-----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, RVyn8ukfzW2A6Vi1fQfGi2mgzW16DmcG0MpLedLAd6de2lrW/kJj2ZSSbmIke2/p jJE3qfN3RgHi/6D53RWTLw== 0000950144-96-003468.txt : 19960719 0000950144-96-003468.hdr.sgml : 19960719 ACCESSION NUMBER: 0000950144-96-003468 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960504 FILED AS OF DATE: 19960617 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERFUMANIA INC CENTRAL INDEX KEY: 0000880460 STANDARD INDUSTRIAL CLASSIFICATION: 5122 IRS NUMBER: 650026340 STATE OF INCORPORATION: FL FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19714 FILM NUMBER: 96581850 BUSINESS ADDRESS: STREET 1: 11701 N W 101 RD CITY: MIAMI STATE: FL ZIP: 33178 BUSINESS PHONE: 3058891600 MAIL ADDRESS: STREET 1: 11701 N W 101 RD CITY: MIAMI STATE: FL ZIP: 33178 10-Q 1 PERFUMANIA, INC. FORM 10-Q 5-4-96 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 -------------------------------------- FOR THE QUARTERLY PERIOD ENDED MAY 4, 1996 COMMISSION FILE NUMBER 0-19714 PERFUMANIA, INC. STATE OF FLORIDA I.R.S. NO. 65-0026340 11701 N.W. 101ST ROAD MIAMI, FLORIDA 33178 TELEPHONE NUMBER: (305) 889-1600 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 twelve (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 ninety (90) days. YES X NO ----- ----- COMMON STOCK $.01 PAR VALUE OUTSTANDING SHARES AT MAY 4, 1996 -- 6,709,700 2 TABLE OF CONTENTS PERFUMANIA, INC. PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS - - ------ Consolidated Balance Sheets....................................... 3 Consolidated Statements of Operations............................. 4 Consolidated Statements of Cash Flows............................. 5 Notes to Condensed Consolidated Financial Statements.............. 6 ITEM 2 Management's Discussion and Analysis of - - ------ Consolidated Financial Condition and Results of Operations..................................................... 9 2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PERFUMANIA, INC. CONSOLIDATED BALANCE SHEETS
MAY 4, 1996 FEBRUARY 3, 1996 ------------ ---------------- ASSETS Current assets: Cash and cash equivalents................................ $ 776,238 $ 331,028 Trade receivables, less allowances for doubtful accounts.............................................. 9,773,168 13,492,118 Advances to suppliers.................................... 6,560,098 4,311,660 Inventories, net of reserve of $750,000.................. 64,035,524 56,014,501 Prepaid expenses......................................... 1,161,748 1,152,095 Net deferred tax asset................................... 1,254,000 1,254,000 Due from related parties................................. 122,538 122,538 ------------ ----------- Total current assets.................................. 83,683,314 76,677,940 Property and equipment, net................................ 14,025,174 13,453,780 Leased equipment under capital leases, net................. 1,533,577 1,606,497 Other assets, net.......................................... 1,472,498 1,411,579 Due from related parties................................... 417,763 415,527 ------------ ----------- $101,132,326 $93,565,323 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank line of credit and current portion of notes payable............................................... $ 26,737,832 $23,553,897 Accounts payable......................................... 21,300,317 18,814,302 Accrued expenses and other liabilities................... 2,863,214 2,903,959 Convertible debentures................................... 3,000,000 -- Current portion of obligations under capital leases...... 421,797 498,348 Due to related parties................................... 680,000 680,000 ------------ ----------- Total current liabilities............................. 55,003,160 46,450,506 Long-term portion of loans payable....................... 601,503 601,503 Long-term portion of obligations under capital leases.... 1,213,066 1,213,066 ------------ ----------- Total liabilities..................................... 56,817,729 48,265,075 ------------ ----------- Stockholders' equity: Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued............................... -- -- Common stock, $.01 par value, 25,000,000 shares authorized, 6,709,700 and 6,707,700 shares issued and outstanding........................................... 67,097 67,077 Common stock subscribed.................................. 956,250 -- Capital in excess of par value........................... 47,967,694 47,959,464 Treasury stock........................................... (123,323) (123,323) Accumulated deficit...................................... (4,553,121) (2,602,970) ------------ ----------- Total stockholders' equity................................. 44,314,597 45,300,248 ------------ ----------- $101,132,326 $93,565,323 ============ ===========
See accompanying notes to consolidated financial statements. 3 4 PERFUMANIA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
THIRTEEN THIRTEEN WEEKS ENDED WEEKS ENDED MAY 4, 1996 APRIL 29, 1995 ----------- -------------- Net sales.................................................... $23,220,473 $23,536,042 Cost of goods sold........................................... 13,312,526 14,489,019 ----------- ----------- Gross profit............................................... 9,907,947 9,047,023 ----------- ----------- Operating Expenses: Selling, general and administrative........................ 10,278,919 10,006,990 Depreciation and amortization.............................. 854,190 793,056 ----------- ----------- Total operating expenses................................ 11,133,109 10,800,046 ----------- ----------- Loss from operations before other expense.................... (1,225,162) (1,753,023) Other expense................................................ (724,989) (586,227) ----------- ----------- Loss before income taxes..................................... (1,950,151) (2,339,250) Provision for income taxes................................... -- -- ----------- ----------- Net loss..................................................... $(1,950,151) $(2,339,250) =========== =========== Loss per common share........................................ $ (0.26) $ (0.34) =========== ===========
See accompanying notes to consolidated financial statements. 4 5 PERFUMANIA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
THIRTEEN THIRTEEN WEEKS ENDED WEEKS ENDED MAY 4, 1996 APRIL 29, 1995 ----------- -------------- Cash flows from operating activities: Net loss................................................... $(1,950,151) $(2,339,250) Adjustments to reconcile net loss to net cash used in ----------- ----------- operating activities: Capitalized preopening costs............................ (149,489) (34,086) Provision for doubtful accounts......................... 60,000 -- Depreciation and amortization........................... 854,190 793,056 Loss on disposition..................................... 16,319 82,477 Change in assets and liabilities, (Increase) decrease in: Trade receivables................................... 3,658,950 268,778 Advances to suppliers............................... (2,248,438) (327,988) Inventories......................................... (8,021,023) (3,092,582) Other current assets................................ 54,986 (409,841) Tax refund receivable............................... -- 372,799 Other assets........................................ 29,540 16,543 Increase (decrease) in: Accounts payable.................................... 2,486,015 2,816,301 Accrued expenses and other current liabilities...... (40,745) (235,217) ----------- ----------- Total adjustments....................................... (3,299,695) 250,240 ----------- ----------- Net cash used in operating activities............... (5,249,846) (2,089,010) ----------- ----------- Cash flows from investing activities: Additions to property and equipment..................... (1,268,042) (506,727) Proceeds from sale of other property.................... -- 617,914 ----------- ----------- Net cash provided by (used in) investing activities. (1,268,042) 111,187 ----------- ----------- Cash flows from financing activities: Net borrowings and repayments under bank line of credit and notes payable..................................... 3,183,935 1,905,971 Issuance of convertible debentures (see Note 5)......... 2,935,361 -- Net borrowings from related parties..................... (2,236) (63,168) Principal payments under capital lease obligations...... (118,462) (98,024) Proceeds from issuance of common stock.................. 8,250 6,250 Subscription of stock (see Note 5)...................... 956,250 -- ----------- ---------- Net cash provided by financing activities........... 6,963,098 1,751,029 ----------- ----------- Increase (decrease) in cash and cash equivalents............. 445,210 (226,794) Cash and cash equivalents at beginning of period............. 331,028 505,872 ----------- ----------- Cash and cash equivalents at end of period................... $ 776,238 $ 279,078 =========== =========== Supplemental disclosure of cash flow information: - - ------------------------------------------------- Cash paid for: Interest.............................................. $ 797,547 $ 730,410 Income taxes.......................................... $ 25,000 35,000
See accompanying notes to consolidated financial statements. 5 6 PERFUMANIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1). SIGNIFICANT ACCOUNTING POLICIES - - ------------------------------------ The condensed consolidated financial statements include the accounts of Perfumania and subsidiaries (the Company). All material intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. The financial information presented herein, which is not necessarily indicative of results to be expected for the current fiscal year, reflects all adjustments which, in the opinion of the Company, are necessary for a fair statement of the results for the periods indicated. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 1996. (2). STOCKHOLDERS' EQUITY - - -------------------------
COMMON STOCK COMMON STOCK SUBSCRIBED CAPITAL IN TREASURY STOCK ------------------- ------------------ EXCESS ------------------ RETAINED SHARES AMOUNT SHARES AMOUNT OF PAR SHARES AMOUNT EARNINGS TOTAL --------- ------- ------- -------- ----------- ------ --------- ----------- ----------- Balance at February 3, 1996................. 6,707,700 $67,077 -- -- $47,959,464 23,000 ($123,323) ($2,602,970) $45,300,248 Exercise of stock options.............. 2,000 20 -- -- 8,230 -- -- -- 8,250 Subscription of common stock................ -- -- 180,000 $956,250 -- -- -- -- 956,250 Net loss for the thirteen weeks ended May 4, 1996.......... -- -- -- -- -- -- -- (1,950,151) (1,950,151) --------- ------- ------- -------- ----------- ------ --------- ----------- ----------- Balance at May 4, 1996................. 6,709,700 $67,097 180,000 $956,250 $47,967,694 23,000 $(123,323) $(4,553,121) $44,314,597 --------- ------- ------- -------- ----------- ------ --------- ----------- -----------
(3). EARNINGS (LOSS) PER COMMON SHARE - - ------------------------------------- Earnings (loss) per common share are computed by dividing net income (loss) by the weighted average number of common shares outstanding. The weighted average number of common shares for the period ended May 4, 1996 and April 29, 1995 were 7,489,818 and 6,816,775, respectively. 6 7 PERFUMANIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (4). SEGMENT INFORMATION - - ------------------------ The Company operates in two industry segments, specialty retail sale and wholesale distribution of fragrances and related products. Financial information for these segments is summarized in the following table.
THIRTEEN WEEKS THIRTEEN WEEKS ENDED ENDED MAY 4, 1996 APRIL 29, 1995 -------------- -------------- Sales Wholesale............................................... $ 5,028,257 $ 7,915,200 Retail.................................................. 18,192,216 15,620,842 ----------- ----------- Total net sales...................................... $23,220,473 $23,536,042 ----------- ----------- Cost of goods sold Wholesale............................................... $ 3,839,397 $ 6,060,325 Retail.................................................. 9,473,129 8,428,694 ----------- ----------- Total cost of goods sold............................. $13,312,526 $14,489,019 ----------- ----------- Gross profit Wholesale............................................... $ 1,188,860 $ 1,854,875 Retail.................................................. 8,719,087 7,192,148 ----------- ----------- Total gross profit................................... $ 9,907,947 $ 9,047,023 ----------- -----------
MAY 4, 1996 FEBRUARY 3, 1996 ------------ ---------------- Inventory Wholesale............................................... $19,566,376 $17,260,449 Retail.................................................. 44,469,148 38,754,052 ----------- ----------- Total net inventory.................................. $64,035,524 $56,014,501 ----------- ----------- Number of stores.......................................... 195 194
An unaffiliated customer of the wholesale segment accounted for approximately 40% and 2% of the consolidated net sales for the thirteen weeks ended May 4, 1996 and April 29, 1995, respectively, and 72% and 48% of the consolidated net trade accounts receivable balance at May 4, 1996 and February 3, 1996, respectively. (5). ISSUANCE OF STOCK SUBSCRIPTION AND CONVERTIBLE DEBENTURES - - -------------------------------------------------------------- On March 21, 1996, the Company executed a Regulation S stock subscription agreement to sell 180,000 shares of common stock to a non-U.S. person for approximately $956,000. The proceeds were received in March 1996 and the shares were subsequently issued in May 1996. On March 25, 1996, the Company issued $3,000,000 of 5% Convertible Debentures (the "Debentures") in a Regulation S offering to non-U.S. persons. The debentures mature on April 1, 1997, and are convertible into shares of common stock of the Company, at any time after May 21, 1996, at a conversion price for each share of common stock equal to eighty-five percent of the market price of the common stock on the date of conversion, not to exceed $8.50 per share of common stock. On May 23, 1996, $500,000 of the debentures were converted to approximately 115,000 shares of the Company's common stock by the registered holder. 7 8 PERFUMANIA, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (6). SUBSEQUENT EVENTS - - ---------------------- On May 8, 1996, the Company signed two non-binding letters of intent with Model Imperial, Inc. (Model). One letter pertains to the proposed acquisition by the Company of Model's retail operations, including its 650 licensed retail departments and its Cosmetique chain of five stores, and the other pertains to the Company's proposed acquisition of 51% of Model's common stock. The transactions are subject to a number of conditions, including among other things, satisfactory completion of due diligence, the Company obtaining financing for the transactions, the execution of a definitive acquisition agreement, and regulatory approvals, if required. There are no assurances that either transaction will be consummated. Through May 23, 1996, the Company has repurchased 45,000 shares of its common stock for approximately $242,000. This repurchase was previously authorized by the Company's Board of Directors. 8 9 PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS SEASONALITY - - ----------- The Company's operations have historically been seasonal, with generally higher retail sales in the third and fourth fiscal quarters than in the first and second fiscal quarters. Significantly higher fourth fiscal quarter retail sales result from increased purchases of fragrances as gift items during the Christmas holiday season. Wholesale sales also vary by fiscal quarter as a result of the selection of merchandise available for sale as well as the need for the Company to stock its retail stores for the Christmas holiday season. Therefore, the results of any interim period are not necessarily indicative of the results that might be expected during a full fiscal year. LIQUIDITY AND CAPITAL RESOURCES - - ------------------------------- At May 4, 1996 working capital was $28.7 million compared to $30.2 million at February 3, 1996. The decrease was primarily due to the current period loss. Net cash used in operating activities during the thirteen weeks ended May 4, 1996 was approximately $5.2 million, principally as a result of the net change in the Company's trade receivables, advances to suppliers, inventories, and accounts payable. At May 4, 1996, approximately $0.7 million of the Company's trade receivables were considered past due compared to $0.7 million at February 3, 1996. Of the $9.8 million in trade receivables, $7.1 million was due from one customer which also accounted for 40% of the Company's wholesale sales during the thirteen weeks ended May 4, 1996. The Company's sales to this customer are made on an open account terms and since late 1991 the Company has extended credit terms to this customer of up to one year. The Company has not experienced any write-offs of accounts receivable from this customer due to collectibility. Net cash used in investing activities during the current period was $1.3 million. This represents purchases of furniture, fixtures and equipment for new store openings and renovations of existing stores during the first and second quarters. Net cash provided by financing activities during the current period was approximately $7.0 million, which was the result of an increase in the Company's use of its line of credit, along with the issuance of Regulation S 5% convertible debentures of $3 million, and a Regulation S subscription of 180,000 shares of common stock for approximately $1.0 million (see Note 5). On March 29, 1996, the Company's $25 million line of credit, which expires on April 30, 1999, was increased to $30 million. During the thirteen weeks ended May 4 1996, the Company closed one store and opened two stores. At May 4, 1996, the Company operated 195 stores. The Company plans to open approximately 20 stores during the second and third quarters. 9 10 RESULTS OF OPERATIONS - - --------------------- Comparison of the Thirteen Weeks Ended May 4, 1996 with the Thirteen Weeks Ended April 29, 1995. Net sales decreased 1.3% from $23.5 million in the first thirteen weeks of 1995 to $23.2 million in the first thirteen weeks of 1996. The decrease in net sales was the result of a 36.5% decrease in wholesale sales (from $7.9 million to $5.0 million), which offset a 16.5% increase in retail sales (from $15.6 million to $18.2 million). The decrease in wholesale sales was primarily due to a slowdown in wholesale orders. The increase in retail sales was principally due to the increase in the number of stores operated during the first thirteen weeks of 1996 compared to the first thirteen weeks of 1995. Comparable store sales during the current period increased 6.0% when compared to last year. Gross profit increased 9.5% from $9.0 million in the first thirteen weeks of 1995 (38.4% of total net sales) to $9.9 million in the first thirteen weeks of 1996 (42.7% of total net sales) due to an increase in gross profit for the retail division offset by a decrease in gross profit for the wholesale division. Gross profit for the wholesale division decreased from $1.9 million in the first thirteen weeks of 1995 to $1.2 million in the first thirteen weeks of 1996 as a result of lower wholesale sales. As a percentage of net sales, gross profit for the wholesale division increased from 23.4% in the first thirteen weeks of 1995 to 23.6% in the first thirteen weeks of 1996. Gross profit for the retail division increased to $8.7 million in the first thirteen weeks of 1996 from $7.2 million in the first thirteen weeks of 1995 as a result of higher retail sales. As a percentage of net sales, gross profit for the retail division increased from 46.0% in the first thirteen weeks of 1995 to 47.9% in the first thirteen weeks of 1996 primarily as a result of less promotional sales of merchandise at lower margins. Operating expenses, which include selling, general and administrative expenses as well as depreciation, increased 3.1% from $10.8 million in the first thirteen weeks of 1995 to $11.1 million in the first thirteen weeks of 1996. The increase was primarily due to costs associated with the operation of 17 additional stores during the current period. The Company had a net loss of $1,950,151, or $0.26 per share, in the first thirteen weeks of 1996 compared to a net loss of $2,339,250 or $0.34 per share, in the first thirteen weeks of 1995. The weighted average number of common shares outstanding were 7,489,818 for the first thirteen weeks of 1996 and 6,816,775 for the first thirteen weeks of 1995. 10 11 PERFUMANIA, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized. Perfumania, Inc. ------------------------------------- (Registrant) Date: June 13, 1996 By: /S/ SIMON FALIC ------------------------------------- Simon Falic Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) By: /S/ RON A. FRIEDMAN ------------------------------------- Ron A. Friedman Chief Financial Officer Treasurer, and Secretary (Principal Financial and Accounting Officer) 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 U.S. DOLLARS 3-MOS FEB-05-1997 FEB-04-1996 MAY-04-1996 1 776,238 0 9,773,168 0 64,035,524 83,683,314 14,025,174 0 101,132,326 55,003,160 0 0 0 67,097 48,800,621 101,132,326 23,220,473 23,220,473 13,312,526 13,312,526 1,185,098 0 0 (1,950,151) 0 (1,950,151) 0 0 0 (1,950,151) (.26) (.26)
-----END PRIVACY-ENHANCED MESSAGE-----