-----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, NWQEc3IwR554bEZGsbUORf0HLS9ri1dJfucs7G8i6zZ0+kCMTN3K6BhvK9hXdM8j lVsdlX1isIqP/U5sViPYLg== 0000950144-96-009135.txt : 19961218 0000950144-96-009135.hdr.sgml : 19961218 ACCESSION NUMBER: 0000950144-96-009135 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961102 FILED AS OF DATE: 19961217 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERFUMANIA INC CENTRAL INDEX KEY: 0000880460 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] 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: 96681904 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 11/02/96 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 NOVEMBER 2, 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 NOVEMBER 2, 1996 - 7,807,791 2 TABLE OF CONTENTS PERFUMANIA, INC. PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS Consolidated Balance Sheets ............................................ 2 Consolidated Statements of Operations .................................. 3 Consolidated Statements of Cash Flows .................................. 4 Notes to Condensed Consolidated Financial Statements.................... 5 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................................................... 8 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.............................................. 11
1 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PERFUMANIA, INC. CONSOLIDATED BALANCE SHEETS
November 2, 1996 February 3, 1996 ---------------- ---------------- ASSETS Current assets: Cash and cash equivalents $ 885,782 $ 331,028 Trade receivables, net 12,904,776 13,492,118 Advances to suppliers 7,471,110 4,311,660 Inventories, net of reserve of $750,000 73,750,945 56,014,501 Prepaid expenses and other current assets 1,595,465 1,152,095 Net deferred tax asset 1,320,906 1,254,000 Due from related parties 122,538 122,538 ------------ ----------- Total current assets 98,051,522 76,677,940 Property and equipment, net 15,860,550 13,453,780 Leased equipment under capital leases, net 2,023,751 1,606,497 Other assets 1,985,526 1,411,579 Due from related parties 417,763 415,527 ------------ ----------- $118,339,112 $93,565,323 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank line of credit and current portion of notes payable $ 29,713,683 $23,553,897 Accounts payable 33,283,890 18,814,302 Accrued expenses and other liabilities 3,725,240 2,903,959 Current portion of obligations under capital leases 498,348 498,348 Due to related parties 790,000 680,000 ------------ ----------- Total current liabilities 68,011,161 46,450,506 Other long-term liabilities 2,114,410 1,814,569 ------------ ----------- Total liabilities 70,125,571 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, 7,807,791 and 6,707,700 shares issued and outstanding 78,078 67,077 Capital in excess of par 51,900,229 47,959,464 Accumulated deficit (2,707,619) (2,602,970) Treasury stock (1,057,147) (123,323) ------------ ----------- Total stockholders' equity 48,213,541 45,300,248 ------------ ----------- $118,339,112 $93,565,323 ============ ===========
See accompanying notes to consolidated financial statements. 2 4 PERFUMANIA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen Thirteen Thirty-nine Thirty-nine Weeks Ended Weeks Ended Weeks Ended Weeks Ended November 2, 1996 October 28, 1995 November 2, 1996 October 28, 1995 ---------------- ---------------- ---------------- ---------------- Net sales $34,576,849 $34,329,850 $86,668,286 $85,247,430 Cost of goods sold 19,536,336 20,830,709 48,894,635 51,137,772 ----------- ----------- ----------- ----------- Gross profit 15,040,513 13,499,141 37,773,651 34,109,658 ----------- ----------- ----------- ----------- Operating Expenses: Selling, general and administrative 11,899,577 10,700,484 33,088,856 30,743,658 Depreciation and amortization 917,141 840,271 2,627,568 2,427,070 ----------- ----------- ----------- ----------- Total operating expenses 12,816,718 11,540,755 35,716,424 33,170,728 ----------- ----------- ----------- ----------- Income from operations before other expense 2,223,795 1,958,386 2,057,227 938,930 Other expense (774,772) (726,682) (2,228,782) (2,036,397) ----------- ----------- ----------- ----------- Income (loss) before income taxes 1,449,023 1,231,704 (171,555) (1,097,467) (Provision) benefit for income taxes (564,017) - 66,906 - ----------- ----------- ----------- ----------- Net income (loss) $ 885,006 $ 1,231,704 $ (104,649) $(1,097,467) ----------- ----------- ----------- ----------- Earnings (loss) per common share $ 0.10 $ 0.18 $ (0.01) $ (0.16) ----------- ----------- ----------- -----------
See accompanying notes to consolidated financial statements. 3 5 PERFUMANIA, INC CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirty-nine Thirty-nine Weeks Ended Weeks Ended November 2, 1996 October 28, 1995 ---------------- ---------------- Cash flows from operating activities: Net loss $ (104,649) $(1,097,467) Adjustments to reconcile net loss to net cash used in operating activities: Capitalized preopening costs (623,346) (354,898) Provision for doubtful accounts 340,000 - Benefit for income taxes (66,906) - Depreciation and amortization 2,627,568 2,427,070 Loss on disposition 39,179 82,477 Change in assets and liabilities, (Increase) decrease in: Trade receivables 247,342 (2,723,642) Advances to suppliers (3,159,450) (789,466) Inventories (17,736,444) (9,141,622) Other current assets (443,370) 156,605 Tax refund receivable - 378,681 Other assets (164,492) 16,246 Increase (decrease) in: Accounts payable 14,469,588 10,161,382 Other current liabilities 861,857 (1,015) ----------- ----------- Total adjustments (3,608,474) 211,818 ----------- ----------- Net cash used in operating activities (3,713,123) (885,649) ----------- ----------- Cash flows from investing activities: Additions to property and equipment (4,722,114) (2,319,158) Proceeds from sale of other property - 617,914 ----------- ----------- Net cash used in investing activities (4,722,114) (1,701,244) ----------- ----------- Cash flows from financing activities: Net borrowings under loan payable 9,159,786 2,923,187 Net borrowings from related parties 107,764 (29,468) Principal payments under capital lease obligations (308,235) (247,589) Proceeds from issuance of common stock 964,500 62,125 Payments to acquire treasury stock (933,824) (123,323) ----------- ----------- Net cash provided by financing activities 8,989,991 2,584,932 ----------- ----------- Increase (decrease) in cash and cash equivalents 554,754 (1,961) Cash and cash equivalents at beginning of period 331,028 505,872 ----------- ----------- Cash and cash equivalents at end of period $ 885,782 $ 503,911 ----------- ----------- Supplemental disclosure of cash flow information: Cash paid Interest $ 2,458,821 $ 2,278,149 Income taxes $ 106,138 $ 35,000
See accompanying notes to consolidated financial statements. 4 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 Capital in Treasury Stock ----------------------- Excess -------------------- Accumulated Shares Amount of Par Shares Amount Deficit 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 Sale of Common Stock 180,000 1,800 954,450 - - - 956,250 Conversion of debentures 918,091 9,181 2,978,085 - - - 2,987,266 Purchases of treasury stock - - - 207,850 (933,824) - (933,824) Net loss for the thirty-nine weeks ended Nov. 2, 1996 - - - (104,649) (104,649) --------- ------- ----------- ------- ----------- ----------- ----------- Balance at November 2, 1996 7,807,791 $78,078 $51,900,229 230,850 $(1,057,147) $(2,707,619) $48,213,541 --------- ------- ----------- ------- ----------- ----------- -----------
5 7 (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 numbers of common shares for the thirteen and thirty-nine weeks ended November 2, 1996 was 8,447,436 and 7,858,334, respectively. The weighted average number of common shares for the thirteen and thirty-nine weeks ended October 28, 1995 was 6,818,700. (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 Thirteen Thirty-nine Thirty-nine Weeks Ended Weeks Ended Weeks Ended Weeks Ended Nov. 2, 1996 Oct. 28, 1995 Nov. 2, 1996 Oct. 28, 1995 ------------ ------------- ------------ ------------- Sales Wholesale $ 8,565,178 $11,106,321 $19,709,774 $25,707,236 Retail 26,011,671 23,223,529 66,958,512 59,540,194 ----------- ----------- ----------- ----------- Total net sales $34,576,849 $34,329,850 $86,668,286 $85,247,430 ----------- ----------- ----------- ----------- Cost of goods sold Wholesale $ 5,983,724 $ 8,405,229 $14,222,691 $19,335,806 Retail 13,552,612 12,425,480 34,671,944 31,801,966 ----------- ----------- ----------- ----------- Total cost of goods sold $19,536,336 $20,830,709 $48,894,635 $51,137,772 ----------- ----------- ----------- ----------- Gross profit Wholesale $ 2,581,454 $ 2,701,092 $ 5,487,083 $ 6,371,430 Retail 12,459,059 10,798,049 32,286,568 27,738,228 ----------- ----------- ----------- ----------- Total gross profit $15,040,513 $13,499,141 $37,773,651 $34,109,658 ----------- ----------- ----------- -----------
November 2, February 3 1996 1996 ----------- ----------- Inventory - --------- Wholesale $20,672,580 $17,260,449 Retail 53,078,365 38,754,052 ----------- ----------- $73,750,945 $56,014,501 ----------- ----------- Number of stores 207 194
An unaffiliated customer of the wholesale segment accounted for approximately 10% and 6% of the consolidated net sales for the thirty-nine weeks ended November 2, 1996 and October 28, 1995, respectively, and 57% and 52% of the consolidated net trade accounts receivable balance at November 2, 1996 and October 28, 1995, respectively. 6 8 (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 "Debenture") in a Regulation S offering to non-U.S. persons. The debentures mature on April 1, 1997, and were 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 common stock on the date of conversion, not to exceed $8.50 per share of common stock. As of July 19, 1996, all of the debentures had been converted by the registered holders into an aggregate of approximately 918,000 shares of the Company's common stock. (6). SUBSEQUENT EVENTS Effective November 19, 1996, the Company purchased substantially all of the assets of Nature's Elements International, Ltd. ("Nature's Elements"), consisting primarily of thirty-three retail store locations and related inventory in the northeastern United States, for approximately $2.5 million. Nature's Elements currently sells cosmetics, treatments, bath and body products, and candles. Subsequent to November 2, 1996, the Company has repurchased an additional 217,000 shares of its common stock for approximately $658,000. This repurchase was previously authorized by the Company's Board of Directors. 7 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 November 2, 1996 working capital was $30.0 million compared to $30.2 million at February 3, 1996. Net cash used in operating activities during the thirty-nine weeks ended November 2, 1996 was approximately $3.7 million, principally as a result of the net change in the Company's trade receivables, advances to suppliers, accounts payable, and inventory. At November 2, 1996, approximately $1.8 million of the Company's trade receivables were considered past due compared to $0.7 million at February 3, 1996. Of the $12.9 million in trade receivables due from unaffiliated customers at November 2, 1996, $7.4 million was due from one customer which also accounted for 46% of the Company's wholesale sales during the thirteen weeks ended November 2, 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 $4.7 million. This represents purchases of furniture, fixtures and equipment for store openings during fiscal 1996. Net cash provided by financing activities during the current period was approximately $9.0 million, which was primarily the result of an increase in the Company's use of its line of credit, along with the issuance of $3.0 million of 5% convertible debentures, and issuance of 180,000 shares of common stock for approximately $1.0 million (see Note 5). The $30.0 million line of credit expires on April 30, 1999. During the thirty-nine weeks ended November 2, 1996, the Company closed four stores and opened seventeen stores. At November 2, 1996, the Company operated 207 stores. 8 10 RESULTS OF OPERATIONS COMPARISON OF THE THIRTEEN WEEKS ENDED NOVEMBER 2, 1996 WITH THE THIRTEEN WEEKS ENDED OCTOBER 28, 1995. Net sales increased $0.3 million from $34.3 million in the thirteen weeks ended October 28, 1995 to $34.6 million in the thirteen weeks ended November 2, 1996. The increase in net sales was the result of a $2.8 million increase in retail sales (from $23.2 million to $26.0 million) offset by a $2.5 million decrease in wholesale sales (from $11.1 million to $8.6 million). The increase in retail sales was principally due to the increase in the number of stores operated during the thirteen weeks ended November 2, 1996. Comparable store sales during the current period increased 2.6% when compared to last year. The decrease in wholesale sales was primarily due to lower wholesale demand for fragrances. Gross profit increased 11.4% from $13.5 million in the thirteen weeks ended October 28, 1995 (39.3% of net sales) to $15.0 million in the thirteen weeks ended November 2, 1996 (43.5% of total net sales) due primarily to the increase in retail sales. Gross profit for the wholesale division decreased from $2.7 million in the thirteen weeks ended October 28, 1995 to $2.6 million in the thirteen weeks ended November 2, 1996 as a result of lower wholesale sales. As a percentage of net sales, gross profit for the wholesale division increased from 24.3% in the thirteen weeks ended October 28, 1995 to 30.1% in the thirteen weeks ended November 2, 1996, as a result of higher margin sales. Gross profit for the retail division increased 15.4% from $10.8 million in the thirteen weeks ended October 28, 1995 to $12.5 million in the thirteen weeks ended November 2, 1996 as a result of higher retail sales. As a percentage of net sales, gross profit for the retail division increased from 46.5% in the thirteen weeks ended October 28, 1995 to 47.9% in the thirteen weeks ended November 2, 1996. Operating expenses, which include selling, general and administrative expenses as well as depreciation, increased 11.1% from $11.5 million in the thirteen weeks ended October 28, 1995 to $12.8 million in the thirteen weeks ended November 2, 1996. The increase was primarily due to costs associated with the operation of 12 additional stores. The Company had a pre-tax net income of $1,449,023, or $0.17 per share, in the thirteen weeks ended November 2, 1996 compared to a pre-tax net income of $1,231,704, or $0.18 per share, in the thirteen weeks ended October 28, 1995. On an after-tax basis, net income was $885,006, or $0.10 per share, in the thirteen weeks ended November 2, 1996 compared to net income of $1,231,704, or $0.18 per share in the thirteen weeks ended October 28, 1995. The weighted average common shares outstanding was 8,447,436 for the thirteen weeks ended November 2, 1996 and 6,818,700 for the thirteen weeks ended October 28, 1995. 9 11 COMPARISON OF THE THIRTY-NINE WEEKS ENDED NOVEMBER 2, 1996 WITH THE THIRTY-NINE WEEKS ENDED OCTOBER 28, 1995. Net sales increased 1.7% from $85.2 million in the thirty-nine weeks ended October 28, 1995 to $86.7 million in the thirty-nine weeks ended November 2, 1996. The increase in net sales was due to a 12.5% increase in retail sales (from $59.5 million to $67.0 million), which was offset by a 23.3% decrease in wholesale sales (from $25.7 million to $19.7 million). The increase in retail sales was principally due to the increase in the number of stores operated during the thirty-nine weeks ended November 2, 1996 compared to the thirty-nine weeks ended October 28, 1995. Comparable store sales during the thirty-nine weeks ended November 2, 1996 increased 2.7% when compared to last year. Gross profit increased 10.7% from $34.1 million in the thirty-nine weeks ended October 28, 1995 (40.0% of net sales) to $37.8 million in the thirty-nine weeks ended November 2, 1996 (43.6% of net sales) primarily as a result of the increase in net sales. Gross profit for the wholesale division decreased 13.9% from $6.4 million in the thirty-nine weeks ended October 28, 1995 to $5.5 million in the thirty-nine weeks ended November 2, 1996. As a percentage of net sales, gross profit for the wholesale division increased from 24.8% in the thirty-nine weeks ended October 28, 1995 to 27.8% in the thirty-nine weeks ended November 2, 1996, primarily due to higher margin sales. Gross profit for the retail division increased 16.4% from $27.7 million in the thirty-nine weeks ended October 28, 1995 to $32.3 million in the thirty-nine weeks ended November 2, 1996. The retail division's gross margin increased from 46.6% in the thirty-nine weeks ended October 28, 1995 to 48.2% in the thirty-nine weeks ended November 2, 1996. Operating expenses increased $2.5 million in the thirty-nine weeks ended November 2, 1996 compared to the thirty-nine weeks ended October 28, 1995. The increase was primarily due to costs associated with the operation of 14 additional stores. During the thirty-nine weeks ended November 2, 1996 the Company had a pre-tax net loss of $171,555 or ($0.02) per share (based on 7,858,334 weighted average common shares outstanding), compared to a pre-tax net loss of $1,097,467 or ($0.16) per share, (based on 6,818,700 weighted average common shares outstanding) during the thirty-nine weeks ended October 28, 1995. On an after-tax basis, the Company had a net loss of $104,649 or ($0.01) per share (based on 7,858,334 weighted average common shares outstanding), compared to a net loss of $1,097,467 or ($0.16) per share, (based on 6,818,700 weighted average common shares outstanding. 10 12 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following list of schedules and exhibits included in this Form 10-Q: 27 Financial Data Schedule (for SEC use only). 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: December 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 9-MOS FEB-03-1996 FEB-04-1996 NOV-02-1996 1 885,782 0 12,904,776 0 73,750,945 98,051,522 15,860,550 0 118,339,112 68,011,161 0 0 0 78,078 48,135,463 118,339,112 86,668,286 86,668,286 48,894,635 48,894,635 0 0 0 (171,555) (66,906) (104,649) 0 0 0 (104,649) (0.01) (0.01)
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