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FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 333-10843
SRI RECEIVABLES PURCHASE CO., INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-349276
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10201 MAIN STREET, HOUSTON, TEXAS 77025
(Address of principal executive offices) (Zip Code)
(713) 667-5601
Registrant's telephone number, including area code
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 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares of common stock outstanding as of December 15, 1998 was
1,000 shares which were held by Specialty Retailers, Inc., a wholly owned
subsidiary of Stage Stores, Inc.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND
(b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT.
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SRI RECEIVABLES PURCHASE CO., INC.
(An indirect, wholly-owned subsidiary of Stage Stores, Inc.)
CONDENSED BALANCE SHEET
(in thousands, except par value)
(unaudited)
October 31, January 31,
1998 1998
------- -------
ASSETS
Retained Certificates in Trust ...................... $71,516 $72,918
Restricted cash ..................................... 5,408 7,808
Debt issue cost Adjustments
to reconcile net income to net .................... 1,392 1,874
Trust organization costs ............................ 4,069 3,883
------- -------
$82,385 $86,483
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Accrued expenses and other liabilities .............. $ 2,861 $ 1,847
Payable to SRI ...................................... 5,511 14,324
Long-term debt ...................................... 30,000 30,000
------- -------
Total liabilities ............................. 38,372 46,171
Common stock, par value $0.01, 1 share
authorized, issued and outstanding ................ -- --
Additional paid-in capital .......................... 37,813 34,556
Retained earnings ................................... 6,200 5,756
------- -------
Stockholder's equity .......................... 44,013 40,312
------- -------
Commitments and contingencies ....................... -- --
------- -------
$82,385 $86,483
======= =======
The accompanying notes are an integral part of this statement.
2
<PAGE>
SRI RECEIVABLES PURCHASE CO., INC.
(An indirect, wholly-owned subsidiary of Stage Stores, Inc.)
CONDENSED STATEMENT OF INCOME
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
---------------------- --------------------
October 31, November 1, October 31, November 1,
1998 1997 1998 1997
------- ------ ------ ------
Gain associated with
Retained Certificates .... $ (467) $ 38 $ 329 $3,228
Interest income on
receivable from SRI ...... 1,985 1,274 5,633 3,555
Interest income ............ 54 54 161 170
Interest expense ........... 935 935 2,805 2,805
Amortization of debt
issue costs .............. 161 160 482 476
General and
administrative expenses .. 177 170 533 511
------- ------ ------ ------
Operating income ........... 299 101 2,303 3,161
Income tax expense ......... 109 38 852 1,176
------- ------ ------ ------
Net income ................. $ 190 $ 63 $1,451 $1,985
======= ====== ====== ======
The accompanying notes are an integral part of this statement.
3
<PAGE>
SRI RECEIVABLES PURCHASE CO., INC.
(An indirect, wholly-owned subsidiary of Stage Stores, Inc.)
CONDENSED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------
October 31, November 1,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................... $ 1,451 $ 1,985
--------- ---------
Adjustments to reconcile net income to net
cash used in operating activities:
Amortization of trust organization and debt
issue costs ............................... 1,072 1,055
Change in working capital ................... (8,936) (16,653)
--------- ---------
Total adjustments ........................... (7,864) (15,598)
--------- ---------
Net cash used in operating activities ........... (6,413) (13,613)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in restricted cash ........ 2,400 (2,539)
Purchases of accounts receivable from SRI ..... (398,739) (322,988)
Transfer of accounts receivable to the Trust .. 403,759 339,210
--------- ---------
Net cash provided by investing activities ... 7,420 13,683
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to debt issue costs ................. -- (70)
Dividends paid to SRI ......................... (1,007) --
--------- ---------
Net cash used in investing activities ....... (1,007) (70)
--------- ---------
Net change in cash and cash equivalents ..... -- --
Cash and cash equivalents:
Beginning of period ........................... -- --
--------- ---------
End of period ................................. $ -- $ --
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ................................. $ 1,875 $ 1,875
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Contribution of ineligible accounts
receivable .................................. $ 2,481 $ 3,244
========= =========
Contribution of trust organization costs ...... $ 776 $ --
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
SRI RECEIVABLES PURCHASE CO., INC.
(An indirect, wholly-owned subsidiary of Stage Stores, Inc.)
CONDENSED STATEMENT OF STOCKHOLDER'S EQUITY
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Common Stock
---------------- Additional
Shares Paid-in Retained
Outstanding Amount Capital Earnings Total
----- ----- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Balance, January 31, 1998 1 $ -- $34,556 $ 5,756 $ 40,312
Net income ............... -- -- -- 1,451 1,451
Dividends paid ........... -- -- -- (1,007) (1,007)
Contribution of ineligible
accounts receivable .... -- -- 2,481 -- 2,481
Contribution of trust
organization costs .... -- -- 776 -- 776
----- ----- ------- ------- --------
Balance, October 31, 1998 1 $ -- $37,813 $ 6,200 $ 44,013
===== ===== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
SRI RECEIVABLES PURCHASE CO., INC.
(An indirect, wholly owned subsidiary of Stage Stores, Inc.)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed financial statements of SRI
Receivables Purchase Co., Inc. (the "Company" or "SRPC") have been prepared in
accordance with Rule 10-01 of Regulation S-X and do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. Those adjustments, which include only normal
recurring adjustments that are in the opinion of management necessary for a fair
presentation of the results of the interim periods, have been made. The results
of operations for such interim periods are not necessarily indicative of results
of operations for a full year. The unaudited financial statements should be read
in conjunction with the audited financial statements and notes thereto for the
year ended January 31, 1998 filed with SRPC's Annual Report on Form 10-K.
Certain reclassifications have been made to prior year amounts to conform with
the current year presentation. The fiscal years discussed herein end on the
Saturday nearest to January 31 in the following calendar year. For example,
references to "1998" mean the fiscal year ended January 30, 1999.
2. SRPC is a wholly owned, special-purpose subsidiary of Specialty
Retailers, Inc. ("SRI"). The Company's ultimate parent is Stage Stores, Inc.
("Stage Stores"). The Company, which was incorporated in 1993, was established
to acquire substantially all of the trade accounts receivable generated by
holders of SRI's private label credit card accounts and to transfer such
accounts receivable to the SRI Receivables Master Trust (the "Trust") under the
terms of a pooling and servicing agreement. The Company is a separate and
distinct entity from Stage Stores and its other affiliates. The Company was
established with the intent that, in the event of a liquidation, its creditors
would be entitled to satisfy their claims from the Company's assets prior to any
distribution to Stage Stores or any of its subsidiaries. The Trust has issued
certain certificates to third parties representing undivided interests in the
Trust. SRPC owns an undivided interest in the accounts receivable not supporting
the certificates issued to third parties by the Trust (the "Retained Interest").
3. During September 1998, the Company amended the revolving certificate to
increase the limit that may be outstanding from $82.5 million to $165 million
through March 31, 1999. The maximum that can be outstanding under the revolving
certificate will be reduced to $144.4 million from April 1, 1999 to September
30, 1999 and $82.5 million thereafter. In addition, a new class of certificates
(the "Class B-2 Certificates") was created under the revolving certificate to
allow for up to an additional $10 million to be outstanding from October 16,
1998 through December 24, 1998. The Class B-2 Certificates are collateralized by
the accounts receivable transferred to the Trust, subordinated to certain other
classes of certificates outstanding. The Class B-2 Certificates bear a floating
rate of return, which was 10.25% at October 31, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995.
Certain items discussed or incorporated by reference herein contain
forward-looking statements that involve risks and uncertainties including, but
not limited to, the seasonality of demand for apparel which can be affected by
weather patterns, levels of competition, competitors' marketing strategies,
changes in fashion trends and availability of product, the failure of SRI to
achieve the expected results of merchandising and marketing plans or store
opening or closing plans. The occurrence of any of the above could have a
material adverse impact on the amount or quality of accounts receivable
transferred to SRPC, which in turn could affect the operating results of SRPC.
Additionally, changes in economic conditions (including interest rates and
payment patterns of the holders of SRI private label credit card accounts) could
negatively impact SRPC's results of operations. Certain information herein
contains estimates, which represent management's best judgment as of the date
hereof based on information currently available; however, SRPC does not intend
to update this information to reflect developments or information obtained after
the date hereof and disclaims any legal obligation to the contrary.
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations is limited to an analysis of results of operations between the nine
months ended October 31, 1998 and the nine months ended November 1, 1997,
pursuant to General Instruction H of Form 10-Q.
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<PAGE>
The gain associated with the Retained Certificates for the nine months
ended October 31, 1998 decreased 90.6% to $0.3 million from $3.2 million in the
same period in 1997 due to an increase in premium payments to SRI for the
purchase of accounts receivable as well as an increase in the return paid to
certificate holders in the Trust partially offset by an increase in the amount
of service charge income and a decrease in bad debt expense. Interest income on
balances with SRI increased 55.6% to $5.6 million for the nine months ended
October 31, 1998 from $3.6 million in the same period in 1997 primarily due to
an increase in the net cash advances to SRI. Interest expense remained the same
at $2.8 million for the nine months ended October 31, 1998 and November 1, 1997.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item omitted pursuant to General Instruction H of Form 10-Q.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
This item is omitted pursuant to General Instruction H of Form 10-Q.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
This item is omitted pursuant to General Instruction H of Form 10-Q.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
This item is omitted pursuant to General Instruction H of Form 10-Q.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 Amended and Restated Series 1997-1 Supplement dated as of October
16, 1998 to Amended and Restated Pooling and Servicing Agreement
dated as of August 11, 1995 and Amended on May 30, 1996 and
August 1, 1998 by and among SRI Receivables Purchase Co., Inc.,
Specialty Retailers, Inc., and Bankers Trust (Delaware) on behalf
of the Series 1997-1 Certificateholders. Incorporated by
reference from the Form 10-Q Stage Stores, Inc. (commission file
number 001-14035) for the quarter ended October 31, 1998 filed on
December 15, 1998.
7
<PAGE>
4.2 Class B-2 Certificate Purchase Agreement dated as of October 16,
1998 by and among SRI Receivables Purchase Co., Inc., Specialty
Retailers, Inc., the Class B-2 Purchasers parties thereto, and
Credit Suisse First Boston. Incorporated by reference from the
Form 10-Q Stage Stores, Inc. (commission file number 001-14035)
for the quarter ended October 31, 1998 filed on December 15,
1998.
4.3 Amendment No. 1 to Class A Certificate Purchase Agreement dated
as of October 16, 1998 by and among SRI Receivables Purchase Co.,
Inc., Specialty Retailers, Inc., the Class A Purchasers parties
thereto and Credit Suisse First Boston. Incorporated by reference
from the Form 10-Q Stage Stores, Inc. (commission file number
001-14035) for the quarter ended October 31, 1998 filed on
December 15, 1998.
4.4 Amendment No. 1 to Class B Certificate Purchase Agreement dated
as of October 16, 1998 by and among SRI Receivables Purchase Co.,
Inc., Specialty Retailers, Inc., the Class B Purchasers parties
thereto and Credit Suisse First Boston. Incorporated by reference
from the Form 10-Q Stage Stores, Inc. (commission file number
001-14035) for the quarter ended October 31, 1998 filed on
December 15, 1998.
27.1 Financial Data Schedule.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SRI RECEIVABLES PURCHASE CO., INC.
DECEMBER 15, 1998 /s/ CARL E. TOOKER
(Date) Carl E. Tooker
Chairman , Chief Executive Officer
and President
(principal executive officer)
DECEMBER 15, 1998 /s/ JAMES A. MARCUM
(Date) James A. Marcum
Vice Chairman and
Chief Financial Officer
(principal financial and accounting
officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE SRI RECEIVABLES PURCHASE CO., INC. FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-END> OCT-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 76,924
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 82,385
<CURRENT-LIABILITIES> 2,861
<BONDS> 30,000
<COMMON> 0
0
0
<OTHER-SE> 44,013
<TOTAL-LIABILITY-AND-EQUITY> 82,385
<SALES> 0
<TOTAL-REVENUES> 6,123
<CGS> 0
<TOTAL-COSTS> 1,015
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,805
<INCOME-PRETAX> 2,303
<INCOME-TAX> 852
<INCOME-CONTINUING> 1,451
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,451
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
