UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 2, 1996
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 0-15385
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ONE PRICE CLOTHING STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 57-0779028
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Highway 290, Commerce Park
1875 East Main Street
Duncan, South Carolina 29334
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (864) 433-8888
--------------
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
The number of shares of the Registrant's Common Stock outstanding as of December
6, 1996 was 10,435,531.
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INDEX
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -- November 2, 1996, December
30, 1995 and October 28, 1995
Condensed consolidated statements of operations -- Three-month and
nine-month periods ended November 2, 1996 and October 28, 1995
Condensed consolidated statements of cash flows -- Nine-month
periods ended November 2, 1996 and October 28, 1995
Notes to unaudited condensed consolidated financial statements -- November 2, 1996
Independent accountants' report on review of interim financial information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
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SIGNATURES
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PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
One Price Clothing Stores, Inc. and Subsidiary
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November 2, December 30, October 28,
1996 1995 1995
---------------- ------------------ ------------
(Unaudited) (1) (Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 394,000 $ 668,000 $ 1,107,000
Merchandise inventories 48,389,000 28,961,000 44,602,000
Prepaid Federal and state income taxes 2,971,000 1,363,000 2,317,000
Deferred income taxes 2,454,000 2,093,000 2,267,000
Other current assets 5,282,000 2,865,000 4,124,000
-------------- ------------ -------------
TOTAL CURRENT ASSETS 59,490,000 35,950,000 54,417,000
------------- ----------- ------------
PROPERTY AND EQUIPMENT, at cost 58,058,000 58,759,000 57,154,000
Less accumulated depreciation 20,653,000 17,575,000 16,669,000
------------- ------------ ------------
37,405,000 41,184,000 40,485,000
------------- ------------ ------------
OTHER ASSETS 2,767,000 2,230,000 1,861,000
-------------- ------------- -------------
$ 99,662,000 $79,364,000 $96,763,000
============ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 24,955,000 $10,298,000 $17,411,000
Note payable 10,865,000 412,000 15,238,000
Current portion of long-term debt 1,579,000 921,000 2,000,000
Sundry liabilities 7,148,000 6,963,000 6,396,000
-------------- ------------- ------------
TOTAL CURRENT LIABILITIES 44,547,000 18,594,000 41,045,000
------------- ------------ -----------
LONG-TERM DEBT 5,263,000 6,579,000 4,000,000
-------------- ------------- ------------
DEFERRED INCOME TAXES AND OTHER
NONCURRENT LIABILITIES 2,829,000 2,310,000 2,043,000
-------------- ------------- ------------
SHAREHOLDERS' EQUITY
Preferred Stock, par value $0.01
--authorized and unissued 500,000 shares
Common Stock, par value $0.01
--authorized 35,000,000 shares, issued
and outstanding 10,435,531, 10,335,031
and 10,317,031 shares 104,000 103,000 103,000
Additional paid-in capital 11,453,000 11,002,000 10,954,000
Retained earnings 35,466,000 40,776,000 38,618,000
------------- ------------ ------------
47,023,000 51,881,000 49,675,000
------------- ------------ ------------
$ 99,662,000 $79,364,000 $96,763,000
============ =========== ===========
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(1) Derived from audited financial statements
See notes to unaudited condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
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One Price Clothing Stores, Inc. and Subsidiary
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Three-Month Period Ended Nine-Month Period Ended
November 2, October 28, November 2, October 28,
1996 1995 1996 1995
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NET SALES $ 63,899,000 $ 69,451,000 $227,643,000 $ 223,330,000
Cost of goods sold, distribution
and buying costs 42,622,000 46,739,000 146,419,000 144,750,000
--------------- -------------- ------------- -------------
GROSS MARGIN 21,277,000 22,712,000 81,224,000 78,580,000
--------------- -------------- -------------- -------------
Selling, general and
administrative expenses 17,943,000 18,571,000 54,888,000 53,760,000
Store rent and related expenses 6,363,000 6,332,000 19,200,000 18,541,000
Depreciation and
amortization expense 1,172,000 1,165,000 3,520,000 3,185,000
Interest expense 390,000 383,000 1,388,000 953,000
---------------- --------------- -------------- -------------
25,868,000 26,451,000 78,996,000 76,439,000
Interest income 43,000 9,000 121,000 35,000
---------------- --------------- -------------- -------------
NET EXPENSES 25,825,000 26,442,000 78,875,000 76,404,000
---------------- -------------- ------------- -------------
(LOSS) INCOME BEFORE INCOME
TAXES (4,548,000) (3,730,000) 2,349,000 2,176,000
(Benefit from) provision for
income taxes (1,785,000) (1,455,000) 935,000 848,000
----------------- --------------- ------------- -------------
NET (LOSS) INCOME $ (2,763,000) $ (2,275,000) $ 1,414,000 $ 1,328,000
================ ============== ============= =============
Net (loss) income per common
share -- Note B $ (0.26) $ (0.22) $ 0.14 $ 0.13
================ =============== ============= =============
Weighted average number of common
shares outstanding -- Note B 10,435,531 10,315,531 10,405,422 10,356,280
================ ============= ============ =============
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See notes to unaudited condensed consolidated financial statements
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
One Price Clothing Stores, Inc. and Subsidiary
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Nine-Month Period Ended
November 2, October 28,
1996 1995
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OPERATING ACTIVITIES:
Net income $ 1,414,000 $ 1,328,000
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 3,520,000 3,185,000
Decrease (increase) in other noncurrent assets 483,000 (134,000)
Deferred income taxes 623,000 (300,000)
Loss on disposal of property and equipment 672,000 442,000
Changes in operating assets and liabilities (3,479,000) (10,679,000)
-------------- ---------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 3,233,000 (6,158,000)
-------------- ----------------
INVESTING ACTIVITIES:
Purchases of property and equipment (2,113,000) (7,336,000)
Purchases of other noncurrent assets (231,000) (416,000)
-------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (2,344,000) (7,752,000)
-------------- --------------
FINANCING ACTIVITIES:
Net (repayments of) borrowings from revolving
credit facility (1,950,000) 7,175,000
Proceeds from issuance of long-term debt 7,500,000 6,000,000
Repayment of long-term debt (6,158,000) --
Debt financing costs incurred (710,000) (85,000)
Decrease in amount due to related party (33,000) (30,000)
Proceeds from exercise of Common Stock options 452,000 52,000
------------- ---------------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES (899,000) 13,112,000
------------- ---------------
DECREASE IN CASH AND CASH EQUIVALENTS (10,000) (798,000)
Cash and cash equivalents at beginning of period 404,000 1,905,000
-------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 394,000 $ 1,107,000
============== ================
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 1,281,000 $ 869,000
Income taxes paid 65,000 455,000
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See notes to unaudited condensed consolidated financial statements
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
One Price Clothing Stores, Inc. and Subsidiary
November 2, 1996
NOTE A -- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are unaudited and
include the accounts of One Price Clothing Stores, Inc. and its wholly-owned
subsidiary (the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions 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.
For interim reporting, the Company uses an estimated gross profit as calculated
on a current quarterly basis by its inventory management system. Beginning in
1996, inventories are stated on the first-in, first-out (FIFO) retail method
(see Note D).
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. Due
to the seasonality of the Company's sales, operating results for the three-month
and nine-month periods ended November 2, 1996 are not necessarily indicative of
the results that may be expected for the year ending February 1, 1997. For
further information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
30, 1995.
Certain previously reported amounts have been reclassified to conform with the
current year presentation.
NOTE B -- EARNINGS PER SHARE
Earnings per share are computed based upon the weighted average number of common
and common equivalent shares outstanding. Common equivalent shares consist of
shares under option.
NOTE C -- CHANGE IN FISCAL YEAR END
Beginning in fiscal 1996, the Company changed its fiscal year end from the
Saturday nearest December 31 to the Saturday nearest January 31. This change was
made to conform the Company's fiscal calendar to the seasonal patterns it
experiences, as well as to enhance comparability of its fiscal quarterly and
annual results with other retail companies. The period December 31, 1995 to
February 3, 1996 (the "Transition Period") was previously reported in the
Company's Form 10-Q for the quarter ended May 4, 1996. Certain unaudited
proforma results of operations for previous periods were presented in Note D to
the Unaudited Condensed Consolidated Financial Statements therein and are
incorporated herein by reference.
NOTE D -- CHANGES IN ACCOUNTING PRINCIPLES
The Financial Accounting Standards Board ("FASB") issued Statement No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." This statement essentially requires that when the
Company commits to closing specific stores and for other stores
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which may be impaired, the fixed assets for such stores must be written down to
fair market value. The adoption of SFAS 121, required for years beginning after
December 15,1995, resulted in a decrease in net fixed assets for stores to be
closed of approximately $1,630,000 and a charge of approximately $1,397,000 (net
of income taxes) which is included in the cumulative effect of changes in
accounting principles in the Statement of Operations for the Transition Period
previously reported in the Company's Form 10-Q for the quarter ended May 4, 1996
(see Note C).
The Company also elected to change certain methods of accounting for merchandise
inventories beginning in the Transition Period. The Company changed from the
lower of average first-in, first-out (FIFO) cost or market method of accounting
to the lower of cost (computed using the FIFO retail method) or market. The
Company believes that the FIFO retail method provides improved information for
the operation of its business in a manner consistent with the method used widely
in the retail industry. The Company is also capitalizing into inventory certain
merchandise acquisition and distribution costs to provide a better matching of
revenues and expenses, particularly in interim periods. The effect of the change
to the FIFO retail method was to reduce merchandise inventories by approximately
$1,207,000, and the effect of capitalizing into inventory certain merchandise
acquisition and distribution costs was to increase merchandise inventories by
approximately $1,698,000. The resulting net increase in merchandise inventories
of approximately $491,000 and a benefit of approximately $307,000 (net of income
taxes) is included in the cumulative effect of changes in accounting principles
in the Statement of Operations for the Transition Period in the Company's Form
10-Q for the quarter ended May 4, 1996 (see Note C).
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors and Shareholders of
One Price Clothing Stores, Inc.
Duncan, South Carolina
We have reviewed the accompanying condensed consolidated balance sheets of One
Price Clothing Stores, Inc. and subsidiary (the "Company") as of November 2,
1996 and October 28, 1995, the related condensed consolidated statements of
operations for the three-month and nine-month periods then ended, and the
related condensed consolidated statements of cash flows for the nine-month
periods then ended. These financial statements are the responsibility of the
Company's management.
We conducted our review 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 of 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 audited 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 review, we are not aware of any material modifications that should
be made to such condensed consolidated 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 of One Price Clothing Stores, and
subsidiary as of December 30, 1995, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 15, 1996 (March 25, 1996 as
to Note B and Note H), we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 30, 1995 is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
November 21, 1996
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net sales for the quarter ended November 2, 1996 decreased approximately 8% to
$63,899,000 compared to $69,451,000 for the same quarter ended October 28, 1995.
Net sales for the nine-month period ended November 2, 1996 increased
approximately 2% to $227,643,000 compared to $223,330,000 for the comparable
nine-month period ended October 28, 1995. Comparable store sales (adjusted for
the calendar shift - to compare the 13 weeks and 39 weeks ended November 2, 1996
to the 13 weeks and 39 weeks ended November 4, 1995) decreased 7% for the
quarter and decreased 3% for the nine-month period compared to the same periods
last year. The Company considers stores that have been open 18 months or more as
comparable, and there were 595 such stores at November 2, 1996.
The decrease in sales during the third quarter of fiscal 1996 compared to the
same period in fiscal 1995 is partially attributable to a decrease in the number
of stores in operation. In addition, management believes that disappointing
sales during the third quarter of fiscal 1996 reflect the impact of unseasonably
warm weather and a continued softness in spending by lower and middle income
consumers on women's apparel. However, management is guardedly optimistic
regarding Christmas sales results due to implementation of targeted marketing
campaigns for the holiday season.
Nine stores were opened during the third quarter of fiscal 1996 and 11
underperforming stores were closed. For the nine-month period ended November 2,
1996, the Company opened 21 stores and closed 48 underperforming stores. At
November 2, 1996, the Company operated 661 stores, 29 fewer than at quarter-end
last year, in 28 states and Puerto Rico. The Company expects to open 34 stores
(including 11 relocations) and close approximately 63 stores during fiscal 1996.
The Company's sales and operating results are seasonal, as is typical in the
women's retail apparel industry. As previously reported, the Company changed its
fiscal year end to conform the fiscal calendar to the seasonal patterns the
Company experiences. Based on the former fiscal calendar (January - December),
the Company's sales historically were lowest during the first quarter (January
March) and third quarter (July - September) and highest during the second
quarter (April - June) and fourth quarter (October - December). Reduced sales
volumes in the first and third quarters coincided with the transition of
seasonal merchandise. Therefore, increased levels of markdowns occurred during
those transitional periods, and operating expenses, when expressed as a
percentage of sales, were typically higher. On a restated basis, fiscal 1995 and
fiscal 1994 produced higher sales and operating results in the first quarter
(February - April) and second quarter (May - July) compared to the third quarter
(August - October) and fourth quarter (November - January). Sales and operating
results in the fourth quarters of 1995 and 1994 reflected disappointing holiday
sales which resulted in increased markdowns. The Company is unable to predict if
this trend will continue in the future.
Gross margin increased to 33.3% of net sales in the third quarter of fiscal 1996
compared to 32.7% of net sales for the comparable quarter ended October 28,
1995. Gross margin for the nine-month period ended November 2, 1996 was 35.7% of
net sales compared to 35.2% for the nine-month period ended October 28, 1995.
Gross margin results reflect the change (effective beginning January 1996) in
accounting for merchandise inventories to include the cost of certain
distribution and buying costs. Distribution and buying costs, which were
previously classified as selling, general and administrative expenses, were
reclassified as a component of cost of goods sold in the condensed consolidated
statements of operations for the third quarter and the first nine months of
fiscal 1995 to conform to the current year presentation. The increase in gross
margin as a percentage of net sales for the third quarter and nine-month period
ended November 2, 1996 was due primarily to efficiencies achieved in the
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Company's distribution center which were partially offset by increased markdowns
needed to clear slower-moving merchandise.
Selling, general and administrative expenses were 28.1% of net sales in the
third quarter of fiscal 1996 and 26.7% of net sales for the comparable period
last year. The increase was principally due to the lower average per store sales
volumes experienced during the third quarter of fiscal 1996. Selling, general
and administrative expenses in dollars per average store were flat in the third
quarter of fiscal 1996 compared to the same period last year. Total selling,
general and administrative expenses in the third quarter of fiscal 1996 were
lower than in the third quarter of fiscal 1995 due to operating an average of 19
fewer stores. For the first nine months of fiscal 1996, selling, general and
administrative expenses as a percentage of net sales were flat compared to the
same period last year. Selling, general and administrative expenses in dollars
per average store decreased slightly for the nine-month period ended November 2,
1996 compared to the same period last year. Increases in store closing costs and
computer equipment lease costs at the Company's home office were offset by
efficiencies achieved in store and store operations expenses.
Store rent and related expenses were 10.0% of net sales in the third quarter of
fiscal 1996 and 9.1% of net sales for the comparable period last year. For the
first nine months of fiscal 1996, store rent and related expenses as a
percentage of net sales increased slightly to 8.4% of net sales from 8.3% of net
sales for the comparable period last year. The increase in store rent when
expressed as a percentage of net sales was in part due to higher average store
rents and to lower average sales dollars per store experienced in the third
quarter compared to the same period last year.
Store rent and related expenses in dollars per average store for the quarter and
nine-month period ended November 2, 1996 increased 3% and 2%, respectively, due
to entering into leases in larger, more costly, urban and metropolitan markets
with higher base rent structures and the closing of older, underperforming
stores which generally had lower average rent expense. Management believes that
the trend of increasing average store rent expense in dollars may continue.
Depreciation and amortization expense increased to 1.8% of net sales in the
third quarter of fiscal 1996 compared to 1.7% of net sales for the third quarter
of fiscal 1995. Depreciation and amortization expense increased to 1.5% of net
sales from 1.4% of net sales for the nine-month period ended November 2, 1996
compared to the same period in 1995. These increases in depreciation and
amortization expense are due primarily to the expansion of the Company's
distribution center which was completed during the second half of fiscal 1995.
Interest expense was 0.6% of net sales in both the third quarter of fiscal 1996
and the third quarter of fiscal 1995. Interest expense increased to 0.6% of net
sales in the first nine months of fiscal 1996 from 0.4% of net sales in the
first nine months of fiscal 1995. The increase in interest expense in dollars
and as a percentage of net sales is due primarily to amortization of loan
origination fees under the Company's new credit facilities effective in March
1996.
The Company's effective tax benefit rate for restated fiscal 1995 was 42.5%.
Management expects the effective tax rate to decrease in fiscal 1996 because the
items creating the fiscal 1995 increase (the benefit arising from the carry back
of the Targeted Jobs Tax Credits and recognition of the tax benefit relating to
the future benefit of the prior year Puerto Rico net operating loss) will not be
repeated. The Company's estimated annual effective tax rate for fiscal 1996 is
approximately 39.8%
Liquidity and Capital Resources
During the first nine months of fiscal 1996, $3,233,000 was provided by
operating activities, primarily due to an increase in the proportion of
inventory financed by accounts payable and a decrease in
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prepaid income taxes. During the first nine months of fiscal 1995, $6,158,000
was used in operating activities, primarily due to an increase in inventory and
prepaid expenses.
Total inventories at the end of the third quarter of fiscal 1996 and 1995 were
$48,389,000 and $44,602,000, respectively. Total inventories at December 30,
1995 were $28,961,000. The level of inventories is subject to fluctuations
because of the Company's opportunistic buying strategy and prevailing business
conditions. The above amounts represent total inventory, whether located at the
stores, in the distribution center or in-transit. The total average inventory
per store was approximately $73,000 and $65,000 at the end of the third quarter
of fiscal 1996 and 1995, respectively. This increase in average per store
inventories resulted from an increase in inventory in-transit to the
distribution center at the end of the third quarter of fiscal 1996 (primarily
for Spring 1997 merchandise) and an increase for the capitalization of certain
distribution and buying costs partially offset by lower in-store inventories.
The average total inventory per store was approximately $41,000 at December 30,
1995, when the Company's inventory is typically at its lowest level.
Total accounts payable and amounts outstanding under the credit facilities,
including the long-term portions thereof, at the end of the third quarter of
fiscal 1996 and 1995, respectively, were $42,662,000 and $38,649,000,
respectively. The increase in the accounts payable and amounts outstanding under
the credit facilities is due to funding purchases of inventory for the fourth
quarter of fiscal 1996. In comparison, total accounts payable and amounts
outstanding under the credit facilities at December 30, 1995 were $18,210,000.
The level of accounts payable and amounts outstanding under the credit
facilities is subject to fluctuations because of the Company's seasonal
operations, opportunistic buying strategy, rate of capital expenditures and
prevailing business conditions.
During the first nine months of fiscal 1996, net cash of $2,113,000 was used in
investing activities to purchase property and equipment. This consisted
principally of costs incurred for the 21 new stores and 10 relocated stores
opened during the period. In fiscal 1996, the Company plans to spend
approximately $2.8 million on capital expenditures primarily to open 23 new
stores, relocate 11 stores and to renovate certain existing stores. During the
first nine months of fiscal 1995, $7,336,000 was used to purchase property and
equipment for the 72 new stores and 13 relocated stores opened during the
period, to expand the Company's distribution center and to upgrade the computer
facilities at the Company's headquarters.
The maximum amounts outstanding under the credit facilities, including the
long-term portions thereof, during the third quarter of fiscal 1996 and fiscal
1995 were approximately $17,739,000 and $21,710,000, respectively. The average
amounts outstanding under the credit facilities were $13,414,000 during the
third quarter of fiscal 1996 and $16,410,000 during the third quarter of fiscal
1995. The weighted average interest rates were 7.0% and 8.0% for the third
quarter of fiscal 1996 and fiscal 1995, respectively. The maximum amounts
outstanding under the credit facilities during the first nine months of fiscal
1996 and fiscal 1995 were approximately $26,741,000 and $21,710,000,
respectively. The average amounts outstanding under the credit facilities were
$14,666,000 and $16,418,000 during the first nine months of fiscal 1996 and
fiscal 1995, respectively. The weighted average interest rates were 7.8% and
8.1% for the first nine months of fiscal 1996 and fiscal 1995, respectively.
The Company had outstanding documentary letters of credit totaling approximately
$17,613,000 at November 2, 1996 compared to $14,424,000 at October 28, 1995. The
increase in outstanding letters of credit is due to buying a larger proportion
of direct imports of foreign merchandise as a component of total inventory
purchases. For the first nine months of fiscal 1996, the Company purchased
approximately 22% of its merchandise directly from foreign sources compared to
approximately 15% for the first nine months of fiscal 1995. Management expects
this trend to continue in the foreseeable future.
<PAGE>
The Company's credit agreement contains certain covenants which, among other
things, restrict the ability of the Company to incur indebtedness, or encumber
or dispose of assets, and prohibit the Company from repurchasing its Common
Stock or paying dividends. Additionally, the Company must maintain a minimum
adjusted net worth (as defined in the agreement) of $34,000,000 and maintain a
minimum working capital, exclusive of amounts outstanding under the credit
facilities, of $5,000,000. The Company was in compliance with these covenants at
November 2, 1996 and as of the date of this document.
The exercise of Common Stock options pursuant to the Company's stock option
plans provided cash of $452,000 in the first nine months of fiscal 1996 compared
to $52,000 in the first nine months of fiscal 1995.
Management believes that the Company's liquidity requirements in the foreseeable
future will be met principally through cash provided by operations and its
credit facilities. If deemed by management to be in the best interest of the
Company, additional long-term debt, capital leases or other permanent financing
may be considered.
Private Securities Litigation Reform Act of 1995
The statements contained in this Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) that are not historical facts may
be forward-looking statements subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. The Company cautions readers of this
Quarterly Report on Form 10-Q that a number of important factors could cause the
Company's actual results in 1996 and beyond to differ materially from those
expressed in any such forward-looking statements. These factors include, without
limitation, the general economic and business conditions affecting off-price
women's apparel retailers, competition from other existing or new off-price
women's apparel retailers, the Company's ability to meet debt service
obligations and other liquidity needs, the seasonality of the Company's sales,
the availability of both domestic and foreign sources of merchandise inventories
at substantially discounted prices, Acts of God, and unusual seasonal weather
patterns.
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PART II. OTHER INFORMATION
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Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
11 Statement Re: Computation of Per Share Earnings
15 Acknowledgment of Deloitte & Touche LLP, Independent Accountants
27 Financial Data Schedule (electronic filing only)
(b) The Company was not required to file any report on Form 8-K
for the quarter ended November 2, 1996.
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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.
ONE PRICE CLOTHING STORES, INC. (Registrant)
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Date: December 16, 1996 /s/ Henry D. Jacobs, Jr.
------------------------
Henry D. Jacobs, jr.
Chairman, Chief Executive Officer and President
(principal executive officer)
Date: December 16, 1996 /s/ Stephen A. Feldman
----------------------
Executive Vice President and Chief Financial Officer
(principal financial officer)
<PAGE>
</TABLE>
EXHIBIT 11 -- Statement Re: Computation of Per Share Earnings
<TABLE>
<S> <C> <C> <C> <C>
Three-Month Period Ended Nine-Month Period Ended
November 2, October 28, November 2, October 28,
1996 1995 1996 1995
----------------------------------------------------------
PRIMARY (LOSS) INCOME PER SHARE
Weighted average number
of common shares outstanding 10,435,531 10,315,531 10,389,209 10,312,204
Net effect of dilutive stock
options - based on the treasury stock
method using the average market price -- -- 16,213 44,076
------------- ----------- --------- -------------
TOTAL 10,435,531 10,315,531 10,405,422 10,356,280
============= ============== =========== ===========
Net (loss) income $(2,763,000) $(2,275,000) $ 1,414,000 $ 1,328,000
============ ============= =========== ===========
Net (loss) income per common share $ (0.26) $ (0.22) $ 0.14 $ 0.13
================================ =========== ===========
FULLY DILUTED (LOSS) INCOME PER
SHARE
Weighted average number
of common shares outstanding 10,435,531 10,315,531 10,389,209 10,312,204
Net effect of dilutive stock options -
based on the treasury stock method
using the greater of ending or
average market price -- -- 26,592 44,335
------------- ------------- ----------- ----------
TOTAL 10,435,531 10,315,531 10,415,801 10,356,539
============ ============= =========== ===========
Net (loss) income $(2,763,000) $ (2,275,000) $ 1,414,000 $ 1,328,000
============ ============= =========== ===========
Net (loss) income per common share $ (0.26) $ (0.22) $ 0.14 $ 0.13
============ ============== =========== ===========
<PAGE>
</TABLE>
EXHIBIT 15 -- ACKNOWLEDGMENT OF DELOITTE & TOUCHE LLP
INDEPENDENT ACCOUNTANTS
One Price Clothing Stores, Inc. and Subsidiary
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim condensed
consolidated financial information of One Price Clothing Stores, Inc. and
subsidiary for the three-month and nine-month periods ended November 2, 1996 and
October 28, 1995, as indicated in our report dated November 21, 1996; because we
did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended November 2, 1996, is
incorporated by reference in Registration Statements No. 33-20529, 33-31623,
33-48091, and 33-61803 on Form S-8 pertaining to the 1987 Stock Option Plan, the
1988 Stock Option Plan, the 1991 Stock Option Plan, and the Director Stock
Option Plan, respectively, of One Price Clothing Stores, Inc.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
December 12, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> NOV-02-1996
<CASH> 394
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 48389
<CURRENT-ASSETS> 59490
<PP&E> 58058
<DEPRECIATION> 20653
<TOTAL-ASSETS> 99662
<CURRENT-LIABILITIES> 44547
<BONDS> 0
0
0
<COMMON> 104
<OTHER-SE> 46919
<TOTAL-LIABILITY-AND-EQUITY> 99662
<SALES> 227643
<TOTAL-REVENUES> 227643
<CGS> 146419
<TOTAL-COSTS> 146419
<OTHER-EXPENSES> 22720
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1388
<INCOME-PRETAX> 2349
<INCOME-TAX> 935
<INCOME-CONTINUING> 1414
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1414
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
