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 May 4, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-1308
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STRAWBRIDGE & CLOTHIER
- ------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-1131660
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
801 Market Street
Philadelphia, PA 19107-3199
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(Address of principal executive offices) (Zip Code)
(215) 629-6000
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(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 June 3, 1996 is 7,709,841.
The number of shares of Series B Common Stock, par value $1 per share,
of the registrant outstanding at June 3, 1996 is 2,904,680.
<PAGE>
Form 10-Q
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
---------------------------------------
INDEX
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Page
PART I. FINANCIAL INFORMATION Number
- ------------------------------ ------
Item 1. Financial Statements (unaudited)
Condensed consolidated statements of operations--
three months and trailing years ended May 4, 1996
and April 29, 1995 3
Condensed consolidated balance sheets--May 4, 1996
and February 3, 1996 4
Condensed consolidated statements of cash flows--three
months ended May 4, 1996 and April 29, 1995 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 8
SIGNATURES 9
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Form 10-Q
Page 3
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS TRAILING YEAR
ENDED ENDED
--------------------- -----------------------
May 4, April 29, May 4, April 29,
1996 1995 1996 1995
---------- --------- ----------- ----------
(53 weeks) (52 weeks)
<S> <C> <C> <C> <C>
Net sales $208,127 $198,625 $ 990,100 $993,846
Other income, net of
other deductions 128 692 5,674 3,370
-------- -------- ---------- --------
208,255 199,317 995,774 997,216
Deduct:
Cost of sales, including
occupancy and buying costs 161,720 153,160 755,033 740,341
Selling and administrative
expenses, net of finance
charges 42,426 41,147 190,486 174,586
Depreciation 7,924 7,348 31,876 29,481
Interest 4,216 4,205 18,975 19,219
Provision for doubtful accounts 2,472 2,859 13,790 11,405
-------- -------- ---------- --------
218,758 208,719 1,010,160 975,032
Earnings (loss) before
income taxes (10,503) (9,402) (14,386) 22,184
Income taxes (benefit) (3,571) (3,338) (4,731) 7,228
-------- -------- ---------- --------
NET EARNINGS (LOSS) $ (6,932) $ (6,064) $ (9,655) $ 14,956
======== ======== ========== ========
NET EARNINGS (LOSS)
PER SHARE $(0.65) $(0.58) $(0.91) $1.43
======== ======== ========== ========
Cash dividends per share:
Series A Common Stock $0.275 $0.275 $1.10 $1.10
======== ======== ========== ========
Series B Common Stock $0.25 $0.25 $1.00 $1.00
======== ======== ========== ========
Average shares outstanding 10,614 10,517 10,569 10,458
======== ======== ========== ========
See notes to condensed consolidated financial statements.
</TABLE>
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Form 10-Q
Page 4
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
May 4, February 3,
1996 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 6,925 $ 14,253
Accounts receivable, less allowance
(5/4/96 -- $1,940; 2/3/96 -- $1,940) 52,910 43,118
Merchandise inventories 175,957 154,009
Deferred income taxes 3,365 3,365
Income taxes recoverable 5,197 5,653
Prepaid expenses and other 13,904 9,534
-------- --------
TOTAL CURRENT ASSETS 258,258 229,932
PROPERTY, FIXTURES AND EQUIPMENT 675,833 671,444
Less allowance for depreciation (349,640) (342,052)
-------- --------
326,193 329,392
OTHER ASSETS 17,135 16,490
-------- --------
$601,586 $575,814
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 46,000 $ 0
Accounts payable 66,996 63,494
Accrued expenses 27,085 30,153
Taxes on income (367) 3,116
Long-term debt and capital lease
obligations due within one year 7,001 13,637
-------- --------
TOTAL CURRENT LIABILITIES 146,715 110,400
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS -- due after one year 164,037 165,097
ACCRUED RETIREMENT COSTS 48,313 48,518
OTHER LIABILITIES 7,248 6,740
SERIES PREFERRED STOCK 0 0
SHAREHOLDERS' EQUITY
Common stock 10,615 10,614
Other shareholders' equity 224,658 234,445
-------- --------
TOTAL SHAREHOLDERS' EQUITY 235,273 245,059
-------- --------
$601,586 $575,814
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
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Form 10-Q
Page 5
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
May 4, April 29,
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES $(37,744) $(15,102)
NET CASH USED FOR INVESTING ACTIVITIES
Acquisition of property, fixtures and equipment (4,389) (17,790)
Changes in other assets (645) (28)
-------- --------
TOTAL (5,034) (17,818)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES
Payment of long-term debt and capital lease
obligations (7,696) (665)
Increase in short-term notes payable 46,000 40,000
Purchase of preferred stock and treasury stock (7) (121)
Cash dividends (2,847) (5,598)
-------- --------
TOTAL 35,450 33,616
-------- --------
CHANGE IN CASH AND EQUIVALENTS (7,328) 696
Cash and equivalents at beginning of period 14,253 1,575
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 6,925 $ 2,271
======== ========
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 months ended May 4, 1996
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 February 3, 1996.
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.
Note C -- Accounts Receivable
- -----------------------------
The amount of receivables sold under the Company's $150,000,000 receivable
facility was $116,000,000 at May 4, 1996 and $145,000,000 million at February
3, 1996. For further information, refer to footnote 3 to the financial
statements included in the Company's annual report on Form 10-K for the year
ended February 3, 1996.
Note D -- Proposed Sale of Assets and Liquidation of the Company
- ----------------------------------------------------------------
On April 4, 1996, the Company announced that its Board of Directors had
approved agreements for the sale of the assets of the Company. The
transactions will consist of the sale of the department store assets in a
tax-free reorganization to The May Department Stores Company ("May") in
exchange for May stock and the assumption of certain liabilities; the sale of
the Clover stores to Kimco Realty Corporation for cash and the assumption of
certain liabilities; and the liquidation of Clover inventory and fixtures.
Following these sales, the Company will be liquidated and, after provision for
liabilities not assumed by the buyers, the shareholders will receive May
stock. Depending on the final amount of liabilities not assumed by the buyers
and other factors, the Company's management has estimated that shareholders
will receive approximately four-tenths to four and a half-tenths of a share of
May stock for each share of the Company. The closing price of the May stock
on the New York Stock Exchange was $47.75 on June 6, 1996. The proposed
transactions and subsequent liquidation of the Company are subject to
shareholder approval at the annual meeting of shareholders scheduled for July
15, 1996. The financial statements do not reflect these proposed
transactions. The Company will change to a liquidation basis of accounting
upon shareholder approval of the proposed transactions.
<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 an increase of 4.8% for the three months ended May 4, 1996 and a
decrease of .4% for the trailing year ended May 4, 1996. Changes in
comparable store sales were an increase of 1.7% and a decrease of 3.3% for
the three month and trailing year ended May 4, 1996, respectively. Sales
for the prior year were negatively impacted by a fourteen day public
transit strike in the Company's trading area.
Costs and expenses as a percentage of sales and the effective tax rates
were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED TRAILING YEAR ENDED
------------------ -------------------
5/4/96 4/29/95 5/4/96 4/29/95
------ ------- ------ -------
<S> <C> <C> <C> <C>
Cost of sales, including occupancy
and buying costs 77.7 77.1 76.3 74.5
Selling and administrative expenses,
net of finance charges 20.4 20.7 19.2 17.6
Depreciation 3.8 3.7 3.2 3.0
Interest 2.0 2.1 1.9 1.9
Provision for doubtful accounts 1.2 1.4 1.4 1.1
Effective tax rate 34.0 35.5 32.9 32.6
</TABLE>
Cost of sales, including occupancy and buying costs, for the three months and
trailing year ended May 4, 1996, reflect increased markdowns taken to
stimulate sales in the Company's highly competitive trading area. Selling and
administrative expenses, net of finance charge income for the three months
ended May 4, 1996, reflect tight control of operating expenses, partially
offset by a reduction of finance charge income due to the sale of customer
accounts receivable, as discussed in Note C. The increase in selling and
administrative expenses, net of finance charge income for the trailing year
ended May 4, 1996 as a percent of sales reflects the decrease in sales,
expenses for the three stores opened in fiscal 1995 and a reduction in finance
charge income due to the sale of customer accounts receivable. Depreciation
expense increased due to the new stores opened in fiscal 1995. The provision
for doubtful accounts for the three months ended May 4, 1996 decreased
slightly due to revised credit policies instituted in fiscal 1995. The
decrease in the effective tax rate for the three months ended May 4, 1996
resulted from a lower statutory federal rate as a result of anticipated
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 February 3, 1996 for discussion of
additional matters affecting the trailing year results.
<PAGE>
Form 10-Q
Page 8
STRAWBRIDGE & CLOTHIER AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONT'D)
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
Operating activities resulted in a use of $37.7 million of cash for the three
months ended May 4, 1996, compared to $15.1 million in the prior year. The
increase is primarily attributable to reduced collections of customer
accounts.
Capital expenditures of $4.4 million for the three months ended May 4, 1996,
included amounts needed to finish projects started in fiscal 1995. Prior year
capital expenditures of $17.8 million included two new Clover stores and a
home furnishings store and other renovation projects. Cash provided by
financing activities was $35.5 million for the three months ended May 4, 1996,
compared to $33.6 million in the prior year. Cash dividends paid for the
three months ended May 4, 1996 reflect one payment, while the prior year
period reflects two payments, due to the Company's fiscal calendar.
On April 4, 1996, the Company announced that its Board of Directors had
approved agreements for the sale of the assets of the Company. The
transactions will consist of the sale of the department store assets in a
tax-free reorganization to The May Department Stores Company ("May") in
exchange for May stock and the assumption of certain liabilities; the sale of
the Clover stores to Kimco Realty Corporation for cash and the assumption of
certain liabilities; and the liquidation of Clover inventory and fixtures.
Following these sales, the Company will be liquidated and, after provision for
liabilities not assumed by the buyers, the shareholders will receive May
stock. The transactions are subject to shareholder approval. Management
believes that existing credit facilities will be sufficient to provide
necessary financing until the closing of the May and Kimco transactions.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
None.
(b) Reports on Form 8-K
-------------------
None.
<PAGE>
Form 10-Q
Page 9
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: June 18, 1996
-------------
/s/ Steven L. Strawbridge
-------------------------------------------
Steven L. Strawbridge
Vice President, Treasurer & Secretary
(principal financial officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> MAY-04-1996
<CASH> 6,925
<SECURITIES> 0
<RECEIVABLES> 54,850
<ALLOWANCES> 1,940
<INVENTORY> 175,957
<CURRENT-ASSETS> 258,258
<PP&E> 675,833
<DEPRECIATION> 349,640
<TOTAL-ASSETS> 601,586
<CURRENT-LIABILITIES> 146,715
<BONDS> 164,037
<COMMON> 10,615
0
0
<OTHER-SE> 224,658
<TOTAL-LIABILITY-AND-EQUITY> 601,586
<SALES> 208,127
<TOTAL-REVENUES> 208,255
<CGS> 161,720
<TOTAL-COSTS> 161,720
<OTHER-EXPENSES> 50,350
<LOSS-PROVISION> 2,472
<INTEREST-EXPENSE> 4,216
<INCOME-PRETAX> (10,503)
<INCOME-TAX> (3,571)
<INCOME-CONTINUING> (6,932)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,932)
<EPS-PRIMARY> (0.65)
<EPS-DILUTED> (0.65)
</TABLE>
