-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, TxoYsyTw0TLSfcsBNtcgxINShuX6PCRN/xbNlIUQ6IWxvYKQd3RSz3TyyoJbni7T 7XpUTjFIz27iEGwVTmV41Q== 0000077808-94-000002.txt : 19940621 0000077808-94-000002.hdr.sgml : 19940621 ACCESSION NUMBER: 0000077808-94-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940614 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PETRIE STORES CORP CENTRAL INDEX KEY: 0000077808 STANDARD INDUSTRIAL CLASSIFICATION: 5621 IRS NUMBER: 362137966 STATE OF INCORPORATION: NY FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06166 FILM NUMBER: 94534055 BUSINESS ADDRESS: STREET 1: 70 ENTERPRISE AVE CITY: SECAUCUS STATE: NJ ZIP: 07094 BUSINESS PHONE: 2018663600X1480 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended April 30, 1994 Commission File Number 1-6166 PETRIE STORES CORPORATION (Exact Name of Registrant as specified in its Charter) New York 36-2137966 (State of Incorporation) (I.R.S. Employer Identification No.) 70 Enterprise Avenue Secaucus, New Jersey 07094 (Address of principal (Zip Code) executive offices) (201) 866-3600 NONE ____ (Registrant's Telephone Number) 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 (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 _ - Number of shares outstanding at April 30, 1994, 46,768,984 shares, $1.00 par value, common stock. PETRIE STORES CORPORATION AND SUBSIDIARIES INDEX PAGE NO. ________ Part I - Financial Information (Unaudited): Consolidated Balance Sheets April 30, 1994 and January 29, 1994.................... 3 & 4 of 12 Consolidated Operations - Three Months Ended April 30, 1994 and May 1, 1993................... 5 of 12 Consolidated Additional Paid-In Capital and Consolidated Retained Earnings - Three Months Ended April 30, 1994... 6 of 12 Consolidated Cash Flows - Three Months Ended April 30, 1994 and May 1, 1993.................... 7 of 12 Notes................................................... 8 of 12 Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 9 & 10 of 12 Part II - Other Information..................................... 11 of 12 Signature....................................................... 11 of 12 Exhibits: Exhibit A - Independent Accountants' Report - David Berdon & Co....................................... 12 of 12 PETRIE STORES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ___________________________ (In thousands of dollars) April 30, January 29, 1994 1994 ____ ____ ASSETS (Unaudited) Current Assets: Cash and short-term investments................ $ 27,749 $ 39,290 Investments in common stock (Note 2)........... 19,012 35,740 Accounts receivable: Trade, less allowance for doubtful accounts of $2,450........................................ 49,204 49,999 Other......................................... 11,247 13,745 Merchandise inventories........................ 232,691 187,627 Prepaid expenses............................... 10,913 6,887 Deferred income taxes.......................... 7,456 7,456 _______ _______ TOTAL CURRENT ASSETS.................... 358,272 340,744 _______ _______ Investments: Investments in common stock (Notes 2 and 3).... 1,379,924 1,481,937 _________ _________ Property and Equipment, at Cost: Land........................................... 2,777 2,777 Buildings and improvements..................... 16,361 16,157 Leasehold costs, improvements, store fixtures and equipment.................................. 610,924 588,450 _______ _______ 630,062 607,384 Less accumulated depreciation and amortization. 353,471 339,409 _______ _______ 276,591 267,975 _______ _______ Excess of Cost Over the Fair Value of Net Assets Acquired, Less accumulated amortization of $28,911 at 4/30/94 and $28,176 at 1/29/94................. 88,867 89,602 ______ ______ Other Assets: Debt issuance costs, less accumulated amortization of $591 at 4/30/94 and $574 at 1/29/94........................................ 1,138 1,155 Other.......................................... 6,429 6,394 _____ _____ 7,567 7,549 _____ _____ $ 2,111,221 $ 2,187,807 ========= ========= See notes to consolidated financial statements. PETRIE STORES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ___________________________ (In thousands of dollars) April 30, January 29, 1994 1994 ____ ____ (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Short-term borrowings............................ $ 50,000 $ 20,000 Accounts payable................................. 27,819 26,993 Accrued expenses and other liabilities........... 40,891 44,917 _______ ______ TOTAL CURRENT LIABILITIES................... 118,710 91,910 _______ ______ Long-Term Liabilities: Convertible subordinated debentures.............. 124,942 124,952 Deferred income taxes (Note 2)................... 560,826 600,678 Other............................................ 5,504 5,704 _______ _______ 691,272 731,334 _______ _______ Shareholders' Equity: Common stock, par value $1 per share: authorized 80,000,000 shares; issued 46,770,653 shares at 4/30/94 and 46,770,202 shares at 1/29/94......... 46,771 46,770 Additional paid-in capital....................... 93,982 93,973 Retained earnings................................ 460,643 462,079 Unrealized gain on investment in common stock, net (Note 2)..................................... 699,879 761,777 _________ _________ 1,301,275 1,364,599 Less: Treasury stock - at cost (1,669 shares)............ 36 36 ________ ________ TOTAL SHAREHOLDERS' EQUITY.................... 1,301,239 1,364,563 _________ _________ $ 2,111,221 $ 2,187,807 ========= ========= See notes to consolidated financial statements. PETRIE STORES CORPORATION AND SUBSIDIARIES CONSOLIDATED OPERATIONS (Unaudited) ___________ (In thousands except per share amounts) Three Months Ended ------------------ April 30, May 1, 1994 1993 ---- ---- Revenues: Net Sales.......................................... $ 337,525 $ 331,782 Other Income....................................... 1,278 1,916 ------- ------- 338,803 333,698 ------- ------- Cost of Goods Sold, Buying and Occupancy Costs........ 247,318 244,823 Selling, General and Administrative Expenses.......... 85,471 83,199 Nonrecurring Expenses (Note 3)........................ 1,300 0 Interest Expense...................................... 2,937 2,615 ------ ------ 337,026 330,637 ------- ------- (Loss) from Investment in Common Stock................ 0 (13,661) ------- -------- Earnings (Loss) from Continuing Operations Before Income Taxes and Cumulative Effect of Accounting Change for Income Taxes............................... 1,777 (10,600) ------- -------- Income Taxes: Federal............................................ 620 604 State and Local.................................... 107 244 Deferred........................................... 148 (4,970) ------ ------ 875 (4,122) ------ ------- Earnings (Loss) before Cumulative Effect of Accounting Change for Income Taxes............................... 902 (6,478) Cumulative Effect of Accounting Change for Income Taxes................................................. 0 2,800 --- ----- Net Earnings (Loss)................................... $ 902 $ (3,678) ==== ===== Earnings (Loss) per Share (Note 4): Earnings (Loss) before Cumulative Effect of Accounting Change for Income Taxes............................. $ .02 $ (.14) Cumulative Effect of Accounting Change for Income Taxes.............................................. 0 .06 Net Earnings (Loss)................................ $ .02 $ (.08) ==== ==== Dividends Per Share................................... $ .05 $ .05 ==== ==== Weighted Average Number of Shares..................... 46,769 46,768 ====== ====== See notes to consolidated financial statements. PETRIE STORES CORPORATION AND SUBSIDIARIES CONSOLIDATED ADDITIONAL PAID-IN CAPITAL (Unaudited) ----------- (In thousands of dollars) Balance January 30, 1994.......................................... $ 93,973 Conversion of debentures.......................................... 9 ------ Balance April 30, 1994............................................ $ 93,982 ====== PETRIE STORES CORPORATION AND SUBSIDIARIES CONSOLIDATED RETAINED EARNINGS (Unaudited) ----------- (In thousands of dollars) Balance January 30, 1994......................................... $ 462,079 Net income for the three months ended April 30, 1994............. 902 Cash dividends on common stock................................... (2,338) -------- Balance April 30, 1994........................................... $ 460,643 ======= See notes to consolidated financial statements. PETRIE STORES CORPORATION AND SUBSIDIARIES CONSOLIDATED CASH FLOWS (Unaudited) ----------- (In thousands of dollars) Three Months Ended April 30, May 1, 1994 1993 Cash flows from operating activities: ---- ---- Net income (loss)..................................... $ 902 $ (3,678) Adjustments to reconcile net income (loss) to net cash (used in) operating activities: Depreciation and amortization of property and equipment............................................ 14,062 15,138 Other amortization................................... 772 781 Compensation in connection with stock options........ 0 339 Loss from investment in common stock................. 0 13,661 Deferred taxes....................................... 148 (4,970) Cumulative effect of accounting change for income taxes................................................ 0 (2,800) Changes in assets and liabilities: Decrease (increase) in: Accounts receivable................................ 3,293 3,265 Merchandise inventories............................(45,064) (48,000) Prepaid expenses................................... (4,026) 1,301 Other assets....................................... (55) (3,747) Increase (decrease) in: Accounts payable................................... 826 5,915 Accrued expenses and other liabilities............. (4,026) 1,020 Income taxes....................................... 0 (510) Other long-term liabilities........................ (200) 3,702 Proceeds from sale of investment in common stock - trading securities................................... 16,843 0 ------ ------ Net cash (used in) operating activities...................(16,525) (18,583) ------ ------ Cash flows from investing activities: Additions to property and equipment.................... (22,678) (18,463) ------- ------- Cash flows from financing activities: Net short-term borrowings.............................. 30,000 0 Cash dividends......................................... (2,338) (2,338) ----- ----- Net cash provided by (used in) financing activities....... 27,662 (2,338) ------ ----- Net (decrease) in cash and short-term investments......... (11,541) (39,384) Cash and short-term investments - beginning of period..... 39,290 82,270 ------ ------ Cash and short-term investments - end of period........... $27,749 $ 42,886 ====== ====== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest............................................... $ 30 $ 98 Income taxes........................................... $ 202 $ 1,377 Supplemental disclosure of noncash investing and financing activities: $10,000 of Convertible Subordinated Debentures were exchanged for 451 shares of the Company's common stock during the quarter ended April 30, 1994. See notes to consolidated financial statements. PETRIE STORES CORPORATION AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - - ------ In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of April 30, 1994 and the results of operations and cash flows for the three months ended April 30, 1994 and May 1, 1993. The results of operations for the three months ended April 30, 1994 are not necessarily indicative of the results to be expected for the full year. Note 2 - Investments in Common Stock - - ------------------------------------ At April 30, 1994, the Company's investment in common stock consists of Toys "R" Us, Inc. ("Toys") (40,402,488 shares - 14.05%) - A chain of toy specialty retail stores. Effective January 29, 1994, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Accordingly, investments in common stock, classified as trading securities and included in current assets in the accompanying Consolidated Balance Sheet at April 30, 1994, are being carried at market value. Investments in common stock classified as available for sale securities are being carried at market value of $1,379,924,000 with the unrealized gain of $1,224,879,000 net of deferred income taxes of $525,000,000 included in shareholders' equity at April 30, 1994. At January 29, 1994 the unrealized gain amounted to $1,326,777,000 net of deferred income taxes of $565,000,000 was credited to shareholders' equity. Note 3 - Nonrecurring Expenses - - ------------------------------ Nonrecurring expenses relate primarily to legal and real estate consulting expenses incurred in connection with the acquisition agreement entered into with Toys in April 1994. This agreement provides for the exchange of approximately 40 million shares of Toys common stock and cash (up to $250 million) for newly issued shares of Toys common stock, less $115 million. The closing of the transaction is subject to certain conditions as set forth in the agreement. Note 4- Earnings Per Share - - -------------------------- Primary earnings per share has been computed based on the weighted average number of shares outstanding. Fully diluted earnings per share has been computed based on the weighted average number of common and common equivalent shares outstanding assuming exercise of dilutive stock options computed by the treasury stock method and the conversion of the 8% Convertible Subordinated Debentures after elimination of interest (net of taxes) on the convertible debentures. Fully diluted earnings per share are not presented for the three months ended April 30, 1994 and three months ended May 1, 1993 as the effect would be anti-dilutive. Weighted average number of shares for computing fully diluted earnings per share was 52,416,000 for the three months ended April 30, 1994 and 52,509,000 for the three months ended May 1, 1993. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - - ----------------------------------------------------------------------- OF OPERATIONS - - ------------- Revenues - - -------- Net sales increased $5,743,000 (1.7%) for the three months ended April 30, 1994 as compared to the corresponding period last year. This increase was due to an increase in non comparable store sales of approximately $8,000,000 offset by a decrease of $2,500,000 (.8%) in comparable store sales. Other income decreased $638,000 for the three months ended April 30, 1994 as compared to the corresponding period last year due to a decrease in temporary investments. Cost of Goods Sold, Buying and Occupancy Costs (CGS) - - ---------------------------------------------------- As a percentage of sales, CGS decreased approximately .5% for the three-month period ended April 30, 1994 as compared to the corresponding period last year primarily due to a .4% decrease in buying and distribution costs and a .1% increase in gross margin as a result of an improved initial mark up partially offset by an increase in markdowns. Selling, General & Administrative Expenses (S,G&A) - - ------------------------------------------------- S,G&A as a percentage of sales increased approximately .2% for the three-month period ended April 30, 1994 as compared to the corresponding period last year primarily due to an increase of .4% in payroll and employee related costs, offset by a decrease of .1% in depreciation expense. Nonrecurring Expenses - - --------------------- Nonrecurring expenses relate primarily to legal and real estate consulting expenses in connection with the acquisition agreement with Toys (See Note 3). Interest Expense - - ---------------- Interest expense relates primarily to the 8% Convertible Subordinated Debentures. The increase in interest expense during the three months ended April 30, 1994 is due to interest expense associated with the Company's short-term borrowings. (Loss) From Investment in Common Stock - - -------------------------------------- The loss from investment in common stock for the three months ended May 1, 1993 represents the write-down of the Company's investment in Deb Shops, Inc. ("Debs") to market value as of May 1, 1993. Income Taxes - - ------------ The provision for income taxes as a percentage of earnings (loss) before income taxes increased 10.4% for the three-month period ended April 30, 1994 as compared to the corresponding period last year primarily due to an increase in expenses producing no tax benefit. Cumulative Effect of Accounting Change for Income Taxes - - ------------------------------------------------------- Effective January 31, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", which resulted in a deferred tax benefit of $2,800,000, or $.06 per share for the three months ended May 1, 1993. Restructuring - - ------------- In connection with the Company's restructuring plan adopted in fiscal 1994, the Company closed 16 stores in the first quarter of the current fiscal year. The only significant cost savings during the three months ended April 30, 1994 due to the restructuring was a reduction in depreciation expense of approximately $1,100,000 primarily as a result of the elimination of depreciation expense associated with the stores that have not yet been closed as of April 30, 1994. Liquidity and Capital Resources - - ------------------------------- The Company continues to be in a strong financial position. Among the Company's sources of liquidity are its cash and temporary investments, its Toys "R" Us, Inc. ("Toys") common stock, its ability to obtain financing and preferred stock issuances. Pursuant to the acquisition agreement with Toys the Company has restricted its ability to sell shares of Toys common stock to 4,000,000 shares and has restricted its ability to pledge such shares in connection with borrowings to $175,000,000 in secured borrowings. As of April 30, 1994 the Company had $50,000,000 outstanding under a short-term borrowing agreement with a broker. These borrowings were used for capital expenditures, inventory and general working capital requirements. The Company has $107,500,000 in lines of credit available, principally for establishing letters of credit with its suppliers. The Company's holdings in Debs were sold in early April 1994 for approximately $16,800,000 with the proceeds used to reduce short-term borrowings. The Company sold a small portion of its holdings in Toys during June 1994 for approximately $19,200,000 to offset the loss from the sale of Debs stock, with the proceeds from this sale also used to reduce short-term borrowings. Such Toys shares were included in Current Assets under the caption " Investments in Common Stock" in the accompanying Consolidated Balance Sheet at April 30, 1994. The Company's merchandise inventories are historically lower at the end of its fiscal year as compared to the end of its first quarter due to the seasonal nature of the Company's business. The Company has budgeted approximately $45,000,000 for capital expenditures during fiscal 1995, which includes approximately $13,000,000 for new Point of Sale Registers and associated technology. The funds are being provided by working capital and short-term borrowing arrangements. In connection with its Convertible Subordinated Debentures, the Company is obligated to call such debentures pursuant to the acquisition agreement with Toys. The following items measure the Company's ability to meet its short-term obligations: April 30, 1994 January 29, 1994 -------------- ---------------- Working capital $239,562,000 $248,834,000 Current ratio 3.0 3.7 *Working capital consists of current assets less current liabilities. The Company's current ratio has decreased but management believes this will not affect the Company's borrowing capacity. See the Statements of Consolidated Cash Flows for an analysis of the sources and uses of funds for the three months ended April 30, 1994 as compared to the corresponding period last year. PART II - OTHER INFORMATION --------------------------- Item 6 - Exhibits and Reports on Form 8-K (b) During the three months ended April 30, 1994 the Company filed a Form 8-K on April 22, 1994 and a Form 8-K/A on April 27, 1994. These filings refer to the acquisition agreement between the Company and Toys "R" Us, Inc. 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. PETRIE STORES CORPORATION (registrant) /S/ Peter A. Left ------------------------ June 14, 1994 BY Peter A. Left, Vice Chairman, Chief Operating Officer, Chief Financial Officer and Secretary. INDEPENDENT ACCOUNTANTS' REPORT ------------------------------- To The Board of Directors Petrie Stores Corporation We have reviewed the accompanying consolidated balance sheet of Petrie Stores Corporation and subsidiaries as of April 30, 1994 and the related consolidated statements of operations and cash flows for the three-month periods ended April 30, 1994 and May 1, 1993, and the consolidated statements of additional paid-in capital and retained earnings for the three months ended April 30, 1994. These financial statements are the responsibility of the company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as at January 29, 1994 (presented herein), and the related consolidated statements of earnings, shareholders' equity, and cash flows for the year then ended (not presented herein), and in our report, dated March 24, 1994, we expressed an unqualified opinion on those consolidated financial statements. David Berdon & Co. Certified Public Accountants New York, New York June 8, 1994 -----END PRIVACY-ENHANCED MESSAGE-----