-----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, BpbjImp8JfXbH6ZnsxGKFQHYdmFRI0P8SoGtQr/UI6IZprPnWdT2tjI8eCIep8r4 OxIIHGxVhTymKgj1kWrfZg== 0000950144-97-010120.txt : 19970918 0000950144-97-010120.hdr.sgml : 19970918 ACCESSION NUMBER: 0000950144-97-010120 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970802 FILED AS OF DATE: 19970916 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: SEC FILE NUMBER: 000-19714 FILM NUMBER: 97681322 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 DATED 08/02/97 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 August 2, 1997 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 August 2, 1997 - 7,807,791 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........................................... 8 2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PERFUMANIA, INC. CONSOLIDATED BALANCE SHEETS
AUGUST 2, 1997 FEBRUARY 1, 1997 -------------- ---------------- ASSETS Current assets: Cash and cash equivalents $ 2,030,464 $ 1,641,527 Trade receivables, less allowance for doubtful accounts of $1,010,591 and $248,386: Customers 9,211,601 12,275,159 Affiliates 1,444,725 653,657 Advances to suppliers 8,981,774 5,023,718 Inventories, net of reserve of $940,000 82,273,949 85,110,423 Prepaid expenses and other current assets 1,401,723 1,899,320 Net deferred tax asset 2,564,557 873,472 Due from related parties 85,613 85,613 ------------- ------------- Total current assets 107,994,406 107,562,889 Property and equipment, net 17,902,402 17,709,758 Leased equipment under capital leases, net 1,779,844 2,013,857 Other assets 2,337,615 2,203,442 Due from related parties 457,243 417,763 ------------- ------------- $ 130,471,510 $ 129,907,709 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank line of credit and current portion of notes payable $ 36,580,192 $ 31,372,171 Accounts payable 35,013,656 36,128,515 Accrued expenses and other liabilities 3,895,212 3,940,440 Income taxes payable 308,509 1,321,203 Current portion of obligations under capital leases 873,425 873,425 Due to related parties 754,483 770,000 ------------- ------------- Total current liabilities 77,425,477 74,405,754 Long term portion of loans payable 5,085,942 4,519,859 Long-term portion of obligations under capital leases 746,208 1,187,516 ------------- ------------- Total liabilities 83,257,627 80,113,129 ------------- ------------- Excess of fair value of assets acquired over cost 616,169 470,000 ------------- ------------- 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 shares issued and outstanding 78,078 78,078 Capital in excess of par 51,900,229 51,900,229 Treasury stock (2,845,349) (2,655,110) Retained earnings (accumulated deficit) (2,535,244) 1,383 ------------- ------------- Total stockholders' equity 46,597,714 49,324,580 ------------- ------------- $ 130,471,510 $ 129,907,709 ============= =============
See accompanying notes to consolidated financial statements 3 4 PERFUMANIA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
THIRTEEN THIRTEEN TWENTY-SIX TWENTY-SIX WEEKS ENDED WEEKS ENDED WEEKS ENDED WEEKS ENDED AUGUST 2, 1997 AUGUST 3, 1996 AUGUST 2, 1997 AUGUST 3, 1996 ------------ ------------ ------------ ------------ Net sales: Unaffiliated customers $ 36,095,848 $ 28,870,964 $ 65,042,533 $ 52,091,437 Affiliates 1,188,682 -- 2,230,721 -- ------------ ------------ ------------ ------------ 37,284,530 28,870,964 67,273,254 52,091,437 ------------ ------------ ------------ ------------ Cost of goods sold: Unaffiliated customers 20,648,699 16,045,773 36,689,383 29,358,299 Affiliates 1,007,553 -- 2,049,592 -- ------------ ------------ ------------ ------------ 21,656,252 16,045,773 38,738,975 29,358,299 ------------ ------------ ------------ ------------ Gross profit 15,628,278 12,825,191 28,534,279 22,733,138 ------------ ------------ ------------ ------------ Operating Expenses: Selling, general and administrative 14,136,500 10,919,296 28,248,397 21,189,279 Depreciation and amortization 1,366,001 856,237 2,660,005 1,710,427 ------------ ------------ ------------ ------------ Total operating expenses 15,502,501 11,775,533 30,908,402 22,899,706 ------------ ------------ ------------ ------------ Income (loss) from operations before other expense 125,777 1,049,658 (2,374,123) (166,568) Other expense (955,601) (720,085) (1,853,589) (1,454,010) ------------ ------------ ------------ ------------ Income (loss) before income taxes (829,824) 329,573 (4,227,712) (1,620,578) Provision (benefit) for income taxes (331,930) 129,636 (1,691,085) (630,923) ------------ ------------ ------------ ------------ Net income (loss) $ (497,894) $ 199,937 $ (2,536,627) $ (989,655) ============ ============ ============ ============ Earnings (loss) per common share $ (0.07) $ 0.03 $ (0.35) $ (0.13) ============ ============ ============ ============
See accompanying notes to consolidated financial statements. 4 5 PERFUMANIA, INC CONSOLIDATED STATEMENTS OF CASH FLOWS
TWENTY-SIX TWENTY-SIX WEEKS ENDED WEEKS ENDED AUGUST 2, 1997 AUGUST 3, 1996 -------------- -------------- Cash flows from operating activities: Net loss $(2,536,627) $ (989,655) Adjustments to reconcile net loss to net cash used in operating activities: Benefit for deferred taxes (1,691,085) (630,923) Capitalized preopening costs (237,910) (354,522) Provision for doubtful accounts 510,000 150,000 Depreciation and amortization 2,660,005 1,710,427 Loss on disposition 138,350 26,070 Change in assets and liabilities, (Increase) decrease in: Trade receivables 1,762,490 1,801,926 Advances to suppliers (3,958,056) (3,767,207) Inventories 2,836,474 (8,858,754) Other current assets 497,597 (331,784) Other assets (310,282) (189,924) Increase (decrease)in: Accounts payable (1,114,859) 5,990,409 Other current liabilities (14,059) 937,935 Income taxes payable (1,012,694) (25,000) ----------- ----------- Total adjustments 65,971 (3,541,347) ----------- ----------- Net cash used in operating activities (2,470,656) (4,531,002) ----------- ----------- Cash flows from investing activities: Additions to property and equipment (2,231,648) (2,040,882) ----------- ----------- Net cash used in investing activities (2,231,648) (2,040,882) ----------- ----------- Cash flows from financing activities: Borrowings and repayments under loan payable 5,774,104 6,832,786 Borrowings and repayments from related parties -- 60,000 Repayments and loans to related parties (15,517) (2,236) Principal payments under capital lease obligations (477,107) (217,414) Purchases of treasury stock (190,239) (241,875) Proceeds from issuance of common stock -- 964,500 ----------- ----------- Net cash provided by financing activities 5,091,241 7,395,761 ----------- ----------- Increase in cash and cash equivalents 388,937 823,877 Cash and cash equivalents at beginning of period 1,641,527 331,028 ----------- ----------- Cash and cash equivalents at end of period $ 2,030,464 $ 1,154,905 =========== =========== Supplemental disclosure of cash flow information: Cash paid for: Interest $ 2,323,228 $ 1,770,109 Income Taxes 1,012,694 25,000
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 1, 1997. (2). STOCKHOLDERS' EQUITY - -------------------------
COMMON STOCK CAPITAL IN TREASURY STOCK ---------------------------- EXCESS ---------------------------- RETAINED SHARES AMOUNT OF PAR SHARES AMOUNT EARNINGS TOTAL ------------ ------------ ------------ ------------ ------------ ------------ ------------ Balance at February 1, 1997 7,807,791 $ 78,078 $ 51,900,229 667,000 ($ 2,655,110) $ 1,383 $ 49,324,580 Purchases of treasury stock -- -- -- 56,400 (190,239) -- (190,239) Net loss for the twenty-six weeks ended August 2, 1997 -- -- -- -- -- (2,536,627) $ 2,536,627 ------------ ------------ ------------ ------------ ------------ ------------ ------------ Balance at August 2, 1997 7,807,791 $ 78,078 $ 51,900,229 723,400 ($ 2,845,349) ($ 2,535,244) $ 46,597,714 ------------ ------------ ------------ ------------ ------------ ------------ ------------
(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. If the Company were required to calculate earnings per share under Statement of Financial Accounting Standards No. 128, which is effective for periods after December 15, 1997, basic and diluted earnings per share for the first two quarters of 1997 and 1996, respectively, would not have been materially different than the earnings per share reported in the accompanying consolidated statements of income. The weighted average number of common shares for the thirteen and twenty-six weeks ended August 2, 1997 were 7,164,348 and 7,178,261, respectively. The weighted average number of common shares for the thirteen and twenty-six weeks ended August 3,1996 was 7,800,589 and 7,567,541, respectively. 6 7 (4). SEGMENT INFORMATION - ------------------------ The Company operates in two industry segments, specialty retail and wholesale distribution of fragrances and related products. Financial information for these segments is summarized in the following table.
THIRTEEN WEEKS THIRTEEN WEEKS TWENTY-SIX TWENTY-SIX ENDED ENDED WEEKS ENDED WEEKS ENDED AUGUST 2, 1997 AUGUST 3, 1996 AUGUST 2, 1997 AUGUST 3,1996 -------------- -------------- -------------- ------------- Sales Wholesale $ 8,332,664 $ 6,116,339 $14,873,987 $11,144,596 Retail 28,951,866 22,754,625 52,399,267 40,946,841 ----------- ----------- ----------- ----------- Total net sales $37,284,530 $28,870,964 $67,273,254 $52,091,437 ----------- ----------- ----------- ----------- Cost of goods sold Wholesale $ 6,168,258 $ 4,399,570 $11,253,231 $ 8,238,967 Retail 15,487,994 11,646,203 27,485,744 21,119,332 ----------- ----------- ----------- ----------- Total cost of goods sold $21,656,252 $16,045,773 $38,738,975 $29,358,299 ----------- ----------- ----------- ----------- Gross profit Wholesale $ 2,164,406 $ 1,716,769 $ 3,620,756 $ 2,905,629 Retail 13,463,872 11,108,422 24,913,523 19,827,509 ----------- ----------- ----------- ----------- Total gross profit $15,628,278 $12,825,191 $28,534,279 $22,733,138 ----------- ----------- ----------- ----------- Number of stores 271 195
August 2, February 1, 1997 1997 ----------- ----------- INVENTORY - --------- Wholesale $28,677,740 $32,051,346 Retail 53,596,209 53,059,077 ----------- ----------- $82,273,949 $85,110,423 ----------- -----------
An unaffiliated customer of the wholesale segment accounted for approximately 7% and 5% of the consolidated net sales for the twenty-six weeks ended August 2, 1997 and August 3, 1996, respectively, and 53% and 70% of the consolidated net trade accounts receivable balance at August 2, 1997 and August 3, 1996, respectively. (5). SUBSEQUENT EVENT - -------------------- In August 1997, one of the Company's wholesale customers who is affiliated via common ownership filed for relief under Chapter 11 of the United States Bankruptcy Code. The Company is an unsecured creditor of the customer and as of August 2, 1997, had outstanding receivables net of accounts payable from the customer of approximately $1.4 million. Depending on the resolution of the customer's bankruptcy case, the Company may not be paid the full amount due from the customer. Due to the above, the Company recorded a bad debt reserve of $500,000 during the second quarter of 1997, increasing the allowance for doubtful accounts to $1.0 million as of August 2, 1997. 7 8 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 August 2, 1997 working capital was $30.6 million compared to $33.2 million at February 1, 1997. The decrease was primarily due to the loss for the twenty-six weeks ended August 2, 1997. Net cash used in operating activities during the twenty-six weeks ended August 2, 1997 was approximately $2.5 million, principally as a result of the net change in the Company's inventory, trade receivables, and accounts payable, as well as the net loss for the twenty-six week period. At August 2, 1997, approximately $1.9 million of the Company's trade receivables were considered past due compared to $0.2 million at February 1, 1997. Of the $9.2 million in trade receivables due from unaffiliated customers, $5.6 million was due from one customer which also accounted for 34% of the Company's wholesale sales during the thirteen weeks ended August 2, 1997. 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 $2.2 million. This represents purchases of furniture, fixtures and equipment for new store openings and the renovation of existing stores during the first three quarters. Net cash provided by financing activities during the current period was approximately $5.1 million, which was primarily the result of an increase in the Company's use of its line of credit. The Company's $35 million line of credit expires on April 30, 1999. During the thirteen weeks ended August 2, 1997, the Company opened 5 stores and closed 4 stores. At August 2, 1997, the Company operated 271 stores. The Company plans to open approximately 30 stores during the remainder of fiscal 1997. 8 9 RESULTS OF OPERATIONS - --------------------- COMPARISON OF THE THIRTEEN WEEKS ENDED AUGUST 2, 1997 WITH THE THIRTEEN WEEKS ENDED AUGUST 3, 1996. Net sales increased from $28.9 million in the thirteen weeks ended August 3,1996, to $37.3 million in the thirteen weeks ended August 2, 1997. Wholesale sales increased by 36.2% (from $6.2 million to $8.3 million) and retail sales increased by 27.2% (from $22.8 million to $29.0 million). The increase in retail sales was principally due to the increase in the number of stores operated during the thirteen weeks ended August 2, 1997 compared to the thirteen weeks ended August 3, 1996. Comparable store sales during the current period increased 1.9% when compared to last year. Gross profit increased 21.9% from $12.8 million in the thirteen weeks ended August 3, 1996 (44.4% of net sales) to $15.6 million in the thirteen weeks ended August 2, 1997 (41.9% of net sales) due to an increase in gross profit for both the retail and wholesale divisions. Gross profit for the wholesale division increased from $1.7 million in the thirteen weeks ended August 3, 1996 to $2.2 million in the thirteen weeks ended August 2, 1997. As a percentage of net sales, gross profit for the wholesale division decreased from 28.1% in the thirteen weeks ended August 3, 1996 to 26.0% in the thirteen weeks ended August 2, 1997, primarily as a result of lower margin sales. Gross profit for the retail division increased to $13.5 million in the thirteen weeks ended August 2, 1997 from $11.1 million in the thirteen weeks ended August 3, 1996 as a result of higher retail sales. As a percentage of net sales, gross profit for the retail division decreased from 48.8% in the thirteen weeks ended August 3, 1996 to 46.5% in the thirteen weeks ended August 2, 1997 primarily as a result of increased promotional sales of merchandise at lower margins. Operating expenses, which include selling, general and administrative expenses as well as depreciation, increased 31.7% from $11.8 million in the thirteen weeks ended August 3, 1996 to $15.5 million in the thirteen weeks ended August 2, 1997. The increase was primarily due to costs associated with the operation of 75 additional stores during the current period. The Company had a net loss of $497,894, or ($0.07) per share, in the thirteen weeks ended August 2, 1997 compared to a net income of $199,937, or $0.03 per share, in the thirteen weeks ended August 3, 1996. The weighted average number of common shares outstanding were 7,164,348 for the thirteen weeks ended August 2, 1997 and 7,800,589 for the thirteen weeks ended August 3, 1996. COMPARISON OF THE TWENTY-SIX WEEKS ENDED AUGUST 2, 1997 WITH THE TWENTY-SIX WEEKS ENDED AUGUST 3, 1996 Net sales increased 29.1% from $52.1 million in the twenty-six weeks ended August 3, 1996 to $67.3 million in the twenty-six weeks ended August 2, 1997. The increase in net sales was due to a 28.0% increase in retail sales (from $40.9 million to $52.4 million), and a 33.5% increase in wholesale sales (from $11.1 million to $14.9 million). The increase in wholesale sales was primarily attributable to a difficult wholesale market last year. The increase in retail sales was principally due to the increase in the number of stores operated during the twenty-six weeks ended August 2, 1997 compared to the twenty-six weeks ended August 3, 1996. Comparable store sales during the twenty-six weeks ended August 2, 1997 increased 3.0% when compared to last year. Gross profit increased 25.5% from $22.7 million in the twenty-six weeks ended August 3, 1996 (40.5% of net sales) to $28.5 million in the twenty-six weeks ended August 2, 1997 (43.6% of net sales) as a result of increases in both retail and wholesale sales. Gross profit for the wholesale division increased 24.6% from $2.9 million in the twenty-six weeks ended August 3, 1996 to $3.6 million in the twenty-six weeks ended August 2, 1997, primarily as a result of higher 9 10 wholesale sales. As a percentage of net sales, gross profit for the wholesale division decreased from 26.1% in the twenty-six weeks ended August 3, 1996 to 24.3% in the twenty-six weeks ended August 2, 1997. Gross profit for the retail division increased 25.7% from $19.8 million in the twenty-six weeks ended August 3, 1996 to $24.9 million in the twenty-six weeks ended August 2, 1997. The retail division's gross margin decreased from 48.4% in the twenty-six weeks ended August 3, 1996 to 47.5% in the twenty-six weeks ended August 2, 1997 as a result of increased promotional sales of merchandise at lower margins. Operating expenses increased $8.0 million in the twenty-six weeks ended August 2, 1997 compared to the twenty-six weeks ended August 3, 1996. The increase was primarily due to costs associated with the operation of 74 additional stores. During the twenty-six weeks ended August 2, 1997 the Company had a net loss of $2,536,627 or ($0.35) per share (based on 7,178,261 average common shares outstanding), compared to a net loss of $989,655 or ($0.13) per share (based on 7,567,541 average common shares outstanding) during the twenty-six weeks ended August 3, 1996. 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: September 10, 1997 By: /s/ Simon Falic ------------------------------------- Simon Falic Chairman of the Board and Chief Executive Officer (Principal Executive Officer) By: /s/ Ron A. Friedman ------------------------------------- Ron A. Friedman President, Chief Financial Officer, Treasurer, and Secretary (Principal Financial and Accounting Officer) 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS JAN-31-1998 MAY-04-1997 AUG-02-1997 2,030,464 0 10,656,326 0 82,273,949 107,994,406 17,902,402 0 130,471,510 77,425,477 0 0 0 78,078 47,052,030 130,471,510 67,273,254 67,273,254 38,738,975 38,738,975 0 0 0 (4,227,712) (1,691,085) (2,536,627) 0 0 0 (2,536,627) (0.35) (0.35)
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