<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QA
Amendment Number 1
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
<PAGE> 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
ITEM 6 Exhibits
- ------
Exhibit 27 - Restated Financial Data Schedule (for SEC use only).
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PERFUMANIA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 4, 1996 FEBRUARY 3, 1996
------------ ----------------
<S> <C> <C>
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................................... 2,014,559 1,254,000
Due from related parties................................. 122,538 122,538
------------ -----------
Total current assets.................................. 84,443,873 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
------------ -----------
$101,892,885 $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...................................... (3,792,562) (2,602,970)
------------ -----------
Total stockholders' equity................................. 45,075,156 45,300,248
------------ -----------
$101,892,885 $93,565,323
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
PERFUMANIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN
WEEKS ENDED WEEKS ENDED
MAY 4, 1996 APRIL 29, 1995
----------- --------------
<S> <C> <C>
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 (benefit) for income taxes......................... (760,559) --
----------- -----------
Net loss..................................................... $(1,189,592) $(2,339,250)
=========== ===========
Loss per common share........................................ $ (0.16) $ (0.34)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
PERFUMANIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THIRTEEN THIRTEEN
WEEKS ENDED WEEKS ENDED
MAY 4, 1996 APRIL 29, 1995
----------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................... $(1,189,592) $(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 --
Deferred tax benefit.................................... (760,559) --
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....................................... (4,060,254) 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
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 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
- -------------------------
<TABLE>
<CAPTION>
COMMON STOCK
COMMON STOCK SUBSCRIBED CAPITAL IN TREASURY STOCK
------------------- ------------------ EXCESS ------------------ RETAINED
SHARES AMOUNT SHARES AMOUNT OF PAR SHARES AMOUNT EARNINGS TOTAL
--------- ------- ------- -------- ----------- ------ --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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.......... -- -- -- -- -- -- -- (1,189,592) (1,189,592)
--------- ------- ------- -------- ----------- ------ --------- ----------- -----------
Balance at May 4,
1996................. 6,709,700 $67,097 180,000 $956,250 $47,967,694 23,000 $(123,323) $(3,792,562) $45,075,156
--------- ------- ------- -------- ----------- ------ --------- ----------- -----------
</TABLE>
(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
<PAGE> 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.
<TABLE>
<CAPTION>
THIRTEEN WEEKS THIRTEEN WEEKS
ENDED ENDED
MAY 4, 1996 APRIL 29, 1995
-------------- --------------
<S> <C> <C>
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
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MAY 4, 1996 FEBRUARY 3, 1996
------------ ----------------
<S> <C> <C>
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
</TABLE>
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
<PAGE> 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
<PAGE> 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 $29.4 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
<PAGE> 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 $1,189,592, or $0.16 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
<PAGE> 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: August 29, 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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PERFUMANIA, INC. FOR THE 3 MONTHS ENDED MAY 4, 1996, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-3-1996
<PERIOD-START> FEB-4-1996
<PERIOD-END> MAY-4-1996
<CASH> 776,238
<SECURITIES> 0
<RECEIVABLES> 9,773,168
<ALLOWANCES> 0
<INVENTORY> 64,035,524
<CURRENT-ASSETS> 84,443,873
<PP&E> 14,025,174
<DEPRECIATION> 0
<TOTAL-ASSETS> 101,892,885
<CURRENT-LIABILITIES> 55,003,160
<BONDS> 5,236,366
0
0
<COMMON> 67,097
<OTHER-SE> 45,008,059
<TOTAL-LIABILITY-AND-EQUITY> 101,892,885
<SALES> 23,220,473
<TOTAL-REVENUES> 23,220,473
<CGS> 13,312,526
<TOTAL-COSTS> 13,312,526
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,950,151)
<INCOME-TAX> (760,559)
<INCOME-CONTINUING> (1,189,592)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,189,592)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
