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 29, 1995
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
incorporation or organization) Identification No.)
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 ( )
102,957,660 common shares were outstanding as of April 29, 1995.
CHARMING SHOPPES, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets
April 29, 1995 and January 28, 1995.....................1-2
Consolidated Statements of Income
Thirteen weeks ended April 29, 1995 and
April 30, 1994............................................3
Consolidated Statements of Cash Flows
Thirteen weeks ended April 29, 1995 and
April 30, 1994............................................4
Notes to Consolidated Financial Statements...................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............6-7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................8
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 29, January 28,
1995 1995
(In Thousands)
ASSETS
Current Assets
Cash and cash equivalents $ 30,385 $ 43,923
Available-for-sale securities 31,950 40,180
Merchandise inventories 320,183 258,552
Prepayments and other 76,633 89,060
-------- --------
Total Current Assets 459,151 431,715
Property, equipment and leasehold improvements 493,860 483,372
Less: accumulated depreciation and amortization 208,113 197,119
-------- --------
Net property, equipment and leasehold
improvements 285,747 286,253
Available-for-sale securities (net of a
fair value adjustment of ($1,489) and ($2,591)
respectively) 78,486 76,988
Other assets 49,580 45,853
-------- ---------
Total Assets $872,964 $840,809
======== =========
See Notes to Unaudited Consolidated Financial Statements
(1)
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
April 29, January 28,
1995 1995
(In Thousands Except Shares)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $186,201 $137,622
Accrued expenses 86,450 97,276
Current portion - long-term debt 5,004 5,002
-------- --------
Total Current Liabilities 277,655 239,900
Deferred taxes 24,789 24,789
Long-term debt 17,118 17,298
Stockholders' Equity
Common Stock $.10 par value
Authorized 300,000,000 shares
Issued and outstanding 102,957,660 and
102,894,239 shares 10,296 10,289
Additional paid in capital 55,724 55,176
Deferred employee compensation (5,027) (5,025)
Unrealized losses on Available for Sale
Securities (net of income taxes of
$521 and $906, respectively) (968) (1,685)
Retained earnings 493,377 500,067
-------- --------
Total Stockholders' Equity 553,402 558,822
-------- --------
Total Liabilities and Stockholders' Equity $872,964 $840,809
======== ========
See Notes to Unaudited Consolidated Financial Statements
(2)
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For Thirteen Weeks Ended
(In Thousands Except Share and April 29, April 30,
Per Share Amounts) 1995 1994
Net sales $244,342 $297,611
Other income 1,907 2,175
-------- --------
Total Revenue 246,249 299,786
-------- --------
Cost of goods sold, buying and
occupancy expenses 186,777 210,715
Selling, general and administrative expenses 65,002 67,923
Interest expense 539 566
-------- --------
Total Expenses 252,318 279,204
-------- --------
Income (loss) before income taxes (6,069) 20,582
Income tax expense (benefit) (1,699) 6,627
-------- -------
Net Income (Loss) $ (4,370) $ 13,955
======== ========
Weighted average number of common shares
outstanding 102,922,381 108,145,048
=========== ===========
Per Share Data:
Net Income (Loss) ($.04) $.13
==== ====
Cash Dividends $.0225 $.0225
====== ======
See Notes to Unaudited Consolidated Financial Statements
(3)
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For Thirteen Weeks Ended
April 29, April 30,
(In Thousands) 1995 1994
Operating Activities
Net income (Loss) $(4,370) $13,955
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income taxes 0 500
Depreciation & amortization 12,062 11,018
Amortization of deferred compensation expense 478 646
Gain on sale of available-for-sale securities (18) (11)
Changes in operating assets and liabilities:
Prepayments & other 12,081 (23,858)
Merchandise inventories (61,631) (38,352)
Accounts payable 48,579 40,272
Accrued expenses (10,826) (3,006)
Income taxes payable 0 (2,903)
------- -------
Net Cash Used in Operating Activities (3,645) (1,739)
------- -------
Investing Activities
Investment in capital assets (10,488) (20,622)
Sales of available-for-sale securities 12,870 4,932
Purchases of available-for-sale securities (5,018) (4,472)
(Increase) decrease in other assets (4,794) 1,550
-------- --------
Net Cash Used in Investing Activities (7,430) (18,612)
-------- --------
Financing Activities
Reduction of long-term debt (178) (180)
Proceeds from exercise of stock options 35 288
Dividends paid (2,320) (2,312)
-------- --------
Net Cash Used in Financing Activities (2,463) (2,204)
-------- --------
Decrease in Cash and Cash Equivalents (13,538) (22,555)
Cash and Cash Equivalents, Beginning of Year 43,923 52,390
-------- --------
Cash and Cash Equivalents, End of Period $ 30,385 $ 29,835
======== ========
See Notes to Unaudited Consolidated Financial Statements
(4)
CHARMING SHOPPES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Consolidated Financial Statements
The consolidated balance sheet as of April 29, 1995, the
consolidated statements of income for the three month periods ended
April 29, 1995 and April 30, 1994 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 29, 1995 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 28, 1995 annual report on Form 10-K. The results
of operations for the periods ended April 29, 1995 and April 30, 1994
are not necessarily indicative of the operating results for the full
year.
2. Stockholders' Equity
During the three months ended April 29, 1995, shareholders'
equity changed to reflect the following items: net loss of $4,370,000;
dividends paid of $2,320,000; amortization of deferred compensation
expense of $478,000; an increase in common stock and additional paid in
capital of $75,000 from the exercise of options for common stock; and a
increase in stockholders' equity of $717,000 from a reduction in the
unrealized loss on available-for-sale securities.
(5)
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 29, 1995 and April 30, 1994.
Thirteen Weeks Ended
April 29, April 30,
1995 1994
--------------------
Net Sales 100.0% 100.0%
---------------------
Cost of Goods Sold,
Buying, and Occupancy 76.5 70.8
---------------------
Selling, General and
Administrative 26.6 22.8
---------------------
Interest Expense .2 .2
---------------------
Income Taxes (0.7) 2.2
---------------------
Net Income (Loss) (1.8%) 4.7%
---------------------
Thirteen Weeks Ended April 29, 1995 and April 30, 1994
Net sales for the first quarter of the fiscal year ending
February 3, 1996 ("Fiscal 1996") totaled $244,342,000 as compared to
$297,611,000 for the corresponding period of the fiscal year ended
January 28, 1995 ("Fiscal 1995"), a 17.9% decrease. The Company had a
22.8% decrease in sales of existing stores compared to Fiscal 1995.
7.3% of sales for the first quarter of Fiscal 1996 are attributable to
stores opened since the first quarter of Fiscal 1995. Sales for stores
closed since the first quarter of Fiscal 1995 accounted for 2.4% of
sales during that quarter. The decrease in sales from existing stores
was primarily attributable to the lack of consumer acceptance of the
Company's Spring merchandise assortment and a general weakness in
women's apparel sales. The number of retail stores increased from 1,344
on April 30, 1994 to 1,416 on April 29, 1995. During the first quarter
of Fiscal 1996 the Company opened 11 new stores and closed 23 existing
stores. The Company anticipates a net addition of 10 new stores in
Fiscal 1996.
(6)
Cost of goods sold, buying and occupancy expenses expressed as a
percentage of sales increased 5.7% in the first quarter of Fiscal 1996
as compared with the corresponding period of Fiscal 1995. The Company's
cost of goods sold percentage increased by approximately 1.0% during the
first quarter of Fiscal 1996 as a rsult of promotions initiated to
stimulate consumer demand. As a percent of sales, buying and occupancy
expenses increased 4.7% due to the effect of lower comparative sales on
these relatively fixed costs.
Selling, general and administrative expenses expressed as a
percentage of sales increased 3.8% in the first quarter of Fiscal 1996
as compared to the corresponding period of Fiscal 1995. The primary
reason for this increase was the effect of lower comparative store sales
on relatively fixed general and administrative costs.
The effective rate of income taxes as a percent of income before
income taxes decreased to 28.0% for the first quarter of Fiscal 1996 as
compared to 32.2% for the corresponding period of Fiscal 1995. This
reduction is attributable to the cumulative annual effect of permanent
tax benefits applied to lower pretax income.
LIQUIDITY AND CAPITAL RESOURCES
At April 29, 1995, the Company had working capital of
$181,496,000 as compared with $191,815,000 at January 28, 1995. The
ratio of current assets to current liabilities was 1.7 to 1 at April 29,
1995 and 1.8 to 1 at January 28, 1995.
Cash used in operating activities during the first three months
of Fiscal 1996 increased $1,906,000 as compared to the corresponding
period of Fiscal 1995. This increase was primarily due to an an
increase in cash flow from the Company's investment in prepaid assets.
Prepaid assets increased $23,858,000 during the first quarter of Fiscal
1995 as a result of the purchase of accounts receivable of the Company's
private label credit card program and decreased $12,081,000 in the first
quarter of Fiscal 1996 due to a refund of federal income taxes. This
was offset by $18,325,000 decline in net income as well as a $14,972,000
increase in the Company's net investment in inventory (inventory
increase less accounts payable increase).
Through April 29, 1995, capital expenditures amounted to
$10,488,000. During Fiscal 1996, the Company anticipates incurring
capital expenditures of approximately $30 million primarily for the
construction of 55 new stores, the remodeling and expansion of existing
stores, and completing the expansion of a 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 $2,320,000 for the three months ended April
29, 1995 as compared to $2,312,000 for the comparable period of Fiscal
1995.
(7)
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 29, 1995
(8)
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: June 12, 1995 S/Philip Wachs
------------------ -----------------------------------
Philip Wachs-Chairman of the Board,
President, Chief Operating Officer
and acting Chief Executive Officer
Date: June 12, 1995 S/Ivan Szeftel
------------------ ------------------------------------
Ivan Szeftel-Executive Vice
President Finance (Chief Financial
Officer)
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