<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 30, 1995
------------------------------------------------
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 0-12188
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DEB SHOPS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1913593
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9401 Blue Grass Road, Philadelphia, Pennsylvania 19114
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(Address of principal executive offices) (Zip Code)
(215) 676-6000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name and address and former fiscal year, if changed since last report)
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 l934 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, Par Value $.01 12,844,680
- ---------------------------- -------------------------------
(Class) (Outstanding at April 30, 1995)
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DEB SHOPS, INC. AND SUBSIDIARIES
I N D E X
---------
Page
----
PART I. Financial Information:
Consolidated Balance Sheets - 1
April 30, 1995 and January 31, 1995
Consolidated Statements of Operations 2
Three Months Ended April 30, 1995 and April 30, 1994
Consolidated Statements of Cash Flows - 3
Three Months Ended April 30, 1995 and April 30, 1994
Notes to Consolidated Financial Statements - 4
April 30, 1995
Management's Discussion and Analysis of Results of
Operations and Financial Condition 5-7
PART II. Other Information 8
<PAGE> 3
DEB SHOPS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
APRIL 30, JANUARY 31,
1995 1995
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 47,218,007 $ 50,610,195
Merchandise Inventories 24,794,806 28,576,374
Prepaid expenses and other 5,457,969 3,920,716
Current deferred income taxes 1,196,129 1,196,129
------------ ------------
Total Current Assets 78,666,911 84,303,414
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost
Building and improvements 1,982,000 1,982,000
Leasehold improvements 30,974,367 31,198,281
Furniture and equipment 17,199,135 16,647,563
------------ ------------
50,155,502 49,827,844
Less accumulated depreciation
and amortization 30,583,886 29,762,281
------------ ------------
19,571,616 20,065,563
------------ ------------
OTHER ASSETS
Long term deferred income taxes 665,211 665,211
Other 1,167,514 1,167,514
------------ ------------
Total Other Assets 1,832,725 1,832,725
------------ ------------
$100,071,252 $106,201,702
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 8,812,294 $ 11,663,983
Accrued expenses 4,831,981 5,114,260
Income taxes -- --
------------ ------------
Total Current Liabilities 13,644,281 16,778,243
------------ ------------
Capital Lease Obligation 2,040,408 2,040,408
------------ ------------
COMMITMENTS
SHAREHOLDERS' EQUITY
Series A Preferred Stock, par value $1.00
a share:
Authorized - 5,000,000 shares
Issued and outstanding - 460 shares,
liquidation value $460,000 460 460
Common Stock, par value $.01 a share:
Authorized - 25,000,000 shares
Issued Shares - Apr 30, 1995: 15,688,290;
January 31, 1995: 15,688,290 156,883 156,883
Additional paid in capital 5,541,944 5,541,944
Retained earnings 96,263,699 99,218,862
------------ ------------
101,962,986 104,918,149
Less common treasury shares, at cost -
April 30, 1995: 2,843,610; 17,576,423 17,535,098
------------ ------------
January 31, 1995: 2,835,345 84,386,563 87,383,051
------------ ------------
$100,071,252 $106,201,702
============ ============
The notes to consolidated financial statements are an integral part of these
financial statements.
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<PAGE> 4
DEB SHOPS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended April 30,
---------------------------------------
1995 1994
---- ----
Revenues
Net Sales $ 39,101,458 $43,315,633
Other Income, principally
interest 588,866 324,193
------------- ------------
39,690,324 43,639,826
------------- ------------
Costs and Expenses
Cost of Sales, including
buying and occupancy costs 32,770,495 35,100,036
Selling and administrative 9,396,352 9,954,393
Depreciation and
amortization 981,804 999,779
------------- ------------
43,148,651 46,054,208
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(Loss) Before Income Taxes ( 3,458,327) ( 2,414,382)
Income taxes (benefit) ( 1,159,000) ( 809,000)
------------- ------------
Net (Loss) ($ 2,299,327) ($ 1,605,382)
============= ============
Net (Loss) Per Common Share ($ 0.18) ($ 0.11)
============= ============
Cash Dividend Declared
Per Common Share $ 0.05 $ 0.05
============= ============
Weighted Average Number of
Common Shares Outstanding 12,846,746 14,212,640
============= ============
The notes to consolidated financial statements are an integral part of these
financial statements.
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<PAGE> 5
DEB SHOPS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended April 30,
---------------------------------
1995 1994
---- ----
<S> <C> <C>
(Decrease) in Cash and Cash Equivalents
Cash flows from (used in) operating activities:
Net (Loss) ($ 2,299,327) ($ 1,605,382)
Adjustments to reconcile net (Loss) to net
cash used in operating activities:
Depreciation and amortization 981,804 999,779
Vesting of restricted incentive stock ( 41,325) ( 53,040)
Loss on retirement of property and equipment 137,938 116,841
Change in assets and liabilities:
Decrease (Increase) in merchandise inventories 3,781,568 ( 514,715)
(Increase) in prepaid expenses and other ( 1,537,253) ( 1,005,729)
(Decrease) in trade accounts payable ( 2,851,485) ( 2,432,064)
(Decrease) increase in accrued expenses ( 282,279) 66,992
(Decrease) in income taxes -- ( 2,834,878)
------------ ------------
Net cash used in operating activities ( 2,110,359) ( 7,262,196)
------------ ------------
Cash flows from (used in) investing activities:
Purchase of property, plant and equipment ( 625,795) ( 412,293)
------------ ------------
Net cash used in investing activities ( 625,795) ( 412,293)
------------ ------------
Cash flows from (used in) financing activities:
Preferred stock cash dividends paid ( 13,800) ( 13,800)
Common stock cash dividends paid ( 642,234) ( 642,063)
Purchase of treasury stock (NOTE D) (16,708,890)
------------ ------------
Net cash used in financing activities ( 656,034) (17,364,753)
------------ ------------
(Decrease) in cash and cash equivalents ( 3,392,188) (25,039,242)
Cash and cash equivalents at beginning of period 50,610,195 71,614,201
------------ ------------
Cash and cash equivalents at end of period $47,218,007 $ 46,574,959
============ =============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on capital lease obligation $ 105,000 $ 111,000
Income taxes 23,082 2,274,453
</TABLE>
The notes to consolidated financial statements are an integral part of these
financial statements.
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<PAGE> 6
DEB SHOPS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
APRIL 30, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended April 30, 1995 are
not necessarily indicative of the results that may be expected for the fiscal
year ending January 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1995. The Balance
Sheet at January 31, 1995 has been derived from the audited financial statements
at that date.
NOTE B - INCOME TAXES
The liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using enacted tax rates and laws that are expected to be in effect when
the differences reverse. Deferred income taxes result principally from
differences in the time of recognition of overhead in inventory, deductibility
of certain liabilities and depreciation expense.
NOTE C - RESTRICTED STOCK INCENTIVE PLAN
Effective June 1, 1990, the Company adopted a Restricted Stock Incentive
Plan ("RSIP"), administered by the Company's Stock Option Committee. Under the
RSIP, a maximum of 300,000 shares of the Company's Common Stock may be awarded
as bonuses to key employees. No more than 100,000 shares may be issued under
this plan during any calendar year. Upon grant, the shares shall be registered
in the name of the recipient who shall have the right to vote the shares and
receive cash dividends, but the right to receive the certificates and retain the
shares does not vest until the grantee has remained in the employ of the Company
for a period determined by the Stock Option Committee. At the time of vesting, a
portion of the shares may be withheld to cover withholding taxes due on the
compensation income resulting from the grant.
At April 30, 1995, there were 206,000 shares reserved for future grant.
NOTE D - TREASURY STOCK
On April 4, 1994, the Company purchased 2,761,800 shares of its outstanding
common stock for approximately $16,700,000, utilizing available cash funds.
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<PAGE> 7
DEB SHOPS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Net sales for the three months ended April 30, 1995 decreased ($4,214,175)
(9.7%) compared to the same three month period of 1994. The decrease in net
sales was principally attributable to continued customer resistance to product
and pricing and a lack of fashion direction in the women's specialty apparel
industry.
Per Store Data(1)
Three Months Ended April 30
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1995 1994
---- ----
Stores open at end of period 336 359
Average number of stores in operation during
the period 338 359
Average net sales per store (in thousands) $ 116 $121
Average net (loss) per store (in thousands) ($ 7) ($ 4)
Comparable store sales(2) - Percent Change ( 1.89%) ( 1.63%)
Since fiscal 1993 the Company has trended toward lower sales and since
fiscal 1991 the Company has trended toward lower earnings. Sales have been lower
principally due to lower demand as a result of increased customer resistance to
product and pricing and a lack of fashion direction in the women's specialty
apparel industry. Management has tried and continues to try to adjust the
product mix and pricing philosophy in an attempt to stimulate sales. In March,
1995, the Company introduced shoes into 200 of its locations in an attempt to
generate new business and multiple sales. In August, 1993, the Company
introduced its private label credit card as a means of attempting to stimulate
sales. The credit card also serves a vehicle for direct mail contact with the
customer.
The decrease in net sales was accompanied by a net loss of ($2,299,327)
compared to a net loss of ($1,605,382) for the same three month period of 1994.
The loss was primarily attributable to the decrease in total sales, along with
decreased margins as a result of increased competitive pressures. Sales and
margins at these levels are insufficient to cover fixed overhead. The net loss
for the three months ended April 30, 1994 was partially offset (to the extent of
$600,000) by refunds of insurance premiums received during the quarter. The
primary reason for the decreases in comparable store sales was customer
resistance to product and pricing and a lack of fashion direction in the women's
specialty apparel industry. Net loss was (5.9%) of net sales for the three
months ended April 30, 1995 and the net loss was (3.7%) of net sales for the
three months ended April 30, 1994.
Cost of sales, including buying and occupancy costs for the three months
ended April 30, 1995 decreased $2,330,000 (6.6%) over the comparable three month
period of 1994. The principle reason for the dollar decrease was the decrease in
sales, and a decline in the average number of stores in operation. As a
percentage of net sales these costs were 83.8% for the three month period ended
April 30, 1995 and 81.0% for the three month period ended April 30, 1994. The
increased cost of sales percentage resulted principally from higher promotional
activity as a result of increased competitive pressures. Buying and occupancy
costs for the three months ended April 30, 1995 were 24.7% of sales and for the
comparable period in 1994 were 22.8% of sales. The percentage increase is a
result principally from decreased comparable store sales.
_____________________________
(1) Includes Tops 'N Bottoms
(2) Comparable store sales includes stores opened for both periods in the
current format and location. A store is added to the comparable store base
in its 13th month of operation.
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<PAGE> 8
The inventory turn-over rate was approximately 1.26 times during the three
months ended April 30, 1995 as compared to 1.31 times during the three months
ended April 30, 1994. Due to the comparability of these turns, the impact on
profit margins is not material.
Selling and administrative expenses for the three months ended April 30,
1995 decreased $558,000 (5.6%) over the comparable three month period of 1994.
The decrease in selling and administrative expenses for the three months ended
April 30, 1995 was principally due to a decrease in the number of stores, a
decrease in sales, and a continuing control over expenses. Selling and
administrative expenses for the three months ended April 30, 1994 was offset by
approximately $600,000 of refunds received for health and worker's compensation
insurance as a result of favorable experience. As a percentage of net sales,
these expenses were 24.0% for the three month period ended April 30, 1995 and
23.0% for the three month period ended April 30, 1994.
The decrease in depreciation and amortization expenses of $18,000 was
principally attributed to the write-off of leasehold improvements of closed
stores, net of the remodeling of the Company's stores.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended April 30, 1995 and 1994, the Company funded
internally all of its operating needs, including capital expenditures for the
opening of new stores, remodeling of existing stores, and the acquisition of
Treasury stock. For the three months ended April 30, 1995, the Company used net
cash of $2,110,000 in operating activities as a result, principally, of the net
loss for the period, increased prepaid expenses, decreased trade accounts
payable net of decreased merchandise inventories.
Merchandise inventory, for the three months ended April 30, 1995, decreased
principally as the result of the reduction in the total number of stores in
operation and the timing of the purchase of inventory. The decrease in income
taxes for the three months ended April 30, 1994 is the result of loss incurred
for the period and the payment of income taxes for the prior year end. The
company realized a loss for the fiscal year ended January 31, 1995 and the three
months ended April 30, 1995 and no income taxes were required.
Net cash used in investing activities was $626,000 and $412,000 for the
three months ended April 30, 1995 and 1994, respectively. These funds were used
in the opening of new stores and the remodeling of existing stores.
Net cash used in financing activities was $656,000 for the three months
ended April 30, 1995 and $17,365,000 for the three months ended April 30, 1994.
For the three months ended April 30, 1995 these funds were used for the payment
of dividends on preferred and common stock. For the three months ended April 30,
1994 these funds were principally used for the purchase of treasury stock and
the payment of dividends for preferred and common stock.
As of April 30, 1995, the Company had cash and cash equivalents of
approximately $47,218,000 compared with approximately $46,575,000 at April 30,
1994. Since fiscal 1993, the Company has trended toward lower sales and since
fiscal 1991 the Company has trended toward lower earnings and these trends are
continuing into the second quarter of fiscal 1996. There are no known other
trends or commitments, events or other uncertainties that are reasonably likely
to result in the Company's liquidity increasing or decreasing in any material
way. The Company believes that internally generated funds will be sufficient to
meet its anticipated capital expenditures, none of which are material, and
current operating needs.
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<PAGE> 9
DEB SHOPS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
(Continued)
SEASONAL NATURE OF OPERATIONS
The following table shows the Company's net sales and net earnings per quarter
for the fiscal year ended January 31, 1995 on an unaudited basis.
Net Sales Net Income
--------------------------------------------------
Amount % Amount %
------ --- ------ ---
(Dollars in Thousands)
----------------------
1st Quarter $ 43,316 21.3% ($1,605) ( 59.0%)
2nd Quarter 47,294 23.3 ( 1,002) ( 36.8 )
3rd Quarter 49,170 24.2 ( 2,313) ( 85.1 )
4th Quarter 63,158 31.2 2,201 80.9
-------- ----- ------- ------
TOTAL $202,938 100.0% ($2,719) 100.0%
======== ===== ======= =====
Approximately 55% and (4%) of the Company's net sales and net (loss) income,
respectively, for fiscal 1995 occurred during the last six months, which
includes the Back-to-School and Christmas selling seasons.
PART II. OTHER INFORMATION
Items 1 - 5. NOT APPLICABLE
- ------------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ------- ---------------------------------
(a) Exhibits
Exhibit No. Description of Document
----------- -----------------------
11 Computation of Earnings Per Share
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended April 30, 1995.
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<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DEB SHOPS, INC.
DATE: June 15, 1995 By /s/ Marvin Rounick
-----------------------
Marvin Rounick
President
DATE: June 15, 1995 By /s/ Lewis Lyons
------------------------
Lewis Lyons
Vice President, Finance
Chief Financial Officer
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<PAGE> 11
EXHIBIT 11
DEB SHOPS, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
Three Months Ended April 30
---------------------------------
1995 1994
---- ----
PRIMARY
Average shares outstanding 12,846,746 14,212,640
Net effect of dilutive stock
options and restricted incentive
stock based on the treasury stock
method using average market price 0 0
------------ ------------
12,846,746 14,212,640
============ ============
Net (Loss) Income ($ 2,299,327) ($ 1,605,382)
Preferred dividend paid 13,800 13,800
------------ ------------
($ 2,313,127) ($ 1,619,182)
============ ============
Per common share amount ($ .18) ($ .11)
============ ============
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> APR-30-1995
<CASH> 47,218,007
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 24,794,806
<CURRENT-ASSETS> 78,666,911
<PP&E> 50,155,502
<DEPRECIATION> 30,583,886
<TOTAL-ASSETS> 100,071,252
<CURRENT-LIABILITIES> 13,644,281
<BONDS> 0
460
0
<COMMON> 156,883
<OTHER-SE> 101,805,643
<TOTAL-LIABILITY-AND-EQUITY> 100,071,252
<SALES> 39,101,458
<TOTAL-REVENUES> 39,690,324
<CGS> 23,124,150
<TOTAL-COSTS> 43,148,651
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,458,327)
<INCOME-TAX> (1,159,000)
<INCOME-CONTINUING> (2,299,327)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,299,327)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
