SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q
Quarterly Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended November 2, 1996
Commission file number 33-27126
PEEBLES INC.
Virginia 54-0332635
(State of Incorporation) (I.R.S. Employer Identification No.)
One Peebles Street
South Hill, Virginia 23970-5001 (804) 447-5200
(Address of principal executive offices) (Telephone Number)
Securities registered pursuant to Section 12 (b) of the Act:NONE
Securities registered pursuant to Section 12 (g) of the Act:NONE
Indicate by check (x) 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 November 2, 1996 1,000 shares of common stock of Peebles Inc. were
outstanding.
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
CONDENSED BALANCE SHEET
PEEBLES INC.
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
November 2, 1996 February 3, 1996 October 28, 1995
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 51 $ 193 $ 36
Accounts receivable, net 28,243 28,534 25,650
Merchandise inventories 63,055 42,684 51,282
Prepaid expenses 1,849 386 553
Refundable income taxes -- -- 671
Other 166 62 106
------- ------- -------
TOTAL CURRENT ASSETS 93,364 71,859 78,298
PROPERTY AND EQUIPMENT, net 36,658 32,248 30,443
BUILDINGS UNDER CAPITAL LEASES, net 936 1,060 1,088
OTHER ASSETS
Excess of cost over net assets
acquired, net 52,243 51,129 49,152
Deferred financing costs 3,007 3,659 3,869
Other 5,130 5,598 6,258
-------- ------- --------
60,380 60,386 59,279
-------- ------- --------
$ 191,338 $ 165,553 $ 169,108
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 14,370 $ 9,957 $ 11,028
Accrued compensation and other 3,281 3,955 2,481
expenses
Income taxes payable 734 855 2,194
Deferred income taxes 2,679 2,788 1,781
Current maturities of long-term debt 20,764 5,377 14,108
Other 401 532 202
-------- -------- --------
TOTAL CURRENT LIABILITIES 42,229 23,464 31,794
LONG-TERM DEBT 78,475 69,774 70,050
LONG-TERM CAPITAL LEASE OBLIGATIONS 1,447 1,627 1,713
DEFERRED INCOME TAXES 4,484 6,350 5,224
STOCKHOLDERS' EQUITY --
Common stock--par value $.10 per
share, authorized 5,000,000
shares, issued and outstanding
1,000, shares , respectively 1 1 1
Additional capital 59,307 59,307 59,307
Retained earnings: accumulated from
May 27, 1995 5,395 5,030 1,019
------- ------- -------
64,703 64,338 60,327
-------- --------- ---------
$191,338 $ 165,553 $ 169,108
========= ========= =========
</TABLE>
See notes to condensed financial statements
<PAGE>
CONDENSED STATEMENT OF OPERATIONS
PEEBLES INC.
(dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three- Three- Nine- Five- Four-
Month Month Month Month Month
Period Period Period Period Period
Ended Ended Ended Ended Ended
November 2, October 28, November 2, October 28, May 27,
1996 1995 1996 1995 1995
(Prior to 1995
Acquisition)
<S> <C> <C> <C> <C> <C>
NET SALES $ 47,540 $42,562 $ 127,961 $ 68,880 $ 49,163
COSTS AND
EXPENSES
Cost of sales 29,462 25,093 76,874 40,251 29,935
Selling, general and 14,340 12,530 38,865 20,197 14,639
administrative expenses
Stock option settlement -- -- -- -- 3,089
Depreciation and amortization 1,839 1,643 5,383 2,821 2,349
------- ------- -------- ------- ------
45,641 39,266 121,122 63,269 50,012
------- ------- -------- ------- -------
OPERATING INCOME (LOSS) 1,899 3,296 6,839 5,611 (849)
OTHER INCOME 52 92 197 171 77
INTEREST EXPENSE 2,275 2,454 6,427 4,084 1,414
------- ------- ------- ------- ------
INCOME (LOSS) BEFORE
INCOME TAXES (BENEFIT) (324) 934 609 1,698 (2,186)
------- ------- ------- ------- ------
INCOME TAXES (BENEFIT)
Federal, state and deferred (130) 374 244 679 (874)
------- ------- ------- ------- ------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (194) 560 365 1,019 (1,312)
EXTRAORDINARY ITEM-DEBT
REFINANCE -- -- -- -- (216)
------- ------ ------- ------ ------
NET INCOME (LOSS) $ (194) $ 560 $ 365 $1,019 $(1,528)
======= ====== ======= ====== =======
EARNINGS(LOSS) PER SHARE $ (194) $ 560 $ 365 $1,019 $ (.52)
======= ====== ======= ====== =======
Average common stock and
common stock equivalents
outstanding 1,000 1,000 1,000 1,000 2,942,785
======= ====== ======= ====== ========
</TABLE>
See notes to condensed financial statements
<PAGE>
CONDENSED STATEMENT OF CASH FLOWS
PEEBLES INC.
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine-Month Period Ended
November 2, 1996 October 28, 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (loss) $ 365 $ (509)
Adjustments to reconcile net income
(loss) to net cash used
in operating activities:
Depreciation 3,447 3,296
Amortization 2,626 2,299
Provision for doubtful accounts 683 522
Extraordinary loss -- 216
LIFO Reserve adjustment 122 530
Changes in operating assets and
liabilities net of effects
from acquisition adjustments:
Accounts receivable 2,811 2,640
Merchandise inventories (16,555) (10,514)
Accounts payable 4,413 2,306
Other assets and liabilities (2,176 (1,402)
------- -------
NET CASH USED IN OPERATING (4,264) (616)
ACTIVITIES
INVESTING ACTIVITIES
Acquisition of Peebles Inc. -- (90,642)
Acquisition of Carlisle Retailers, (11,549) --
Inc.
Purchase of property and equipment (7,857) (5,613)
Other (559) 36
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (19,965) (96,219)
FINANCING ACTIVITIES
Proceeds from revolving facilities 203,700 211,127
Reduction in revolving facilities and (189,826) (202,638)
long-term debt
Proceeds from revolving facilities- 10,213 --
Acquisition of Carlisle Retailers,
Inc.
Proceeds from 1995 Acquisition debt -- 76,390
Retirement of pre-1995 Acquisition debt -- (40,917)
Financing and acquisition fees, 1995 -- (6,807)
Acquisition
Proceeds from equity, 1995 Acquisition -- 59,308
------- -------
NET CASH PROVIDED BY FINANCING 24,087 96,463
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS (142) (372)
Cash and cash equivalents beginning of 193 408
period ------- -------
CASH AND CASH EQUIVALENTS END OF $ 51 $ 36
PERIOD ======= =======
See notes to condensed financial statements
</TABLE>
<PAGE>
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
PEEBLES INC.
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Common Stock
Par Additional Retained
Shares Value Capital Earnings
<S> <C> <C> <C> <C>
Balance January 28, 1995 2,942,690 $ 294 $64,390 $17,550
Net (loss) -- -- -- (1,528)
--------- ------ ------- -------
Balance May 27, 1995, prior to 2,942,690 294 64,390 16,022
1995 Acquisition
1995 Acquisition adjustments (2,941,690) (293) (5,083) (16,022)
--------- ----- ------- -------
Balance May 27, 1995 following 1,000 1 59,307 --
1995 Acquisition
Net Income -- -- -- 1,019
--------- ----- ------- -------
Balance October 28, 1995 1,000 1 59,307 1,019
Net Income -- -- -- 4,011
--------- ----- ------- -------
Balance February 3, 1996 1,000 1 59,307 5,030
Net Income -- 365
--------- ----- ------- -------
Balance November 2, 1996 1,000 $ 1 $59,307 $ 5,395
========= ===== ======= =======
See notes to condensed financial statements
</TABLE>
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
PEEBLES INC.
November 2, 1996
(dollars in thousands, except per share amounts)
NOTE A_BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with
instructions to Form 10-Q and Article 10 of Regulation S-X.
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 and recurring accruals)
considered necessary for a fair presentation have been included.
As a result of the 1995 Acquisition, the financial statements and
related footnote amounts for periods prior to the acquisition are
not comparable to the current period. In addition, the operating
results for the current fiscal periods are not necessarily
indicative of the results that may be expected for the fiscal
year ended February 1, 1997, due to the seasonal nature of the
business of Peebles. For further information, refer to the
financial statements and footnotes thereto included in Peebles'
annual report on Form 10-K for the fiscal year ended February 3,
1996.
NOTE B_ACQUISITION OF PEEBLES INC.
1995 Acquisition (the "1995 Acquisition"): On June 9, 1995, PHC
Retail Holding Company ("PHC Retail") acquired the entire equity
interest of Peebles Inc. ("Peebles" or the "Company") for
approximately $136 million, which included acquisition related
expenses of approximately $5.6 million and the refinancing of
existing debt. PHC Retail is an affiliate of Kelso & Company
("Kelso"), an investment firm located in New York, New York. PHC
Retail has no significant assets other than the shares of Peebles
common stock, $.10 par value (the "Common Stock") and had no
operations prior to the 1995 Acquisition.
The 1995 Acquisition has been accounted for using the purchase
method of accounting with an effective date of May 27, 1995, and
accordingly, a new accounting basis was begun. The 1995
Acquisition cost has been allocated to the assets and liabilities
of Peebles as follows:
Cash purchase price $135,558
Pre-acquisition debt refinanced (40,917)
Adjusted purchase price 94,641
Tangible net assets at historical cost (63,840)
Incremental acquisition debt 35,474
Purchase price to be allocated 66,275
Purchase price allocations:
Merchandise inventories $7,436
Buildings 1,133
Land 1,411
Beneficial leaseholds 3,232
Pension asset 533
------
13,745
--------
Excess of cost over net assets acquired $ 52,530
The excess of cost over net assets acquired is being amortized on
a straight-line basis over 25 years beginning May 27, 1995.
Beneficial leaseholds are amortized on a straight-line basis over
the composite useful lives of the related leases. Buildings are
amortized on a straight-line basis over the their estimated
useful lives.
As a result of the 1995 Acquisition, the Company recorded an
extraordinary loss, net of tax, of $216 related to the write-off
of financing costs capitalized in periods prior to the 1995
Acquisition.
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
PEEBLES INC.
NOTE C_ACQUISITION OF CARLISLE RETAILERS, INC.
On May 20, 1996, a merger (the "CRI Merger") was consummated
whereby Carlisle Retailers, Inc. ("Carlisle"), an Ohio
corporation, became a wholly owned subsidiary of Peebles Inc.
The CRI Merger provides Peebles with five store locations in
northeastern Ohio, the Company's first Ohio stores, and two store
locations in northwestern Pennsylvania. The $11,549 purchase
price included $6,311 to common shareholders of Carlisle, $3,458
to a financial services company for the majority of the
outstanding Carlisle proprietary credit card accounts receivable
portfolio, and $1,780 in acquisition expenses. The acquisition
was funded primarily by proceeds from the Senior Revolving
Facility.
The CRI Merger has been accounted for using the purchase method
of accounting. The allocation of the purchase price is as
follows:
Purchase price $11,549
Tangible net assets acquired:
Accounts receivable, net $3,330
Merchandise inventories, net 3,698
Fixed assets, net 244
Other assets 2,367
Operating liabilities (849)
------
Total tangible net assets 8,790
-------
Excess of cost over net assets acquired $2,759
The excess of cost over net assets acquired is being amortized
over a twenty-five year period beginning May 20, 1996.
NOTE D_ACCOUNTS RECEIVABLE
Accounts receivable are shown net of $1,087, $960 and $930
representing the allowance for uncollectible accounts at November
2, 1996, February 3, 1996 and October 28, 1995, respectively. As
a service to its customers, the Company offers credit through the
use of its own charge card, certain major credit cards and a
layaway plan. The Peebles' customer typically resides in the
local community immediately surrounding the store location.
Peebles stores serve these local customers in Virginia, Maryland,
North Carolina, South Carolina, Tennessee, Kentucky, Delaware,
New Jersey, Pennsylvania, New York, Ohio and Alabama. The
Company does not require collateral from its customers.
NOTE E_MERCHANDISE INVENTORIES
Merchandise inventories are accounted for by the retail inventory
method applied on a last in, first out ("LIFO") basis. The 1995
Acquisition was accounted for using the purchase method of
accounting with an effective date of May 27, 1995. Consistent
with the purchase method of accounting, the LIFO reserve was
eliminated, the recorded value of merchandise inventories was
increased to fair value (the "Fair Value Adjustment") and a new
LIFO base year was established at May 27, 1995. Merchandise
inventories consisted of the following:
November 2, February 3, October 28,
1996 1996 1995
Merchandise inventories at
lower of
cost (FIFO) or market $ 56,133 $ 35,662 $ 43,846
Fair Value Adjustment 7,436 7,436 7,436
LIFO reserve 327 449 --
------- -------- --------
Merchandise inventories at 63,896 43,547 51,282
LIFO cost
Market reserve (841) (863) --
------- ------- --------
Merchandise inventories at
lower of cost or market $ 63,055 $ 42,684 $ 51,282
======== ======== ========
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
PEEBLES INC.
NOTE F _ LONG-TERM DEBT
Long-term debt consisted of the following
November 2, February 3, October 28,
1996 1996 1995
1995 Senior Revolving $ 49,000 $ 25,000 $ 33,173
Facility
Senior Term Note A 18,150 19,250 19,500
Senior Term Note B 27,550 27,775 27,850
Swingline Facility 4,539 3,126 3,635
-------- -------- --------
99,239 75,151 84,158
Less current maturities 20,764 5,377 14,108
-------- -------- --------
$ 78,475 $ 69,774 $ 70,050
======== ======== ========
On June 9, 1995, the Company entered into a $120 million credit
facility (the "1995 Credit Agreement") to i) refinance the
existing debt under the pre-acquisition Credit Agreement, ii)
provide the additional funding necessary to complete the 1995
Acquisition, and iii) provide working capital and funds for
capital expenditures. The 1995 Credit Agreement is secured by a
first priority security interest in substantially all the
personal property and certain real property of Peebles. The 1995
Credit Agreement provides a Senior Term Facility ("Senior Term
Note A" and "Senior Term Note B"), a Senior Revolving Facility
(the "1995 Revolving Facility"), and a "Swingline Facility".
Restrictive covenants prohibit the payment of cash dividends in
any fiscal year.
The amount available under the 1995 Revolving Facility is
determined by a defined asset based formula with maximum
borrowings limited to $65 million less outstanding amounts under
letters of credit. At November 2, 1996 the Company had
approximately $10,600 available to borrow under the 1995
Revolving Facility. The Company pays a fee of 1/2 of 1% per
annum on any unused portion of the 1995 Revolving Facility. The
1995 Revolving Facility has no specific paydown provisions. On
May 20, 1996, the Company drew $10,213 to consummate the CRI
Merger. Based on the anticipated operations of the Company in
the succeeding twelve-month period, $34,600, $24,600 and $23,000
were considered long-term obligations at November 2, 1996,
February 3, 1996 and October 28, 1995, respectively.
The 1995 Credit Agreement provided for optional conversion to
LIBOR-based interest rates upon the occurrence of certain pre-
defined events in addition to prime-based rates. In November
,1995, the pre-defined conditions were satisfied. At February 3,
1996, the entire outstanding balance of the Senior Term Facility
and $24,000 of the 1995 Senior Revolving Facility were converted
to the LIBOR-based interest rates. At November 2, 1996 the Senior
Term Facility and $45,000 of the Senior Revolving Facility bore
interest at LIBOR-based rates which were approximately 200 basis
points less than the prime-based rates available in the 1995
Credit Agreement.
NOTE G_LEASES
The Company leases substantially all of its store locations under
capital and operating leases with initial terms ranging from 1 to
25 years and renewal options ranging from 1 to 5 years expiring
at various dates through 2033. The Company has signed or
obtained noncancelable operating leases for fourteen new store
locations opening in the fiscal year ended February 1, 1997.
Included are i) five stores in Ohio and two stores in
Pennsylvania obtained in the CRI Merger; ii) two stores in
Alabama and one store in Tennessee purchased from the Belk
Companies and opened September 12, 1996; and iii) four new
Peebles stores in North Carolina, New York, Alabama and
Tennessee, two of which opened August 22, 1996 and two of which
opened November 14, 1996. The annual aggregate base rent for
these locations is approximately $1.22 million with initial lease
terms ranging from 1 to 21 years.
NOTE H_INCOME TAXES
Differences between the effective rate of income taxes and the
statutory rate arise principally from the state income taxes and
non-deductible amortization related to certain purchase
accounting adjustments.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(dollars in thousands, except per share amounts)
The following management's discussion and analysis provides
information with respect to the results of operations for the
three-month period ("Fiscal Quarter") and nine-month period ended
November 2, 1996 in comparison with the three-month period and
nine-month period ended October 28, 1995. The 1995 Acquisition
has been accounted for using the purchase method of accounting.
Accordingly, a new basis of accounting was begun on May 27, 1995.
As a result, financial statements for periods prior to the 1995
Acquisition are not comparable to periods subsequent thereto.
The nine-month period ended October 28, 1995 consists of the four-
month period ended May 27, 1995, prior to the 1995 Acquisition,
and the five-month period ended October 28, 1995, subsequent to
the 1995 Acquisition. As a result, certain components of
operations have been significantly affected by the acquisition
transactions, purchase accounting adjustments or a combination
thereof.
Net sales for the three-month period ended November 2, 1996
totaled $47,540, an 11.7% increase over the $42,562 for the three-
month period ended October 28, 1995. For the nine-month periods
ended November 2, 1996 and October 28, 1995, net sales were
$127,961 and $118,043, respectively, an increase of 8.4%. In the
twelve-month period subsequent to October 28, 1995, the Company
opened fourteen new store locations, including the seven Carlisle
store locations acquired in the CRI Merger, effective May 20,
1996. These new stores accounted entirely for the increases in
net sales. Net sales at comparable stores were $39,903 in the
current Fiscal Quarter, down $754 or 1.7% in comparison to the
prior year Fiscal Quarter, where comparable store sales were
$40,607. Comparable store sales in the nine-month periods ended
November 2, 1996 and October 28, 1995 totaled $112,670 and
$114,388, respectively, a decrease of $1,718, or 1.5%. In both
the three-month and nine-month periods of the current fiscal
year, comparable store sales have been affected by weaker
consumer demand for apparel and increased competition for the
customer dollar. In addition, Hurricane Bertha in July and
Hurricane Fran in September closed or reduced hours at a number
of the Company's store locations, resulting directly in
comparable store sales decreases of aprroximately $250 and $430,
respectively. The longer term effects of these natural disasters
and unseasonable weather contributed to aggregate comparable
store sales decreases in July and September of $1,594, in
comparison to the same months in the prior year.
Cost of sales as a percentage of net sales for the three-month
periods ended November 2, 1996 and October 28, 1995 were 62.0%
and 59.0%, respectively. For the comparable nine-month periods,
the cost of sales as a percentage of net sales was 60.1% and
59.5%, respectively. In general, new stores, including those
acquired in the CRI Merger, showed a higher cost of sales
percentage, resulting primarily from opening promotions and
adjustments to inventory levels in response to actual sales
versus planned. At the fourteen new store locations opened
subsequent to October 28, 1995, cost of sales as a percentage of
net sales was 63.3% during the nine-month period ended November
2, 1996. Cost of sales were adversely impacted in the third
Fiscal Quarter by markdowns necessary to clear summer inventory
resulting from the slower than normal July sales. In addition,
the full assortment of Fall merchandise reached the store selling
floor later than planned in the current year relative to the
prior year due to the distribution center expansion, which
prevented merchandise handling equipment from operating at full
capacity
Selling, general and administrative expenses ("SG&A"), including
depreciation and amortization, was 34.1% and 34.6% as a
percentage of net sales for the three-month and nine-month
periods ended November 2, 1996. In the prior year comparable
three-month and nine-month periods ended October 28, 1995, SG&A
was 33.3% and 33.9%, respectively, as a percentage of net sales.
This increase is primarily attributed to the additional expenses
incurred in the opening of fourteen new store locations,
including the seven stores acquired in the CRI Merger. New stores
typically have higher occupancy, payroll, and advertising
expenses as a percentage of net sales as compared to mature
stores. The Company has been successful in controlling expenses
during growth periods, and expects to realize efficiencies
through economies of scale in succeeding Fiscal Quarters. During
the nine-month period ended October 28, 1995, approximately $3.1
million was paid to settle the 1993 Stock Option Plan as a pre-
requisite to closing the 1995 Acquisition.
Interest expense for the Fiscal Quarters ended November 2, 1996
and October 28, 1995 was $2,275 and $2,454, respectively, and
$6,427 and $5,498, respectively for the nine-month periods then
ended. The increase in comparing the nine-month periods results
primarily from the increased debt assumed in connection with both
the 1995 Acquisition and the CRI Merger. The 1995 Credit
Agreement increased outstanding borrowings at the date of the
1995 Acquisition by approximately $35.5 million. The Company
increased the outstanding balance on the Senior Revolving
Facility by approximately $10.2 million to consummate the CRI
Merger. Interest expense decreased in the comparable Fiscal
Quarters as the Company exercised certain optional conversion
provisions under the 1995 Credit Agreement to LIBOR based rates
on the Term Facility and a significant portion of the Revolving
Facility. During the current Fiscal Quarter, LIBOR rates were
approximately 200 basis points less than the prime rates in the
comparable prior year Fiscal Quarter.
For the three-month periods ended November 2, 1996 and October
28, 1995, the Company had an income tax benefit of $130 and
income tax expense of $374, respectively. For the nine-month
periods then ended, the Company had income tax expense of $244
and an income tax benefit of $195. The effective income tax and
benefit rates for the respective periods differ from the
statutory rate primarily due to state income taxes and
nondeductible amortization related to certain purchase accounting
adjustments.
The Company recorded an extraordinary loss, net of tax, of $216
at May 27, 1995 related to the write-off of unamortized financing
costs related to the pre-1995 Acquisition Credit Agreement.
As a result of the changes discussed above, the Company had a net
loss of $194 and net income of $365 for the three and nine-month
periods ended November 2, 1996, respectively. In the prior year
comparable periods ended October 28, 1995, the Company showed net
income of $560 and a net loss of $509, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for capital
expenditures in connection with both the Company's new store
expansion and remodeling program and for working capital needs.
The Company's primary sources of funds are cash flow from
continuing operations, borrowings under the Credit Agreement and
trade accounts payable. The Company's inventory levels typically
build throughout the fall, peaking during the Christmas selling
season, while accounts receivable peak during December and
decrease during the first quarter. Capital expenditures
typically occur evenly throughout the first three quarters of
each year.
For the nine-month periods ended November 2, 1996 and October 28,
1996, operating activities used cash of $4,264 and $616,
respectively. In the prior year nine-month period, cash was
used to pay $3,089 in settlement of the 1993 Stock Option Plan.
In both the current year and prior year nine-month periods,
operating cash was used to increase merchandise inventory to
normal seasonal levels. In the current nine-month period,
however, the slowdown in the merchandise inventory supply chain
from vendor to store selling floor due to the construction at the
distribution center built significant inventory levels at the
distribution center which could not be realized in net sales. In
addition, cash from operations was used to build inventory at two
new store locations which opened immediately after the end of the
third Fiscal Quarter. The Company had working capital of
$51,135 and $46,504 at November 2, 1996 and October 28, 1995,
respectively. The increase is due primarily to merchandise
inventory and accounts receivable acquired in the CRI Merger and
the additional build-up of merchandise inventory described above.
Net cash provided by operations was adversely affected by the
increased interest expense resulting from incremental debt
assumed to facilitate both the 1995 Acquisition and the CRI
Merger.
Net cash used in investing activities, exclusive of the CRI
Merger and 1995 Acquisition, was $8,416 and $5,577 for the nine-
month periods ended November 2, 1996 and October 28, 1995,
respectively. This cash was used primarily for capital
expenditures. The increase in the current year is primarily
attributable to the expansion of the distribution center in South
Hill, new cash registers for the stores acquired in the CRI
Merger, and the opening of five new Peebles stores during the
nine-month period and two new stores immediately following the
close of the third Fiscal Quarter. The Company expects capital
expenditures to total approximately $11.1 million in fiscal 1996,
with some $2.6 million allocated to the distribution center.
The CRI Merger provided the Company with five store locations in
northeastern Ohio and two stores in northwestern Pennsylvania.
The Ohio locations are the Company's first stores in Ohio. These
stores began operation as Carlisle/Peebles on May 20, 1996 and
increased the gross square footage of the Company by
approximately 180,000 square feet. In June 1996, the Company
signed a purchase agreement with the Belk Companies ("Belk") to
allow Peebles to purchase two stores in Alabama and one store in
Tennessee from Belk, and sell one store in Virginia to Belk. The
Company paid $1.5 million for the acquired inventory and fixtures
and received $.4 million for the fixtures remaining in the store
sold. The agreement was effective September 9, 1996, and the
stores opened as Peebles stores on September 13, 1996. These
stores are the Company's first locations in Alabama.
During the third and early fourth fiscal quarters of the current
year, the Company opened new Peebles stores in Edenton, North
Carolina (17,000 gross square feet); 2) Rochester, New York
(25,000); 3) Albertville, Alabama (25,000); and 4). Winchester,
Tennessee (21,000). Based on historical experience, the Company
estimates that the cost of opening a new store will include
capital expenditures of approximately $425 for leasehold
improvements and fixtures and approximately $425 for initial
inventory, approximately one-third of which is normally financed
through vendor credit. Accounts receivable for new stores
typically build to 15% of net sales or approximately $300 within
24 months of the store opening.
The Company finances its operations, capital expenditures, and
debt service payments with funds available under the Senior
Revolving Facility. The maximum amount available under the
Senior Revolving Facility is $65 million less amounts outstanding
under letters of credit. The actual amount available is
determined by an asset based formula, adjusted for seasonal
working capital requirements. The Company believes the cash flow
generated from operating activities together with funds available
under the New Revolving Facility will be sufficient to fund the
investing activities and the required payments under the New
Credit Agreement.
<PAGE>
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27. Financial Data Schedule.
b. Reports on Form 8-K
None
<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.
PEEBLES INC.
Date: December 13, 1996 By /s/ Michael F. Moorman
----------------------
Michael F. Moorman
President and Chief Executive
Officer (Principal Executive
Officer)
By /s/ E. Randolph Lail
--------------------------
E. Randolph Lail
Chief Financial Officer,
Senior Vice President-
Finance, Treasurer and
Secretary (Principal Financial
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> FEB-01-1997 FEB-01-1997
<PERIOD-END> NOV-02-1996 NOV-02-1996
<CASH> 51 51
<SECURITIES> 0 0
<RECEIVABLES> 29,330 29,330
<ALLOWANCES> 1,087 1,087
<INVENTORY> 63,055 63,055
<CURRENT-ASSETS> 93,364 93,364
<PP&E> 59,267 59,267
<DEPRECIATION> 22,609 22,609
<TOTAL-ASSETS> 191,338 191,338
<CURRENT-LIABILITIES> 42,229 42,229
<BONDS> 84,406 84,406
<COMMON> 1 1
0 0
0 0
<OTHER-SE> 64,702 64,702
<TOTAL-LIABILITY-AND-EQUITY> 191,338 191,338
<SALES> 47,540 127,961
<TOTAL-REVENUES> 47,540 127,961
<CGS> 29,462 76,874
<TOTAL-COSTS> 45,641 121,122
<OTHER-EXPENSES> (52) (197)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,275 6,427
<INCOME-PRETAX> (324) 609
<INCOME-TAX> (130) 244
<INCOME-CONTINUING> (194) 365
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (194) 365
<EPS-PRIMARY> (194) 365
<EPS-DILUTED> (194) 365
</TABLE>
