<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 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 0-23669
SHOE PAVILION, INC.
(Exact name of Registrant as Specified in its Charter)
Delaware 94-3289691
(State or Other Jurisdiction of Incorporation (IRS Employer
or Organization) Identification Number)
3200-F Regatta Boulevard, Richmond, California 94804
(Address of principal executive offices) (Zip Code)
(510) 970-9775
(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 [_].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock outstanding as of August 5, 1998 was 6,800,000 shares
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The following financial statements and related financial information are filed
as part of this report:
<TABLE>
<CAPTION>
Shoe Pavilion, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data) June 30 December 31 June 30
1998 1997 1997
------- ----------- -------
(Restated)
(Note 3)
<S> <C> <C> <C>
ASSETS
Current assets
Cash $ 323 $ 395 $ 306
Inventories 24,888 19,795 18,579
Prepaid expenses and other 298 73 50
------- ------- -------
Total current assets 25,509 20,263 18,935
Property and equipment, net 2,382 2,075 1,718
Other assets 573 308 81
------- ------- -------
Total assets $28,464 $22,646 $20,734
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 8,284 $ 5,921 $ 8,390
Accrued expenses 602 843 971
Line of credit 3,200 7,387 4,987
Current portion of long-term obligations 21 68 69
------- ------- -------
Total current liabilities 12,107 14,219 14,417
Deferred rent 942 896 629
Long-term obligations, less current portion 71 203 153
------- ------- -------
Total liabilities 13,120 15,318 15,199
------- ------- -------
Stockholders' equity
Common stock- $.001 par value: 15,000,000 shares authorized;
issued and outstanding; 6,800,000, 4,500,000, 4,500,000 7 4 4
Preferred stock- $.001 par value; 1,000,000 shares authorized;
no shares issued or outstanding -- -- --
Additional paid-in capital 13,968 812 812
Retained earnings 1,369 6,512 4,719
------- ------- -------
Total stockholders' equity 15,344 7,328 5,535
------- ------- -------
Total liabilities and stockholders' equity $28,464 $22,646 $20,734
======= ======= =======
</TABLE>
See notes to condensed consolidated financial statements
2
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<TABLE>
<CAPTION>
Shoe Pavilion, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share and number of stores)
Three Months Ended Six Months Ended
June 30 June 30
----------------------- -----------------------
1998 1997 1998 1997
--------- --------- ---------- --------
(Restated)
(Note 3)
<S> <C> <C> <C> <C>
Net sales $13,386 $12,174 $24,837 $20,329
Cost of sales and related occupancy expenses 8,591 7,665 16,232 13,140
------- ------- ------- -------
Gross profit 4,795 4,509 8,605 7,189
Selling, general and administrative expenses 3,628 3,116 6,636 5,151
------- ------- ------- -------
Income from operations 1,167 1,393 1,969 2,038
Interest and other, net 52 127 169 239
------- ------- ------- -------
Income before taxes 1,115 1,266 1,800 1,799
Income taxes 429 89 92 126
------- ------- ------- -------
Net Income $ 686 $ 1,177 $ 1,708 $ 1,673
======= ======= ======= =======
Earnings per share:
Basic $ 0.10 $ 0.26 $ 0.28 $ 0.37
Diluted $ 0.10 $ 0.26 $ 0.28 $ 0.37
Weighted average shares outstanding:
Basic 6,800 4,500 6,114 4,500
Diluted 6,845 4,500 6,142 4,500
PRO FORMA
Historical income before taxes on income $ 1,266 $ 1,800 $ 1,799
Pro forma provision for income taxes 478 687 679
------- ------- -------
Pro forma net income $ 788 $ 1,113 $ 1,120
======= ======= =======
Pro forma earnings per share
Basic $ 0.17
Diluted $ 0.17
Pro forma weighted average shares outstanding
Basic 6,493
Diluted 6,521
Stores open at end of period 58 54
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
Shoe Pavilion, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended
June 30
---------------------------
1998 1997
----------- ---------
(Restated)
(Note 3)
<S> <C> <C>
Operating activities:
Net income $ 1,708 $ 1,673
Adjustments to reconcile net income to net cash
used by operating activities
Depreciation 362 258
Deferred taxes (485) --
Effect of changes in:
Inventories (5,093) (5,092)
Prepaid expenses and other current assets (225) 24
Accounts payable 2,363 2,695
Accrued expenses (241) 197
Other assets 220 (73)
Deferred rent 46 191
-------- --------
Net cash used by operating activities (1,345) (127)
-------- --------
Investing activities-
Purchase of property and equipment, net (669) (601)
-------- --------
Financing activities:
Net proceeds from initial public offering 14,108 --
Borrowings (repayments) on line of credit (4,187) 1,587
Principal payments on capital leases (179) (51)
Distributions paid to stockholder (7,800) (704)
-------- --------
Net cash provided by financing activities 1,942 832
-------- --------
NET (DECREASE) INCREASE IN CASH (72) 104
CASH, BEGINNING OF PERIOD 395 202
-------- --------
CASH, END OF PERIOD $ 323 $ 306
======== ========
</TABLE>
See notes to condensed consolidated financial statements
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Notes to Financial Statements
1. Basis of Presentation
General - The accompanying unaudited condensed consolidated financial statements
have been prepared from the records of the Company without audit, and in the
opinion of management, include all adjustments necessary to present fairly the
financial position at June 30, 1998 and 1997 and the interim results of
operations for the three and six months then ended and cash flows for the six
months then ended. The balance sheet as of December 31, 1997, presented
herein, has been derived from the audited financial statements of the Company
for the year then ended.
Accounting policies followed by the Company are described in Note 2 to the
audited consolidated financial statements for the year ended December 31, 1997,
included in the Company's prospectus dated February 23, 1998. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted for purposes of the condensed consolidated interim
financial statements. The condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements,
including the notes thereto, for the year ended December 31, 1997.
The results of operations for the three-month and six-month periods presented
herein are not necessarily indicative of the results to be expected for the full
year.
Public Offering - On February 27, 1998, the Company sold 2,300,000 shares of its
common stock for net proceeds of $14,107,651. In connection with the offering,
the Company terminated its status as an S corporation and recorded deferred
taxes of $485,000.
New Accounting Pronouncement - The Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income during the
quarter ended March 31, 1998. SFAS 130 requires that an enterprise report, by
major components and as a single total, the change in its net assets during the
period from nonowner sources. As the Company has no changes in net assets from
nonowner sources, comprehensive income and net income are the same.
2. Pro Forma Information
The objective of the pro forma information is to show what the significant
effects on the historical information might have been had the Company not been
treated as an S Corporation for tax purposes prior to the February 23, 1998, the
effective date of the Company's initial public offering.
Income Taxes - The pro forma information presented on the condensed consolidated
statements of income reflects a provision for income taxes at an effective rate
of 38.5% for the six months ended June 30, 1998 and 1997 and the quarter ended
June 30, 1997.
Pro Forma Net Income Per Share - Pro forma basic net income per share is based
on the weighted average number of shares of common stock outstanding during the
period plus the estimated number of shares offered by the Company (1,271,650
shares) which were necessary to fund the $7,800,000 distribution paid to the
Company's stockholder upon termination of the Company's status as an S
Corporation. Pro forma diluted net income per share is calculated using the
number of shares used in the basic calculation plus the dilutive effect of stock
options outstanding during the period.
3. Restatement
Subsequent to the issuance of the Company's condensed consolidated financial
statements for the six months and quarter ended June 30, 1998, the Company
determined that the effect of recording the $485,000 deferred tax asset on
5
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February 23, 1998 resulting from the termination of the Company's status as an
S corporation should have been recorded as a deduction to tax expense rather
than directly to additional paid-in capital. As a result, additional paid-in
capital, retained earnings, income taxes and net income have been restated
from amounts previously reported as follows:
<TABLE>
<CAPTION>
(In thousands) As Previously As
Reported Restated
------------- --------
<S> <C> <C>
At June 30, 1998:
Additional paid-in capital $14,453 $13,968
Retained Earnings 884 1,369
For the six months ended June 30, 1998:
Income taxes 577 92
Net income $ 1,223 $ 1,708
</TABLE>
6
<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 on the 17th day of March 1999.
SHOE PAVILION, INC., as Registrant
By /s/ Dmitry Beinus
---------------------------------------------
Dmitry Beinus
Chairman and Chief Executive Officer
By /s/ Gary A. Schwartz
---------------------------------------------
Gary A. Schwartz
Vice President and Chief Financial Officer
7
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INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 323 323
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 24,888 24,888
<CURRENT-ASSETS> 25,509 25,509
<PP&E> 4,434 4,434
<DEPRECIATION> 2,052 2,052
<TOTAL-ASSETS> 28,464 28,464
<CURRENT-LIABILITIES> 12,107 12,107
<BONDS> 0 0
0 0
0 0
<COMMON> 7 7
<OTHER-SE> 15,337 15,337
<TOTAL-LIABILITY-AND-EQUITY> 28,464 28,464
<SALES> 13,386 24,837
<TOTAL-REVENUES> 13,386 24,837
<CGS> 8,591 16,232
<TOTAL-COSTS> 8,591 16,232
<OTHER-EXPENSES> 3,628 6,636
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 52 169
<INCOME-PRETAX> 1,115 1,800
<INCOME-TAX> 429 92
<INCOME-CONTINUING> 686 1,708
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 686 1,708
<EPS-PRIMARY> .10 .28
<EPS-DILUTED> .10 .28
</TABLE>
