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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) January 7, 2000
Charming Shoppes, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-7258 23-1721355
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(Commission File Number) (I.R.S. Employer
Identification No.)
450 Winks Lane
Bensalem, Pennsylvania 19020
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(Address of Principal (Zip Code)
Executive Offices)
(215) 245-9100
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(Registrant's Telephone Number,
Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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<PAGE> 2
This report on Form 8-K/A amends and supplements the report on Form 8-K
filed by Charming Shoppes, Inc. ("Charming Shoppes" or the "Company") on
January 21, 2000 in connection with the merger of Rose Merger Sub, Inc., a
Tennessee corporation and a wholly-owned subsidiary of Charming Shoppes
("Merger Sub"), with and into Catherines Stores Corporation ("Catherines
Stores"), a Tennessee corporation (the "Report on Form 8-K"), in accordance
with Item 7(b)(2), within 60 days after the due date of the initial filing.
The disclosures required by Item 2, Item 5, and Item 7(a) were included in
the Report on Form 8-K. This amendment amends and supplements the Report on
Form 8-K to include the pro forma financial information required by Item 7(b).
Item 7. Financial Statements and Exhibits.
Item 7(b) is hereby amended and supplemented as follows:
(b) Pro Forma Financial Information.
The unaudited pro forma financial information included herein gives
effect to the Company's acquisition of Catherines Stores. The Unaudited Pro
Forma Condensed Consolidated Statements of Operations are based on historical
data as reported by the separate companies, and reflect adjustments prepared
as if the acquisition had occurred on February 1, 1998. The Unaudited Pro
Forma Condensed Consolidated Balance Sheet is based on historical data as
reported by the separate companies, and reflects adjustments prepared as if
the acquisition had occurred on October 30, 1999.
The acquisition of Catherines Stores has been accounted for using the
purchase method of accounting. Accordingly, the assets acquired and lia-
bilities assumed have been recorded at their estimated fair values, with
appropriate recognition given to the Company's borrowing rates, accounting
policies, and income taxes. The Company's management does not expect that
the final allocation of the purchase price for the acquisition of Catherines
Stores will differ materially from the allocations used to prepare the
unaudited pro forma financial information presented herein.
The Unaudited Pro Forma Condensed Consolidated Financial Statements
contained herein (the "Statements") have been prepared based on available
information, using assumptions that the Company's management believes are
reasonable. The Statements do not purport to represent the actual financial
position or results of operations that would have occurred if the acquisition
had occurred on the dates specified. The Statements are not necessarily
indicative of the results of operations that may be achieved in the future.
The Statements do not reflect any adjustments for the effect of non-recurring
items or operating synergies that the Company may realize as a result of the
acquisition. No assurances can be made as to the amount of any financial
benefits, if any, that may actually be realized as the result of the acqui-
sition.
The assumptions used and adjustments made in preparing the Statements
are described in the Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements contained herein (the "Notes"), which should be read
in conjunction with the Statements contained herein. The Statements and
related Notes contained herein should be read in conjunction with the
consolidated financial statements and related notes of the Company included
in its Annual Report on Form 10-K for the year ended January 30, 1999, the
unaudited condensed consolidated financial statements and related notes of
the Company included in its Quarterly Report on Form 10-Q for the quarter
ended October 30, 1999, and the consolidated financial statements and
related notes of Catherines Stores incorporated by reference in Item 7(a)
of the Report on Form 8-K, as amended hereby.
<PAGE> 3
CHARMING SHOPPES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
OCTOBER 30, 1999
<TABLE>
<CAPTION>
As Reported
--------------------
Charming Catherines
(In thousands) Shoppes Stores Adjustments Notes Pro Forma
-------- ---------- ----------- ----- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents..... $ 12,842 $ 9,936 $ 22,778
Available-for-sale securities. 42,572 0 42,572
Accounts receivable........... 0 4,454 $ (4,454) 5 0
Merchandise inventories....... 262,488 60,326 (3,270) 1,2 319,544
Deferred taxes................ 15,194 4,203 3,293 2,4 22,690
Prepayments and other......... 38,334 3,967 4,019 2,5 46,320
-------- -------- -------- --------
Total current assets....... 371,430 82,886 (412) 453,904
-------- -------- -------- --------
Property, equipment and
leasehold improvements..... 410,786 81,310 (5,677) 2 486,419
Less accumulated depreciation
and amortization........... (257,165) (45,214) 5,217 2 (297,162)
-------- -------- -------- --------
Net property, equipment
and leasehold improvements. 153,621 36,096 (460) 189,257
-------- -------- -------- --------
Available-for-sale securities. 199,865 0 (154,884) 2,3 44,981
Other assets.................. 28,559 1,929 (1,754) 2 28,734
Goodwill...................... 0 21,116 76,329 2 97,445
-------- -------- -------- --------
Total assets............... $753,475 $142,027 $(81,181) $814,321
======== ======== ======== ========
</TABLE>
[FN]
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
</FN>
<PAGE> 4
CHARMING SHOPPES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
OCTOBER 30, 1999
<TABLE>
<CAPTION>
As Reported
--------------------
Charming Catherines
(In thousands) Shoppes Stores Adjustments Notes Pro Forma
-------- ---------- ----------- ----- ---------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Accounts payable.............. $ 98,054 $ 26,741 $124,795
Accrued expenses.............. 112,559 20,390 $ 5,610 2,5 138,559
Income taxes payable.......... 12,053 0 (4,093) 2,4,5 7,960
Accrued restructuring expenses 8,928 0 8,928
Current portion -- long-term
debt....................... 17 1,811 1,828
-------- -------- -------- --------
Total current liabilities.. 231,611 48,942 1,517 282,070
-------- -------- -------- --------
Deferred taxes................ 6,942 378 834 2,4 8,154
Long-term debt................ 96,136 9,175 105,311
Stockholders' equity
Common stock.................. 10,759 68 (68) 1 10,759
Paid-in capital............... 68,396 41,351 (41,351) 1 68,396
Treasury stock................ (40,824) (40,824)
Deferred employee compensation (2,011) (2,011)
Accumulated other
comprehensive income....... (2,191) (2,191)
Retained earnings............. 384,657 42,113 (42,113) 1 384,657
-------- -------- -------- --------
Total stockholders' equity.... 418,786 83,532 (83,532) 418,786
-------- -------- -------- --------
Total liabilities and
stockholders' equity....... $753,475 $142,027 $(81,181) $814,321
======== ======== ======== ========
</TABLE>
[FN]
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
</FN>
<PAGE> 5
CHARMING SHOPPES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED OCTOBER 30, 1999
<TABLE>
<CAPTION>
As Reported
--------------------
(In thousands except Charming Catherines
net income per share) Shoppes Stores Adjustments Notes Pro Forma
-------- ---------- ----------- ----- ---------
<S> <C> <C> <C> <C> <C>
Net sales.................... $848,159 $234,206 $1,082,365
Other income................. 9,299 $(6,097) 3,5 3,202
-------- -------- ------- ----------
Total revenue............. 857,458 234,206 (6,097) 1,085,567
-------- -------- ------- ----------
Cost of goods sold, buying,
and occupancy expenses.... 604,011 153,815 6,168 5 763,994
Selling, general, and
administrative expenses... 200,115 60,899 (5,645) 5 255,369
Amortization of intangible
assets.................... 0 765 2,889 2 3,654
Write-down of store assets
and store closing costs... 0 356 356
Restructuring credit......... (2,834) 0 (2,834)
Non-recurring gain from
demutualization of
insurance company......... (6,700) 0 (6,700)
Interest expense............. 5,526 259 437 5 6,222
-------- -------- ------- ----------
Total expenses............ 800,118 216,094 3,849 1,020,061
-------- -------- ------- ----------
Income from continuing
operations before
income taxes.............. 57,340 18,112 (9,946) 65,506
Income tax provision......... 22,069 7,153 (2,646) 4 26,576
-------- -------- ------- ----------
Income from continuing
operations................ 35,271 10,959 (7,300) 38,930
======== ======== ======= ==========
Basic income per share
from continuing operations $0.36 $1.58 $0.40
===== ===== =====
Weighted average shares
outstanding............... 98,286 6,937 98,286
Diluted net income per share
from continuing operations $0.34 $1.54 $0.37
===== ===== =====
Weighted average shares and
equivalents outstanding... 115,386 7,101 115,386
</TABLE>
[FN]
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
</FN>
<PAGE> 6
CHARMING SHOPPES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 30, 1999
<TABLE>
<CAPTION>
As Reported
--------------------
(In thousands except Charming Catherines
net income per share) Shoppes Stores Adjustments Notes Pro Forma
-------- ---------- ----------- ----- ---------
<S> <C> <C> <C> <C> <C>
Net sales.................... $1,035,160 $295,278 $1,330,438
Other income................. 16,003 $(8,526) 3,5 7,477
---------- -------- ------- ----------
Total revenue............. 1,051,163 295,278 (8,526) 1,337,915
---------- -------- ------- ----------
Cost of goods sold, buying,
and occupancy expenses.... 771,107 201,189 6,084 5 978,380
Selling, general, and
administrative expenses... 246,747 79,100 (5,525) 5 320,322
Amortization of intangible
assets.................... 0 1,046 3,826 2 4,872
Write-down of store assets
and store closing costs... 0 507 507
Restructuring charge......... 54,246 0 54,246
Interest expense............. 10,052 737 231 5 11,020
---------- -------- ------- ----------
Total expenses............ 1,082,152 282,579 4,616 1,369,347
---------- -------- ------- ----------
Income (loss) before
income taxes.............. (30,989) 12,699 (13,142) (31,432)
Income tax provision
(benefit)................. (10,854) 5,072 (3,494) 4 (9,276)
---------- -------- ------- ----------
Net income (loss)............ $ (20,135) $ 7,627 $(9,648) $ (22,156)
========== ======== ======= ==========
Basic net income (loss)
per share................. $(0.20) $1.05 $(0.22)
===== ===== =====
Weighted average shares
outstanding............... 99,441 7,259 99,441
Diluted net income per share. $1.03
=====
Weighted average shares and
equivalents outstanding... 7,407
</TABLE>
[FN]
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
</FN>
<PAGE> 7
CHARMING SHOPPES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1. BASIS OF PRESENTATION
The unaudited pro forma financial information included herein gives
effect to the Company's acquisition of Catherines Stores Corporation. The
Unaudited Pro Forma Condensed Consolidated Statements of Operations are based
on historical data as reported by the separate companies, and reflect
adjustments prepared as if the acquisition had occurred on February 1, 1998.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet is based on
historical data as reported by the separate companies, and reflects adjust-
ments prepared as if the acquisition had occurred on October 30, 1999.
The acquisition of Catherines Stores has been accounted for using the
purchase method of accounting. Accordingly, the assets acquired and
liabilities assumed have been recorded at their estimated fair values, with
appropriate recognition given to the Company's borrowing rates, accounting
policies, and income taxes. The Company's management does not expect that
the final allocation of the purchase price for the acquisition of Catherines
Stores will differ materially from the allocations used to prepare the
unaudited pro forma financial information presented herein.
In connection with the acquisition, Catherines Stores accounting poli-
cies have been conformed with those of the Company. The unaudited pro forma
financial information contained herein gives effect to certain conforming
adjustments relating to inventories and intangibles. In addition, certain
reclassifications have been made to the historical financial information of
Catherines Stores to conform to the Company's presentation.
2. DESCRIPTION OF ACQUISITION
The pro forma cost of the acquisition of Catherines Stores consists of
the following:
<TABLE>
<S> <C>
(In thousands)
Purchase of Catherines Stores stock............................... $162,848
Fees and other direct costs....................................... 5,909
--------
Cost of the acquisition of Catherines Stores (1).................. $168,757
--------
Net tangible book value of Catherines Stores at October 30, 1999.. $ 60,662
Aggregate exercise price of Catherines Stores stock options
exercised subsequent to October 30, 1999....................... 10,679
Reimbursement for taxes related to stock option exercises......... 3,194
Adjustments to conform Catherines Stores inventory accounting
policies with those of the Company............................. (3,270)
Step-up to estimated fair value of headquarters and distribution
center facility................................................ 2,693
Write-off of net book value of duplicate facilities and equipment. (3,153)
Write-off of other current assets................................. (435)
Increase in net deferred tax assets resulting from acquisition.... 2,459
Decrease in income taxes payable resulting from acquisition....... 4,093
Increase in accrued acquisition liabilities, primarily payments
required under change-in-control agreements.................... (5,610)
--------
Estimated fair value of net assets acquired....................... $ 71,312
--------
Excess of pro forma cost of acquisition over estimated fair
value of net assets acquired................................... $ 97,445
========
</TABLE>
[FN]
(1) The cost of the acquisition was funded through the use of the company's
existing cash and available-for-sale securities.
</FN>
The excess of cost of the acquisition over the estimated fair value of
the assets acquired was allocated to goodwill, which will be amortized on a
straight-line basis over 20 years.
<PAGE> 8
CHARMING SHOPPES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
3. INTEREST INCOME
The acquisition was funded through the use of the Company's existing cash
and available-for-sale securities. Had the acquisition occurred on February 1,
1998 (the date used to prepare the Unaudited Pro Forma Condensed Consolidated
Statements of Operations), the Company would have earned lower interest income
as a result of the reduction in available-for-sale securities. The Unaudited
Pro Forma Condensed Consolidated Statements of Operations give effect to the
lower interest income that would have been earned during the periods presented,
using actual weighted average yields on the available-for-sale securities sold.
4. INCOME TAXES
The Unaudited Pro Forma Condensed Consolidated Statements of Operations
have been adjusted to reflect the estimated amount of income taxes that would
have been accrued on pre-tax income from continuing operations had the acqui-
sition taken place on February 1, 1998.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet reflects
deferred income taxes which result from differences in the estimated fair
values of net assets acquired and liabilities assumed for financial reporting
purposes and their respective tax bases.
5. RECLASSIFICATIONS
The unaudited pro forma condensed consolidated financial statements
include the following reclassifications to conform the historical financial
information of Catherines Stores to the Company's presentation:
Unaudited Pro Forma Condensed Consolidated Balance Sheet:
<TABLE>
<CAPTION>
October 30,
1999
----
<S> <C>
Accounts receivable reclassifed to prepaids and other........ $4,454
Income taxes payable reclassified from accrued expenses...... 781
</TABLE>
Unaudited Pro Forma Condensed Consolidated Statement of Operations:
<TABLE>
<CAPTION>
Nine Months Year
Ended Ended
October 30, January 30,
1999 1999
---- ----
<S> <C> <C>
Reclassification of layaway income from selling,
general, and administrative expenses to
other income................................. $ 436 $ 536
Reclassification of interest income from
interest expense............................. 437 231
Net reclassification of operating expenses from
selling, general, and administrative expenses
to cost of goods sold, buying, and occupancy
expenses..................................... 6,046 6,000
</TABLE>
<PAGE> 9
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 hereunto duly authorized.
CHARMING SHOPPES, INC.
(Registrant)
Dated: March 22, 2000 By: /S/ ERIC M. SPECTER
Name: Eric M. Specter
Title: Executive Vice President
