-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HCjxmxnY5u9L4vbU8/tH/cjQ8Uj5QCM82fQMcSVFMyvWLaXFuXpL+zht4xNvgZSY gELcOJ9IGsFD7dsLhFkBpA== 0000019353-97-000009.txt : 19970710 0000019353-97-000009.hdr.sgml : 19970710 ACCESSION NUMBER: 0000019353-97-000009 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970503 FILED AS OF DATE: 19970709 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-07258 FILM NUMBER: 97638261 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/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 1 TO 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 3, 1997 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 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) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports re- quired 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 outstanding of the issuer's Common Stock, as of May 3, 1997, was 105,737,866 shares. This Amendment No. 1 to Form 10-Q for the Quarter Ended May 3, 1997 is being filed to include "Part II, Item 2. Changes in Securities," which was omitted from the original filing. With the exception of this Item, the remainder of this Amendment is unchanged from the original filing. CHARMING SHOPPES, INC. AND SUBSIDIARIES INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets (Unaudited) May 3, 1997 and February 1, 1997.............................. 1-2 Condensed Consolidated Statements of Operations (Unaudited) Thirteen weeks ended May 3, 1997 and May 4, 1996.............. 3 Condensed Consolidated Statements of Cash Flows (Unaudited) Thirteen weeks ended May 3, 1997 and May 4, 1996.............. 4 Notes to Condensed Consolidated Financial Statements (Unaudited). 5-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..............................7-10 PART II. OTHER INFORMATION Item 2. Changes in Securities...................................... 11 Item 6. Exhibits and Reports on Form 8-K........................... 11
PART I. FINANCIAL INFORMATION Item 1. Financial Statements CHARMING SHOPPES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
May 3, February 1, (In thousands) 1997 1997 ---- ---- ASSETS Current assets Cash and cash equivalents............................$ 59,032 $ 78,979 Available-for-sale securities(including fair value adjustments of $0 and ($2), respectively).... 52,273 55,856 Income tax refund receivable......................... 5,296 3,836 Merchandise inventories.............................. 215,408 193,977 Deferred taxes....................................... 3,277 3,277 Prepayments and other................................ 29,046 30,301 -------- -------- Total current assets................................. 364,332 366,226 Property, equipment and leasehold improvements....... 440,236 438,933 Less: accumulated depreciation and amortization...... 247,031 238,539 -------- -------- Net property, equipment and leasehold improvements... 193,205 200,394 Available-for-sale securities (including fair value adjustments of ($504) and $220, respectively) 132,597 119,975 Other assets......................................... 22,160 23,802 -------- -------- Total assets.........................................$712,294 $710,397 ======== ========
See Notes to Condensed Consolidated Financial Statements (1) CHARMING SHOPPES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
May 3, February 1, (In thousands except shares) 1997 1997 ---- ---- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable.....................................$ 62,881 $ 55,501 Accrued expenses..................................... 83,003 84,226 Accrued restructuring expenses....................... 1,030 2,339 Current portion -- long-term debt.................... 16 16 -------- -------- Total current liabilities............................ 146,930 142,082 Deferred taxes....................................... 9,152 9,152 Long-term debt....................................... 138,124 138,128 Stockholders' equity Common Stock $.10 par value Authorized 300,000,000 shares Issued and outstanding 105,737,866 and 105,470,251 shares................................ 10,574 10,547 Additional paid-in capital........................... 62,610 62,818 Deferred employee compensation....................... (1,376) (1,444) Unrealized (losses) gains on available-for-sale securities (net of income tax (benefit) expense of ($171) and $59, respectively).......... (333) 159 Retained earnings.................................... 346,613 348,955 -------- -------- Total stockholders' equity........................... 418,088 421,035 -------- -------- Total liabilities and stockholders' equity...........$712,294 $710,397 ======== ========
See Notes to Condensed Consolidated Financial Statements (2) CHARMING SHOPPES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Thirteen Weeks Ended (In thousands except share and May 3, May 4, per-share amounts) 1997 1996 ---- ---- Net sales...........................................$235,688 $237,454 Other income........................................ 3,393 519 -------- -------- Total revenue....................................... 239,081 237,973 -------- -------- Cost of goods sold, buying and occupancy expenses... 182,951 184,122 Selling, general and administrative expenses........ 56,855 59,400 Interest expense.................................... 2,621 2,888 -------- -------- Total expenses...................................... 242,427 246,410 -------- -------- Loss before income taxes............................ (3,346) (8,437) Income tax benefit.................................. (1,004) (2,279) -------- -------- Net loss............................................$ (2,342) $ (6,158) ======== ======== Per-share data Net loss............................................ $ (.02) $ (.06) ====== ====== Weighted average number of common shares outstanding...................................105,624,517 103,509,837 =========== ===========
See Notes to Condensed Consolidated Financial Statements (3) CHARMING SHOPPES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Thirteen Weeks Ended May 3, May 4, (In thousands) 1997 1996 ---- ---- Operating activities Net loss.............................................$ (2,342) $ (6,158) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization..................... 9,499 10,532 Amortization of deferred compensation expense..... 144 831 Gain from disposition of capital assets........... (250) 0 Gain on sale of available-for-sale securities..... (35) 0 Changes in operating assets and liabilities: Income tax refund receivable................... (1,229) (2,987) Prepayments and other.......................... 596 15,289 Merchandise inventories........................ (21,431) (16,241) Accounts payable............................... 7,380 6,454 Accrued expenses............................... (1,223) 71 Accrued restructuring expenses................. (1,309) (8,439) -------- -------- Net cash used in operating activities................ (10,200) (648) -------- -------- Investing activities Investment in capital assets......................... (1,479) (2,164) Proceeds from sales of capital assets................ 607 0 Proceeds from sales of available-for-sale securities. 45,217 0 Gross purchases of available-for-sale securities..... (54,935) (3,165) Decrease (Increase) in other assets.................. 445 (791) -------- -------- Net cash used in investing activities................ (10,145) (6,120) -------- -------- Financing activities Proceeds from short-term borrowings.................. 0 245,895 Reduction of short-term borrowings................... 0 (239,985) Reduction of long-term borrowings.................... (4) (199) Proceeds from exercise of stock options.............. 402 300 -------- -------- Net cash provided by financing activities............ 398 6,011 -------- -------- Decrease in cash and cash equivalents................ (19,947) (757) Cash and cash equivalents, beginning of period....... 78,979 25,117 -------- -------- Cash and cash equivalents, end of period.............$ 59,032 $ 24,360 ======== ========
See Notes to Condensed Consolidated Financial Statements (4) CHARMING SHOPPES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Condensed Consolidated Financial Statements The condensed consolidated balance sheet as of May 3, 1997 and the condensed consolidated statements of operations and cash flows for the thirteen weeks ended May 3, 1997 and May 4, 1996 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 at May 3, 1997 and the results of operations and cash flows for the thirteen weeks ended May 3, 1997 and May 4, 1996 have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted ac- counting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's February 1, 1997 Annual Report on Form 10-K. The results of operations for the thirteen weeks ended May 3, 1997 and May 4, 1996 are not necessarily indi- cative of operating results for the full fiscal year. 2. Stockholders' Equity During the thirteen weeks ended May 3, 1997, stockholders' equity changed as a result of the following items: a net loss of $2,342,000; an increase in common stock and additional paid-in capital of $306,000 from the exercise of options for Common Stock; a decrease in paid-in capital of $563,000 from shares of Common Stock tendered by employees in payment of payroll taxes due from the exercise of stock options; amortization of deferred compensation expense of $144,000; and unrealized losses on available-for-sale securities of $492,000 (net of income tax benefit of $230,000). 3. Net Loss Per Share Common Stock equivalents are not included in the weighted average shares outstanding for determining net loss per share for the thirteen weeks ended May 3, 1997 and May 4, 1996 as the result would be anti- dilutive. (5) CHARMING SHOPPES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) In February 1997 the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earn- ings Per Share." SFAS No. 128 establishes revised standards for reporting earnings per share. The provisions of SFAS No. 128 are effective for in- terim and annual periods ending after December 15, 1997, with restatement of prior periods required. Adoption of SFAS No. 128 will not affect the net loss per share as currently reported for the thirteen weeks ended May 3, 1997 and May 4, 1996. The Company does not believe the adoption of SFAS No. 128 will have a material impact on the Company's Fiscal 1998 financial statements. 4. Asset Securitization In June 1996 the FASB issued SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 125 establishes the accounting for certain financial asset trans- fers, including securitization transactions. The provisions of SFAS No. 125 are effective for transactions occurring after December 31, 1996, and are applied prospectively. The adoption of SFAS No. 125 did not have a material impact on the financial statements for the thirteen weeks ended May 3, 1997. Based on the anticipated performance of securitization transactions the Company has undertaken, the Company does not believe the adoption of the new standard will have a material impact on the Company's Fiscal 1998 financial statements. However, the Company will continuously assess the performance of new and existing securitization transactions as assumptions of cash flows change. (6) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements concern- ing the Company's operations, performance and financial condition, in- cluding, in particular, certain forward-looking statements regarding store openings, capital requirements, the level of credit card delinquencies and other matters. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ mater- ially from those indicated in the forward-looking statements due to a number of factors. Such factors may include, but are not limited to, risks and uncertainties detailed in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 1997. RESULTS OF OPERATIONS The following table sets forth, as a percentage of net sales, certain items appearing in the Condensed Consolidated Statements of Operations:
Thirteen Weeks Ended May 3, May 4, 1997 1996 ---- ---- Net sales........................................100.0% 100.0% Cost of goods sold, buying and occupancy expenses 77.6 77.5 Selling, general and administrative expenses..... 24.1 25.0 Interest expense................................. 1.1 1.2 Income tax benefit............................... 0.4 1.0 Net loss......................................... (1.0) (2.6)
Thirteen Weeks Ended May 3, 1997 and May 4, 1996 Net sales for the first quarter ended May 3, 1997 ("Fiscal 1998 First Quarter") were $235,688,000, a 0.7% decrease from $237,454,000 for the first quarter ended May 4, 1996 ("Fiscal 1997 First Quarter"). The de- crease was primarily due to a reduction in the number of retail stores as a result of the implementation of the Company's restructuring plan, which was completed as of February 1, 1997. The number of retail stores decreased from 1,225 on May 4, 1996 to 1,131 on May 3, 1997, a reduction of 8%. Sales of stores closed since the Fiscal 1997 First Quarter equaled 6.8% of sales for the Fiscal 1997 First Quarter. The Company, however, recorded a 5.8% increase in the Fiscal 1998 First Quarter in comparable store sales (sales generated by stores in operation during the same weeks of each period) as compared to the Fiscal 1997 First Quarter. The increase in comparable store sales was primarily attributable to increased sales of sportswear and dresses. In addition, the Fiscal 1998 First Quarter sales (7) from new stores opened less than a full year equaled 0.7% of the Fiscal 1997 First Quarter sales. Cost of goods sold, buying and occupancy expenses expressed as a per- centage of sales increased 0.1% in the Fiscal 1998 First Quarter as compared to the Fiscal 1997 First Quarter. Cost of goods sold as a percentage of sales increased 2.3% in the Fiscal 1998 First Quarter as compared to the Fiscal 1997 First Quarter. The increase in cost of goods sold as a percentage of sales resulted primarily from higher merchandise markdowns as compared to the prior year. Buying and occupancy expenses expressed as a percentage of sales decreased 2.2% in the Fiscal 1998 First Quarter as compared to the Fiscal 1997 First Quarter. The decrease in buying and occupancy expenses was due to the elimination of occupancy expenses in the 96 stores closed during the last three quarters of the fiscal year ended February 1, 1997 ("Fiscal 1997") as part of the Company's restructuring plan, which was completed as of February 1, 1997, and the savings achieved as part of the Company's expense reduction initiative. Selling, general and administrative expenses expressed as a percentage of sales decreased 0.9% in the Fiscal 1998 First Quarter as compared to the Fiscal 1997 First Quarter. This was primarily attributable to a reduction in selling expenses resulting from the closing of 96 stores during the last three quarters of Fiscal 1997 and administrative expense reductions as part of the Company's expense reduction initiative. Selling expenses for the current quarter have continued to be adversely impacted by high levels of delinquincies within the Company's securitized proprietary credit card receivables portfolio. However, the effect of such delinquincies has been partially offest by reduced expenses related to the servicing of the credit card operations. Interest expense decreased in the Fiscal 1998 First Quarter as compared to the Fiscal 1997 First Quarter. Such decrease resulted from a lower average interest rate on outstanding borrowings, which was substantially offset by an increase in the average level of borrowings outstanding. During the Fiscal 1998 First Quarter the Company had outstanding $138 million of 7.5% Convertible Subordinated Notes, as compared to average borrowings of $99 million at an average interest rate of approximately 11.5% for the Fiscal 1997 First Quarter. The income tax benefit for the Fiscal 1998 First Quarter was 30% of the Company's pre-tax loss, as compared to a benefit of 27% of the pre-tax loss for the Fiscal 1997 First Quarter. (8) LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of working capital are (i) cash flow from operations, (ii) proprietary credit card receivables securitization agreements, (iii) its long-term investment portfolio and (iv) its $150 million revolving credit facility. As of May 3, 1997 the Company had work- ing capital of $217,402,000 as compared to $224,144,000 at February 1, 1997. Working capital at May 3, 1997 included $59,032,000 of cash and cash equivalents, compared to cash and cash equivalents of $78,979,000 at Feb- ruary 1, 1997. The ratio of current assets to current liabilities was 2.5 to 1 at May 3, 1997 and 2.6 to 1 at February 1, 1997. Net cash used in operating activities was $10,200,000 for the Fiscal 1998 First Quarter as compared to net cash used in operating activities of $648,000 for the Fiscal 1997 First Quarter. The primary reasons for the $9,552,000 increase in cash used in operations were (i) an increase of $14,693,000 in prepaid and other current assets, (ii) an increase of $4,264,000 in the Company's investment in merchandise inventories, net of accounts payable and (iii) other net uses of cash of $1,541,000. These increases in cash used in operations were partially offset by (i) a de- crease of $7,130,000 in payments for accrued restructuring expenses and (ii) a decrease of $3,816,000 in the Company's net loss. The Company has an agreement with a commercial finance company to provide a revolving credit facility with a maximum availability of $150,000,000, subject to limitations based upon eligible inventory. The primary purpose of this facility, which expires on June 1, 1998, is to enable the Company to issue letters of credit for overseas purchases of merchandise as well as to provide for seasonal cash borrowings. This facility is secured by merchandise inventory, furniture and fixtures at the retail stores and certain other Company assets. As of May 3, 1997 the availability under this facility was approximately $101,015,000, against which the Company had outstanding letters of credit of $42,304,000. There were no cash borrowings outstanding under this agreement as of May 3, 1997. This agreement requires that, among other things, the Company maintain a minimum net worth of $350,000,000 and not pay dividends on its Common Stock. Capital expenditures of $1,479,000 during the Fiscal 1998 First Quar- ter were primarily for the fixturing of existing retail stores. During the year ended January 31, 1998 ("Fiscal 1998"), the Company anticipates cap- ital expenditures of approximately $20 million, which are intended princi- pally for remodeling and fixturing of existing retail stores, construction and fixturing of new stores and investment in management information systems technology. The Company plans to open approximately 25 new stores during Fiscal 1998. It is anticipated that the funds required for capital expenditures will be financed principally through internally generated funds. (9) As of May 3, 1997 the Company had approximately $1,030,000 of accrued, unpaid restructuring costs, primarily related to severance benefits. These costs are included in current liabilities, and are expected to be paid by the end of Fiscal 1998. The Company paid no dividends during the Fiscal 1998 First Quarter or Fiscal 1997 First Quarter. On October 2, 1995 the Company's Board of Directors announced an indefinite suspension of dividends on the Company's Common Stock. In addition, the Company's revolving credit facility re- quires the Company to refrain from paying dividends on its Common Stock during the term of such agreement. RECENT ACCOUNTING PRONOUNCEMENTS In June 1996 the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 125 establishes the accounting for certain finan- cial asset transfers, including securitization transactions. The provi- sions of SFAS No. 125 are effective for transactions occurring after December 31, 1996, and are applied prospectively. The adoption of SFAS No. 125 did not have a material impact on the financial statements for the thirteen weeks ended May 3, 1997. Based on the anticipated performance of securitization transactions the Company has undertaken, the Company does not believe the adoption of the new standard will have a material impact on the Company's Fiscal 1998 financial statements. However, the Company will continuously assess the performance of new and existing securitization transactions as assumptions of cash flows change. In February 1997 the FASB issued SFAS No. 128, "Earnings Per Share." SFAS No. 128 establishes revised standards for reporting earnings per share. The provisions of SFAS No. 128 are effective for interim and annual periods ending after December 15, 1997, with restatement of prior periods required. Adoption of SFAS No. 128 will not affect the net loss per share as currently reported for the thirteen weeks ended May 3, 1997 and May 4, 1996. The Company does not believe the adoption of SFAS No. 128 will have a material impact on the Company's Fiscal 1998 financial statements. (10) PART II. OTHER INFORMATION Item 2. Changes in Securities (a) Not applicable (b) Not applicable (c) Recent Sales of Unregistered Securities During the quarter ended May 3, 1997, the Company issued 164,488 shares of its Common Stock, $.10 par value. The shares were issued on Feb- ruary 6, 1997 and March 13, 1997 to employees of the Company under the terms of the Company's Restricted Stock Award Plan for Associates and the 1996 Restricted Stock Award Program. No cash consideration was received for the shares, which were issued as bonus awards to the employees. The aggre- gate fair market value of the shares on the dates of issue was $972,372.38. The issuance and delivery of the 164,488 shares of Common Stock under the Restricted Stock Award Plan for Associates and the 1996 Restricted Stock Award Program need not be registered under the Securities Act of 1933, as amended (the "1933 Act") because they were bonus grants of Restricted Stock under an employee benefit plan, and, therefore, did not involve an "offer" or "sale" of securities under Section 2(3) of the 1933 Act. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following is a list of Exhibits filed as part of this Quarterly Report on Form 10-Q. Where so indicated by footnote, Exhibits which were previously filed are incorporated by reference. For Exhibits incorporated by reference, the location of the Exhibit in the previous filing is indi- cated in parenthesis. 3.1 Restated Articles of Incorporation, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 1994. (Exhibit 3.1) 3.2 Bylaws, as Amended and Restated, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 29, 1994. (Exhibit 3.2) 27 Financial Data Schedule. (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the quarter ended May 3, 1997. (11) 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: July 9, 1997 DORRIT J. BERN ----------------- ------------------------------------- Dorrit J. Bern Chairman of the Board President and Chief Executive Officer Date: July 9, 1997 ERIC M. SPECTER ----------------- ------------------------------------- Eric M. Specter Executive Vice President Chief Financial Officer (12) -----END PRIVACY-ENHANCED MESSAGE-----