SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 30, 1994 Commission File Number 1-6166
PETRIE STORES CORPORATION
(Exact Name of Registrant as specified in its Charter)
New York 36-2137966
(State of Incorporation) (I.R.S. Employer Identification No.)
70 Enterprise Avenue
Secaucus, New Jersey 07094
(Address of principal (Zip Code)
executive offices)
(201) 866-3600 NONE
____
(Registrant's Telephone Number) Former name, former 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 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 _
-
Number of shares outstanding at April 30, 1994, 46,768,984 shares, $1.00 par
value, common stock.
<PAGE>
PETRIE STORES CORPORATION AND SUBSIDIARIES
INDEX
PAGE NO.
________
Part I - Financial Information (Unaudited):
Consolidated Balance Sheets
April 30, 1994 and January 29, 1994.................... 3 & 4 of 12
Consolidated Operations - Three Months
Ended April 30, 1994 and May 1, 1993................... 5 of 12
Consolidated Additional Paid-In Capital and Consolidated
Retained Earnings - Three Months Ended April 30, 1994... 6 of 12
Consolidated Cash Flows - Three Months
Ended April 30, 1994 and May 1, 1993.................... 7 of 12
Notes................................................... 8 of 12
Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 9 & 10 of 12
Part II - Other Information..................................... 11 of 12
Signature....................................................... 11 of 12
Exhibits:
Exhibit A - Independent Accountants' Report -
David Berdon & Co....................................... 12 of 12
<PAGE>
PETRIE STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
___________________________
(In thousands of dollars)
April 30, January 29,
1994 1994
____ ____
ASSETS (Unaudited)
Current Assets:
Cash and short-term investments................ $ 27,749 $ 39,290
Investments in common stock (Note 2)........... 19,012 35,740
Accounts receivable:
Trade, less allowance for doubtful accounts of
$2,450........................................ 49,204 49,999
Other......................................... 11,247 13,745
Merchandise inventories........................ 232,691 187,627
Prepaid expenses............................... 10,913 6,887
Deferred income taxes.......................... 7,456 7,456
_______ _______
TOTAL CURRENT ASSETS.................... 358,272 340,744
_______ _______
Investments:
Investments in common stock (Notes 2 and 3).... 1,379,924 1,481,937
_________ _________
Property and Equipment, at Cost:
Land........................................... 2,777 2,777
Buildings and improvements..................... 16,361 16,157
Leasehold costs, improvements, store fixtures
and equipment.................................. 610,924 588,450
_______ _______
630,062 607,384
Less accumulated depreciation and amortization. 353,471 339,409
_______ _______
276,591 267,975
_______ _______
Excess of Cost Over the Fair Value of Net Assets
Acquired,
Less accumulated amortization of $28,911 at
4/30/94 and $28,176 at 1/29/94................. 88,867 89,602
______ ______
Other Assets:
Debt issuance costs, less accumulated
amortization of $591 at 4/30/94 and $574 at
1/29/94........................................ 1,138 1,155
Other.......................................... 6,429 6,394
_____ _____
7,567 7,549
_____ _____
$ 2,111,221 $ 2,187,807
========= =========
See notes to consolidated financial statements.
<PAGE>
PETRIE STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
___________________________
(In thousands of dollars)
April 30, January 29,
1994 1994
____ ____
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings............................ $ 50,000 $ 20,000
Accounts payable................................. 27,819 26,993
Accrued expenses and other liabilities........... 40,891 44,917
_______ ______
TOTAL CURRENT LIABILITIES................... 118,710 91,910
_______ ______
Long-Term Liabilities:
Convertible subordinated debentures.............. 124,942 124,952
Deferred income taxes (Note 2)................... 560,826 600,678
Other............................................ 5,504 5,704
_______ _______
691,272 731,334
_______ _______
Shareholders' Equity:
Common stock, par value $1 per share: authorized
80,000,000 shares; issued 46,770,653 shares at
4/30/94 and 46,770,202 shares at 1/29/94......... 46,771 46,770
Additional paid-in capital....................... 93,982 93,973
Retained earnings................................ 460,643 462,079
Unrealized gain on investment in common stock,
net (Note 2)..................................... 699,879 761,777
_________ _________
1,301,275 1,364,599
Less:
Treasury stock - at cost (1,669 shares)............ 36 36
________ ________
TOTAL SHAREHOLDERS' EQUITY.................... 1,301,239 1,364,563
_________ _________
$ 2,111,221 $ 2,187,807
========= =========
See notes to consolidated financial statements.
<PAGE>
PETRIE STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED OPERATIONS
(Unaudited)
___________
(In thousands except per share amounts)
Three Months Ended
------------------
April 30, May 1,
1994 1993
---- ----
Revenues:
Net Sales.......................................... $ 337,525 $ 331,782
Other Income....................................... 1,278 1,916
------- -------
338,803 333,698
------- -------
Cost of Goods Sold, Buying and Occupancy Costs........ 247,318 244,823
Selling, General and Administrative Expenses.......... 85,471 83,199
Nonrecurring Expenses (Note 3)........................ 1,300 0
Interest Expense...................................... 2,937 2,615
------ ------
337,026 330,637
------- -------
(Loss) from Investment in Common Stock................ 0 (13,661)
------- --------
Earnings (Loss) from Continuing Operations Before
Income Taxes and Cumulative Effect of Accounting
Change for Income Taxes............................... 1,777 (10,600)
------- --------
Income Taxes:
Federal............................................ 620 604
State and Local.................................... 107 244
Deferred........................................... 148 (4,970)
------ ------
875 (4,122)
------ -------
Earnings (Loss) before Cumulative Effect of Accounting
Change for Income Taxes............................... 902 (6,478)
Cumulative Effect of Accounting Change for Income
Taxes................................................. 0 2,800
--- -----
Net Earnings (Loss)................................... $ 902 $ (3,678)
==== =====
Earnings (Loss) per Share (Note 4):
Earnings (Loss) before Cumulative Effect of Accounting
Change for Income Taxes............................. $ .02 $ (.14)
Cumulative Effect of Accounting Change for Income
Taxes.............................................. 0 .06
Net Earnings (Loss)................................ $ .02 $ (.08)
==== ====
Dividends Per Share................................... $ .05 $ .05
==== ====
Weighted Average Number of Shares..................... 46,769 46,768
====== ======
See notes to consolidated financial statements.
<PAGE>
PETRIE STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED ADDITIONAL PAID-IN CAPITAL
(Unaudited)
-----------
(In thousands of dollars)
Balance January 30, 1994.......................................... $ 93,973
Conversion of debentures.......................................... 9
------
Balance April 30, 1994............................................ $ 93,982
======
PETRIE STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED RETAINED EARNINGS
(Unaudited)
-----------
(In thousands of dollars)
Balance January 30, 1994......................................... $ 462,079
Net income for the three months ended April 30, 1994............. 902
Cash dividends on common stock................................... (2,338)
--------
Balance April 30, 1994........................................... $ 460,643
=======
See notes to consolidated financial statements.
<PAGE>
PETRIE STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CASH FLOWS
(Unaudited)
-----------
(In thousands of dollars)
Three Months Ended
April 30, May 1,
1994 1993
Cash flows from operating activities: ---- ----
Net income (loss)..................................... $ 902 $ (3,678)
Adjustments to reconcile net income (loss) to net
cash (used in) operating activities:
Depreciation and amortization of property and
equipment............................................ 14,062 15,138
Other amortization................................... 772 781
Compensation in connection with stock options........ 0 339
Loss from investment in common stock................. 0 13,661
Deferred taxes....................................... 148 (4,970)
Cumulative effect of accounting change for income
taxes................................................ 0 (2,800)
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable................................ 3,293 3,265
Merchandise inventories............................(45,064) (48,000)
Prepaid expenses................................... (4,026) 1,301
Other assets....................................... (55) (3,747)
Increase (decrease) in:
Accounts payable................................... 826 5,915
Accrued expenses and other liabilities............. (4,026) 1,020
Income taxes....................................... 0 (510)
Other long-term liabilities........................ (200) 3,702
Proceeds from sale of investment in common stock -
trading securities................................... 16,843 0
------ ------
Net cash (used in) operating activities...................(16,525) (18,583)
------ ------
Cash flows from investing activities:
Additions to property and equipment.................... (22,678) (18,463)
------- -------
Cash flows from financing activities:
Net short-term borrowings.............................. 30,000 0
Cash dividends......................................... (2,338) (2,338)
----- -----
Net cash provided by (used in) financing activities....... 27,662 (2,338)
------ -----
Net (decrease) in cash and short-term investments......... (11,541) (39,384)
Cash and short-term investments - beginning of period..... 39,290 82,270
------ ------
Cash and short-term investments - end of period........... $27,749 $ 42,886
====== ======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................... $ 30 $ 98
Income taxes........................................... $ 202 $ 1,377
Supplemental disclosure of noncash investing and financing
activities:
$10,000 of Convertible Subordinated Debentures were exchanged for 451 shares
of the Company's common stock during the quarter ended April 30, 1994.
See notes to consolidated financial statements.
<PAGE>
PETRIE STORES CORPORATION AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
- - ------
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as of
April 30, 1994 and the results of operations and cash flows for the three
months ended April 30, 1994 and May 1, 1993.
The results of operations for the three months ended April 30, 1994
are not necessarily indicative of the results to be expected for the full
year.
Note 2 - Investments in Common Stock
- - ------------------------------------
At April 30, 1994, the Company's investment in common stock consists
of Toys "R" Us, Inc. ("Toys") (40,402,488 shares - 14.05%) - A chain of toy
specialty retail stores. Effective January 29, 1994, the Company adopted
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". Accordingly, investments in common stock, classified as trading
securities and included in current assets in the accompanying Consolidated
Balance Sheet at April 30, 1994, are being carried at market value.
Investments in common stock classified as available for sale securities are
being carried at market value of $1,379,924,000 with the unrealized gain of
$1,224,879,000 net of deferred income taxes of $525,000,000 included in
shareholders' equity at April 30, 1994. At January 29, 1994 the unrealized
gain amounted to $1,326,777,000 net of deferred income taxes of $565,000,000
was credited to shareholders' equity.
Note 3 - Nonrecurring Expenses
- - ------------------------------
Nonrecurring expenses relate primarily to legal and real estate
consulting expenses incurred in connection with the acquisition agreement
entered into with Toys in April 1994. This agreement provides for the
exchange of approximately 40 million shares of Toys common stock and cash
(up to $250 million) for newly issued shares of Toys common stock, less $115
million. The closing of the transaction is subject to certain conditions
as set forth in the agreement.
Note 4- Earnings Per Share
- - --------------------------
Primary earnings per share has been computed based on the weighted
average number of shares outstanding.
Fully diluted earnings per share has been computed based on the
weighted average number of common and common equivalent shares outstanding
assuming exercise of dilutive stock options computed by the treasury stock
method and the conversion of the 8% Convertible Subordinated Debentures
after elimination of interest (net of taxes) on the convertible debentures.
Fully diluted earnings per share are not presented for the three months
ended April 30, 1994 and three months ended May 1, 1993 as the effect
would be anti-dilutive. Weighted average number of shares for computing
fully diluted earnings per share was 52,416,000 for the three months ended
April 30, 1994 and 52,509,000 for the three months ended May 1, 1993.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- - -----------------------------------------------------------------------
OF OPERATIONS
- - -------------
Revenues
- - --------
Net sales increased $5,743,000 (1.7%) for the three months ended
April 30, 1994 as compared to the corresponding period last year. This
increase was due to an increase in non comparable store sales of
approximately $8,000,000 offset by a decrease of $2,500,000 (.8%) in
comparable store sales.
Other income decreased $638,000 for the three months ended April 30,
1994 as compared to the corresponding period last year due to a decrease in
temporary investments.
Cost of Goods Sold, Buying and Occupancy Costs (CGS)
- - ----------------------------------------------------
As a percentage of sales, CGS decreased approximately .5% for the
three-month period ended April 30, 1994 as compared to the corresponding
period last year primarily due to a .4% decrease in buying and distribution
costs and a .1% increase in gross margin as a result of an improved initial
mark up partially offset by an increase in markdowns.
Selling, General & Administrative Expenses (S,G&A)
- - -------------------------------------------------
S,G&A as a percentage of sales increased approximately .2% for the
three-month period ended April 30, 1994 as compared to the corresponding
period last year primarily due to an increase of .4% in payroll and employee
related costs, offset by a decrease of .1% in depreciation expense.
Nonrecurring Expenses
- - ---------------------
Nonrecurring expenses relate primarily to legal and real estate
consulting expenses in connection with the acquisition agreement with Toys
(See Note 3).
Interest Expense
- - ----------------
Interest expense relates primarily to the 8% Convertible Subordinated
Debentures. The increase in interest expense during the three months ended
April 30, 1994 is due to interest expense associated with the Company's
short-term borrowings.
(Loss) From Investment in Common Stock
- - --------------------------------------
The loss from investment in common stock for the three months ended
May 1, 1993 represents the write-down of the Company's investment in
Deb Shops, Inc. ("Debs") to market value as of May 1, 1993.
Income Taxes
- - ------------
The provision for income taxes as a percentage of earnings (loss)
before income taxes increased 10.4% for the three-month period ended
April 30, 1994 as compared to the corresponding period last year primarily
due to an increase in expenses producing no tax benefit.
Cumulative Effect of Accounting Change for Income Taxes
- - -------------------------------------------------------
Effective January 31, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes", which resulted in a deferred tax benefit of $2,800,000,
or $.06 per share for the three months ended May 1, 1993.
Restructuring
- - -------------
In connection with the Company's restructuring plan adopted in fiscal
1994, the Company closed 16 stores in the first quarter of the current
fiscal year. The only significant cost savings during the three months
ended April 30, 1994 due to the restructuring was a reduction in
depreciation expense of approximately $1,100,000 primarily as a result of
the elimination of depreciation expense associated with the stores
that have not yet been closed as of April 30, 1994.
Liquidity and Capital Resources
- - -------------------------------
The Company continues to be in a strong financial position. Among the
Company's sources of liquidity are its cash and temporary investments, its
Toys "R" Us, Inc. ("Toys") common stock, its ability to obtain financing
and preferred stock issuances. Pursuant to the acquisition agreement with
Toys the Company has restricted its ability to sell shares of Toys common
stock to 4,000,000 shares and has restricted its ability to pledge such
shares in connection with borrowings to $175,000,000 in secured borrowings.
As of April 30, 1994 the Company had $50,000,000 outstanding under a
short-term borrowing agreement with a broker. These borrowings were used
for capital expenditures, inventory and general working capital requirements.
The Company has $107,500,000 in lines of credit available, principally for
establishing letters of credit with its suppliers.
The Company's holdings in Debs were sold in early April 1994 for
approximately $16,800,000 with the proceeds used to reduce short-term
borrowings. The Company sold a small portion of its holdings in Toys during
June 1994 for approximately $19,200,000 to offset the loss from the sale of
Debs stock, with the proceeds from this sale also used to reduce short-term
<PAGE>
borrowings. Such Toys shares were included in Current Assets under the
caption " Investments in Common Stock" in the accompanying Consolidated
Balance Sheet at April 30, 1994.
The Company's merchandise inventories are historically lower at the end
of its fiscal year as compared to the end of its first quarter due to the
seasonal nature of the Company's business.
The Company has budgeted approximately $45,000,000 for capital
expenditures during fiscal 1995, which includes approximately $13,000,000
for new Point of Sale Registers and associated technology. The funds are
being provided by working capital and short-term borrowing arrangements.
In connection with its Convertible Subordinated Debentures, the
Company is obligated to call such debentures pursuant to the acquisition
agreement with Toys.
The following items measure the Company's ability to meet its
short-term obligations:
April 30, 1994 January 29, 1994
-------------- ----------------
Working capital $239,562,000 $248,834,000
Current ratio 3.0 3.7
*Working capital consists of current assets less current liabilities. The
Company's current ratio has decreased but management believes this will not
affect the Company's borrowing capacity.
See the Statements of Consolidated Cash Flows for an analysis of the sources
and uses of funds for the three months ended April 30, 1994 as compared to
the corresponding period last year.
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 6 - Exhibits and Reports on Form 8-K
(b) During the three months ended April 30, 1994 the Company filed a
Form 8-K on April 22, 1994 and a Form 8-K/A on April 27, 1994. These
filings refer to the acquisition agreement between the Company and
Toys "R" Us, Inc.
SIGNATURE
---------
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.
PETRIE STORES CORPORATION
(registrant)
/S/ Peter A. Left
------------------------
June 14, 1994 BY Peter A. Left, Vice Chairman,
Chief Operating Officer,
Chief Financial Officer
and Secretary.
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------
To The Board of Directors
Petrie Stores Corporation
We have reviewed the accompanying consolidated balance sheet of
Petrie Stores Corporation and subsidiaries as of April 30, 1994 and the
related consolidated statements of operations and cash flows for the
three-month periods ended April 30, 1994 and May 1, 1993, and the
consolidated statements of additional paid-in capital and retained
earnings for the three months ended April 30, 1994. These financial
statements are the responsibility of the company's management.
We conducted our reviews in accordance with standards established
by the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in
scope than an audit conducted in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying financial statements for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as at January 29, 1994
(presented herein), and the related consolidated statements of earnings,
shareholders' equity, and cash flows for the year then ended (not presented
herein), and in our report, dated March 24, 1994, we expressed an
unqualified opinion on those consolidated financial statements.
David Berdon & Co.
Certified Public Accountants
New York, New York
June 8, 1994
