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 August 2, 1997
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)
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 August 2, 1997, 1,000 shares of Common Stock of Peebles Inc. were
outstanding.
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
PEEBLES INC. & SUBSIDIARY
(dollars in thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C>
August 2, 1997 February 1, 1997 August 3, 1996
--------------- ---------------- ---------------
ASSETS (Unaudited) (Unaudited)
CURRENT ASSETS
Cash $ 59 $ 228 $ 48
Accounts receivable, net 26,579 32,062 27,246
Merchandise inventories 56,057 54,431 49,793
Prepaid expenses 1,049 1,036 1,002
Other 205 69 466
-------- -------- --------
TOTAL CURRENT ASSETS 83,949 87,826 78,555
PROPERTY AND EQUIPMENT, net 36,562 33,460 36,544
OTHER ASSETS
Excess of cost over net
assets acquired, net 35,274 36,069 53,135
Deferred financing cost 2,383 2,808 3,219
Other 3,180 3,405 6,045
-------- -------- --------
40,837 42,282 62,399
-------- -------- --------
$ 161,348 $ 163,568 $ 177,498
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 11,188 $ 10,737 $ 9,614
Accrued compensation
and other expenses 4,286 5,000 3,491
Income taxes payable 431 675 1,037
Deferred income taxes 2,934 2,934 2,788
Current maturities
of long-term debt 8,965 9,665 8,383
Other 363 602 455
-------- -------- --------
TOTAL CURRENT LIABILITIES 28,167 29,613 25,768
LONG-TERM DEBT 78,565 79,950 78,975
LONG-TERM CAPITAL LEASE
OBLIGATIONS 1,188 1,347 1,507
DEFERRED INCOME TAXES 3,235 3,235 6,350
STOCKHOLDERS' EQUITY
Preferred stock - no par
value, authorized
1,000,000 shares, none
issued and outstanding -- -- --
Common stock-- par value
$.10 per share, authorized
5,000,000 shares, 1,000
issued and outstanding. 1 1 1
Additional capital 59,307 59,307 59,307
Retained earnings
(deficit): accumulated
from May 27, 1995; (9,115) (9,885) 5,590
-------- -------- -------
50,193 49,423 64,898
-------- -------- -------
$ 161,348 $ 163,568 $ 177,498
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF INCOME
PEEBLES INC. & SUBSIDIARY
(dollars in thousands, except per share amounts)
(Unaudited)
Three-Month Period Ended Six-Month Period Ended
------------------------ ------------------------
<TABLE>
<S> <C> <C> <C> <C>
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
---------- --------- ---------- ----------
NET SALES $ 49,808 $ 42,366 $ 94,958 $ 80,421
COSTS AND EXPENSES
Cost of sales 29,515 24,805 57,777 47,412
Selling, general and
administrative expenses 15,183 12,984 28,320 24,525
Depreciation and
amortization 1,620 1,820 3,179 3,544
--------- -------- -------- --------
46,318 39,609 89,276 75,481
--------- -------- -------- --------
OPERATING INCOME 3,490 2,757 5,682 4,940
OTHER INCOME 25 91 57 145
INTEREST EXPENSE 2,313 2,272 4,456 4,152
------- ------ -------- --------
INCOME BEFORE
INCOME TAXES 1,202 576 1,283 933
INCOME TAXES
Federal, state
and deferred 481 230 513 373
-------- -------- ------- --------
NET INCOME $ 721 $ 346 $ 770 $ 560
======== ======== ======== ========
EARNINGS PER SHARE $ 721 $ 346 $ 770 $ 560
======== ======== ======== ========
Average common stock
and common stock
equivalents outstanding 1,000 1,000 1,000 1,000
======== ======== ======== ========
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
PEEBLES INC. & SUBSIDIARY
(dollars in thousands)
(Unaudited)
<TABLE>
Six-Month Period Ended
<S> <C> <C>
August 2, 1997 August 3, 1996
OPERATING ACTIVITIES
Net Income $ 770 $ 560
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation 2,241 2,265
Amortization 1,400 1,739
Provision for doubtful
accounts 756 509
LIFO Reserve adjustment 479 50
Changes in operating assets
and liabilities:
Accounts receivable 4,727 3,915
Merchandise inventories (2,105) (3,471)
Accounts payable 451 (343)
Other assets and
liabilities (1,347) (762)
------- ------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 7,372 4,462
INVESTING ACTIVITIES
Acquisition of Carlisle
Retailers, Inc. -- (9,769)
Acquisition Fees -
Carlisle Retailers, Inc. -- (1,780)
Purchase of property and
equipment (5,436) (5,342)
Other (20) 77
------- ------
NET CASH USED IN
INVESTING ACTIVITIES (5,456) (16,814)
FINANCING ACTIVITIES
Proceeds from revolving line
of credit and long-term debt 126,798 123,913
Reduction in revolving line
of credit and long-term debt (128,883) (121,919)
Proceeds from revolving
facilities-Acquisition of
Carlisle Retailers, Inc. -- 10,213
-------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (2,085) 12,207
-------- --------
DECREASE IN CASH AND
CASH EQUIVALENTS (169) (145)
Cash and cash equivalents
beginning of period 228 193
-------- -------
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 59 $ 48
======== ========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
PEEBLES INC. & SUBSIDIARY
(dollars in thousands, except per share amounts)
(Unaudited)
Common Stock
------------
Par Additional Retained
Shares Value Capital Earnings (Deficit)
-------- ----- ---------- ------------------
<TABLE>
<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 1995 Acquisition 2,942,690 294 64,390 16,022
1995 Acquisition
adjustments (2,941,690) (293) (5,083) (16,022)
---------- ----- --------- --------
Balance May 27, 1995,
following 1995 Acquisition 1,000 1 59,307 --
Net income -- -- -- 5,030
---------- ----- -------- --------
Balance February 3, 1996 1,000 1 59,307 5,030
Net income -- -- -- 560
---------- ----- -------- --------
Balance August 3, 1996 1,000 1 59,307 5,590
Net (loss) -- -- -- (15,475)
---------- ----- -------- --------
Balance February 1, 1997 1,000 1 59,307 (9,885)
Net income -- -- -- 770
---------- ----- -------- --------
Balance August 2, 1997 1,000 $ 1 $ 59,307 $ (9,115)
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PEEBLES INC. & SUBSIDIARY
August 2, 1997
(dollars in thousands, except per share amounts)
NOTE A.ORGANIZATION AND BASIS OF PRESENTATION
The 1995 Acquisition: Peebles Inc. was acquired by PHC Retail Holding Company
("PHC Retail") for approximately $136 million, which included acquisition
related expenses of approximately $5.6 million and the refinancing of existing
debt (the "1995 Acquisition"). PHC Retail, a closely held company, has no
significant assets other than the entire equity interest of Peebles Inc.
common stock, $.10 par value (the "Common Stock") and had no operations prior
to the 1995 Acquisition. The 1995 Acquisition was accounted for using the
purchase method of accounting with an effective date of May 27, 1995, and
accordingly, a new accounting basis was begun.
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.
together the "Company"). The $11,549 cash 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 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 January 31, 1998, due to the
seasonal nature of the business of Peebles. For further information, refer to
the financial statements and footnotes thereto included in the Company's
annual report on Form 10-K for the fiscal year ended February 1, 1997.
NOTE B. ACCOUNTS RECEIVABLE
Accounts receivable are shown net of $1,349, $1,224 and $1,087 representing the
allowance for uncollectible accounts at August 2, 1997, February 1, 1997 and
August 3, 1996, 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 usually 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, Alabama, Delaware, New Jersey, Ohio, Pennsylvania and
New York. The Company does not require collateral from its customers.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PEEBLES INC. & SUBSIDIARY
August 2, 1997
NOTE C. MERCHANDISE INVENTORIES
Consistent with the purchase method of accounting used in the 1995 Acquisition,
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. The market reserve adjusts
inventory to lower of LIFO cost and market.
Merchandise inventories consisted of the following:
<TABLE>
August 2, 1997 February 1, 1997 August 3, 1996
-------------- ---------------- --------------
<S> <C> <C> <C>
Merchandise inventories
at FIFO cost $ 49,553 $ 47,448 $ 43,121
Fair Value Adjustment 7,436 7,436 7,436
LIFO reserve (789) 366 138
-------- --------- ---------
Merchandise inventories
at LIFO cost 56,200 55,250 50,695
Market reserve (143) (819) (902)
-------- --------- ---------
Merchandise inventories
at lower of cost or
market $ 56,057 $ 54,431 $ 49,793
</TABLE>
NOTE D. ASSET REVALUATION
In 1996, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". The Company periodically reviews the
carrying value of long-lived assets to determine if impairment has occurred.
The primary indicators of impairment are, but not limited to, significant
changes in competition or demographics, recent historical operating
profitability, projected profitability and the related cash flows of each.
Projections are based on management's best estimates of future performance.
In the fourth quarter of fiscal 1996, on an individual store basis, increased
competition and shifting demographics in certain markets, together with
historical and projected store operations, indicated that the aggregate
estimated undiscounted cash flows to be generated would be less than the
current carrying values of certain store assets, related intangibles and
allocated goodwill. As a result, fair value was calculated using a
multiple of discounted projected cash flows and carrying values were reduced
as follows:
Store fixtures and equipment $ 4,034
Related beneficial leaseholds 1,528
Allocated goodwill 15,220
--------
Total asset revaluation $ 20,782
A fair value estimate is based on the best information available, including
prices for similar assets or the results of valuation techniques such as
discounting estimated future cash flows as if the decision to continue to
use the impaired asset was a new investment decision.
The Company continues to calculate the fair value of its assets and does not
expect a future material effect on the Company's consolidated financial position
or operating results from the application of SFAS 121.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PEEBLES INC. & SUBSIDIARY
August 2, 1997
NOTE E. LONG-TERM DEBT
Long -term debt consisted of the following:
August 2, 1997 February 1, 1997 August 3, 1996
-------------- ---------------- --------------
Senior Revolving Facility $ 31,000 $ 43,000 $ 38,000
Senior Term Note A 16,625 17,725 18,575
Senior Term Note B 37,298 27,475 27,625
Swingline Facility 2,607 1,415 3,158
--------- --------- ---------
87,530 89,615 87,358
Less current maturities 8,965 9,665 8,383
--------- --------- ---------
$ 78,565 $ 79,950 $ 78,975
The Company has a $120 million credit facility (the "1995 Credit Agreement")
which provides a Senior Term Facility, a Senior Revolving Facility, and a
"Swingline Facility". The 1995 Credit Agreement is secured by a first
priority security interest in substantially all the personal property and
certain real property of Peebles. Restrictive covenants prohibit the payment of
cash dividends in any fiscal
year.
The Senior Term Facility includes two notes, Senior Term Note A and Senior Term
Note B, with original principal balances of $20 million and $30 million,
respectively. In conjunction with an amendment of the 1995 Credit Agreement
on July 30, 1997, the Company transferred $10 million from the Senior
Revolving Facility to Senior Term Note B. Senior Term Note A and Senior Term
Note B each require quarterly payments, coinciding with the Company's fiscal
quarters, of principal (increasing annually from the current $425 and $102
per quarter, respectively) and interest in arrears through maturity. Senior
Term Note A and Senior Term Note B mature on June 9, 2000 and 2002,
respectively. Senior Term Note A and Senior Term Note B bear interest at
LIBOR plus 2.75% and LIBOR plus 3.25%, respectively.
The amount available under the Senior Revolving Facility is determined by a
defined asset based formula with maximum borrowings limited to $65 million
less outstanding amounts under letters of credit. The Company pays a fee of
1/2 of 1% per annum on any unused portion of the Senior Revolving Facility.
The Senior Revolving Facility matures on June 9, 2000 and has no
specific paydown provisions. On May 20, 1996, the Company drew approximately
$10,200 to consummate the CRI Merger. Based on the anticipated operations of
the Company in the succeeding twelve-month period, $27,500, $37,500 and $34,600
were considered long-term obligations at August 2, 1997, February 1, 1997 and
August 3, 1996, respectively. The Senior Revolving Facility bears interest at
LIBOR plus 2.75%.
Loans under the Swingline facility are drawn and repaid daily based on the
operating activity of the Company. Aggregate amounts outstanding under the
Swingline Facility cannot exceed $5 million. Excess borrowings or
funding outside these amounts revert to the 1995 Senior Revolving Facility.
The Swingline Facility currently bears interest at prime plus 1-1/2% and has no
LIBOR conversion option.
NOTE F. 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 10 years expiring at various dates through
2033. The Company has signed or obtained noncancelable operating leases for
eight new store locations opening in the fiscal year ended January 31, 1998.
Included are Milford, Delaware (32,000 square feet), Altavista, Virginia
(29,500 square feet), Kennett Square, Pennsylvania (25,000 square feet),
Gardendale, Alabama (21,400 square feet), Paris, Tennessee (21,200 square
feet), Fayetteville, Tennessee (29,000 square feet), New Castle, Pennsylvania
(25,000 square feet), and Bedford, Virginia (25,000 square feet). The average
annual base rent is $97 for each location with initial terms ranging from 10 to
20 years and renewal options ranging from 3 to 5 years.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PEEBLES INC. & SUBSIDIARY
August 2, 1997
NOTE G. 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 (or "Fiscal
Quarter") and six-month period ended August 2, 1997 in comparison with the
Fiscal Quarter and six-month period ended August 3, 1996. With the consummation
of the CRI Merger on May 20, 1996, Carlisle Retailers Inc. became a wholly owned
subsidiary of Peebles Inc. These stores are included in the results of
consolidated operations beginning May 20, 1996.
Consolidated net sales and results of consolidated operations, expressed as
percentage of net sales are presented below for the three-month and six-month
periods ended August 2, 1997 and August 3, 1996.
<TABLE>
Three-Month Period Ended Six-Month Period Ended
------------------------ ----------------------
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net sales $ 49,808 $ 42,366 $ 94,958 $ 80,421
% increase 17.6% 8.7% 18.1% 6.5%
Comparable stores % increase
(decrease) in sales: 8.1% (1.9%) 6.5% (1.4%)
Operations as a Percentage
of Net Sales:
Cost of sales (FIFO) 58.5% 58.4% 60.3% 58.9%
LIFO adjustment .8 .2 .5 .1
------- ------ ------ ------
Cost of sales (LIFO) 59.3 58.6 60.8 59.0
Selling, general &
administrative expenses 30.4 30.6 29.8 30.5
Depreciation and amortization 3.3 4.3 3.4 4.4
------- ------ ----- -----
Operating Income 7.0 6.5 6.0 6.1
Interest Expense 4.6 5.4 4.7 5.1
Other income .1 .2 - .2
Provision for income taxes 1.0 .5 .5 .5
-------- ------ ---- ----
Net Income 1.5% .8% .8% .7%
</TABLE>
Net sales for the three-month period ended August 2, 1997 totaled $49,808, a
17.6% increase over net sales of $42,366 for the comparable three-month
period ended August 3, 1996. Net sales at comparable stores were up 8.1% in
comparison to the prior year Fiscal Quarter, contributing $3,049 to the total
$7,442 net sales increase. The remaining increase in net sales for the Fiscal
Quarter, $4,393, was provided by a net 8 store locations operating the entire
Fiscal Quarter ended August 2, 1997 which were not in operation in the
comparable prior year Fiscal Quarter. Comparable store sales increased in
June as a relatively mild, wet spring transitioned into a dry, hot summer in
most of the Company's regions. In addition, a greater percentage of
fall/winter merchandise was cleared earlier in the current year than in the
prior, and together with earlier delivery of spring/summer merchandise gave
the Company the opportunity to better meet the increased demand when the weather
changed. For the six-month periods ended August 2, 1997 and August 3, 1996,
net sales were $94,958 and $80,421, respectively, an increase of 18.1%. In
the current year six-month period, comparable sales were $80,175, up $4,862 or
6.5% in comparison to the prior year six-month period ended August 3, 1996.
The remaining increase of $9,675 was due to the inclusion of the Carlisle stores
for the entire six-month period and the opening of 10 new store locations
while closing 3 marginally profitable stores in the twelve month period
subsequent to August 3, 1996. One store closed in the last week of the
current Fiscal Quarter.
<PAGE>
For the second Fiscal Quarter, cost of sales, measured on a FIFO basis,
was consistent with the prior year at 58.5%, versus 58.4% in the prior year.
Cost of sales was controlled during a Fiscal Quarter of significant sales
growth and new store growth due to the management of inventory levels and the
Company's pricing strategy. In the first Fiscal Quarter of the current year,
the Company liquidated a greater percentage of fall/winter seasonal
merchandise than in the prior year first Fiscal Quarter, and as a result the
FIFO cost of sales percentage for the six month period ended August 2, 1997
was 60.3%, up from 58.9% for the comparable prior year period. This earlier
liquidation of seasonal merchandise allowed for a less promotional clearance
transition to the summer merchandise and planned inventory levels, the benefits
of which offset the opening of 8 net new stores since August 3, 1996, 3 of
which opened as recently as the last 2 weeks of the current year first Fiscal
Quarter. Management expects cost of sales to remain under control during the
transition to Fall merchandise as robust sales and greater management of
merchandise mix has inventory levels in line with plans.
Benign inflation as measured through the Bureau of Labor's Department Store
Inventory Price Index has minimized LIFO reserve requirements since the
Company's re-establishment of LIFO base year in June 1995. In the current
year second Fiscal Quarter, however, indications of rising costs coupled with
the projected increase in inventory levels resulted in a greater accrual
adjusting FIFO to LIFO than in prior periods.
Selling, general and administrative expenses, exclusive of depreciation and
amortization, improved to 30.4% of net sales for the Fiscal Quarter ended August
2, 1997, from the 30.6% for the comparable prior year period. For the
comparable six-month period, selling, general and administrative expenses
improved to 29.8% of net sales from 30.5% in the prior year comparable
period. Reductions came from the Company's ability to successfully leverage
its selling, general and administrative expenses as the economies of scale are
realized in the central office and distribution facilities. Offsetting these
reductions in selling, general and administrative expenses, are the new
stores higher occupancy, payroll, and advertising expenses as a percentage of
net sales as compared to mature stores. The Company has been successful in
controlling these expenses during growth periods, and expects to realize further
efficiencies through economies of scale in succeeding Fiscal Quarters.
Depreciation and amortization was 3.3% and 3.4% as a percentage of net sales for
the Fiscal Quarter and six-month period ended August 2, 1997, respectively.
In the prior year comparable three-month and six-month periods ended August 3
, 1996 depreciation and amortization was 4.3% and 4.4% of net sales,
respectively. This decrease is attributable primarily to the impact of lower
amortization of goodwill due to an asset revaluation in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" in the fourth quarter of 1996.
Interest expense for the Fiscal Quarters ended August 2, 1997 and August 3, 1996
was $2,313 and $2,272, respectively and $4,456 and $4,152, respectively for
the six-month periods then ended. The increase results primarily from the
increased debt assumed in connection with the addition of the new stores,
including those acquired in the CRI Merger.
The income tax expense for the three-month and six-month period ended August 2,
1997 was $481 and $513, respectively, compared to a $230 and $373,
respectively, for the comparable periods ended August 3, 1996. The effective
tax rate differs from the statutory rate primarily due to state income taxes and
nondeductible amortization relating to certain acquisition related assets.
As a result of the changes discussed above, net income for the three-month and
six-month periods ended August 2, 1997 was $721 and $770, respectively, compared
to net income of $346 and $560 for the three-month and six-month period ended
August 3, 1996.
<PAGE>
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 1995 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 six-month period ended August 2, 1997 and August 3, 1996, operating
activities provided cash of $7,372 and $4,462, respectively. The Company
had working capital of $55.8 million and $52.8 million at August 2, 1997 and
August 3, 1996, respectively. Operations provided more net cash in the current
six-month period in comparison to the prior year as i) accounts receivable
were collected ratably faster; ii) merchandise inventories were built slower;
iii) accounts payable increased versus being paid down and iv) overall
operations produced greater net income.
Net cash used in investing activities, primarily for capital expenditures,
increased to $5,436 from $5,342 for the six-month period ended August 2, 1997
and August 3, 1996, respectively. As discussed in more detail below, the
Company opened three new stores in the first Fiscal Quarter of 1997, will open 5
new stores by November 1997, and will relocate three existing stores. The
Company expects capital expenditures to total approximately $10.7 million in
fiscal 1997. Additional new stores, remodelings and relocations will continue
to require funding of additional working capital for which the Company must
depend on internally generated funds and borrowings under the 1995
Credit Agreement.
The Company currently plans on opening eight new store locations, totaling some
208,100 square feet during the current fiscal year. Three of these new store
locations were opened during the first Fiscal Quarter of 1997. The cities,
states and gross square footage are as follows: 1) Milford, Delaware
(32,000); 2) Altavista, Virginia (29,500) and 3) Kennett Square, Pennsylvania
(25,000). The Company has signed non-cancelable leases for the five
remaining new store locations, due to open in the Fall of 1997. These stores
are: 1) Paris, Tennessee (21,200); 2) New Castle, Pennsylvania (25,000);
3) Bedford, Virginia (25,000); Gardendale Alabama (21,400), Fayetteville,
Tennessee (29,000). 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 may also incur capital expenditures to acquire
existing stores.
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 Senior Revolving Facility
will be sufficient to fund the investing activities and the required payments
under the 1995 Credit Agreement.
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
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: September 11, 1997 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>
<PERIOD-TYPE> 3-MOS
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0
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