781 ------------------------- Total current assets 12,534,062 9,039,203 ------------------------- Property and equipment-net of accumulated depreciation of $764,031 and 727,413 343,936 377,145 ------------------------- Other assets: Noncompetition agreements 324,756 334,698 Trademark 4,477,946 4,548,650 Other 402,074 409,649 ------------------------- Total other assets 5,204,776 5,292,997 ------------------------- Total assets $18,082,774 $14,709,345 ========================= See accompanying notes to condensed consolidated financial statements. 3 Candie's, Inc. and Subsidiaries Condensed Consolidated Balance Sheets
April 30, January 31, 1997 1997 --------------------------- (unaudited) Liabilities and Stockholders' equity Current liabilities: Accounts payable-trade $ 6,032,029 $ 4,673,462 Due to factor -- 580,515 Accrued expenses 1,066,917 739,457 --------------------------- Total current liabilities 7,098,946 5,993,434 Long-term liabilities 105,000 108,000 --------------------------- Total liabilities 7,203,946 6,101,434 --------------------------- Stockholders' equity: Preferred stock, $.01 par value--shares authorized 5,000,000; none issued or outstanding Common stock, $.001 par value--shares authorized 30,000,000; shares issued: 10,170,809 and 9,633,786 10,171 9,634 Additional paid-in capital 13,365,697 11,918,655 Deficit, since February 28, 1993, (deficit eliminated $27,696,007) (2,497,040) (3,320,378) --------------------------- Total stockholders' equity 10,878,828 8,607,911 --------------------------- Total liabilities and stockholders' equity $ 18,082,774 $ 14,709,345 ===========================
See accompanying notes to condensed consolidated financial statements. 4 Candie's, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (unaudited) Three Months Ended April 30, April 30, 1997 1996 ------------------------- Net revenues $16,861,264 $ 6,258,373 Cost of goods sold 11,774,127 4,627,699 ------------------------- Gross profit 5,087,137 1,630,674 ------------------------- Operating expenses: Selling expenses 2,269,803 1,142,328 General and administrative expenses 1,146,473 771,791 ------------------------- 3,416,276 1,914,119 ------------------------- Operating income (loss) 1,670,861 (283,445) Other expenses: Other 68,000 -- Interest expense 274,523 139,893 ------------------------- 342,523 139,893 Income (loss) before provision for income taxes 1,328,338 (423,338) Provision for income taxes 505,000 -- ------------------------- Net income (loss) $ 823,338 $ (423,338) ========================= Net income (loss) per share $ .06 $ (.05) ========================= Weighted average number of common shares and equivalents outstanding 16,426,033 8,750,424 ========================= See accompanying notes to condensed consolidated financial statements. 5 Candie's, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders' Equity April 30, 1997 (unaudited)
Additional Common Stock Paid-In Shares Amount Capital Deficit Total ------------------------------------------------------------------- Balance at January 31, 1997 9,633,786 $ 9,634 $11,918,655 $(3,320,378) $ 8,607,911 Issuance of common stock through exercise of options and warrants 526,245 526 1,288,141 -- 1,288,667 Issuance of common stock in connection with retirement plan 10,778 11 55,901 -- 55,912 Tax effect of utilization of pre-quasi reorganization operating loss carryforwards -- -- 103,000 -- 103,000 Net income for the three months ended April 30, 1997 -- -- -- 823,338 823,338 ------------------------------------------------------------------- Balance at April 30, 1997 10,170,809 $10,171 $13,365,697 $(2,497,040) $10,878,828 ===================================================================
See accompanying notes to condensed consolidated financial statements. 6 Candie's, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (unaudited)
Three Months Ended April 30, April 30, 1997 1996 -------------------------- Cash flows from operating activities: Net income (loss) $ 823,338 $ (423,338) Items in net income (loss) not effecting cash: Depreciation and amortization 128,998 103,718 Provision for allowances and bad debts expense 12,889 198 Tax effect of utilization of pre-quasi reorganization net operating losses 103,000 -- Changes in operating assets and liabilities: Accounts receivable (95,541) 420,761 Inventories (622,346) (559,332) Deferred taxes 372,000 -- Prepaid expenses (389,723) (159,406) Other assets (4,162) -- Due to factor (3,545,485) (520,961) Accounts payable - trade 1,358,567 1,409,323 Accrued expenses 383,372 (293,372) Long term liabilities (3,000) 1,312 -------------------------- Net cash used in operating activities (1,478,093) (21,097) --------------------------
See accompanying notes to condensed consolidated financial statements. 7 Candie's, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (continued) (unaudited) Three Months Ended April 30, April 30, 1997 1996 -------------------------- Cash flows used in investing activities: Capital expenditures $ (3,406) $ (50,022) -------------------------- Net cash used in investing activities (3,406) (50,022) -------------------------- Cash flows provided by financing activities: Proceeds from sale of stock 1,288,667 -- -------------------------- Net cash provided by financing activities 1,288,667 -- -------------------------- Net decrease in cash and cash equivalents (192,832) (71,119) Cash and cash equivalents, beginning of period 389,517 204,996 -------------------------- Cash and cash equivalents, end of period $ 196,685 $ 133,877 ========================== Supplemental disclosures of non-cash activities: The Company issued 10,778 shares of common stock for the three months ended April 30, 1997 as a matching contribution in connection with the Company's retirement plan. See accompanying notes to condensed consolidated financial statements. 8 Candie's, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited) 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 have been included. Operating results for the three month period ended April 30, 1997 are not necessarily indicative of the results that may be expected for the year ending January 31, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-KSB for the year ended January 31, 1997. The condensed consolidated financial statements include the accounts of Candie's, Inc. and its wholly owned subsidiaries, Bright Star Footwear, Inc. ("Bright Star"), Ponca, Ltd. ("Ponca"), Yulong Co., Ltd. ("Yulong"), Candies Galleria, Inc. ("Candies Galleria") and the Company's 60% owned subsidiary Intercontinental Trading Group, Inc. ("ITG"), (collectively, the "Company"). All significant intercompany transactions and balances have been eliminated from the consolidated financial statements for all periods presented. The Company designs, markets, imports and distributes a variety of moderately-priced, casual and fashion footwear for women and girls under the trademarks CANDIE'S(R), BONGO(R), ASPEN(R) and certain others. The Company's product line also includes a wide variety of men's and boys' workboots, hiking shoes and leisure shoes designed, marketed and distributed by Bright Star. The Company sells to retailers throughout the United States and several foreign countries. 2. Inventory Inventories, which consist entirely of finished goods, are valued at the lower of cost or market. Cost is determined by the first-in, first-out ("FIFO") method. 3. Subsequent Event On April 23, 1997, the Company called for redemption on May 27, 1997, which was subsequently extended to May 30, 1997 (the "Redemption Date"), its outstanding Class B redeemable warrants ("Warrants") at a redemption price per Warrant of $0.25. Each Warrant entitled the holder thereof to purchase one share of Common Stock at an exercise price of $4.00 until 5:00 p.m., Eastern Standard time, on the Redemption Date, at which time the right to exercise such Warrant terminated. On April 23, 1997, Warrants to purchase an aggregate of 1,467,200 shares of Common Stock were outstanding. Subsequent to April 30, 1997, 1,423,300 warrants have been exercised and $5,693,200 in gross proceeds received. The Company intends to apply the net proceeds of exercises, first to repay short-term borrowings and the balance, if any, to finance capital expenditures and other working capital requirements. 9 Candie's, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited) (Continued) 4. Recently Issued Accounting Standards In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", which is effective for both interim and annual periods ending after December 15, 1997. Earlier application is not permitted. The Company accordingly plans to adopt SFAS No. 128 in its January 31, 1998 annual financial statements. The Company does not anticipate that SFAS No. 128 would have had a material effect on the earnings per share presented, if it had been adopted in the quarter ended April 30, 1997. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net revenues increased $10,602,891 (169%) for the three months ended April 30, 1997 compared with the three months ended April 30, 1996. The increase was primarily due to the Company's sales and marketing efforts, including the Company's decision to emphasize sales of contemporary and casual footwear. In addition to the growth achieved by the Candie's (R) brand in its core market, the Company's first shipments of its children's footwear line sold well on a national level. Strong sales increases continued in the BONGO (R) product line. The Company is a licensee of the BONGO trademark. Gross margins were 30% in 1997 compared with 26% in 1996. The increase in gross margin was attributable to lower levels of closeout sales and promotional activity, such as markdowns and advertising allowances. In addition gross margin was higher in 1997 due to more favorable prices negotiated with suppliers and increased selling prices. Selling expenses were $2,269,803 in 1997 compared to $1,142,328 in 1996, an increase of 99% primarily due to increases in the amount of salesmen's commissions on increased footwear sales, increases in customer service salaries from personnel additions and increases in advertising and marketing costs. General and administrative expenses were $1,146,473 in 1997 compared with $771,791 in 1996, an increase of 49%, primarily due to an increase in general and administrative salaries from hiring new employees and increases in general expenses directly attributable to the increase in sales during the 1997 period. Interest expense of $274,523 increased in 1997 from the $139,893 reported in the 1996 period due to increased average borrowings. As a result of the foregoing, the Company's net income for the three months ended April 30, 1997 increased to $823,338 or $.06 per share from a loss of $423,338 or ($.05) per share for the corresponding period ended April 30, 1996. Liquidity and Capital Resources The Company relies primarily upon cash flow from operations and borrowings under its credit facility with its factor to finance its operations. For the three months ended April 30, 1997, net cash used in operating activities was $1,534,006 as compared with $21,097 during the same period in the prior year. At April 30, 1997, the Company had working capital of $5,435,116 versus working capital of $3,045,769 at January 31, 1997. The increase is primarily due to cash generated from increased earnings and from the issuance of common stock. During May and June 1997, the Company received gross proceeds totalling $5,693,200, in connection with the redemption of its Class B redeemable warrants as discussed in footnote 3 of the Notes to the Condensed Consolidated Financial Statements. Management anticipates it will be able to satisfy its ongoing cash requirements for the foreseeable future, primarily with cash flow from operations, borrowings under its credit facility and if necessary, funds generated from the sale of securities. 11 PART II. Other Information Item 1. Legal Proceedings None Item 2. Changes in Securities During the fiscal quarter ended April 30, 1997 the Company issued 10,778 shares of its common stock as a matching contribution in connection with the Company's 401-K retirement plan. In addition, the Company issued five-year options to its employees to purchase an aggregate of 105,000 shares of its common stock at exercise prices ranging between $5.06 and $5.13. The foregoing shares and options were acquired by the holders for investment in private transactions exempt from registration by sections 2(3) or 4(2) of the Securities Act of 1933. Items 3-5 None Item 6. Exhibits and Reports on Form 8K A. Exhibits Exhibit 11 Computations of Earnings Per Share Exhibit 27 Financial Data Schedule (SEC use only) B. Reports on Form 8K None 12 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. CANDIE'S, INC. By: /s/ Neil Cole ------------------------ Neil Cole, Chief Executive Officer, (Principal Executive Officer) By: /s/ Gary Klein ------------------------ Gary Klein, Vice President of Finance (Principal Accounting and Financial Officer) Dated: June 16, 1997 13 EX-11 2 COMPUTATIONS OF EARNINGS PER SHARE EXHIBIT 11 CANDIE'S, INC. AND SUBSIDIARIES COMPUTATIONS OF EARNINGS PER SHARE FOR THE THREE MONTHS ENDED (MODIFIED TREASURY STOCK METHOD) April 30, (1) 1997 1996 ----- ---- AVERAGE SHARES OUTSTANDING 9,974,634 8,750,424 NET EFFECT OF DILUTIVE STOCK OPTIONS-BASED ON THE MODIFIED TREASURY STOCK METHOD USING AVERAGE MARKET PRICE WHICH IS GREATER THAN QUARTER-END MARKET PRICE 6,451,399 -- ----------- ----------- TOTAL COMMON STOCK AND EQUIVALENT SHARES 16,426,033 8,750,424 =========== =========== NET INCOME (LOSS) $ 823,338 $ (423,338) ADD: INCOME EARNED, NET OF FEDERAL INCOME TAX EFFECT 198,955 -- ----------- ----------- TOTAL EPS INCOME (LOSS) $ 1,022,293 $ (423,338) =========== =========== PER SHARE AMOUNT (PRIMARY AND FULLY DILUTED) $ .06 $ (.05) =========== =========== (1) NO ADDITIONAL INCOME(EARNINGS FROM INVESTING THE EXCESS PROCEEDS UPON THE EXERCISE OF COMMON STOCK EQUIVALENTS) NOR COMMON STOCK EQUIVALENTS WERE INCLUDED IN THE CALCULATION OF NET LOSS PER SHARE FOR 1996 BECAUSE THE RESULTS WOULD HAVE BEEN ANTIDILUTIVE. 14 EX-27 3 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AT APRIL 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FINANCIAL STATEMENTS INCLUDED IN SUCH FORM 10-Q. 3-MOS JAN-31-1998 APR-30-1997 196,685 0 1,411,466 0 5,873,437 12,534,062 1,107,967 764,031 18,082,774 7,098,946 0 0 0 10,171 10,868,657 18,082,774 16,861,264 16,861,264 11,774,127 11,774,127 0 0 274,523 1,328,338 505,000 823,338 0 0 0 823,338 .06 .06
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