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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 August 1, 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 September 14, 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)
AUGUST 1, JANUARY 31,
1998 1998
----------- ------------
ASSETS
Retained Certificates in Trust .................. $70,551 $72,918
Restricted cash ................................. 5,323 7,808
Debt issue cost ................................. 1,553 1,874
Trust organization costs ........................ 3,565 3,883
------- -------
$80,992 $86,483
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Accrued expenses and other liabilities .......... $ 1,921 $ 1,847
Payable to SRI .................................. 6,642 14,324
Long-term debt .................................. 30,000 30,000
------- -------
Total liabilities ......................... 38,563 46,171
Common stock, par value $0.01, 1 share
authorized, issued and outstanding ........ -- --
Additional paid-in capital ...................... 36,419 34,556
Retained earnings ............................... 6,010 5,756
------- -------
Stockholder's equity ...................... 42,429 40,312
------- -------
Commitments and contingencies ................... -- --
------- -------
$80,992 $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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ ------------------------
AUGUST 1, AUGUST 2, AUGUST 1, AUGUST 2,
1998 1997 1998 1997
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Gain associated with Retained
Certificates ..................... $ 306 1,438 796 3,190
Interest income on receivable
from SRI ......................... 1,924 1,302 3,648 2,281
Interest income .................... 50 63 107 116
Interest expense ................... 935 935 1,870 1,870
Amortization of debt issue
costs ............................ 160 159 321 316
General and administrative
expenses ......................... 182 174 356 341
------ ------ ------ ------
Operating income ................... 1,003 1,535 2,004 3,060
Income tax expense ................. 372 571 743 1,138
------ ------ ------ ------
Net income ......................... $ 631 $ 964 $1,261 $1,922
====== ====== ====== ======
</TABLE>
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)
SIX MONTHS ENDED
------------------------
AUGUST 1, AUGUST 2,
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................ $ 1,261 $ 1,922
--------- ---------
Adjustments to reconcile net income to
net cash used in operating activities:
Amortization of trust organization and debt
issue costs ................................... 713 702
Change in working capital ....................... (7,607) (32,580)
--------- ---------
Total adjustments ............................... (6,894) (31,878)
--------- ---------
Net cash used in operating activities ............. (5,633) (29,956)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in restricted cash .......... 2,485 (1,036)
Purchases of accounts receivable from SRI ....... (264,450) (187,819)
Transfer of accounts receivable to the Trust .... 268,605 218,870
--------- ---------
Net cash provided by investing activities ..... 6,640 30,015
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to debt issue costs ................... -- (59)
Dividends paid to SRI ........................... (1,007) --
--------- ---------
Net cash used in investing activities ......... (1,007) (59)
--------- ---------
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 .................................... $ 1,789 $ 2,232
========= =========
Contribution of trust organization costs ........ $ 74 $ --
========= =========
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 ............... -- -- -- 1,261 1,261
Dividends paid ........... -- -- -- (1,007) (1,007)
Contribution of ineligible
accounts receivable ...... -- -- 1,789 -- 1,789
Contribution of trust
organization costs ....... -- -- 74 -- 74
-------- ---- -------- -------- --------
Balance, August 1, 1998 .. 1 $-- $ 36,419 $ 6,010 $ 42,429
======== ==== ======== ======== ========
</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 was incorporated in 1993 and established to
acquire substantially all of the trade accounts receivable generated by holders
of SRI's private label credit card accounts and transfer such accounts
receivable to 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 it's other affiliates. The Company was established with
the intent that in the event of a liquidation, it's creditors would be entitled
to satisfy their claims from the Company's assets prior to any distribution to
Stage Stores or any of it's subsidiaries.
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 six
months ended August 1, 1998 and the six months ended August 2, 1997, pursuant to
General Instruction H of Form 10-Q
The gain associated with the Retained Certificates for the six months
ended August 1, 1998 decreased 75.0% to $0.8 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 decrease in bad debt expense. Interest income on
balances with SRI increased 56.5% to $3.6 million for the six months ended
August 1, 1998 from $2.3 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
$1.9 million for the six months ended August 1, 1998 and August 2, 1997.
6
<PAGE>
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
27.1 Financial Data Schedule.
7
<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.
SEPTEMBER 14, 1998 /s/ CARL E. TOOKER
(Date) Carl E. Tooker
Chairman , Chief Executive Officer
and President (principal
executive officer)
SEPTEMBER 14, 1998 /s/ JAMES A. MARCUM
(Date) James A. Marcum
Vice Chairman and
Chief Financial Officer
(principal financial and
accounting officer)
8
<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> 6-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-END> AUG-01-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 75,874
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 80,992
<CURRENT-LIABILITIES> 1,921
<BONDS> 30,000
<COMMON> 0
0
0
<OTHER-SE> 42,429
<TOTAL-LIABILITY-AND-EQUITY> 80,992
<SALES> 0
<TOTAL-REVENUES> 4,551
<CGS> 0
<TOTAL-COSTS> 677
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,870
<INCOME-PRETAX> 2,004
<INCOME-TAX> 743
<INCOME-CONTINUING> 1,261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,261
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
