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 May 1, 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 June 4,
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)
May 1, 1999 January 30, 1999
ASSETS
Retained Certificates in Trust $ 78,978 $ 83,044
Restricted cash 6,259 5,926
Prepaid expenses 986 899
Debt issue cost 1,071 1,231
Other 1,205 3,171
$ 88,499 $ 94,271
LIABILITIES AND STOCKHOLDER'S EQUITY
Accrued expenses and other liabilities $ 1,662 $ 709
Payable to SRI 17,051 23,497
Deferred income taxes 2,179 2,179
Long-term debt 30,000 30,000
Total liabilities 50,892 56,385
Common stock, par value $0.01, 1 share
authorized, issued and outstanding -- --
Additional paid-in capital 32,664 32,130
Retained earnings 4,943 5,756
Stockholder's equity 37,607 37,886
Commitments and contingencies -- --
$ 88,499 $ 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)
Three Months Ended
May 1, 1999 May 2, 1998
Gain associated with Retained Certificates $ 1,709 $ 490
Interest income on receivable from SRI -- 1,724
Interest income 44 57
Interest expense 935 935
Amortization of debt issue costs 160 161
General and administrative expenses 34 174
Operating income 624 1,001
Income tax expense 231 371
Income before cumulative effect of a
change in accounting principle 393 630
Cumulative effect of a change in accounting
principle, net of tax - reporting costs
of start-up activities (1,206) --
Net income (loss) $ (813) $ 630
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)
Three Months Ended
May 1, 1999 May 2, 1998
Cash flows from operating activities:
Net income (loss) $ (813) $ 630
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Amortization of debt issue costs and
other assets 224 356
Cumulative effect of a change in
accounting principle 1,206 --
Change in working capital (4,873) (5,697)
Total adjustments (3,443) (5,341)
Net cash used in operating activities (4,256) (4,711)
Cash flows from investing activities:
Decrease (increase) in restricted cash (333) 70
Purchases of accounts receivable from SRI (122,809) (126,281)
Transfer of accounts receivable to the Trust 127,398 131,929
Net cash provided by investing activities 4,256 5,718
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 $ -- $ --
Supplemental schedule of non-cash
investing and financing activities:
Contribution of ineligible accounts receivable $ 523 $ 933
Contribution of other assets $ 11 $ 74
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
Additional
Shares Amount Paid-in Retained Total
Outstanding Capital Earnings
Balance, January 30, 1999 1 $ -- $ 32,130 $ 5,756 $ 37,886
Net loss -- -- -- (813) (813)
Contribution of ineligible
accounts receivable -- -- 523 -- 523
Contribution of other assets -- -- 11 -- 11
Balance, May 1, 1999 1 $ -- $ 32,664 $ 4,943 $ 37,607
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. 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, reported as the cumulative effect
of a change in accounting principle, resulted in an after tax
charge of $1.2 million.
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 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. 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 three months ended May 1, 1999 and the
three months ended May 2, 1998, pursuant to General Instruction H
of Form 10-Q.
The gain associated with the Retained Certificates for the
three months ended May 1, 1999 increased to $1.7 million from
$0.5 million in the same period in 1998 primarily due to an
increase in the amount of service charge and late fee income as
well as a decrease in premium payments to SRI for the purchase of
accounts receivable partially offset by an increase in bad debt
expense. Beginning in fiscal 1999, the Company discontinued
charging interest on intercompany balances between SRPC and SRI.
Interest expense remained the same at $0.9 million for the three
months ended May 1, 1999 and May 2, 1998. In connection with the
adoption of SOP 98-5, the Company recorded a cumulative effect of
a change in accounting principle, net of tax charge of $1.2
million. 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.
June 14, 1999 /s/ Carl E. Tooker
(Date) Carl E. Tooker
Chairman, Chief Executive
Officer and President
(principal executive officer)
June 14, 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.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> May-1-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 85,237
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 88,499
<CURRENT-LIABILITIES> 3,841
<BONDS> 30,000
<COMMON> 0
0
0
<OTHER-SE> 37,607
<TOTAL-LIABILITY-AND-EQUITY> 88,499
<SALES> 0
<TOTAL-REVENUES> 1,753
<CGS> 0
<TOTAL-COSTS> 194
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 935
<INCOME-PRETAX> 624
<INCOME-TAX> 231
<INCOME-CONTINUING> 393
<DISCONTINUED> 0
<EXTRAORDINARY> (1,206)
<CHANGES> 0
<NET-INCOME> (813)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
