-----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, WKGqsU4gBnSaWvirMu9GmFk/Kzom2wInOv27DQw4rOYj/PfWRD5tAz+Jis1+ybFA qfyi7gPkw1cKGHJBFxdVbw== 0000913569-96-000222.txt : 19961218 0000913569-96-000222.hdr.sgml : 19961218 ACCESSION NUMBER: 0000913569-96-000222 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961102 FILED AS OF DATE: 19961217 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROWLEY MILNER & CO CENTRAL INDEX KEY: 0000025871 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 380454910 STATE OF INCORPORATION: MI FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01594 FILM NUMBER: 96682183 BUSINESS ADDRESS: STREET 1: 2301 W LAFAYETTE CITY: DETROIT STATE: MI ZIP: 48216 BUSINESS PHONE: 3139622400 MAIL ADDRESS: STREET 1: 2301 WEST LAFAYETTE CITY: DETROIT STATE: MI ZIP: 48216 10-Q 1 FORM 10-Q REPORT FOR 3RD QUARTER 1996 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20548 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 [ ] 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: 1-1594 CROWLEY, MILNER AND COMPANY (Exact name of registrant as specified in its charter) Michigan 38-0454910 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2301 West Lafayette Boulevard, Detroit, Michigan 48216 (Address of principal executive offices)(Zip Code) (313) 962-2400 (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 required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares outstanding of Registrant's common stock, as of December 17, 1996 was 1,503,378. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CROWLEY, MILNER AND COMPANY AND CONSOLIDATED SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) NINE MONTHS ENDED THREE MONTHS ENDED NOVEMBER 2 OCTOBER 28 NOVEMBER 2 OCTOBER 28 1996 1995 1996 1995 (CONSOLIDATED (CONSOLIDATED 09/01/96) (AS RESTATED) 09/01/96) (AS RESTATED) ----------- ----------- ------------ ----------- Net Sales $86,022,297 $69,920,344 $41,255,148 $24,963,823 Cost of merchandise and services sold 57,545,476 48,658,017 26,706,592 16,664,456 ---------- ---------- ---------- ---------- 28,476,821 21,262,327 14,548,556 8,299,367 Operating, selling, general and admin- istrative expenses 30,505,417 23,919,408 14,496,766 8,494,102 ---------- ---------- ---------- --------- (2,028,596) (2,657,081) 51,790 (194,735) Other charges (credits): Interest expense 1,541,412 1,308,498 668,994 492,459 Investment income (112,077) (73,323) (60,158) (24,889) Other (429,857) (157,493) (427,969) (1,635) Earnings (loss) from operation of Steinbach (837,213) - 556,704 - --------- --------- --------- --------- Loss before income taxes (2,190,861) (3,734,763) (685,781) (660,670) Income tax credit - - - - ---------- --------- -------- -------- Net loss $(2,190,861) $(3,734,763) $(685,781) $(660,670) ========= ========= ======= ======= Net loss per share $(2.03) $(3.87) $(0.52) $(0.68) ==== ==== ==== ==== Dividends per share $0.00 $0.00 $0.00 $0.00 ==== ==== ==== ==== Average number of Common equivalent shares outstanding for earnings per share 1,077,016 966,069 1,320,895 966,069 ========= ======= ========= ======= CROWLEY, MILNER AND COMPANY AND CONSOLIDATED SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) NOVEMBER 2 FEBRUARY 3 OCTOBER 28 1996 1996 1995 (CONSOLIDATED 09/01/96) (AS RESTATED) (AS RESTATED) ----------- ----------- ----------- ASSETS Current assets: Cash and cash equivalents (cash equivalents at 11/02/96: $351,312; at 02/03/96: $241,047 and at 10/28/95: $449,802) $ 441,811 $ 540,613 $ 251,021 Accounts receivable (less allowances at 11/02/96: $66,558; at 02/03/96: $61,558 and at 10/28/95: $83,854) 6,267,116 2,014,918 833,649 Inventories at FIFO cost 61,316,683 21,250,958 28,327,560 Other current assets 3,632,046 2,567,954 1,816,419 ---------- ---------- ---------- Total current assets 71,657,656 26,374,443 31,228,649 ---------- ---------- ---------- Other assets 3,409,056 4,766,006 4,771,881 Property, plant and equipment 27,014,702 23,594,510 25,101,801 Less: Allowance for depreciation and amortization (15,603,763) (13,835,918) (15,283,443) ---------- ---------- ---------- 11,410,939 9,758,592 9,818,358 ---------- ---------- --------- TOTAL ASSETS $86,477,651 $40,899,041 $45,818,888 ========== ========== ========== CROWLEY, MILNER AND COMPANY AND CONSOLIDATED SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued) NOVEMBER 2 FEBRUARY 3 OCTOBER 28 1996 1996 1995 (CONSOLIDATED 09/01/96) (AS RESTATED) (AS RESTATED) ----------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $35,458,276 $ 5,279,188 $10,579,600 Short-term borrowings 20,513,622 8,499,392 10,008,372 Compensation and related withholdings 1,054,198 597,556 728,837 Taxes other than income taxes 1,564,442 1,797,198 1,208,570 Income taxes 109,972 309,495 309,495 Current maturities of long term debt 525,000 525,000 485,000 Current portion of capital lease obligations 284,199 185,402 183,543 ---------- --------- ---------- Total Current Liabilities 59,509,709 17,193,231 23,503,417 Long-Term Liabilities: Long-term debt 5,325,000 5,325,000 5,850,000 Capital lease obligations 6,424,225 3,750,868 3,795,321 Other 1,976,157 1,757,278 1,595,780 --------- --------- --------- 13,725,382 10,833,146 11,241,101 Shareholders' Equity: Common Stock (authorized 4,000,000 shares; out- standing 1,501,378 shares at 11/02/96; 966,069 shares at 02/03/96 and 10/28/96) 1,501,378 966,069 966,069 Other capital 3,204,069 1,178,621 1,199,156 Retained earnings 8,537,113 10,727,974 8,909,145 --------- ---------- --------- 13,242,560 12,872,664 11,074,370 ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $86,477,651 $40,899,041 $45,818,888 ========== ========== ========== CROWLEY, MILNER AND COMPANY AND CONSOLIDATED SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED November 2 October 28, 1996 1995 (Consolidated 09/01/96) (Restated) ---------- ---------- OPERATING ACTIVITIES Net Loss $(2,190,861) $(3,734,763) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 976,152 986,219 Amortization of restricted stock award 57,193 79,720 Changes in Operating Assets and Liabilities: Gain on termination of capital lease (372,514) 0 (Increase) decrease in net accounts receivable (2,118,667) 209,012 (Increase) in inventories (19,135,556) (6,319,687) Decrease in prepaid expenses and other assets (949,188) 592,421 Increase in accounts payable 10,971,666 4,766,177 Increase (decrease) in accrued compensation and other liabilities 1,599,249 (934,076) ---------- --------- NET CASH USED IN OPERATING ACTIVITIES (11,162,526) (4,354,977) INVESTMENT ACTIVITIES Purchase of properties 327,933) (232,554) Steinbach Acquisition 486,122 0 --------- --------- NET CASH USED IN INVESTMENT ACTIVITIES (814,055) (232,554) FINANCING ACTIVITIES Proceeds from revolving line of credit 106,056,568 83,444,226 Principal payments on revolving line of credit (94,042,338) (77,342,371) Principal payments on capital lease obligations (323,415) (127,782) Purchase of common stock and stock options 0 (1,228,212) Proceeds from sale of common stock 186,964 53,967 ---------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 11,877,779 4,799,828 ---------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (98,802) 212,297 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 540,613 38,724 ------- ------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 441,811 $ 251,021 ======= ======= NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS November 2, 1996 Note A - Basis of Presentation - ------------------------------ The accompanying unaudited, consolidated, and condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. As a result, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation of quarterly operating results are reflected herein and are of a normal, recurring nature. Given the seasonal nature of the specialty department store business, operating results for the thirteen week and for the 39 week periods ended November 2, 1996, are not necessarily indicative of the results that may be expected for the year ending February 1, 1997. It is suggested that these condensed, consolidated, financial statements be read in conjunction with the financial statements and notes to financial statements included in the Company's Annual Report on Form 10-K for the year ended February 3, 1996. Note B - Acquisition of Steinbach Stores, Inc. and Presentation of Financial Information - --------------------------------------------- As previously reported by the Company in its Quarterly Report on Form 10-Q for the period ended August 3, 1996, the Company acquired from the several shareholders (the "Steinbach Shareholders") of Steinbach Stores, Inc. ("Steinbach"), all of the issued and outstanding shares of the capital stock of Steinbach in exchange for 514,800 shares of the Common Stock of the Company, pursuant to the terms of an Agreement and Plan of Reorganization, dated November 17, 1995, as amended (the "Reorganization Agreement"), between the Company and the Steinbach Shareholders. As a result of this acquisition, Steinbach, which operates 15 retail department stores in Connecticut, New Hampshire, New York, New Jersey and Vermont, became a wholly-owned subsidiary of the Company as of August 31, 1996. As a result of the terms of the Reorganization Agreement, prior to completion of the acquisition the results of Steinbach's operations through August 31, 1996, are reflected as a separate line item on the Company's consolidated condensed statements of income. Effective at the time of the acquisition on August 31, 1996, and thereafter, the Company consolidates the results of operations for and the financial condition of Steinbach, as a wholly-owned subsidiary. As used herein, the "Company" means Crowley, Milner and Company on a consolidated basis, including Steinbach, "Steinbach" means the Steinbach Stores, Inc., a wholly-owned subsidiary of Crowley, Milner and Company, and "Crowley's" means Crowley, Milner and Company without inclusion of Steinbach. Unless otherwise indicated, the discussions set forth herein pertains to the Company. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Thirteen Weeks Ended November 2, 1996 Compared to Thirteen Weeks Ended October 28, 1995 Crowley's net and comparable store sales for the quarter ended November 2, 1996 increased 5.5%, to $26.3 million, from the $25.0 million recorded for the quarter ended October 28, 1995. A substantial part of the sales increase occurred in September, when Crowley's undertook an extensive and aggressive sales promotion effort in order to move spring and summer clearance merchandise. For September and October, Steinbach reported net sales of $14,9 million. Inasmuch as the Company acquired only certain of Steinbach stores, comparable store sales figures for Steinbach are unavailable. Crowley's gross profit, as a percentage of sales, exclusive of the operation of the Steinbach Stores, increased slightly from 33.3% to 33.7%. Consolidating the operating results of Steinbach for September and October improved the gross profit percentage to 35.3%. Impacting the 35.3% gross profit percentage were positive adjustments to both the merchandise and gift certificate redemptions ($250,000) and the accrual for provisions for merchandise returns ($225,000). Absent these two positive adjustments, the consolidated gross profit percentage nonetheless would have improved to 34.1%. Exclusive of the operation of Steinbach Crowley's selling, general, and administrative expenses, expressed as a percentage of sales, decreased to 32.8% from 34.0%. The decrease was primarily attributable to the reallocation of a pro rata share of the corporate overhead to Steinbach. Taking into consideration the operating results of Steinbach for September and October, this percentage increased slightly to 35.1%. The increase generally is attributable to the additional administrative and corporate expenses incurred in operating Steinbach. On a consolidated basis, interest expense, expressed as a percentage of sales, decreased nearly 18% from approximately 2% of sales to 1.6% of sales. This improvement generally was attributable to the reduction in the nominal interest rate charged on the Company's revolving loan. The reduced interest rate (8.5% versus 9.25%, or prime plus .25%) was effective as of September 5, 1996. Miscellaneous income includes a $95,000 rent adjustment, and the elimination of a capital lease asset and its related long-term obligation resulting in a one-time long-term gain of approximately $377,000. Exclusive of the operation of the Steinbach Stores, for the quarter ended November 2, 1996, Crowley's recorded a net loss of $29,565 compared to a net loss of $660,670 for last year's third quarter. The improvement generally is attributable to the reallocation of approximately $625,000 of corporate overhead to Steinbach's stores for September and October. On a consolidated basis, the Company recorded a net loss of $685,781, or $0.52 per share, compared to a net loss of $660,670, or $0.68 per share, for last year's third quarter. Since the Company has fully exhausted all tax loss carrybacks and is in a net operating loss carryforward position it was unable to tax effect the losses in either the current year's or the prior year's third quarter and nine month periods. Thus, pre-tax and after-tax results are the same. Thirty-Nine Weeks Ended November 2, 1996 Compared To Thirty-Nine Weeks Ended October 28, 1995 Crowley's net and comparable store sales for the thirty-nine weeks ended November 2, 1996, increased 1.7%, to $71.1 million, from the $69.9 million recorded for the thirty-nine weeks ended October 28, 1995. On a consolidated basis, the Company reported net sales of $86.0 million. The $15 million in net sales reported by Steinbach for September and October represented over 43% of the total of the Company's consolidated net sales for these two months. For the thirty-nine weeks ended November 2, 1996, the Company's gross profit percentage improved from 30.4% to 32.0%. The improvement in the Company's gross profit percentage reflects a trend which has continued throughout the current fiscal year. As previoiusly noted, this improvement generally can be attributed to efforts to enhance procedures to control inventory shrinkage, with a particular focus in revising and implementing loss prevention techniques and procedures. On a consolidated basis, the gross profit percentage improved to 33.1%. For a detailed explanation of the increase in the Company's gross profit percentage, please refer to the discussion included under the analysis of operating results for the thirteen weeks ended November 2, 1996. Exclusive of the operation of Steinbach, on a year-to-date basis Crowley's selling, general, and administrative expenses, expressed as a percentage of sales, increased slightly from 34.2% to 35.0%. The increase generally was attributable to the increased expenses incurred in operating Steinbach pursuant to an interim operating agreement which was in place for the first seven months of the fiscal year. Taking into consideration the operating results of Steinbach for September and October, this percentage increased to 35.5%. For the thirty-nine weeks ended November 2, 1996, on a consolidated basis the Company's interest expense, expressed as a percentage of sales, decreased slightly from 1.9% to 1.8%. As noted earlier, this improvement generally is attributable to the reduction in the nominal interest rate charged on the Company's revolving loan. Given that the change in rate was effective September 5, 1996, the year-to-date impact on the Company's interest expense is not as dramatic as the impact realized during the quarter. Exclusive of the operations of Steinbach, for the thirty-nine weeks ended November 2, 1996, Crowley's reported a net loss of $2.9 million compared to a net loss of $3.7 million for the thirty-nine weeks ended October 28, 1995. The improvement generally was attributable to improved gross profit margins (see discussion above), and the reallocation of approximately $625,000 of corporate overhead to Steinbach for September and October. On a consolidated basis, the Company reported a net loss of $2.2 million, or $2.03 per share. FINANCIAL CONDITION Cash and cash equivalents decreased from $1.6 million to $442,000 in the thirteen weeks since August 3, 1996. Inasmuch as the third quarter reflects the most intense buying time of the fiscal year where inventories traditionally are at their highest levels, this decrease in cash and cash equivalents is neither surprising or unanticipated. The cash and cash equivalents balance of $442,000 represents a 76% increase from last year's balance of $251,000. Investing activities used cash of $814,000 in the thirty-nine weeks this year compared to $233,000 in 1995. Investing activities included certain purchases related to the acquisition of Steinbach, and capital expenditures for the modernization and refixturing of existing stores. Financing activities used cash of $11.9 million in the thirty-nine weeks this year compared to $4.8 million last year. This increase is attributable to increased borrowing on the Company's revolving line of credit in order to fund merchandise purchases for both Crowley's and Steinbach. This is reflected in the increase in the net borrowing on the Company's line of credit from $6.1 million last year to $12.0 million at November 2, 1996. Given that the Company was able to secure an increase in its revolving line of credit from $12 million to $24 million effective as of September 5, 1996 (see discussion included in the Form 10-Q filed for the quarter ended August 3, 1996), and inasmuch as the Company now is funding the operations of Crowley's and Steinbach -- two specialty department store operations of comparable size -- the increase in cash used for financing activities is not unexpected. The short-term financial effect of the Company's acquisition of Steinbach, coupled with the Company's change in its method of valuing inventories from the last-in, first-out (LIFO) to the first-in, first-out (FIFO) method has improved the Company's working capital. At November 2, 1996, the Company's working capital increased to $12.2 million, a significant 32.3% improvement from the $9.2 million of working capital available at October 28, 1995. OTHER DEVELOPMENTS As a result of the Company's acquisition of Steinbach, effective September 1, 1996 the Company operates 10 stores in the Detroit metropolitan area, and fifteen stores in the states of Connecticut, New Hampshire, New York, New Jersey, Vermont and New York. With respect to the Steinbach store located in North Utica, New York, the landlord advised the Company during the recently completed quarter of its intention to exercise its right to terminate the lease. The North Utica store conducted a going-out-of- business sale, and is scheduled to close its doors permanently on or before December 31, 1996. The North Utica store reported sales of $3.0 million during the current fiscal year. Final profitability figures are not yet available, but the North Utica locatioin was one fo the Company's weakest stores in terms of profitability. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no material pending legal proceedings in which the Company is a party to which its assets are subject. 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) Reports on Form 8-K: None. (b) Exhibits: No. Description --- ----------- 27 Financial Data Schedule (EDGAR filing only) 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. CROWLEY, MILNER AND COMPANY (Registrant) DATE: December 17, 1996 By /S/ John R. Dallacqua ----------------------- John R. Dallacqua Vice President-Finance and Chief Financial Officer (principal financial and accounting officer and duly authorized officer) EX-27 2 ART 5 FDS FOR 3RD QUARTER 10-Q
5 1 9-MOS FEB-01-1997 NOV-02-1996 441,811 0 6,267,116 66,558 61,316,683 71,657,656 27,014,702 15,603,763 86,477,651 59,509,709 5,325,000 1,501,378 0 0 11,741,182 86,477,651 86,022,297 86,022,297 57,545,476 0 30,505,417 0 1,541,412 (2,190,861) 0 0 0 0 0 (2,190,861) (2.03) (2.03)
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