0000019353-95-000005.txt : 19950914 0000019353-95-000005.hdr.sgml : 19950914 ACCESSION NUMBER: 0000019353-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950729 FILED AS OF DATE: 19950911 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHARMING SHOPPES INC CENTRAL INDEX KEY: 0000019353 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 231721355 STATE OF INCORPORATION: PA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07258 FILM NUMBER: 95572919 BUSINESS ADDRESS: STREET 1: 450 WINKS LANE CITY: BENSALEM STATE: PA ZIP: 19020 BUSINESS PHONE: 2152459100 MAIL ADDRESS: STREET 1: 450 WINKS LANE CITY: BENSALEM STATE: PA ZIP: 19020 10-Q 1 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 July 29, 1995 OR ( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-7258 CHARMING SHOPPES, INC. Exact name of registrant as specified in its charter) PENNSYLVANIA 23-1721355 ------------------------------------------------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 450 WINKS LANE BENSALEM, PA 19020 ------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (215) 245-9100 -------------- (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 ( ) 103,033,899 common shares were outstanding as of July 29, 1995. CHARMING SHOPPES, INC. AND SUBSIDIARIES INDEX PAGE PART I. FINANCIAL INFORMATION: Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets July 29, 1995 and January 28, 1995.....................1-2 Consolidated Statements of Income Thirteen weeks ended July 29, 1995 and July 30, 1994............................................3 Consolidated Statements of Income Twenty-six weeks ended July 29, 1995 and July 30, 1994............................................4 Consolidated Statements of Cash Flows Twenty-six weeks ended July 29, 1995 and July 30, 1994............................................5 Notes to Consolidated Financial Statements..................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..............7-9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K..................10 CHARMING SHOPPES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) July 29, January 28, 1995 1995 (In Thousands) ASSETS Current Assets Cash and cash equivalents $ 22,860 $ 43,923 Available-for-sale securities 20,744 40,180 Merchandise inventories 316,897 258,552 Prepayments and other 67,934 89,060 -------- -------- Total Current Assets 428,435 431,715 Property, equipment and leasehold improvements 500,212 483,372 Less: accumulated depreciation and amortization 219,330 197,119 -------- -------- Net property, equipment and leasehold improvements 280,882 286,253 Available-for-sale securities (including fair value adjustments of ($427) and $($2,591), respectively) 78,146 76,988 Other assets 55,458 45,853 -------- --------- Total Assets $842,921 $840,809 ======== ========= See Notes to Unaudited Consolidated Financial Statements (1) CHARMING SHOPPES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) July 29, January 28, 1995 1995 (In Thousands Except Shares) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $160,858 $137,622 Accrued expenses 86,931 97,276 Current portion - long-term debt 5,004 5,002 -------- -------- Total Current Liabilities 252,793 239,900 Deferred taxes 24,789 24,789 Long-term debt 15,939 17,298 Stockholders' Equity Common Stock $.10 par value Authorized 300,000,000 shares Issued and outstanding 103,033,899 and 102,849,239 shares 10,303 10,289 Additional paid in capital 55,763 55,176 Deferred employee compensation (4,319) (5,025) Unrealized losses on Available for Sale Securities (net of income taxes of $150 and $906, respectively) (277) (1,685) Retained earnings 487,930 500,067 -------- -------- Total Stockholders' Equity 549,400 558,822 -------- -------- Total Liabilities and Stockholders' Equity $842,921 $840,809 ======== ======== See Notes to Unaudited Consolidated Financial Statements (2) CHARMING SHOPPES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) For Twenty-six Weeks Ended (In Thousands Except Share and July 29, July 30, Per Share Amounts) 1995 1994 Net sales $512,790 $621,028 Other income 3,827 4,571 -------- -------- Total Revenue 516,617 625,599 -------- -------- Cost of goods sold, buying and occupancy expenses 394,508 440,450 Selling, general and administrative expenses 134,025 136,772 Interest expense 1,020 1,151 -------- -------- Total Expenses 529,553 578,373 -------- -------- Income (loss) before income taxes (12,936) 47,226 Income tax expense (benefit) (5,433) 15,207 -------- ------- Net Income (Loss) $ (7,503) $ 32,019 ======== ======== Weighted average number of common shares outstanding 102,961,990 107,830,329 =========== =========== Per Share Data: Net Income (Loss) $(.07) $.30 ==== ==== Cash Dividends $.0450 $.0450 ====== ====== See Notes to Unaudited Consolidated Financial Statements (4) CHARMING SHOPPES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) For Thirteen Weeks Ended (In Thousands Except Share and July 29, July 30, Per Share Amounts) 1995 1994 Net sales $268,448 $323,417 Other income 1,920 2,396 -------- -------- Total Revenue 270,368 325,813 -------- -------- Cost of goods sold, buying and occupancy expenses 207,731 229,735 Selling, general and administrative expenses 69,023 68,849 Interest expense 481 585 -------- -------- Total Expenses 277,235 299,169 -------- -------- Income (loss) before income taxes (6,867) 26,644 Income tax expense (benefit) (3,734) 8,580 -------- ------- Net Income (Loss) $ (3,133) $ 18,064 ======== ======== Weighted average number of common shares outstanding 103,001,599 107,515,611 =========== =========== Per Share Data: Net Income (Loss) $(.03) $.17 ==== ==== Cash Dividends $.0225 $.0225 ====== ====== See Notes to Unaudited Consolidated Financial Statements (3) CHARMING SHOPPES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For Twenty-six Weeks Ended July 29, July 30, (In Thousands) 1995 1994 Operating Activities Net income (loss) $(7,503) $32,019 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes 0 1,000 Depreciation & amortization 24,393 22,130 Amortization of deferred compensation expense 1,011 1,293 Gain on sale of available-for-sale securities (50) (184) Changes in operating assets and liabilities: Prepayments & other 20,356 (5,163) Merchandise inventories (58,345) (54,388) Accounts payable 23,236 52,318 Accrued expenses (10,345) (11,731) Income taxes payable 0 (5,867) ------- ------- Net Cash Provided by (Used in) Operating Activities (7,247) 31,427 ------- -------- Investing Activities Investment in capital assets (16,840) (35,476) Sales of available-for-sale securities 25,510 65,314 Purchases of available-for-sale securities (5,018) (28,594) Increase in other assets (11,786) (52) -------- -------- Net Cash Provided by (Used in) Investing Activities (8,134) 1,192 -------- -------- Financing Activities Reduction of long-term debt (1,357) (359) Proceeds from exercise of stock options 309 415 Dividends paid (4,634) (4,625) -------- -------- Net Cash Used in Financing Activities (5,682) (4,569) -------- -------- Increase (Decrease) in Cash and Cash Equivalents (21,063) 28,050 Cash and Cash Equivalents, Beginning of Year 43,923 52,390 -------- -------- Cash and Cash Equivalents, End of Period $ 22,860 $ 80,440 ======== ======== See Notes to Unaudited Consolidated Financial Statements (5) CHARMING SHOPPES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Consolidated Financial Statements The consolidated balance sheet as of July 29, 1995, the consolidated statements of income for the three and six month periods ended July 29, 1995 and July 30, 1994 and the consolidated statements of cash flows for the six month periods then ended have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at July 29, 1995 and for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's January 28, 1995 annual report on Form 10-K. The results of operations for the periods ended July 29, 1995 and July 30, 1994 are not necessarily indicative of the operating results for the full year. 2. Stockholders' Equity During the six months ended July 29, 1995, shareholders' equity changed to reflect the following items: net loss of $7,503,000; dividends paid of $4,634,000; amortization of deferred compensation expense of $1,011,000; an increase in common stock and additional paid in capital of $296,000 from the exercise of options for common stock; and an increase in stockholders' equity of $1,408,000 from a reduction in the unrealized loss on available-for-sale securities. (6) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Unaudited) RESULTS OF OPERATIONS The following table sets forth, as a percentage of net sales, certain items appearing in the Consolidated Statements of Income for the thirteen week and twenty-six week periods ended July 29, 1995 and July 30, 1994. Thirteen Weeks Ended Twenty-six Weeks Ended July 29, July 30, July 29, July 30, 1995 1994 1995 1994 -------------------- -------------------- Net Sales 100.0% 100.0% 100.0% 100.0% -------------------- -------------------- Cost of Goods Sold, Buying, and Occupancy 77.4 71.0 76.9 70.9 -------------------- -------------------- Selling, General and Administrative 25.7 21.3 26.1 22.0 -------------------- -------------------- Interest Expense .2 .2 .2 .2 -------------------- -------------------- Income Tax Expense (Benefit) (1.4) 2.6 (1.0) 2.4 -------------------- -------------------- Net Income (Loss) (1.2)% 5.6% (1.5)% 5.2% -------------------- -------------------- Thirteen Weeks Ended July 29, 1995 and July 30, 1994 Net sales for the second quarter of the fiscal year ending February 3, 1996 ("Fiscal 1996") totaled $268,448,000 as compared to $323,417,000 for the corresponding period of the fiscal year ended January 28, 1995 ("Fiscal 1995"), a 17.0% decrease. The Company had a 20.7% decrease in sales of existing stores compared to Fiscal 1995. 6.0% of sales for the second quarter of Fiscal 1996 are attributable to stores opened since the second quarter of Fiscal 1995. Sales for stores closed since the second quarter of Fiscal 1995 accounted for 2.3% of sales during that quarter. The decrease in sales from existing stores was primarily attributable to the lack of consumer acceptance of the Company's merchandise assortment and a general weakness in women's apparel sales. (7) The number of retail stores increased from 1,368 on July 30, 1994 to 1,415 on July 29, 1995. During the second quarter of Fiscal 1996 the Company opened 7 new stores and closed 8 existing stores. The Company expects to open approximately 47 stores during Fiscal 1996 and plans to close approximately 45 stores prior to December 1995. The Company may also close additional stores during January of 1996. Cost of goods sold, buying and occupancy expenses expressed as a percentage of sales increased 6.4% in the second quarter of Fiscal 1996 as compared with the corresponding period of Fiscal 1995. The cost of goods sold portion of the gross margin increased 2.0% over last year as aggressive promotions were initiated to stimulate consumer demand. This caused markdowns to be taken earlier and more frequently then planned. In dollar terms occupancy expenses increase at a rate less than the increase in average selling square footage. However, the decline in sales caused occupancy expenses expressed as a percentage of sales to increase 3.8%. The decline in sales caused selling, general and administrative expenses expressed as a percentage of sales to increase 4.4% in the second quarter. Expressed in dollar terms the increase in these expenses was limited to .3% compared to the corresponding period of Fiscal 1995. Store payrolls were lower than last year even with a 4% increase in the number of stores. The reductions in payroll were offset by corresponding increases in advertising and promotional expenses. Since the second quarter of Fiscal 1996, sales of existing stores compared to the corresponding period of Fiscal 1995 have continued to decline. Sales of existing stores during August, 1995 declined 24% as compared to the corresponding period of Fiscal 1995. The Company intends to pursue an aggressive promotional sales plan to attempt to address these declining sales level. Furthermore , the Company anticipates an operating loss for the third quarter of Fiscal 1996 which will exceed the loss incurred during the second quarter of Fiscal 1996. Twenty-six Weeks Ended July 29, 1995 and July 30, 1994 Net sales for the first two quarters of Fiscal 1996 totaled $512,790,000 as compared to $621,028,000 for the corresponding period of Fiscal 1995, a 17.4% decrease. The Company had a 21.7% decrease in sales of existing stores compared to Fiscal 1995. 6.4% of sales for the first two quarters of Fiscal 1996 are attributable to stores opened since the second quarter of Fiscal 1995. Sales for stores closed since the second quarter of Fiscal 1995 accounted for 2.1% of sales during the first two quarters of Fiscal 1995. Cost of goods sold, buying and occupancy expenses expressed as a percentage of sales increased 6.0% in the first two quarters of Fiscal 1996 as compared with the corresponding period of Fiscal 1995. The primary reasons for this increase were the effect of lower comparative store sales on relatively fixed buying and occupancy costs and a decline in merchandise margins as compared to the prior year. (8) Selling, general and administrative expenses expressed as a percentage of sales increased 4.1% in the first two quarters of Fiscal 1996 as compared to the corresponding period of Fiscal 1995. The primary reason for the increase was the effect of lower comparative store sales on relatively fixed general and administrative expenses. The Company has recorded an income tax benefit of $5,433,000 for the six month period ended July 29, 1995. This benefit is 42% of the Company's pretax loss for the period as compared to a benefit of 28% of the pretax loss recorded in the first quarter of this fiscal year. This increase is the result of the effect of permanent tax benefits and credits on a lower estimated pretax income. LIQUIDITY AND CAPITAL RESOURCES At July 29, 1995, the Company had working capital of $175,642,000 as compared with $191,815,000 at January 28, 1995. The ratio of current assets to current liabilities was 1.7 to 1 at July 29, 1995 and 1.8 to 1 at January 28, 1995. Operating activities used $7,247,000 in cash during the first six months of Fiscal 1996 as compared to providing $31,427,000 in cash during the corresponding period of Fiscal 1995. This $38,674,000 decrease was primarily due to the decline in net income. An increase in the Company's net investment in inventory (inventory increase less accounts payable increase) was offset by a decrease in prepaid expenses and other current assets. This reduction was achieved by withdrawing the cash value of certain Company owned life insurance policies as well as reducing the prepaid portion of other employee benefit related expenses. Through July 29, 1995, capital expenditures amounted to $16,840,000. During Fiscal 1996, the Company anticipates incurring capital expenditures of approximately $25 million primarily for the construction of 47 new stores, the remodeling and expansion of existing stores, and completing the expansion of the distribution facility in Greencastle, Indiana. It is anticipated that the capital required for expenditures will be financed principally through internally generated funds. Cash dividends were $4,634,000 for the six months ended July 29, 1995 as compared to $4,625,000 for the comparable period of Fiscal 1995. (9) Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the quarter ended July 29, 1995 (10) 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. CHARMING SHOPPES, INC. ---------------------------------- (Registrant) Date: September 11, 1995 S/Philip Wachs ------------------ ----------------------------------- Philip Wachs (Chairman of the Board) Date: September 11, 1995 S/Ivan Szeftel ------------------ ------------------------------------ Ivan Szeftel-Executive Vice President Finance (Chief Financial Officer) -- EX-27 2
5 1000 6-MOS FEB-03-1996 JUL-29-1995 22,860 20,744 0 0 316,897 428,435 500,212 219,330 842,921 252,793 15,939 10,303 0 0 539,097 842,921 512,790 512,790 394,508 394,508 0 0 1,020 (12,936) (5,433) (7,503) 0 0 0 (7,503) (0.07) (0.07)