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 October 28, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-1308
------
STRAWBRIDGE & CLOTHIER
- ------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-1131660
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
801 Market Street
Philadelphia, PA 19107-3199
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(215) 629-6000
- ------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
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 Series A Common Stock, par value $1 per share,
of the registrant outstanding at November 30, 1995 is 7,417,010.
The number of shares of Series B Common Stock, par value $1 per share,
of the registrant outstanding at November 30, 1995 is 3,154,956.
<PAGE>
Form 10-Q
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
---------------------------------------
INDEX
-----
Page
PART I. FINANCIAL INFORMATION Number
- ------------------------------ ------
Item 1. Financial Statements (unaudited)
Condensed consolidated statements of operations--
three and nine months and trailing years ended
October 28, 1995 and October 29, 1994. 3
Condensed consolidated balance sheets--October 28, 1995
and January 28, 1995. 4
Condensed consolidated statements of cash flows--nine
months ended October 28, 1995 and October 29, 1994. 5
Notes to condensed consolidated financial statements. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 7
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 9
- ----------
<PAGE>
Form 10-Q
Page 3
<TABLE>
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TRAILING YEAR ENDED
------------------------------------------------------------------------------
October 28, October 29, October 28, October 29, October 28, October 29,
1995 1994 1995 1994 1995 1994
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $225,504 $226,559 $642,680 $657,756 $988,448 $996,563
Other income,
net of other
deductions 505 546 1,736 1,648 3,353 2,365
------------------------------------------------------------------------------
226,009 227,105 644,416 659,404 991,801 998,928
Deduct:
Cost of sales,
including
occupancy and
buying costs 173,233 168,000 497,863 495,586 747,528 736,175
Selling and
administrative
expenses, net
of finance
charges 46,461 43,590 134,315 121,728 184,616 171,269
Depreciation 7,659 7,311 22,541 22,242 29,886 29,471
Interest 5,363 5,007 14,368 14,362 19,557 19,634
Provision for
doubtful
accounts 3,716 2,409 9,230 5,824 13,687 7,010
------------------------------------------------------------------------------
236,432 226,317 678,317 659,742 995,274 963,559
Earnings (loss)
before income
taxes (10,423) 788 (33,901) (338) (3,473) 35,369
Income taxes
(benefit) (3,191) 263 (11,526) (120) (1,348) 12,250
------------------------------------------------------------------------------
NET EARNINGS
(LOSS) ($7,232) $525 ($22,375) ($218) ($2,125) $23,119
==============================================================================
NET EARNINGS
(LOSS) PER SHARE ($0.68) $0.05 ($2.13) ($0.02) ($0.20) $2.22
==============================================================================
Cash dividends
per share:
Series A
Common Stock $0.275 $0.275 $0.825 $0.825 $1.10 $1.10
==============================================================================
Series B
Common Stock $0.25 $0.25 $0.75 $0.75 $1.00 $1.00
==============================================================================
Average shares
outstanding 10,572 10,444 10,511 10,409 10,491 10,399
==============================================================================
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
Form 10-Q
Page 4
<TABLE>
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
<CAPTION>
October 28, January 28,
1995 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 3,964 $ 1,575
Accounts receivable, less allowance
(10/28/95 - $5,761; 1/28/95 - $5,544) 122,144 161,943
Merchandise inventories 224,557 143,790
Deferred income taxes 3,975 3,975
Prepaid expenses and other 9,269 11,219
----------- -----------
TOTAL CURRENT ASSETS 363,909 322,502
PROPERTY, FIXTURES AND EQUIPMENT 673,423 623,266
Less allowance for depreciation (337,630) (315,105)
----------- -----------
335,793 308,161
OTHER ASSETS 15,947 9,129
----------- -----------
$715,649 $639,792
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 91,500 $ 6,500
Accounts payable 105,055 59,500
Accrued expenses 23,103 24,665
Taxes on income (10,782) 15,357
Dividends payable 2,828 2,798
Long-term debt and capital lease
obligations due within one year 11,355 8,426
----------- -----------
TOTAL CURRENT LIABILITIES 223,059 117,246
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS - due after one year 197,680 202,290
ACCRUED RETIREMENT COSTS 53,403 51,105
OTHER LIABILITIES 7,900 6,799
SERIES PREFERRED STOCK 0 0
SHAREHOLDERS' EQUITY
Common stock 10,572 10,461
Other shareholders' equity 223,035 251,891
----------- -----------
TOTAL COMMON SHAREHOLDERS' EQUITY 233,607 262,352
----------- -----------
$715,649 $639,792
=========== ===========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
Form 10-Q
Page 5
<TABLE>
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<CAPTION>
NINE MONTHS ENDED
-----------------------
Oct. 28, Oct. 29,
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES ($20,763) ($13,552)
NET CASH USED FOR INVESTING ACTIVITIES
Acquisition of property, fixtures and equipment (45,000) (21,323)
Changes in other assets (2,061) (5,728)
-------- --------
TOTAL (47,061) (27,051)
-------- --------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
Payment of long-term debt and capital lease
obligations (6,838) (8,194)
Increase in short-term notes payable 85,000 56,500
Purchase of preferred stock and treasury stock (121) (189)
Proceeds from issuance of common stock 627 622
Cash dividends (8,455) (8,356)
-------- --------
TOTAL 70,213 40,383
-------- --------
CHANGE IN CASH AND EQUIVALENTS 2,389 (220)
Cash and equivalents at beginning of period 1,575 2,860
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 3,964 $ 2,640
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
Form 10-Q
Page 6
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note A - Basis of Presentation
- ------------------------------
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q. Accordingly, they do not include all information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. The results of
operations for the three and nine months ended October 28, 1995 are not
necessarily indicative of the results that may be anticipated for the
full fiscal year. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's
annual report on Form 10-K for the year ended January 28, 1995.
Note B - Per Share Data
- -----------------------
Earnings (loss) per share amounts are based on the weighted average
number of shares of common stock and dilutive common stock equivalents
(employee stock options) outstanding during each period, after
recognition of preferred stock dividends.
Note C - Unusual Items
- ----------------------
Selling and administrative expenses for the nine months and trailing
year ended October 28, 1995, include $2.9 million of costs incurred in
connection with an unsuccessful attempt to acquire six John Wanamaker
stores. Preopening expenses associated with three new stores were $.3
million for the three months ended October 28, 1995 and $1.4 million for
the nine months and trailing year then ended.
Note D - Subsequent Events
- --------------------------
On November 21, 1995, the Company completed an agreement whereby it can
sell, on a revolving basis, up to $150,000,000 of its private label
credit card accounts receivable. Following the one-year revolving
period, there will be a liquidation period during which the purchaser's
interest in principal cash collections will be used to pay down the
purchaser's investment. $118,000,000 of receivables were sold under this
agreement on November 21, 1995. This agreement replaces the Company's
previous agreement to sell up to $50,000,000 of its private label credit
card accounts receivable, under which $50,000,000 had been sold as of
October 28, 1995.
On November 21, 1995, the Company entered into a revolving credit
agreement with a group of banks. Under the terms of the agreement the
Company may borrow up to $100,000,000 through November 20, 1998, subject
to a thirty-day annual clean-down provision, at various interest rate
options (6.3625% at November 30, 1995). The Company must comply with
certain operating and financial covenants. This agreement replaced the
Company's previous $25,000,000 revolving credit agreement and its
previous confirmed bank credit lines.
<PAGE>
Form 10-Q
Page 7
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Net sales changes in comparison to the comparable periods in the
preceding year were decreases of .4%, 2.3% and .8% for the three months,
nine months and trailing year ended October 28, 1995, respectively.
Comparable store sales declined 4.5%, 4.2% and 2.1% for the three
months, nine months and trailing year ended October 28, 1995,
respectively. Continued sluggish sales in women's apparel, the
intensely competitive local retailing climate, low levels of consumer
confidence in the Company's trading area and high personal debt were
major factors contributing to lower sales. This trend continued into
the month of November. Additionally, the nine month and trailing year
periods ended October 28, 1995, were adversely affected by a fourteen
day public transit strike in the Company's trading area. On April 21,
1995, the Company opened its first home furnishings store in the Concord
Mall, on May 8, 1995, the Company opened its new Brandywine Clover store
and on August 7, 1995, the Company opened its new Clover store at the
Gallery in Philadelphia.
Costs and expenses as a percentage of sales and the effective tax rates
were as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS TRAILING YEAR
ENDED ENDED ENDED
------------------ ----------------- ------------------
10/28/95 10/29/94 10/28/95 10/29/94 10/28/95 10/29/94
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Cost of sales,
including occupancy
and buying costs 76.8 74.2 77.5 75.3 75.6 73.9
Selling and adminis-
trative expenses, net
of finance charges 20.6 19.2 20.9 18.5 18.7 17.2
Depreciation 3.4 3.2 3.5 3.4 3.0 3.0
Interest 2.4 2.2 2.2 2.2 2.0 2.0
Provision for
doubtful accounts 1.6 1.1 1.4 .9 1.4 .7
Effective tax rate 30.6 33.4 34.0 35.5 38.8 34.6
</TABLE>
Cost of sales, including occupancy and buying costs, for the three
months, nine months and trailing year ended October 28, 1995, reflect
increased markdowns taken to stimulate sales in the Company's highly
competitive trading area. Selling and administrative expenses, net of
finance charges, for the nine months and trailing year ended October 28,
1995, include $2.9 million of costs incurred in an attempt to acquire
six John Wanamaker stores. Also, the increase in selling and
administrative expenses, net of finance charges, as a percentage of
sales, for all periods shown, reflects the decrease in sales, preopening
expenses for three new stores and a reduction in finance charge income
due to the sale of $50.0 million of customer accounts receivable at the
end of fiscal 1994. This reduction in finance charge income is offset
by comparable interest expense savings resulting from use of the sale
proceeds to reduce borrowings. Preopening expenses were $.3 million for
the three months ended October 28, 1995 and $1.4 million for the nine
months and trailing year ended October 28, 1995. The provision for
doubtful accounts for the three months, nine months and trailing year
ended October 28, 1995, increased due to higher write-offs and increases
in the reserve for doubtful accounts, which resulted from more liberal credit
<PAGE>
Form 10-Q
Page 8
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONT'D)
RESULTS OF OPERATIONS (CONT'D)
- ------------------------------
policies instituted in prior fiscal years to stimulate credit sales and
remain competitive in the credit market. The Company has instituted
revised credit and collection policies and procedures during fiscal year
1995. The lower effective tax rate for the nine months ended October
28, 1995 results primarily from reduced pretax earnings. See
Management's Discussion and Analysis of Financial Condition and Results
of Operations included in the Company's annual report on Form 10-K for
the year ended January 28, 1995 for discussion of additional matters
affecting the trailing year result.
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
Operating activities resulted in a use of $20.8 million of cash for the
nine months ended October 28, 1995, compared to $13.6 million in the
prior year. The change is primarily a result of reduced earnings.
Expenditures for property, fixtures and equipment totalled $45.0 million
for the nine months ended October 28, 1995, and included the opening of
the two new Clover stores and the home furnishings store, the renovation
of the Concord department store and the renovation of the Rising Sun and
the Center Square Clover stores and other renovation projects. Prior
year capital expenditures of $21.3 million included the renovation of
the fourth floor of the Philadelphia store, the renovation of two Clover
stores and other renovation projects. Cash provided by financing
activities resulted from additional short-term borrowings and was $70.2
million for the nine months ended October 28, 1995, compared to $40.4
million for the prior year period.
The ratio of current assets to current liabilities was 1.63 at the end
of the third quarter of fiscal 1995, compared to 2.75 at the end of
fiscal 1994 and 1.84 at the end of the third quarter of fiscal 1994.
The changes in working capital components such as accounts receivable,
merchandise inventories and accrued income taxes, as compared to January
28, 1995, reflect normal seasonal variations. The increase in
short-term borrowings resulted from the normal seasonal increase to fund
merchandise inventories for the all important Christmas season, the
expenditures for the new stores and sluggish sales. Long-term debt and
capital lease obligations were 45.8% of capitalization at October 28,
1995, compared to 43.5% at January 28, 1995.
Subsequent to the end of the third quarter, on November 21, 1995, the
Company completed a $150.0 million asset backed securitization using the
Company's accounts receivable as well as a $100.0 million revolving
credit facility with a group of banks, with PNC Bank, National
Association, as lead agent. These facilities replaced the Company's
existing $50.0 million asset backed securitization agreement, its
existing $25.0 million revolving credit facility and previous confirmed
bank credit lines.
<PAGE>
Form 10-Q
Page 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
None.
(b) Reports on Form 8-K
-------------------
None.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
STRAWBRIDGE & CLOTHIER
------------------------------------------
Registrant
Date: December 12, 1995
-----------------
/s/ Steven L. Strawbridge
------------------------------------------
Steven L. Strawbridge
Vice President, Treasurer & Secretary
(principal financial officer)
THIRD
QUARTER
REPORT
1995
STRAWBRIDGE
& CLOTHIER
[LOGO]
<PAGE>
To Our Shareholders:
In the third quarter of the fiscal year 1995
ended October 28, sales were $225,504,000 compared
to $226,559,000 for the same period last year, a
decrease of .5%. Comparable store sales declined
4.5% during the quarter. The Company incurred a
loss for the quarter of $7,232,000 compared to
earnings of $525,000 in 1994. Loss per share was
$.68 in 1995's third quarter compared to earnings
of $.05 per share last year.
Sales for the first three quarters of the
fiscal year were $642,680,000 compared to
$657,756,000 last year, a decrease of 2.3%.
Comparable store sales declined 4.2%. The Company
incurred a loss year-to-date of $22,375,000
compared to a loss of $218,000 last year. Loss
per share was $2.13 in 1995, which includes $.18
per share in costs for the John Wanamaker
acquisition attempt and $.09 per share of
preopening costs of three new stores this year,
compared to a loss per share of $.02 in 1994.
The continuing intensely competitive local
retailing climate, low levels of consumer
confidence in our trading area and high personal
debt were major factors contributing to lower
sales and earnings for the quarter.
On November 21, 1995, the Company completed a
$150 million asset backed securitization using the
Company's accounts receivable as well as a $100
million revolving credit facility. Both
financings were arranged by PNC Bank, National
Association, as lead agent.
s/ FRANCIS R. STRAWBRIDGE III s/ PETER S. STRAWBRIDGE
Chairman of the Board President
<PAGE>
STRAWBRIDGE & CLOTHIER [LOGO]
==============================================================================
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
==============================================================================
<TABLE>
<CAPTION>
Thirteen Weeks Thirty-nine Weeks Trailing Year
Ended Ended Ended
------------------ ------------------- ------------------
10/28/95 10/29/94 10/28/95 10/29/94 10/28/95 10/29/94
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales $225,504 $226,559 $642,680 $657,756 $988,448 $996,563
Other income,
net of other
deductions 505 546 1,736 1,648 3,353 2,365
-------- -------- -------- -------- -------- --------
226,009 227,105 644,416 659,404 991,801 998,928
Cost of sales 173,233 168,000 497,863 495,586 747,528 736,175
Selling, general
and administra-
tive costs 46,461 43,590 134,315 121,728 184,616 171,269
Depreciation 7,659 7,311 22,541 22,242 29,886 29,471
Interest 5,363 5,007 14,368 14,362 19,557 19,634
Provision for
doubtful
accounts 3,716 2,409 9,230 5,824 13,687 7,010
-------- -------- -------- -------- -------- --------
236,432 226,317 678,317 659,742 995,274 963,559
-------- -------- -------- -------- -------- --------
Earnings (loss)
before income
taxes (10,423) 788 (33,901) (338) (3,473) 35,369
Provision for
income taxes
(benefit) (3,191) 263 (11,526) (120) (1,348) 12,250
-------- -------- -------- -------- -------- --------
NET EARNINGS
(LOSS) $ (7,232) $ 525 $(22,375) $ (218) $ (2,125) $ 23,119
======== ======== ======== ======== ======== ========
NET EARNINGS
(LOSS) PER
SHARE $(0.68) $0.05 $(2.13) $(0.02) $(0.20) $2.22
Average shares
outstanding 10,572 10,444 10,511 10,409 10,491 10,399
==============================================================================
</TABLE>
NOTES: (1) New store preopening expenses had the effect of reducing earnings
per share by $.02 and $.09 for the thirteen weeks and thirty-nine
weeks ended October 28, 1995, respectively.
(2) Costs incurred in the unsuccessful attempt to acquire six stores
had the effect of reducing earnings per share $.18 for the
thirty-nine weeks ended October 28, 1995.
<PAGE>
==============================================================
Condensed Consolidated
Balance Sheets (Unaudited)
(in thousands)
==============================================================
<TABLE>
<CAPTION>
Assets 10/28/95 10/29/94
-------- --------
<S> <C> <C>
Current assets:
Cash and equivalents $ 3,964 $ 2,640
Accounts receivable, net 122,144 185,407
Merchandise inventories 224,557 224,087
Other current assets 13,244 11,098
-------- --------
Total current assets 363,909 423,232
Property, fixtures and
equipment, net 335,793 299,540
Other assets 15,947 12,211
-------- --------
$715,649 $734,983
======== ========
Liabilities and
Shareholders' Equity
Current liabilities:
Notes payable $ 91,500 $100,000
Accounts payable 105,055 98,629
Other 26,504 31,723
-------- --------
Total current liabilities 223,059 230,352
Long-term debt and capital
lease obligations 197,680 200,269
Other liabilities 61,303 60,123
Shareholders'equity 233,607 244,239
-------- --------
$715,649 $734,983
======== ========
</TABLE>
<PAGE>
DEPARTMENT STORES
Philadelphia Exton
Ardmore Christiana
Cherry Hill Burlington
Springfield Concord
Plymouth Meeting The Court at
Neshaminy King of Prussia
Echelon Willow Grove Park
Concord Home Furnishings
CLOVER STORES
Marlton Cheltenham
Blackwood Whitehall Mall
Cinnaminson Palmer Park
Morrisville Rising Sun Plaza
Center Square Township Line
Baltimore Pike Park City
Westmont Penrose Plaza
Andorra Whiteland
Frankford Ave. Towne Center
Cottman Ave. Shore Mall
Bucks Mall Kirkwood Plaza
Mercerville Ralph's Corner
Granite Run Brandywine
Warrington Gallery
----------------------------------
TRANSFER AGENT AND RECORD KEEPER
Please direct address changes and
inquiries regarding stock transfer,
registration and record keeping to:
Chemical Mellon Shareholder Services
P.O. Box 444
Pittsburgh, PA 15230
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> OCT-28-1995
<CASH> 3,964
<SECURITIES> 0
<RECEIVABLES> 127,905
<ALLOWANCES> 5,761
<INVENTORY> 224,557
<CURRENT-ASSETS> 363,909
<PP&E> 673,423
<DEPRECIATION> 337,630
<TOTAL-ASSETS> 715,649
<CURRENT-LIABILITIES> 223,059
<BONDS> 197,680
<COMMON> 10,572
0
0
<OTHER-SE> 223,035
<TOTAL-LIABILITY-AND-EQUITY> 715,649
<SALES> 642,680
<TOTAL-REVENUES> 644,416
<CGS> 497,863
<TOTAL-COSTS> 497,863
<OTHER-EXPENSES> 156,856
<LOSS-PROVISION> 9,230
<INTEREST-EXPENSE> 14,368
<INCOME-PRETAX> (33,901)
<INCOME-TAX> (11,526)
<INCOME-CONTINUING> (22,375)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,375)
<EPS-PRIMARY> (2.13)
<EPS-DILUTED> (2.13)
</TABLE>
