<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended October 31, 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
--------------------------------------------------------
DEB SHOPS, INC.
- - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1913593
- - ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9401 Blue Grass Road, Philadelphia, Pennsylvania 19114
- - ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(215) 676-6000
- - ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- - ------------------------------------------------------------------------------
(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 October 31, 1995)
<PAGE>
DEB SHOPS, INC. AND SUBSIDIARIES
I N D E X
Page
----
PART I. Financial Information:
Consolidated Balance Sheets - 1
October 31, 1995 and January 31, 1995
Consolidated Statements of Operations 2
Nine Months and Three Months Ended
October 31, 1995 and October 31, 1994
Consolidated Statements of Cash Flows - 3
Nine Months Ended October 31, 1995 and
October 31, 1994
Notes to Consolidated Financial Statements - 4-5
October 31, 1995
Management's Discussion and Analysis of Results of 6-10
Operations and Financial Condition
PART II. Other Information 10
<PAGE>
DEB SHOPS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1995 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 33,244,929 $ 50,610,195
Merchandise inventories 31,127,114 28,576,374
Prepaid expenses and other 4,869,832 3,920,716
Current deferred income taxes 1,196,129 1,196,129
------------ ------------
Total Current Assets 70,438,004 84,303,414
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost
Building and improvements 1,982,000 1,982,000
Leasehold improvements 31,334,530 31,198,281
Furniture and equipment 16,901,133 16,647,563
------------ ------------
50,217,663 49,827,844
Less accumulated depreciation
and amortization 31,874,185 29,762,281
------------ ------------
18,343,478 20,065,563
------------ ------------
OTHER ASSETS
Goodwill and Tradenames net of amortization 3,218,405 --
Long-term deferred income taxes 665,211 665,211
Other 1,167,514 1,167,514
------------ ------------
Total Other Assets 5,051,130 1,832,725
------------ ------------
$ 93,832,612 $106,201,702
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 8,430,203 $ 11,663,983
Accrued expenses 4,754,776 5,114,260
------------ ------------
Total Current Liabilities 13,184,979 16,778,243
------------ ------------
Capital Lease Obligation 2,018,823 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 - October 31, 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 90,505,946 99,218,862
------------ ------------
96,205,233 104,918,149
Less common treasury shares, at cost -
October 31, 1995: 2,843,610;
January 31, 1995: 2,835,345 17,576,423 17,535,098
------------ ------------
78,628,810 87,383,051
------------ ------------
$ 93,832,612 $106,201,702
============ ============
</TABLE>
The notes to consolidated financial statements are an
integral part of these financial statements.
-1-
<PAGE>
DEB SHOPS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
October 31, October 31,
------------------------------------- ----------------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Net sales $123,089,966 $139,779,470 $41,671,729 $49,169,910
Other income, principally
interest 1,721,595 675,674 451,449 205,146
-------------- ------------- ------------ ------------
124,811,561 140,455,144 42,123,178 49,375,056
-------------- ------------- ------------ ------------
Costs and Expenses
Cost of sales, including
buying and occupancy costs 102,918,396 112,479,226 35,535,789 40,572,330
Selling and administrative 29,035,448 32,304,857 9,781,569 11,244,720
Depreciation and amortization 3,000,331 3,071,309 1,004,899 1,036,578
-------------- ------------- ------------ ------------
134,954,175 147,855,392 46,322,257 52,853,628
------------- ------------- ------------ ------------
(Loss) Before Income Tax benefit ( 10,142,614) ( 7,400,248) ( 4,199,079) ( 3,478,572)
Income tax benefit ( 3,397,800) ( 2,479,100) ( 1,405,800) ( 1,165,300)
-------------- -------------- ------------- -------------
Net (Loss) ($ 6,744,814) ($ 4,921,148) ($ 2,793,279) ($ 2,313,272)
============== ============== ============= =============
Net (Loss) Per Common Share ($ 0.53) ($ 0.37) ($ 0.22) ($ 0.18)
============== ============== ============= =============
Cash Dividend Declared
Per Common Share $ 0.15 $ 0.15 $ 0.05 $ 0.05
=============== ============= ============ ============
Weighted Average Number of
Common Shares Outstanding 12,845,493 13,392,823 12,844,580 12,852,945
============== ============= ============ ============
</TABLE>
The notes to consolidated financial statements are an
integral part of these financial statements.
-2-
<PAGE>
DEB SHOPS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended October 31,
-------------------------------------
1995 1994
---- ----
<S> <C> <C>
(Decrease) in Cash and Cash Equivalents
Cash flows (used in) operating activities:
Net (Loss) ($ 6,744,814) ($ 4,921,148)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Depreciation and amortization 3,000,331 3,071,309
Vesting of restricted incentive stock ( 41,325) ( 53,040)
Loss on retirement of property and equipment 387,799 447,136
Change in assets and liabilities net of effect
of purchase of business: (NOTE F)
(Increase) in merchandise inventories ( 133,713) ( 7,777,876)
(Increase) in prepaid expenses and other ( 816,426) ( 2,457,697)
(Decrease) in trade accounts payable ( 4,263,749) ( 6,164,908)
(Decrease) increase in accrued expenses ( 456,217) 592,761
(Decrease) in income taxes payable -- ( 2,834,878)
------------ ------------
Net cash (used in) operating activities ( 9,068,114) ( 20,098,341)
------------ ------------
Cash flows (used in) investing activities:
Purchase of business and related net assets,
net of cash acquired (NOTE F) ( 4,468,016) --
Purchase of property, plant and equipment ( 926,034) ( 1,675,304)
------------ ------------
Net cash (used in) investing activities ( 5,394,050) ( 1,675,304)
------------ ------------
Cash flows (used in) financing activities:
Preferred stock cash dividends paid ( 41,400) ( 41,400)
Common stock cash dividends paid ( 1,926,702) ( 1,926,942)
Purchase of treasury stock (NOTE E) -- ( 16,708,890)
Repayment of notes payable ( 913,415) --
Principal payments under capital lease obligations ( 21,585) --
------------ ------------
Net cash (used in) financing activities ( 2,903,102) ( 18,677,232)
------------ ------------
(Decrease) in cash and cash equivalents ( 17,365,266) ( 40,450,877)
Cash and cash equivalents at beginning of period 50,610,195 71,614,201
------------ ------------
Cash and cash equivalents at end of period $33,244,929 $31,163,324
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on capital lease obligation $ 315,000 $ 333,000
Income taxes 194,899 2,587,064
</TABLE>
The notes to consolidated financial statements are an
integral part of these financial statements.
-3-
<PAGE>
DEB SHOPS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 31, 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 nine months ended October 31, 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 timing of recognition of overhead in inventory, deductibility of
certain liabilities and depreciation expense. The tax benefit for the nine
months ended October 31, 1995, is included in prepaid expenses and other on the
accompanying consolidated balance sheet.
NOTE C - STOCK OPTION PLAN
In January, 1983, the Company adopted an Incentive Stock Option Plan.
The plan is administered by a Stock Option Committee designated by the Board of
Directors. Under the plan, a maximum of 1,000,000 shares of the Company's common
stock, par value $.01 per share, may be issued by the Company and sold to
selected key employees on the basis of contribution to the operations of the
Company. The price payable for the shares of Common Stock under each stock
option will be fixed by the Committee, at the time of grant, but will be no less
than 100% of the fair market value of the Company's common stock at the time the
stock option is granted. Options are exercisable commencing one year after the
date of grant, subject to such vesting requirements as the Committee may
specify. The options expire through October, 2000. Changes in outstanding common
stock options during the nine month period ended October 31, 1995 are summarized
below:
Outstanding, beginning of year --
Granted during period 35,000
Canceled during period --
Exercised during period --
------
Outstanding, end of period (at $3.50 per share) 35,000
------
At October 31, 1995, there were 259,210 shares reserved for future grant.
-4-
<PAGE>
NOTE D - 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 October 31, 1995, there were 206,000 shares reserved for future
grant.
NOTE E - 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.
NOTE F - ACQUISITION OF BUSINESS
In October, 1995, the Company acquired substantially all of the net
assets of the Atlantic Book chain (Atlantic) for $4,468,016 in cash. The
purchase price was allocated to the fair market value of the net assets with
$1,513,405 allocated to goodwill.
The following table displays noncash net assets that were consolidated
as a result of the acquisition discussed above:
Merchandise inventories $ 2,417,027
Prepaid expenses and other 137,690
Property, plant and equipment 740,011
Goodwill and Tradenames 3,213,405
Trade accounts payable ( 1,029,969)
Accrued expenses ( 96,733)
Notes payable ( 913,415)
---------------
$ 4,468,016
===============
-5-
<PAGE>
DEB SHOPS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
Deb Shops, Inc. (the "Company") operates 315 women's specialty apparel
retail stores offering moderately priced, fashionable, coordinated sportswear,
dresses, coats, lingerie, accessories and shoes for junior sized women. The
Company also operates 11 Tops `N Bottoms stores which sell moderately priced
men's and women's apparel.
In October, 1995, the Company acquired substantially all of the net
assets of the Atlantic Book chain for a purchase price of $4,468,016. Atlantic
operates 14 locations, including 11 "Atlantic Book Shops" which are small
limited selection book stores, which are generally open seasonally in New Jersey
and Delaware shore resort towns. Atlantic Books also operates three much larger
"Atlantic Book Warehouses" which are full-service book stores emphasizing
bargain books. The Atlantic Book Warehouse stores are located in
Montgomeryville, PA, Cherry Hill, NJ and Dover,DE. Atlantic competes with
national and regional bookstore chains as well as local independent bookstores.
Results of operations for the Company for the three and nine month
periods ended October 31, 1995, are presented on a consolidated basis and are
segmented to provide relevant information concerning the Company's retail
apparel store business which is the Company's principal line of business. In the
opinion of management, at the present time, the results of operations of the
Company's newly acquired book store business are not material to the Company's
consolidated results of operations either (i) when compared to the Company as a
whole or (ii) when compared to the Company's apparel store business, and,
therefore, the Company has not separately reported results of operations of the
book store business.
Results of Operations - Consolidated
Net sales for the nine month and three month periods ended October 31,
1995 decreased ($16,689,504) (11.9%) and ($7,498,181) (15.2%), respectively,
over the comparable nine month and three month periods of 1994. The decrease in
net sales was principally attributable to the decrease in the number of apparel
stores and continued customer resistance to product and pricing and a lack of
fashion direction in the women's specialty apparel industry. For further
information see Results of Operations - Apparel Business.
The decrease in net sales was accompanied by a net loss of ($6,744,814)
for the nine months ended October 31, 1995 and a net loss of ($2,793,279) for
the three months ended October 31, 1995 as compared to a net loss of
($4,921,148) for the nine months ended October 31, 1994 and a net loss of
($2,313,272) for the three months ended October 31, 1994. The loss was primarily
attributable to the decrease in total sales, along with decreased margins as a
result of increased competitive pressures and continued customer resistance.
Sales and margins at these levels are insufficient to cover fixed overhead. The
net loss for the nine months ended October 31, 1994 was partially offset (to the
extent of $600,000) by refunds of insurance premiums received during the quarter
ended April 30, 1994. 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 (5.5%) of net
sales for the nine months ended October 31, 1995 compared to a net loss of
(3.5%) of net sales for the nine months ended October 31, 1994. For the three
months ended October 31, net loss was (6.7%) of net sales in 1995 compared to a
net loss of (4.7%) of net sales in 1994.
-6-
<PAGE>
Cost of sales, including buying and occupancy costs decreased
($9,560,830) (8.5%) and ($5,036,541) (12.4%), respectively, over the comparable
nine month and three month periods of 1994. The decrease in cost of sales,
buying and occupancy costs was principally due to a decline in average net sales
per apparel store, and a decline in the average number of apparel stores in
operation during the period. As a percentage of net sales, these costs were
83.6% and 85.3%, respectively, for the nine month and three month periods ended
October 31, 1995 as compared to 80.5% and 82.5%, respectively for the nine month
and three month periods ended October 31, 1994. Buying and occupancy costs for
the nine months and three months ended October 31, 1995 were 23.2% and 22.5% of
net sales, respectively and for the comparable periods in 1994 were 21.3% and
20.3% of net sales, respectively. This percentage increase was a result of a
decrease in sales for the period.
Selling and administrative expenses for the nine months and three
months ended October 31, 1995 decreased ($3,269,409) (10.1%) and ($1,463,151)
(13.0%) respectively over the comparable periods in 1994. The decrease in
selling and administrative expenses was principally due to a decrease in the
number of stores, a decrease in sales, and continuing control over expenses. As
a percentage of net sales, these expenses were 23.6% and 23.5% respectively, for
the nine month and three month periods ended October 31, 1995 as compared to
23.1% and 22.9%, respectively, for the nine month and three month periods ended
October 31, 1994.
The decrease in depreciation and amortization expenses, ($79,800) and
($31,679), respectively, for the nine month and three month periods ended
October 31, 1995 over the comparable periods of 1994 was principally attributed
to the write-off of leasehold improvements of closed stores, net of the
remodeling of the Company's stores.
Results of Operations - Apparel Business
Net sales for the nine month and three month periods ended October 31,
1995 decreased ($17,294,580) (12.4%) and ($8,103,257) (16.5%), respectively,
over the comparable nine month and three month periods of 1994. The decrease in
net sales was principally attributable to the decrease in the number of stores
and continued customer resistance to product and pricing and a lack of fashion
direction in the women's specialty apparel industry, causing lower averages
sales per store.
<TABLE>
<CAPTION>
Per Store Data October 31(1)
----------------------------
Nine Months Three Months
----------- ------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Stores open at end of period 326 355 326 355
Average number of stores in operation
during period 336 358 330 359
Average net sales per store(in thousands) $ 366 $ 390 $ 126 $ 137
Average net (loss) per store(in thousands) ($ 20 ) ($ 14 ) ($ 8 ) ($ 6 )
Comparable store sales(2) - Percent Change ( 8.6%) ( 6.7%) ( 12.5%) ( 7.9%)
</TABLE>
-7-
- - ----------
(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 operations.
<PAGE>
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 as a vehicle for direct mail contact with the
customer. Despite these efforts average sales per store continue to decline.
The decrease in net sales was accompanied by a net loss of ($6,765,369)
for the nine months ended October 31, 1995 and a net loss of ($2,813,834) for
the three months ended October 31, 1995 as compared to a net loss of
($4,921,148) for the nine months ended October 31, 1994 and a net loss of
($2,313,272) for the three months ended October 31, 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 nine months ended
October 31, 1994 was partially offset (to the extent of $600,000) by refunds of
insurance premiums received during the quarter ended April 30, 1994. 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 (5.5%) of net sales for the nine months ended
October 31, 1995 compared to a net loss of (3.5%) of net sales for the nine
months ended October 31, 1994. For the three months ended October 31, net loss
was (6.9%) of net sales in 1995 compared to a net loss of (4.7%) of net sales in
1994.
Cost of sales, including buying and occupancy costs decreased
($9,984,954) (8.9%) and ($5,460,665) (13.5%), respectively, over the comparable
nine month and three month periods of 1994. The decrease in cost of sales,
buying and occupancy costs was principally due to a decline in average net sales
per store and a decline in the average number of stores in operation during the
period. As a percentage of net sales, these costs were 83.7% and 85.5%,
respectively, for the nine month and three month periods ended October 31, 1995
as compared to 80.5% and 82.5%, respectively for the nine month and three month
periods ended October 31, 1994. Buying and occupancy costs for the nine months
and three months ended October 31, 1995 were 23.3% and 22.7% of sales and for
the comparable periods in 1994 were 21.3% and 20.3% of sales. This percentage
increase was a result of a decrease in sales for the period.
The inventory turn-over rate was approximately 2.6 times during the
nine months ended October 31, 1995 as compared to 2.3 times during the nine
months ended October 31, 1994.
Selling and administrative expenses for the nine months and three
months ended October 31, 1995 decreased ($3,410,604) (10.6%) and ($1,604,346)
(14.3%) respectively over the comparable periods in 1994. The decrease in
selling and administrative expenses was principally due to a decrease in the
number of stores, a decrease in sales, and a continuing control over expenses.
As a percentage of net sales, these expenses were 23.6% and 23.5% respectively,
for the nine month and three month periods ended October 31, 1995 as compared to
23.1% and 22.9%, respectively, for the nine month and three month periods ended
October 31, 1994.
The decrease in depreciation and amortization expenses, ($79,800) and
($40,501), respectively, for the nine month and three month periods ended
October 31, 1995 over the comparable periods of 1994 was principally attributed
to the write-off of leasehold improvements of closed stores, net of the
remodeling of the Company's stores.
-8-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES CONSOLIDATED
During the nine months ended October 31, 1995 and 1994, the Company
funded internally all of its operating needs, including capital expenditures for
the opening of new apparel stores, remodeling of existing apparel stores, the
purchase of the book business and its related net assets and the acquisition of
Treasury stock. For the nine months ended October 31, 1995, the Company used net
cash of $9,068,114 in operating activities as a result, principally, of the net
loss for the period, increased prepaid expenses and a decrease in trade accounts
payable partially offset by depreciation and amortization. The increase in
merchandise inventories for the nine months ended October 31, 1995 was lower
than for the comparable nine months ended October 31, 1994 principally due to
the reduction in the total number of stores in operation and the timing of the
purchase of apparel inventory. For the nine months ended October 31, 1994, the
Company used net cash of $20,098,341 in operating activities as a result,
principally, of the net loss for the period, increased purchases of merchandise
inventory and prepaid expenses, decrease in trade accounts payable and amounts
paid for income taxes incurred during the fiscal year ended January 31, 1994.
The Company realized a loss for the fiscal year ended January 31, 1995 and the
nine months ended October 31, 1995. A tax benefit and corresponding receivable
were recorded for each period based on the amounts recoverable.
Net cash used in investing activities was $5,394,050 and $1,675,304 for
the nine months ended October 31, 1995 and 1994, respectively. In October, 1995,
the Company acquired substantially all of the net assets of the Atlantic Books
chain for a purchase price of $4,468,016, which purchase price was funded from
the Company's internal funds. In addition, these funds were used in investing
activities that were utilized for the purchase of property, plant and equipment
in the opening of new stores and the remodeling of existing stores.
Net cash used in financing activities was $2,903,102 for the nine
months ended October 31, 1995 and $18,677,232 for the nine months ended October
31, 1994. For the nine months ended October 31, 1995 these funds were used
primarily for the payment of dividends on preferred and common stock and for the
repayment of notes payable acquired from Atlantic. For the nine months ended
October 31, 1994 these funds were principally used for the purchase of treasury
stock and the payment of dividends for preferred and common stock.
As of October 31, 1995, the Company had cash and cash equivalents of
$33,244,929 compared with $31,163,324 at October 31, 1994. Since fiscal 1993,
the Company has trended toward lower sales and reported a loss from operations
for the fiscal year ended January 31, 1995, and these trends are continuing into
the fourth quarter of fiscal 1996. The Company's present intention is to expand
the book store business by opening additional warehouse stores. It is
anticipated that the funds to finance this expansion will come from the cash and
cash equivalents on hand. As of the balance sheet date, there are no commitments
for the opening of any additional stores. 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.
-9-
<PAGE>
SEASONAL NATURE OF OPERATIONS
The following table shows the Company's net sales and net (loss) income per
quarter for the fiscal year ended January 31, 1995 on an unaudited basis.
<TABLE>
<CAPTION>
Net Sales Net (Loss) Income
------------------------- ---------------------------
Amount % Amount %
------ - ------ -
(Dollars in Thousands)
----------------------
<S> <C> <C> <C> <C>
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% ($2,719) 100.0%
======== ====== ======== =======
</TABLE>
Approximately 55% and (4%) of the Company's net sales and net (loss) income,
respectively, for fiscal 1995 occurred during the last six months, which
includes the Back-to-School and Christmas selling seasons.
PART II. OTHER INFORMATION
Items 1 - 3. NOT APPLICABLE
Item 5. NOT APPLICABLE
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit No. Description of Document
----------- -----------------------
11 Computation of Earnings Per Share
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended October 31, 1995.
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DEB SHOPS, INC.
DATE: By /s/ Marvin Rounick
------------------------------
Marvin Rounick
President
DATE: By /s/ Lewis Lyons
-------------------------------
Lewis Lyons
Vice President, Finance
Chief Financial Officer
<PAGE>
EXHIBIT 11
DEB SHOPS, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Nine Months Ended October 31 Three Months Ended October 31
----------------------------------- ---------------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
Average shares outstanding 12,845,493 13,392,823 12,844,580 12,852,945
Net effect of dilutive stock
options and restricted incentive
stock based on the treasury stock
method using average market price 0 0 0 0
------------ ----------- ----------- ------------
12,845,493 13,392,823 12,844,580 12,852,945
============ =========== =========== ============
Net (Loss) ($ 6,744,814) ($4,921,148) ($2,793,279) ($ 2,313,272)
Preferred dividend paid 41,400 41,400 13,800 13,800
------------ ----------- ----------- ------------
($ 6,786,214) ($4,962,548) ($2,807,079) ($ 2,327,072)
============ =========== =========== ============
Per common share amount ($ .53) ($ .37) ($ .22) ($ .18)
============ =========== =========== ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> OCT-31-1995
<CASH> 33,244,929
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 31,127,114
<CURRENT-ASSETS> 70,438,004
<PP&E> 50,217,663
<DEPRECIATION> 31,874,185
<TOTAL-ASSETS> 93,832,612
<CURRENT-LIABILITIES> 13,184,979
<BONDS> 0
<COMMON> 156,883
460
0
<OTHER-SE> 72,929,523
<TOTAL-LIABILITY-AND-EQUITY> 93,832,612
<SALES> 123,089,966
<TOTAL-REVENUES> 124,811,561
<CGS> 74,306,576
<TOTAL-COSTS> 134,954,175
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (10,142,614)
<INCOME-TAX> (3,397,800)
<INCOME-CONTINUING> (6,744,814)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,744,814)
<EPS-PRIMARY> (0.53)
<EPS-DILUTED> (0.53)
</TABLE>
