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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-7258
CHARMING SHOPPES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1721355
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
450 WINKS LANE BENSALEM, PA 19020
(Address of principal executive offices) (Zip Code)
(215) 245-9100
(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 ( )
102,784,718 common shares were outstanding as of April 30, 1994.
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CHARMING SHOPPES, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
April 30, 1994 and January 29, 1994...................1-2
Consolidated Statements of Income
Thirteen weeks ended April 30, 1994 and
May 1, 1993.............................................3
Consolidated Statements of Cash Flows
Thirteen weeks ended April 30, 1994 and
May 1, 1993.............................................4
Notes to Consolidated Financial Statements...............5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............8-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................10
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CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 30, January 29,
1994 1994
(In Thousands) -------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 29,835 $ 52,390
Available-for-sale securities 44,957 45,290
Merchandise inventories 297,879 259,527
Prepayments and other 106,456 83,097
-------- -------
Total Current Assets 479,127 440,304
Property, equipment and leasehold improvements 436,651 416,029
Less: accumulated depreciation and amortization 171,350 161,695
-------- -------
Net property, equipment and leasehold
improvements 265,301 254,334
Available-for-sale securities (including a fair
value adjustment of $334 and $0, respectively) 83,913 83,695
Other assets 47,986 50,900
-------- --------
Total Assets $876,327 $829,233
======== ========
See Notes to Unaudited Consolidated Financial Statements
(1)
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CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 30, January 29,
1994 1994
(In Thousands Except Shares) -------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $187,910 $147,638
Accrued expenses 94,228 97,234
Income taxes 5,618 8,521
Current portion - long-term debt 5,006 5,005
-------- --------
Total Current Liabilities 292,762 258,398
Deferred taxes 26,937 26,437
Long-term debt 22,117 22,298
Stockholders' Equity
Common Stock $.10 par value
Authorized 300,000,000 shares
Issued and outstanding 102,784,718 and
102,735,437 shares 10,278 10,274
Additional paid in capital 54,789 54,208
Deferred employee compensation (7,049) (7,015)
Unrealized gain (net of income taxes of
$117 and $0, respectively) 217 0
Retained earnings 476,276 464,633
-------- --------
Total Stockholders' Equity 534,511 522,100
-------- --------
Total Liabilities and Stockholders' Equity $876,327 $829,233
======== ========
See Notes to Unaudited Consolidated Financial Statements
(2)
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CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For Thirteen Weeks Ended
(In Thousands Except Share and April 30, May 1,
Per Share Amounts) 1994 1993
-------- --------
Net sales $297,611 $275,299
Other income 2,175 2,175
-------- --------
Total Revenue 299,786 277,474
-------- --------
Cost of goods sold, buying and
occupancy expenses 210,715 190,083
Selling, general and administrative expenses 67,923 62,961
Interest expense 566 649
-------- --------
Total Expenses 279,204 253,693
-------- --------
Income before income taxes and cumulative
effect of an accounting change 20,582 23,781
Income taxes 6,627 7,562
-------- --------
Income before cumulative effect
of accounting change 13,955 16,219
Cumulative effect of adoption of SFAS 109 0 3,991
-------- --------
Net Income $ 13,955 $ 20,210
======== ========
Weighted average number of common shares
outstanding 108,145,048 108,719,570
=========== ===========
Per Share Data:
Income before cumulative effect of
accounting change $.13 $.15
Cumulative effect of adoption of SFAS 109 .00 .04
------ ------
Net Income $.13 $.19
====== ======
Cash Dividends $.0225 $.0225
====== ======
See Notes to Unaudited Consolidated Financial Statements
(3)
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CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For Thirteen Weeks Ended
April 30, May 1,
(In Thousands) 1994 1993
Operating Activities -------- --------
$13,955 $20,210
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income taxes 500 500
Depreciation & amortization 11,018 9,226
Amortization of deferred compensation expense 646 813
Gain on sale of available-for-sale securities (11) (6)
Cumulative effect of accounting change 0 (3,991)
Changes in operating assets and liabilities:
Prepayments & other (23,858) 2,714
Merchandise inventories (38,352) (40,356)
Accounts payable 40,272 37,497
Accrued expenses (3,006) (7,317)
Income taxes payable (2,903) 279
-------- --------
Net Cash (Used in) Provided by
Operating Activities (1,739) 19,569
-------- --------
Investing Activities
Investment in capital assets 20,622 18,840
Sales of available-for-sale securities (4,932) (11,917)
Purchases of available-for-sale securities 4,472 49,734
Increase (decrease) in other assets (1,550) 8,011
-------- --------
Net Cash Used in Investing Activities 18,612 64,668
-------- --------
Financing Activities
Proceeds from long-term borrowings 0 (1,200)
Reduction of long-term debt 180 90
Proceeds from exercise of stock options (288) (240)
Dividends paid 2,312 2,306
-------- --------
Net Cash Used in Financing Activities 2,204 956
-------- --------
Decrease in Cash and Cash Equivalents (22,555) (46,055)
Cash and Cash Equivalents, Beginning of Year 52,390 98,786
-------- --------
Cash and Cash Equivalents, End of Period $29,835 $52,731
======== ========
See Notes to Unaudited Consolidated Financial Statements
(4)
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CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Consolidated Financial Statements
The consolidated balance sheet as of April 30, 1994, the
consolidated statements of income for the three month periods ended
April 30, 1994 and May 1, 1993 and the consolidated statements of cash
flows for the three month periods then ended have been prepared by the
Company, without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows at
April 30, 1994 and for all periods presented have been made.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's January 29, 1994 annual report on Form 10-K. The results
of operations for the periods ended April 30, 1994 and May 1, 1993 are
not necessarily indicative of the operating results for the full year.
2. Stockholders' Equity
During the three months ended April 30, 1994, shareholders'
equity changed to reflect the following items: net income of
$13,955,000; dividends paid of $2,312,000; amortization of deferred
compensation expense of $646,000; an increase in common stock and
additional paid in capital of $288,000 from the exercise of options for
common stock; a reduction of common stock and additional paid-in
capital of $383,000 from the retirement of common stock; an increase in
stockholders' equity of $1,357,000 from the cumulative effect of
adopting Statement of Financial Accounting Standards No. 115; and a
decrease in stockholders' equity of $1,140,000 from the unrealized loss
on available-for-sale securities.
3. Income Taxes
Effective January 31, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for
Income Taxes" and has separately reported the cumulative effect of that
change in the Consolidated Statement of Income for the thirteen weeks
ended May 1, 1993. SFAS 109 requires a change from the deferred method
of accounting for income taxes under APB Opinion 11 to the liability
method of accounting for income taxes. Under the liability method,
deferred tax assets and liabilities are adjusted to reflect the effect
of changes in enacted tax rates on expected reversals of financial
(5)
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statement and income tax carrying value differences. As permitted by
SFAS 109, the Company elected not to restate the financial
statements for any prior years. The cumulative effect of the change
for the thirteen weeks ended May 1, 1993 was an increase in net income
of $3,991,000 or $0.04 per share.
4. Accounting Changes
In May, 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115 ("SFAS 115"),
"Accounting for Certain Investments in Debt and Equity Securities."
The Company adopted the provisions of the new standard for investments
held as of or acquired after January 30, 1994. In accordance with SFAS
115, prior period financial statements have not been restated.
Pursuant to SFAS 115, management has determined that the Company's
investments should be classified as available-for-sale. As available-
for-sale investments, these securities are carried at fair value
(previously carried at amortized cost) and unrealized gains and losses
are reported in a separate component of stockholders' equity. The
amortized cost of investments is adjusted for amortization of premiums
and the accretion of discounts to maturity. Such amortization is
included in other income. Realized gains and losses are also included
in other income. The cost of securities sold is based on the specific
identification method. Interest from investments is included in other
income.
The following is a summary of available-for-sale securities as of April
30, 1994:
(in thousands)
Net
Unrealized Estimated
Cost Gain(Loss) Fair Value
-------- ----- --------
CAFCO, Inc. certificates $ 25,552 $ 0 $ 25,552
Municipal bonds 54,190 (209) 53,981
Government agency mortgage
backed securities 35,209 227 35,436
Treasury bonds 2,210 173 2,383
Low income housing partnerships 3,187 0 3,187
Preferred stocks 3,507 162 3,669
Other 4,681 (19) 4,662
-------- ----- --------
$128,536 $ 334 $128,870
======== ===== ========
(6)
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The contractual maturities of available-for-sale securities at April
30, 1994 were:
(in thousands)
Estimated
Cost Fair Value
-------- --------
Due in one year or less $ 44,957 $ 44,957
Due after one year through five years 13,963 14,117
Due after five years 27,713 27,502
-------- --------
86,633 86,576
Mortgage backed securities 35,209 35,437
Equity Securities 6,694 6,857
-------- --------
$128,536 $128,870
======== ========
(7)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of net sales,
certain items appearing in the Consolidated Statements of Income for
the thirteen week periods ended April 30, 1994 and May 1, 1993.
Thirteen Weeks Ended
April 30, May 1,
1994 1993
--------------------
Net Sales 100.0% 100.0%
--------------------
Cost of Goods Sold,
Buying, and Occupancy 70.8 69.1
--------------------
Selling, General and
Administrative 22.8 22.9
--------------------
Interest Expense .2 .2
--------------------
Income Taxes 2.2 2.7
--------------------
Income before cumulative
effect of accounting changes 4.7 5.9
--------------------
Cumulative effect of
adoption of SFAS 109 .0 1.4
--------------------
Net Income 4.7% 7.3%
====================
Thirteen Weeks Ended April 30, 1994 and May 1, 1993
Net sales for the first quarter of the fiscal year ending January
28, 1995 ("Fiscal 1995") totaled $297,611,000 as compared to
$275,299,000 for the corresponding period of the fiscal year ended
January 29, 1994 ("Fiscal 1994"), an 8.1% increase. The Company had a
0.3% decrease in sales of existing stores compared to Fiscal 1994.
11.7% of sales for the first quarter of Fiscal 1995 are attributable to
stores opened since the first quarter of Fiscal 1994. Sales for stores
closed since the first quarter of Fiscal 1994 accounted for 3.3% of
sales during that quarter. The number of retail stores increased from
1,236 on May 1, 1993 to 1,344 on April 30, 1994. During the first
quarter of Fiscal 1995 the Company opened 19 new stores and closed 8
existing stores. The Company anticipates a net addition of
(8)
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approximately 125 new stores in Fiscal 1995 and a 17% expansion of
selling square footage.
Cost of goods sold, buying and occupancy expenses expressed as a
percentage of sales increased 1.7% in the first quarter of Fiscal 1995
as compared with the corresponding period of Fiscal 1994. The primary
reasons for this increase were the effect of lower comparative store
sales on relatively fixed buying and occupancy costs and a decline in
merchandise margins as compared to the prior year.
Selling, general and administrative expenses expressed as a
percentage of sales decreased 0.1% in the first quarter of Fiscal 1995
as compared to the corresponding period of Fiscal 1994. The primary
reason for this decrease was the favorable effect of lower interest
rates on the costs of the Company's private label credit card program
as compared to the corresponding period of the prior year. This was
offset by the effects of lower comparative store sales on relatively
fixed general and administrative costs.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1994, the Company had working capital of $186,365,000
as compared with $181,906,000 at January 29, 1994. The ratio of
current assets to current liabilities was 1.6 to 1 at April 30, 1994
and 1.7 to 1 at January 29, 1994.
Cash used in operating activities was $1,739,000 during the first
three months of Fiscal 1995 as compared to cash provided by operating
activities of $19,569,000 during the corresponding period of Fiscal
1994. This decline in cash flow from operations was primarily due to
an $18,438,000 increase in accounts receivable of the Company's private
label credit card program. These receivables are included in other
current assets. The Company has entered into various agreements
whereby it can sell the receivables on a revolving basis and all
receivables held at April 30, 1994 were subsequently sold during May,
1994.
Through April 30, 1994, capital expenditures amounted to
$20,622,000. During Fiscal 1995, the Company anticipates incurring
capital expenditures of approximately $88 million primarily for the
construction of 170 new stores, the remodeling and expansion of 80
existing stores, and the expansion of the distribution facility in
Greencastle, Indiana. It is anticipated that the capital required for
expenditures will be financed principally through internally generated
funds.
Cash dividends were $2,312,000 for the three months ended April
30, 1994 as compared to $2,306,000 for the comparable period of Fiscal
1994.
(9)
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended April 30, 1994
(10)
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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.
CHARMING SHOPPES, INC.
(Registrant)
Date: S/David V. Wachs
David V. Wachs
(Chairman of the Board)
Date: S/Ivan Szeftel
Ivan Szeftel-Executive Vice
President Finance (Chief Financial
Officer)
