<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934. For the period ended January 27, 1996
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934.
Commission File Number: 1-5967
THREE D DEPARTMENTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-0733200
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3535 HYLAND AVENUE, SUITE 200
COSTA MESA, CALIFORNIA 92626-1439
(Address of principal executive offices)
TELEPHONE NUMBER (714) 662-0818
(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
----- -----
As of February 2, 1996, there were 1,154,994 shares of Class A common stock and
1,280,967 shares of Class B common stock, par value $.25, outstanding.
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THREE D DEPARTMENTS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheet at January 27, 1996 and July 29, 1995................ 3
Statement of Operations and Retained Earnings for the
thirteen and twenty six weeks ended January 27, 1996
and January 28, 1995............................................... 4
Statement of Cash Flows for the twenty six week periods ended
January 27, 1996 and January 28, 1995.............................. 5
Notes to Financial Statements...................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders................ 9
Item 6. Exhibits and Reports on Form 8-K................................... 9
Signatures......................................................... 10
2
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THREE D DEPARTMENTS, INC.
BALANCE SHEET
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
January 27, 1996 July 29, 1995
---------------- -------------
<S> <C> <C>
Current Assets:
Cash $ 1,228,063 $ 319,045
Receivables 323,357 296,291
Inventories 15,916,692 16,260,487
Prepaid expenses 618,863 475,435
Prepaid income taxes 112,990 98,363
Deferred income taxes 365,091 325,936
----------- -----------
Total current assets 18,565,056 17,775,557
----------- -----------
Property, Fixtures and Improvements, at cost:
Property, fixtures and equipment 10,691,486 10,988,714
Leasehold improvements 3,045,405 2,821,530
----------- -----------
13,736,891 13,810,244
Less accumulated depreciation and amortization 6,618,239 6,550,443
----------- -----------
7,118,652 7,259,801
----------- -----------
Other Assets:
Deferred cost of leases - net 1,198,969 1,263,509
Deferred income tax 689,426 615,415
Other 1,247,787 1,163,003
----------- -----------
3,136,182 3,041,927
----------- -----------
$28,819,890 $28,077,285
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Long term debt - current portion $ 365,487 $ 312,929
Accounts payable 5,578,476 3,406,867
Accrued liabilities 1,046,237 2,177,819
----------- -----------
Total current liabilities 6,990,200 5,897,615
----------- -----------
Long Term Debt 9,584,524 9,784,325
----------- -----------
Deferred Compensation 200,000 200,000
----------- -----------
Other Liabilities 525,000 450,000
----------- -----------
Stockholder's Equity:
Preferred stock; $1.00 par value; authorized
300,000 shares; none issued
Common stock; $.25 par value;
Class A - authorized 6,000,000 shares;
issued 1,660,469 shares (July 29, 1995 - 1,656,969) 415,117 414,242
Class B - authorized 6,000,000 shares;
issued 1,580,363 shares (July 29, 1995 - 1,576,113) 395,091 394,028
Additional paid-in-capital 1,255,525 1,246,557
Retained earnings 11,259,166 11,495,251
----------- -----------
13,324,899 13,550,078
Less - 804,871 shares of common stock in treasury,
at cost 1,804,733 1,804,733
----------- -----------
11,520,166 11,745,345
----------- -----------
$28,819,890 $28,077,285
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
THREE D DEPARTMENTS, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Week Periods Ended Twenty Six Week Periods Ended
January 27, 1996 January 28, 1995 January 27, 1996 January 28, 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenues $13,922,571 $14,794,036 $26,040,540 $26,498,549
Costs and Expenses:
Cost of sales, including
warehousing and buying
expenses 8,186,301 8,516,730 15,131,725 15,099,224
Store operating, administrative
and general expenses 5,097,004 5,436,546 10,539,362 10,578,908
----------- ----------- ----------- -----------
Income / (loss) from operations 639,266 840,760 369,453 820,417
Interest expense 320,034 232,508 670,686 418,456
----------- ----------- ----------- -----------
Income / (loss) before income taxes 319,232 608,252 (301,233) 401,961
Provision for income taxes 149,716 262,487 (113,166) 190,264
----------- ----------- ----------- -----------
Net income / (loss) $ 169,516 $ 345,765 $ (188,067) $ 211,697
Retained earnings at
beginning of period 11,113,696 11,960,726 11,495,251 12,123,208
Cash dividends (24,046) (23,957) (48,018) (52,371)
Retained earnings at end of
period $11,259,166 $12,282,534 $11,259,166 $12,282,534
=========== =========== =========== ===========
Average number of shares outstanding 2,433,336 2,428,211 2,430,774 2,627,811
=========== =========== =========== ===========
Net income / (loss) per share $ .07 $ .14 $ (.08) $ .08
=========== =========== =========== ===========
Cash dividends per share:
Class A Common $ .0125 $ .0125 $ .0125 $ .025
=========== =========== =========== ===========
Class B Common $ .0075 $ .0075 $ .0075 $ .015
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
THREE D DEPARTMENTS, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
January 27, 1996 January 28, 1995
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income / (loss) $ (188,067) $ 211,697
Adjustments to reconcile net income / (loss)
to net cash provided by operating activities:
Depreciation and amortization 852,834 727,105
Provision for deferred taxes (113,166) 144,500
Increase in cash value of life insurance (157,001) (245,830)
Loss on abandonments of fixtures and leaseholds 27,552 4,938
Change in assets and liabilities:
(Increase) decrease in receivables (27,066) 346,121
(Increase) decrease in inventories 343,795 (1,654,655)
(Increase) in prepaid expenses (143,428) (96,785)
Increase (decrease) in prepaid income taxes (14,627) 63,559
Decrease in other assets 21,589 52,705
(Increase) in deferred income taxes 0 (19,601)
Increase in accounts payable 2,171,609 134,803
Increase (decrease) in accrued liabilities (1,131,582) 764,596
Increase in other liabilities 75,000 450,000
----------- -----------
Net cash provided by operating activities 1,717,442 883,153
----------- -----------
Cash flows from investing activities:
Purchase of building 0 (1,193,834)
Purchase of property, fixtures and improvements (617,629) (1,710,309)
Purchase of software (6,440) (39,869)
Purchase of lease 0 (750,000)
----------- -----------
Net cash (used) in investing activities (624,069) (3,694,012)
----------- -----------
Cash flows from financing activities:
Repayment of debt (147,243) (3,058,804)
Dividends paid (48,018) (52,371)
Purchase of common stock 0 (548,867)
Proceeds from exercise of stock options 10,906 0
Proceeds from borrowings 0 3,800,000
----------- -----------
Net cash provided (used) by financing activities (184,355) 139,958
----------- -----------
Net increase (decrease) in cash 909,018 (2,670,901)
Cash at beginning of period 319,045 3,311,144
----------- -----------
Cash at end of period $ 1,228,063 $ 640,243
=========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
THREE D DEPARTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
1. The financial statements for the year ended July 29, 1995 and for the
thirteen and twenty six week periods ended January 27, 1996 and January 28,
1995, are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of the financial position and operating results for
the interim periods. The financial statements should be read in conjunction
with the financial statements and notes thereto, together with Management's
Discussion and Analysis of Financial Condition and Results of Operations,
contained in the Company's Annual Report to Shareholders incorporated by
reference in the Company's Annual Report on Form 10-K for the fiscal year
ended July 29, 1995. The results of operations for the thirteen and twenty
six week periods ended January 27, 1996, are not necessarily indicative of
the results for the entire fiscal year ending August 3, 1996.
2. The accounting policies followed by the Company for the unaudited interim
periods contained herein, are substantially the same as outlined in the
Company's Annual Report to Shareholders for the fiscal year ended July 29,
1995, which should be read in conjunction with this quarterly report.
3. At the Company's Annual Meeting of Shareholders held on January 25, 1996,
the Company declared a cash dividend of $.0125 per share to stockholders of
Class A common stock and $.0075 per share to stockholders of Class B common
stock.
6
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THREE D DEPARTMENTS, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Thirteen Week Periods Ended January 27, 1996 and January 28, 1995
- -----------------------------------------------------------------
SALES. The Company had sales of $13,922,571 for the thirteen week period ended
January 27, 1996 as compared to sales of $14,794,036 for the thirteen week
period ended January 28, 1995, a decrease of $871,465 or 5.9% of total sales.
The decrease was partly due to the closure of three stores during the second
quarter ended January 27, 1996, and three store closures during the fiscal year
ended July 29, 1995. Additionally, winter storms on the East Coast adversely
impacted sales in the Company's Connecticut Stores. All six store closures were
part of the Company's continuing plan to pare down unprofitable locations and to
replace them, if feasible, with larger stores capable of carrying the Company's
new merchandising format.
Comparative sales for stores open in both periods decreased $1,516,358 or 11.1%.
This was partially offset however, by an increase in sales of $1,305,456 as a
result of new store openings.
COST OF SALES. Cost of sales for the thirteen weeks ended January 27, 1996,
were 58.8% of sales as compared to 57.6% for the thirteen week period ended
January 28, 1995.
STORE OPERATING, ADMINISTRATIVE AND GENERAL EXPENSES. Store operating,
administrative and general expenses for the thirteen week period ended January
27, 1996, were $5,097,004 or 36.6% of sales compared to $5,436,546 or 36.7% of
sales in the same period of the prior year.
INTEREST EXPENSE. Interest expense for the thirteen week periods ended January
27, 1996 and January 28, 1995 was $320,034 and $232,508, respectively. The
increase resulted from an increase in average outstanding borrowings of
approximately $3,800,000 over the year earlier period.
QUARTERLY RESULTS. Net income for the thirteen week period ended January 27,
1996, was $169,516 compared to $345,765 in the same period of the prior year.
The specialty domestics segment of the retail industry has seen increased
competition with corresponding pressure on sales and margins. The Company has
undertaken both a frequent shopper program and a cost reduction program to
mitigate the effects of increased competition.
Twenty Six Week Periods Ended January 27, 1996 and January 28, 1995
- -------------------------------------------------------------------
SALES. The Company had sales of $26,040,540 for the twenty six week period
ended January 27, 1996 as compared to sales of $26,498,549 for the twenty six
week period ended January 28, 1995, a decrease of $458,009 or 1.7% of total
sales. The decrease was partly due to the closure of three stores during the
second quarter ended January 27, 1996, and three store closures during the
fiscal year ended July 29, 1995. Additionally, winter storms on the East Coast
adversely impacted sales in the Company's Connecticut Stores. All six store
closures were part of the Company's continuing plan to pare down unprofitable
locations and to replace them, if feasible, with larger stores capable of
carrying the Company's new merchandising format.
Comparative sales for stores open in both periods were down $2,776,543 or 11.2%.
This was
7
<PAGE>
partially offset however, by an increase in sales of $3,430,638 as a result of
new store openings.
COST OF SALES. Cost of sales for the twenty six weeks ended January 27, 1996,
were 58.1% of sales as compared to 57.0% for the twenty six week period ended
January 28, 1995.
STORE OPERATING, ADMINISTRATIVE AND GENERAL EXPENSES. Store operating,
administrative and general expenses for the twenty six week period ended January
27, 1996, were $10,539,362 or 40.5% of sales compared to $10,578,908 or 40.0% of
sales in the same period of the prior year.
INTEREST EXPENSE. Interest expense for the twenty six week periods ended
January 27, 1996 and January 28, 1995 was $670,686 and $418,456, respectively.
The increase resulted from an increase in average outstanding borrowings of
approximately $3,500,000 over the prior year period.
TWENTY SIX WEEK RESULTS. Net loss for the twenty six week period ended January
27, 1996, was $188,067 compared to net income of $211,697 in the same period of
the prior year. The specialty domestics segment of the retail industry has seen
increased competition with corresponding pressure on sales and margins. The
Company has undertaken both a frequent shopper program and a cost reduction
program to mitigate the effects of increased competition.
LIQUIDITY AND CAPITAL RESOURCES. At January 27, 1996, working capital
decreased to $11,574,856 from $11,877,942. The slight decrease was caused by
capital expenditures for expanded stores and debt repayment which was partially
offset by a reduction in inventories. No significant capital expenditures are
anticipated for the remainder of the fiscal year. Management believes that cash
from operations, coupled with its line of credit will be sufficient to meet the
Company's operational and capital needs for the remainder of the fiscal year.
8
<PAGE>
THREE D DEPARTMENTS, INC.
PART II. - OTHER INFORMATION
Item 4. Submission of matters to a vote of security holders.
The Company held its Annual Meeting of Shareholders on January 25, 1996. The
following were re-elected to the Board of Directors:
Directors Representing Class A Common Stock Shareholders
--------------------------------------------------------
<TABLE>
<CAPTION>
Name Votes For Votes Withheld
- ---------------------- ----------------- ----------------
<S> <C> <C>
Abe Markowicz 1,536,042 (92.5%) 3,315 (.2%)
Henry W. Nozko, Jr. 1,536,042 (92.5%) 3,315 (.2%)
</TABLE>
There were no abstentions and no broker non-votes for any nominee.
Directors Representing Class B Common Stock Shareholders
--------------------------------------------------------
<TABLE>
<CAPTION>
Name Votes For Votes Withheld
- ----------------------- ----------------- ----------------
<S> <C> <C>
John B. Abrahms 1,478,574 (93.6%) 1,224 (.1%)
Bernard Abrams 1,478,574 (93.6%) 1,224 (.1%)
Donald L. Abrams 1,478,574 (93.6%) 1,224 (.1%)
Gerson K. Bernstein 1,478,574 (93.6%) 1,224 (.1%)
David Kotkin 1,478,574 (93.6%) 1,224 (.1%)
Bernard Joseph White 1,478,574 (93.6%) 1,224 (.1%)
</TABLE>
There were no abstentions and no broker non-votes for any nominee.
Price Waterhouse was approved to serve as the independent accountants for the
Company for Fiscal 1996.
Appointment of Price Waterhouse
-------------------------------
<TABLE>
<CAPTION>
Shares Votes For Votes Against Votes Withheld
- ---------- ------------------- --------------- ----------------
<S> <C> <C> <C>
Class A 1,538,748 (92.7%) 396 (0.02%) 213 (0.01%)
Class B 1,478,600 (93.6%) 1,000 (0.06%) 198 (0.01%)
</TABLE>
There were no broker non-votes.
Item 6. Exhibits and Reports of Form 8-K
The Company was not required to file a report on Form 8-K for any event during
the twenty six week period ended January 27, 1996.
9
<PAGE>
THREE D DEPARTMENTS, INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: March 12, 1996
THREE D DEPARTMENTS, INC.
-------------------------
(Registrant)
--------------------------------
Steven Kerkstra
Vice President and
Chief Financial Officer
--------------------------------
Ronald C. Dow
Controller and Treasurer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q,
OCTOBER 28, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-29-1995
<PERIOD-START> JUL-30-1995
<PERIOD-END> JAN-27-1996
<CASH> 1,228,063
<SECURITIES> 0
<RECEIVABLES> 323,357
<ALLOWANCES> 0
<INVENTORY> 15,916,692
<CURRENT-ASSETS> 18,565,056
<PP&E> 13,736,891
<DEPRECIATION> 6,618,239
<TOTAL-ASSETS> 28,819,890
<CURRENT-LIABILITIES> 6,990,200
<BONDS> 0
0
0
<COMMON> 810,208
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 28,819,890
<SALES> 26,040,540
<TOTAL-REVENUES> 26,040,540
<CGS> 15,131,725
<TOTAL-COSTS> 10,539,362
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 670,686
<INCOME-PRETAX> (301,233)
<INCOME-TAX> (113,166)
<INCOME-CONTINUING> (188,067)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (188,067)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
