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 30, 1999
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
3, 1999 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.
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 30,1999 January 30, 1999
ASSETS
Retained Certificates in Trust $ 80,130 $ 83,044
Restricted cash 3,308 5,926
Prepaid expenses 246 899
Debt issue cost 784 1,231
Trust organization costs 1,076 3,171
$ 85,544 $ 94,271
LIABILITIES AND STOCKHOLDER'S EQUITY
Accrued expenses and other liabilities $ 1,524 $ 709
Payable to SRI 12,607 23,497
Deferred income taxes 2,179 2,179
Long-term debt 30,000 30,000
Total liabilities 46,310 56,385
Common stock, par value $0.01, 1 share
authorized, issued and outstanding -- --
Additional paid-in capital 33,550 32,130
Retained earnings 5,684 5,756
Stockholder's equity 39,234 37,886
Commitments and contingencies -- --
$ 85,544 $ 94,271
The accompanying notes are an integral part of this statement.
SRI Receivables Purchase Co., Inc.
(An indirect, wholly-owned subsidiary of Stage Stores, Inc.)
Condensed Statement of Operations
(in thousands)
(unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
Gain associated with
Retained Certificates $ 1,689 $ (467) $ 5,058 $ 329
Interest income on
receivable from SRI -- 1,985 -- 5,633
Interest income 40 54 136 161
Interest expense 935 935 2,805 2,805
Amortization of debt
issue costs 161 161 482 482
General and
administrative expenses 36 177 107 533
Operating income 597 299 1,800 2,303
Income tax expense 221 109 666 852
Income before cumulative
effect of a change in
accounting principle 376 190 1,134 1,451
Cumulative effect of a
change in accounting
principle, net of tax -
reporting costs of
start-up activities -- -- (1,206) --
Net income (loss) $ 376 $ 190 $ (72) $ 1,451
The accompanying notes are an integral part of this statement.
SRI Receivables Purchase Co., Inc.
(An indirect, wholly-owned subsidiary of Stage Stores, Inc.)
Condensed Statement of Cash Flows
(in thousands)
(unaudited)
Thirty-nine Weeks Ended
October 30, 1999 October 31, 1998
Cash flows from operating activities:
Net income (loss) $ (72) $ 1,451
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Amortization of trust organization
and debt issue costs 640 1,072
Cumulative effect of a change in
accounting principle 1,206 --
Change in working capital (9,211) (8,936)
Total adjustments (7,365) (7,864)
Net cash used in operating activities (7,437) (6,413)
Cash flows from investing activities:
Decrease in restricted cash 2,618 2,400
Purchases of accounts receivable
from SRI (394,038) (398,739)
Transfer of accounts receivable to
the Trust 398,857 403,759
Net cash provided by investing
activities 7,437 7,420
Cash flows from financing activities:
Dividends paid to SRI -- (1,007)
Net cash used in investing
activities -- (1,007)
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 $ 1,409 $ 2,481
Contribution of trust organization
costs $ 11 $ 776
The accompanying notes are an integral part of this statement.
SRI Receivables Purchase Co., Inc.
(An indirect, wholly-owned subsidiary of Stage Stores, Inc.)
Condensed Statement of Stockholder's Equity
(in thousands)
(unaudited)
Common Stock
Shares Amount Additional Retained Total
Outstanding Paid-in Earnings
Capital
Balance, January 30, 1999 1 $ -- $32,130 $ 5,756 $37,886
Net loss -- -- -- (72) (72)
Contribution of ineligible
accounts receivable -- -- 1,409 -- 1,409
Contribution of trust
organization costs -- -- 11 -- 11
Balance, October 30, 1999 1 $ -- $33,550 $ 5,684 $39,234
The accompanying notes are an integral part of this statement.
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
30, 1999 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 "1999" mean the fiscal
year ended January 29, 2000.
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. On November 9, 1999, the Company completed a refinancing
of the existing term and revolving certificates outstanding under
its accounts receivable securitization program. In connection
with the refinancing, the previously existing term and revolving
certificates were replaced with new term and revolving
certificates (the "New Certificates"). The New Certificates
provide the Company with a maximum availability of $329.9
million, subject to the amount of receivables held in the Trust.
Based upon the amount of receivables in the Trust at the time of
closing, the Company received approximately $290.0 million of
proceeds. Of this amount, approximately $260.0 million was used
to retire the outstanding balances under the previously existing
Trust certificates, which were scheduled to begin amortizing in
December of 1999. The remainder of the proceeds were used to
redeem the previously existing $30.0 million aggregate principle
amount of SRPC 12.5% Trust certificate-backed notes. In
connection with the refinancing, the Company expects to record an
after-tax extraordinary charge of approximately $1.3 million in
the fourth quarter of 1999.
4. During the first quarter of 1999, the Company adopted
the Accounting Standards Executive Committee's Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities"
("SOP 98-5") which requires costs of start-up activities and
organization costs be expensed as incurred. The initial adoption
of SOP 98-5 during the quarter resulted in an after tax charge of
$1.2 million.
Item2. 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 ability to
obtain financing on terms reasonably satisfactory to SRPC and 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
on normal payment terms and 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. See additional risk factors
discussed in Stage Stores Annual Report on Form 10-K.
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 thirty-nine weeks ended October 30, 1999
and the thirty-nine weeks ended October 31, 1998, pursuant to
General Instruction H of Form 10-Q.
The gain associated with the Retained Certificates for the
thirty-nine weeks ended October 30, 1999 increased to $5.1
million from $0.3 million in the same period in 1998 primarily
due to an increase in the amount of service charge and late fee
income partially offset by an increase in bad debt expense and an
increase in premium payments to SRI for the purchase of accounts
receivable. Beginning in fiscal 1999, the Company discontinued
charging interest on intercompany balances between SRPC and SRI.
Interest expense remained the same at $2.8 million for the thirty-
nine weeks ended October 30, 1999 and October 31, 1998. During
the first quarter of 1999, the Company recorded a cumulative
effect of a change in accounting principle, net of tax charge of
$1.2 million in connection with the adoption of SOP 98-5. The
charge was related to the write-off of the unamortized
organization costs associated with the Trust. The decrease in
general and administrative expenses is due to the reduction in
amortization expense associated with the organization costs which
were written off.
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
27.1 Financial Data Schedule.
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 7, 1999 /s/ Carl E. Tooker
(Date) Carl E. Tooker
Chairman, Chief Executive Officer
and President
(principal executive officer)
December 7, 1999 /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.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> OCT-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 83,684
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 85,544
<CURRENT-LIABILITIES> 3,703
<BONDS> 30,000
<COMMON> 0
0
0
<OTHER-SE> 39,234
<TOTAL-LIABILITY-AND-EQUITY> 85,544
<SALES> 0
<TOTAL-REVENUES> 5,058
<CGS> 0
<TOTAL-COSTS> 107
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,151
<INCOME-PRETAX> 1,800
<INCOME-TAX> 666
<INCOME-CONTINUING> 1,134
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,206)
<NET-INCOME> (72)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
