ITEM 1 BUSINESS
GENERAL
Charming Shoppes, Inc., a Pennsylvania corporation formed in 1969, operates, through its subsidiary corporations, 1,333 women's specialty apparel stores in 45 states. Unless the context indicates otherwise, the term "Company" refers to Charming Shoppes, Inc. and, where appropriate, one or more of its wholly owned subsidiaries. The Company's "Fashion Bug" stores specialize in selling, at moderate and popular prices, a wide variety of junior, misses, womens, girls and large size sportswear, dresses, coats, suits, lingerie, accessories, and casual footwear to women principally in the 15 to 45 year old age group. The Company's "Fashion Bug Plus" stores sell similar merchandise primarily for the large size woman. The Company also sells men's sportswear, accessories and coats in the majority of its Fashion Bug stores.
The Company's stores sell both brand name merchandise and specially manufactured garments under one of the Company's private labels. The Company's policies of advertising, promotion and the offering of its chain-wide charge card permit the Company to operate successfully in smaller malls and strip shopping centers, as well as in regional malls.
MERCHANDISING AND MARKETING
The Company's policy is to stock each store with a broad selection and full range of sizes of current fashions at moderate and popular prices. Rather than a narrow assortment of high-fashion merchandise targeted at a single age group, the stores offer a broad selection of contemporary and classic clothing which appeals to a wide range of lower middle to middle income customers. Through its merchandise information system, the Company constantly monitors the demands of its customers for style and price in order to restock inventories with a selection desirable to each particular stores' customers. The Company has also responded to demographic changes and consumer preferences by providing greater fashion selection in misses and large sizes and better quality at attractive prices.
Merchandise sold by the Company is produced by a large number of manufacturers in the United States and abroad, and the Company constantly evaluates merchandise that is offered in the world markets. Approximately 77% of the merchandise sold is private label, primarily under the "Stefano" and "Maggie Lawrence" labels. The Company anticipates that the percent of private label merchandise will continue to increase. The private label program was developed as a result of customer demand for better quality merchandise, comparable to certain national brands, at lower prices. Our product developers use a state-of-the-art computer system to design and continually update a wide variety of merchandise. The Company then contracts directly with domestic and foreign manufacturers to have goods manufactured to our specifications (construction, fabric, fit and style), which are sold at attractive prices while providing higher than average mark-up for the Company. Use of the private label program requires the Company to contract for merchandise in advance of its intended selling season, thus exposing the Company to markdowns of merchandise caused by changes in customer preferences. (See "Purchasing")
The Company is promotionally oriented, utilizing an advertising program on radio and in newspapers in the locale of the stores, and making extensive use of direct mail. Additionally the Company advertises at the conclusion of a number of nationally syndicated television programs in an effort to gain exposure to a larger base of potential customers. Pricing policies, displays, store promotions, convenient locations and store hours are also used to attract customers. With the assistance and planning of specialized home office personnel, each store provides such displays and advertising as may be necessary to feature certain merchandise or certain promotional selling prices from time to time.
The retail sale of women's apparel is a highly competitive business with numerous competitors, including individual and chain fashion specialty stores and department stores. The Company cannot estimate the number of competitors or its relative competitive position, due to the large number of companies selling women's apparel. The primary elements of competition are merchandise style, size, selection, quality, display and price, as well as store location, design, advertising and promotion and personalized service to the customers. The Company believes that its strategy in specializing in fashionable merchandise, both for the large size women and for the junior and girls' customers, and its ability to effect volume purchases to pass cost savings to its customers are important elements in its operations.
The Company encourages credit sales on its private label charge card. The private label charge program has approximately 3,400,000 active accounts which account for 37% of retail sales. The Company believes that the charge card is a promotional vehicle in itself, engendering customer loyalty, creating a substantial base for direct mail promotion and encouraging incremental sales. Since 1989 the Company has been repurchasing portions of its credit card receivables from various financial institutions. During October, 1993, the Company completed this repurchase and now controls its entire private label credit card file. The Company has entered into agreements whereby it can sell, on a revolving basis, its accounts receivable and currently all receivables have been sold under these programs. These agreements provide for the Company to continue to service the receivables and control credit policies. This will allow the Company to continue to fund receivable growth, provide customer service and collect past due accounts. Accordingly, its relationship with its credit card customers is not affected by the securitization agreements. The Company's charge card portfolio is administered by Spirit of America National Bank, a national association and wholly-owned subsidiary of the Company. Spirit of America National Bank approves credit applications and a third party performs all billing and collection activities. An increase in short-term interest rates could have an adverse effect on credit costs. The Company uses interest rate caps and swaps in an attempt to mitigate the effect of rising interest rates.
The Company's stores feature wall and selling-floor displays which coordinate merchandise in order to promote multiple sales. The stores, which the Company believes must constantly present a fresh, contemporary shopping environment, are redecorated or fully remodeled as necessary to augment sales. The Company is constantly testing and implementing new store designs and fixture packages aimed at providing an effective merchandise presentation.
The Company emphasizes customer service, including the presence of sales people in the stores, rather than self-service; lay-away plans; and acceptance of merchandise returns for cash or credit within a reasonable time period.
PURCHASING
Purchasing is conducted on a departmental basis for each of the "Fashion Bug" and "Fashion Bug Plus" merchandise groups by a staff of buyers supervised by one or more merchandise managers. The Company believes that specialization of buyers within their departments enhances their expertise in obtaining quality merchandise at a cost which will permit attractive selling prices, while obtaining the desired mark-up for the Company.
The merchandising staff obtains store and chain-wide inventory information generated by a merchandise information system utilizing point of sale terminals, through which merchandise can be followed from the placement of the order to the actual sale. Based upon this data, the merchandise managers compare budgeted to actual sales and make merchandising decisions, as indicated, including re-order, markdowns and changes in the buying plans for upcoming seasons.
The Company does not own or operate any significant manufacturing facilities. During the fiscal year ended January 29, 1994, the Company purchased merchandise from approximately 700 suppliers, none of which accounted for more than 3% of its purchases. The Company's wholly-owned contracting and buying subsidiaries are headquartered in Hong Kong. Through this office the Company conducts its sourcing operations in 24 countries with offices in 15 of these countries. Any event that causes a sudden disruption in the flow of or significantly increases the cost of imported merchandise could have a materially adverse effect on the Company's operations.
DISTRIBUTION
The Company operates two distribution centers. One is located in Bensalem, Pennsylvania, adjacent to the Company's corporate headquarters. This automated facility, which also contains executive, administrative and buying offices, occupies approximately 515,000 square feet. The second distribution facility is located in Greencastle, Indiana. The 150 acre tract of land contains a building of approximately 350,000 square feet. During fiscal 1995 the Company will expand this facility by 175,000 square feet. Upon completion of this expansion, the Company estimates that it will have the ability to service over 2,000 stores from these two distribution centers.
The great majority of merchandise purchased by the Company is received at these centers, where it is prepared for distribution to the stores. The functions performed at these central facilities include quality control inspection, ticketing, packing and shipping. During 1993, the Company implemented an automated sortation system in its Bensalem, Pennsylvania distribution center which will continue to enhance the flow of merchandise from receipt to shipment. This system will be implemented in the Greencastle, Indiana facility during Fiscal 1995. Shipments to each store are made by trucks operated principally by common carriers. The Company utilizes a computerized automated distribution model which has enhanced the efficiency of the distribution department and enables that department to build various attributes into each store's plan to determine not only the number of units, but the type of unit to be distributed to each store.
The Company operates a program of shipping direct from the supplier certain merchandise as a complement to its centralized distribution capability. Direct shipping of certain merchandise increases the Company's flexibility and saves time in the distribution of goods.
STORES
Substantially all of the Company's 1,333 stores are located in enclosed shopping malls and strip shopping centers which are situated primarily in suburban metropolitan areas and smaller towns. The Company's extensive promotional policies enable it to operate stores successfully in a variety of shopping environments, whereas many of its competitors rely principally on regional mall traffic (See "Merchandising and Marketing" above). Typically, stores are open seven days per week, eleven hours per day Monday through Saturday and seven hours on Sunday.
The Company experiences a normal seasonal sales pattern for the retail apparel industry, with its peak sales occurring during the Christmas, Easter and back-to-school seasons and the period preceding Mother's Day. The Company generally builds inventory levels prior to these peak selling periods. To keep inventory current and fashionable, the Company reduces the price of slow moving merchandise throughout the year. End of season sales are conducted with the objective of carrying a minimal amount of seasonable merchandise over from one season to another. Sales for the four quarters of the fiscal year ended January 29, 1994, as a percent of total sales, were 21.9, 24.6 , 25.0 and 28.5, respectively.
The "Fashion Bug" stores range in size, generally, from 6,000 square feet to 16,000 square feet, averaging approximately 8,900 square feet. The "Fashion Bug Plus" stores range in size, generally, from 3,000 square feet to 5,000 square feet, averaging approximately 3,900 square feet. Total square feet of leased space as of the fiscal year ended January 29, 1994, increased to 11,468,000 from 9,695,000 as of the fiscal year ended January 30, 1993, a 18.3% increase.
The Company has pursued an aggressive store expansion policy over the past five fiscal years, as set forth in the following tables:
The Company anticipates a net increase of approximately 125 stores during the 1995 fiscal year. The Company also plans to expand or remodel 80 existing stores. The new and expanded stores will average approximately 12,000 square feet in size and will result in a 17% increase in square feet of leased space during fiscal 1995. The factors considered in locating new stores and closing existing stores include the demographics of the surrounding area, the availability of suitable locations, competition in the immediate area, negotiation of satisfactory lease terms, the principal specialty and "anchor" stores, expected customer traffic and the location of the Company's store within the shopping center.
STORE MANAGEMENT AND EMPLOYEES
All stores are operated under the direct management of the Company. Each store has a manager and an assistant manager who are in daily operational control. The Company's 184 supervisors travel to all stores on a frequent basis, to supervise store operations. Generally, store managers are appointed from the group of assistant managers, and supervisors are appointed from the group of existing store managers. It is a policy of the Company to motivate its store personnel through promotion from within, with competitive wages and various incentive, medical and retirement plans. Store operational and purchasing policies are developed centrally, leaving individual store management with the principal duties of display, selling and reporting through point of sale terminals. As of January 29, 1994, the Company employed approximately 15,900 people, approximately 7,800 of whom were employed on a part-time basis. In addition, a number of temporary employees are hired during the Christmas season.
TRADEMARK AND SERVICEMARKS
"Fashion Bug" (R), "Fashion Bug Plus" (R), "Glitter" (R), "Intimate Moments" (R), "Sopre" (R),"Maggie Lawrence Collection" (R), "Stefano" (R), "Stefano Man" (R), "Styles to Fit Every You" (R), "L.A. Blues" (R), "Fashion Bug Fits Your Life" (R), "Details" (R) and several other trademarks and servicemarks of lesser importance to the Company have been registered with the United States Patent and Trademark Office and in other countries.
ITEM 2
ITEM 2 PROPERTIES
The Company primarily leases all store premises. During Fiscal 1994, four stores opened on premises which are owned by the Company. Typically, store leases have initial terms of 5 to 20 years and contain provisions for renewal options, additional rentals based on a percentage of sales and payment of real estate taxes and common area charges. With respect to stores open as of January 29, 1994, the following table shows the number of store leases expiring during the periods indicated, assuming the exercise of the Company's renewal options:
The Company owns a 515,000 square foot distribution center in Bensalem, Pennsylvania and a 350,000 square foot distribution center in Greencastle, Indiana (see Item 1 "Business - Distribution").
The Company owns approximately 22 acres in two parcels across the street from the Company's existing offices and distribution center in Bensalem, Pennsylvania. This 22 acre tract contains a 110,000 square foot office building which houses the Company's data processing facility and additional administrative offices. Spirit of America National Bank, the Company's private label credit card operation, occupies 13,000 square feet of leased office space in Milford, Ohio. The Company owns a total of 60,000 square feet of office and warehouse space in Hong Kong.
ITEM 3
ITEM 3 LEGAL PROCEEDINGS
On December 10, 1993, the Company and a wholly owned subsidiary received federal grand jury subpoenas seeking the production of certain leases to which store operating subsidiaries of the Company ("Store Subsidiaries") are parties and other related documents. The subpoenas were issued in conjunction with an investigation by the United States Attorney in Philadelphia, Pennsylvania concerning the Store Subsidiaries' claims for payment of "construction allowances" from certain of their landlords. The allowances, which were negotiated between the Store Subsidiaries and the landlords of certain of their retail stores, relate to expenses incurred in altering and furnishing the landlords' premises to make such space suitable for conducting the Store Subsidiaries' retail operations. The Company has been providing information in response to the subpoenas and continues to cooperate with the office of the United States Attorney. In view of the fact that the investigation is in a preliminary stage, the Company lacks sufficient information to determine the outcome of the investigation at this time.
ITEM 4
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year.
ITEM 4A EXECUTIVE OFFICERS OF THE REGISTRANT
The following list contains certain information relative to Executive Officers of the Company. There are no family relationships among any Executive Officers, except that David V. Wachs is the father of Philip and Michael Wachs. The term of each Executive Officer expires at the next annual meeting of the Board of Directors following the Annual Meeting of Shareholders scheduled to be held during June, 1994, or until their successors are duly elected and qualified.
David V. Wachs, 68, has been Chairman of the Board since 1971 and Chief Executive Officer since February, 1988. He also served as President of the Company from January, 1989 until March, 1990 when he was succeeded as President by Philip Wachs. Mr. Wachs' term as a Director expires in 1996.
Philip Wachs, 38, has been President and Chief Operating Officer since March, 1990 and Vice Chairman of the Board since June, 1989. Prior to his appointment as President, he served as Executive Vice President - Real Estate for over five years. Mr. Wachs' term as a Director expires in 1995.
Samuel Sidewater, 56, has served as a Director since September, 1988. He has served as Executive Vice President - New Business Development since August, 1990, and prior to that time he served as Executive Vice President - Merchandising for more than five years. Mr. Sidewater's term as a Director expires in 1996.
Mordechay Kafry, 41, has served as a Director since January, 1990, and as Executive Vice President - Merchandise Procurement for more than five years. Mr. Kafry's term as a Director expires in 1994.
Ivan M. Szeftel, 40, has served as Executive Vice President - Finance for more than five years.
Anthony A. DeSabato, 45, has served as Executive Vice President and Corporate Director of Human Resources since March, 1990. He served as Vice President - Human Resources from January, 1988 through March, 1990.
Colin D. Stern, 45, has served as Executive Vice President and General Counsel since March, 1990. Prior to that time, he served as Vice President and General Counsel from November, 1989. Prior to November, 1989, Mr. Stern was a partner in the law firm of Cohen, Shapiro, Polisher, Shiekman and Cohen, Philadelphia, Pennsylvania, during the period from January, 1984 through October, 1989. Mr. Stern was a member of the corporate law department of that firm.
Michael Wachs, 34, has served as Executive Vice President - Real Estate since April 1, 1993. Prior to that time, he served as Vice President - Real Estate.
Bernard Brodsky, 54, has served as Vice President, Treasurer and Secretary for more than five years.
Ben Mento, 44, has served as Vice President - Director of Store Operations for more than five years.
Eric Specter, 36, has served as Vice President - Corporate Controller for more than five years.
PART II
ITEM 5
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS' MATTERS
(a) PRINCIPAL MARKET: The Company's Common Stock is traded on the over-the-counter market and quoted on the NASDAQ National Market System under the symbol CHRS.
(b) The following table sets forth the high and low closing sale prices for the Company's Common Stock during the indicated periods, as reported by NASDAQ, and the amount of cash dividend declared by the Company on its Common Stock during the indicated periods.
On March 9, 1994, (first quarter of fiscal 1995), the Company declared a quarterly dividend of $.0225 per share to shareholders of record on March 25, 1994.
(c) Approximate Number of Holders of Common Stock:
The approximate number of holders of record of the Company's Common Stock as of February 28, 1994, was 4,499.
ITEM 6
ITEM 6 SELECTED FINANCIAL DATA
The following table presents selected financial data for the Company for each of the five fiscal years ended, as of February 3, 1990 through January 29, 1994. All of the selected financial data are extracted from the Company's audited financial statements and should be read in conjunction with the financial statements and the notes thereto included under Item 8 of this Form 10-K.
CHARMING SHOPPES, INC. AND SUBSIDIARIES
(in thousands except per share amounts)
FIVE YEAR COMPARATIVE SUMMARY
ITEM 7
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FINANCIAL SUMMARY
The following table sets forth certain financial data expressed as a percentage of net sales and on a comparative basis:
*Net Income for Fiscal 1994 is before the cumulative effect of an accounting change of $3,991,000 or $.04 per share.
NET SALES
Net sales for the fiscal year ended January 29, 1994 ("Fiscal 1994"), totaled $1,254,122,000 as compared to $1,178,714,000 for the fiscal year ended January 30, 1993 ("Fiscal 1993"), a 6.4% increase. The Company had a 1.8% decrease in sales of existing stores compared to Fiscal 1993. 11.7% of Fiscal 1994 sales relate to stores opened in that year. Sales of stores closed during Fiscal 1994 accounted for 3.5% of Fiscal 1993 sales. The net sales increase of 15.5% in Fiscal 1993 was primarily attributable to the net addition of new stores and a 6.5% increase in comparable stores sales. The number of retail stores increased from 1,220 on January 30, 1993 to 1,333 on January 29, 1994.
Sales for the fourth quarter of Fiscal 1994 totaled $357,186,000 as compared to $337,167,000 for the corresponding period of Fiscal 1993, a 5.9% increase. The Company had a 2.9% decrease in quarterly sales for existing stores as compared to the prior year. 12.1% of the quarterly sales are attributable to new stores opened during Fiscal 1994. Sales for stores closed during Fiscal 1994 accounted for 3.3% of Fiscal 1993 fourth quarter sales.
Net sales increased 14.1% for the fourth quarter of Fiscal 1993 as compared to the corresponding period during the fiscal year ended February 1, 1992 ("Fiscal 1992"). This increase in sales was primarily due to newly opened stores and a 6.0% increase in comparable store sales.
COST OF GOODS SOLD, BUYING AND OCCUPANCY
Cost of goods sold, buying and occupancy expenses expressed as a percentage of sales increased 0.6% in Fiscal 1994 over the prior year and decreased 0.8% in Fiscal 1993 over Fiscal 1992. The Company's cost of goods sold percentage decreased during Fiscal 1994 and Fiscal 1993. During Fiscal 1994 the Company's cost of goods sold percentage decreased as a result of cost reductions achieved through the direct sourcing of private label merchandise. During Fiscal 1993 the Company was able to increase merchandise margins through improvements in its overall merchandise assortments which were refined through the use of enhanced analysis and distribution systems to meet local consumer preferences.
As a percentage of sales, buying and occupancy expenses increased in Fiscal 1994 as a result of the spreading of these relatively fixed costs over decreased comparable store sales. In Fiscal 1993 buying and occupancy expenses decreased as a percentage of sales due to the implementation of cost control measures in the areas of stores rents and utilities and the effect of higher comparative store sales relative to fixed expenses.
Cost of goods sold, buying and occupancy expenses comprised the same percentage of sales in the fourth quarter of Fiscal 1994 as compared to the corresponding period of Fiscal 1993 and increased 0.1% in the fourth quarter of Fiscal 1993 as compared to the corresponding period of Fiscal 1992. During the fourth quarters of Fiscal 1993 and 1994, the Company's cost of goods sold percentage decreased. For Fiscal 1994 this improvement was the result of cost savings achieved through direct sourcing of private label merchandise. In Fiscal 1993 the Company experienced a less promotional selling environment and an improved merchandise mix. In Fiscal 1994 these improved margins were offset by the effect of fixed buying and occupancy expenses on lower comparable store sales. In Fiscal 1993 costs associated with store closings offset the effect of improved margins.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses, expressed as a percentage of sales increased 0.7% in Fiscal 1994 over Fiscal 1993 and decreased 0.8% in Fiscal 1993 over Fiscal 1992. The primary reason for the increase in Fiscal 1994 was the effect of lower comparative store sales to these relatively fixed expenses. The primary reasons for the decrease in Fiscal 1993 were the favorable effect of the interest rates on the costs of the Company's private label credit card program and the effect of higher comparative store sales to relatively fixed expenses.
INTEREST EXPENSE
Interest expense decreased in Fiscal 1994 and Fiscal 1993 primarily due to lower interest rates and a reduction in long-term debt.
PROVISION FOR INCOME TAXES
The effective tax rates were 32.2%, 31.9%, and 31.8% for Fiscal 1994, 1993 and 1992, respectively. The increase in the effective tax rate for Fiscal 1994 was primarily the result of an increase in the federal statutory rate from 34% to 35%. The effective tax rate for Fiscal 1993 was comparable to the rate in Fiscal 1992.
PERFORMANCE ANALYSIS
The following ratios measure the Company's overall performance as shown by the return on average stockholders' equity and return on average total assets.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operations and the Company's capital structure provide the resources needed to support both current operations and future growth. The following ratios measure the Company's ability to meet its short-term obligations:
The Company considers, and currently uses for internal management purposes, the following measures of liquidity and capital resources:
Cash provided by operating activities represents the Company's primary source of liquidity and capital. Cash provided by operating activities amounted to $90.2 million in Fiscal 1994 as compared to $98.8 million in Fiscal 1993.
The primary reason for the decrease in operating cash flow was an increase in the net investment in inventory (increase in inventory less increase in accounts payable) which was partially offset by an increase in accrued expenses. This additional inventory was the result of a 7% increase in average inventory per store and additional inventory in transit due to the higher level of imported private label merchandise. The increase in accrued expenses resulted from the acquisition and simultaneous sale of the Company's private label credit card receivables which resulted in an increase in the limited recourse liability established for sold receivables.
The Company operates a proprietary credit card program for customers of its stores. The Company had previously sold the receivables generated from these credit sales ("Receivables") to various financial institutions. To increase its control over this credit card program, the Company has been repurchasing these Receivables. During Fiscal 1994, the Company repurchased $186.9 million of Receivables which completed the acquisition of its entire private label credit card file.
In conjunction with these repurchases the Company has entered into various securitization agreements whereby it can sell, on a revolving basis, for a specified term, up to $400 million of Receivables. When the revolving period terminates, an amortization period begins whereby the principal payments are paid to the party with whom the Company has entered into the securitization agreement. Through the end of Fiscal 1994 the Company had sold $380.7 million of Receivables of which $186.9 million were sold during Fiscal 1994. Receivables are sold under these agreements at face value.
These securitization agreements improve overall liquidity and lessen the effect of interest rate volatility by replacing short term sources of funding. Under certain agreements the Company is subject to limited recourse if credit losses exceed designated limits. The Company has established an accrual of $29.2 million which management believes is an adequate reserve against any such uncollected receivables.
These agreements provide for the Company to continue to service the receivables and control credit policies. This will allow the Company to continue to fund receivable growth, provide customer service and collect past due accounts. Accordingly, its relationship with its credit card customers is not affected by the securitization agreements.
The increased investment in other assets is primarily related to investments in joint ventures relating to the Company's direct sourcing operation and an increase in fixed assets not placed in service.
The Company believes that its liquidity and capital resources are sufficient to sustain current operations and provide for accelerated future growth.
CAPITAL REQUIREMENTS
Capital expenditures amounted to $79.0 million, $65.0 million, and $46.7 million in Fiscal 1994, 1993 and 1992, respectively. These expenditures were primarily for new store construction, the remodeling and expansion of existing stores and the expansion of the Company's Greencastle, Indiana distribution center.
During fiscal 1995, the Company anticipates capital expenditures of approximately $88 million which are principally for the construction of approximately 170 new stores and the remodeling and expansion of existing stores. This budget also includes $15 million to complete the expansion of its distribution center in Greencastle, Indiana. In both fiscal 1995 and 1996, the Company has scheduled debt maturity payments of $5.0 million. It is anticipated that the capital required for these expenditures and debt payments will be financed principally through internally generated funds.
Cash dividends were $9,236,000 during Fiscal 1994 as compared to $8,176,200 during Fiscal 1993.
INFLATION
The Company's financial statements are presented on a historical cost basis. The Company believes that the impact of inflation during Fiscal 1994 has not been material to its financial condition and results of operations.
ITEM 8
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors Charming Shoppes, Inc. Bensalem, Pennsylvania
We have audited the accompanying consolidated balance sheets of Charming Shoppes, Inc. and subsidiaries as of January 29, 1994 and January 30, 1993 and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three fiscal years in the period ended January 29, 1994. Our audits also included the financial statement schedules listed in the Index as Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedules are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedules. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement and schedule presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Charming Shoppes, Inc. and subsidiaries at January 29, 1994 and January 30, 1993 and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended January 29, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
As discussed in the Notes to Consolidated Financial Statements, the Company changed its method of accounting for income taxes in Fiscal 1994.
ERNST & YOUNG
Philadelphia, Pennsylvania March 8, 1994
CONSOLIDATED BALANCE SHEETS
CHARMING SHOPPES, INC. AND SUBSIDIARIES (in thousands except share and per share amounts)
CONSOLIDATED STATEMENTS OF INCOME
CHARMING SHOPPES, INC. AND SUBSIDIARIES (in thousands except shares and per share amounts)
CONSOLIDATED STATEMENTS OF CASH FLOWS
CHARMING SHOPPES, INC. AND SUBSIDIARIES (in thousands)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CHARMING SHOPPES, INC. AND SUBSIDIARIES (in thousands except shares)
See Notes to Consolidated Financial Statements
CHARMING SHOPPES, INC. AND SUBSIDIARIES Year Ended January 29, 1994
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS The Company operates a chain of specialty stores merchandising moderately priced junior, misses, plus and children's size sportswear, dresses, coats, lingerie accessories and casual footwear. A limited assortment of men's sportswear is also available in most stores.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All significant intercompany accounts and transactions are eliminated. The parent and its subsidiaries have a 52-53 week fiscal year ending the Saturday nearest January 31.
FOREIGN OPERATIONS The Company follows the practice of using a December 31 fiscal year for all foreign subsidiaries in order to expedite the year-end closing.
CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. These amounts are stated at cost which approximates market value.
SHORT-TERM INVESTMENTS Short-term investments include investments with an original maturity of greater than three months and a remaining maturity of less than one year. Short-term investments are stated at cost which approximates market value.
INVENTORIES Merchandise inventories are valued at the lower of cost or market as determined by the retail method (average cost basis).
PROPERTY AND DEPRECIATION Depreciation and amortization for financial reporting purposes are principally computed by the straight-line method over the estimated useful lives of the assets, or in the case of leasehold improvements, over the lives of the respective leases. Accelerated depreciation methods are used for income tax reporting purposes. Depreciation expense was $36,417,000, $29,575,000, and $26,617,000 in fiscal 1994, 1993, and 1992, respectively.
COMMON STOCK PLANS Deferred compensation expense relating to Employee Stock Option and Stock Incentive Plans is amortized over the required employment period.
CHARMING SHOPPES, INC. AND SUBSIDIARIES Year Ended January 29, 1994
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME TAXES Effective January 31, 1993, the Company adopted Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes" and has separately reported the cumulative effect of that change in the Consolidated Statement of Income for the fifty-two weeks ended January 29, 1994. SFAS 109 requires a change from the deferred method of accounting for income taxes under APB Opinion 11 to the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are adjusted to reflect the effect of changes in enacted tax rates on expected reversals of financial statement and income tax carrying value differences. As permitted by SFAS 109, the Company has elected not to restate the financial statements for any prior years. The effect of the change on pretax income from continuing operations for the twelve months ended January 29, 1994 was not material; however, the cumulative effect of the change increased net income by $3,991,000 or $0.04 per share.
U.S. Income Taxes have not been provided on undistributed earnings of foreign subsidiaries accumulated prior to January 29, 1994, because the Company intends to reinvest such undistributed earnings in the operations. Presently, income taxes would not be significantly increased if such earnings were remitted because of available foreign tax credits.
NET INCOME PER SHARE Net income per common share is based on the weighted average number of shares and share equivalents outstanding during each fiscal year. Common stock equivalents include the effect of dilutive stock options.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CHARMING SHOPPES, INC. AND SUBSIDIARIES Year Ended January 29, 1994
FINANCIAL INSTRUMENTS The Company has entered into various agreements whereby it can sell, on a revolving basis, up to $400,000,000 of the Company's private label credit card accounts receivable. Through the end of fiscal 1994, the Company has sold a total of $380,678,000 of which $186,857,000, $54,826,000 and $92,754,000 were sold during the fiscal years ended January 29, 1994, January 30, 1993 and February 1, 1992, respectively. As of January 29, 1994 and January 30, 1993, $380,678,000 and $197,373,000 remained to be collected, respectively. The Company remained contingently liable for approximately $29,316,000 of the sold receivables. The Company has established an accrual of $29,225,000 which management believes is an adequate reserve against any such uncollected receivables. Net accounts receivable finance income is included in selling, general and administrative expenses.
The Company uses interest rate swaps and caps to manage its exposure to interest rate fluctuations. The Company has entered into three interest rate swap agreements with notional principal amounts totaling $100 million. These agreements, which expire in July, 1996, effectively converted the variable interest rate utilized in a portion of the sale settlement transactions described above to a fixed rate. The Company has also entered into three interest rate cap agreements with notional principal amounts totaling $300 million. These agreements expire between October 1994 and February 1996. Net receipts or payments under these agreements are recognized as an adjustment to selling, general and administrative expenses.
At January 29, 1994 these swap agreements had a fair value of ($657,500) and the caps had a fair value of $0. The fair value is an estimated amount that the Company would receive or pay to terminate the agreement at the reporting date, taking into account current interest rates and the credit worthiness of the counterparties.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
LONG-TERM INVESTMENTS
The carrying amounts and fair values of long-term investments based on quoted market prices are as follows:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CHARMING SHOPPES, INC. AND SUBSIDIARIES Year Ended January 29, 1994
INCOME TAXES
The Company adopted SFAS 109 as of January 31, 1993. The cumulative effect of this change in accounting for income taxes of $3,991,000 is determined as of January 31, 1993 and is reported separately in the consolidated statement of income for the year ended January 29, 1994.
Income tax expense attributable to income from continuing operations consists of:
The components of deferred income tax expense of $2,007, for the year ended January 29, 1994 are all attributable to income from continuing operations.
The components of deferred income tax expense for the years ended January 30, 1993 and February 1, 1992 are as follows:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CHARMING SHOPPES, INC. AND SUBSIDIARIES Year Ended January 29, 1994
Prepayments and other assets include deferred income taxes of $9,418,000 at January 30, 1993. The Company made income tax payments of $33,674,000, $30,778,000 and $19,604,000 for the years ended January 29, 1994, January 30, 1993 and February 1, 1992, respectively.
The components of deferred tax assets and liabilities at January 29, 1994 are as follows:
Net current deferred taxes are included in prepayments and other current assets.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CHARMING SHOPPES INC. AND SUBSIDIARIES Year Ended January 29, 1994
A reconciliation of the effective tax rate with the statutory federal income tax rate follows:
The components of income before income taxes and the cumulative effect of an accounting change consist of the following:
DEBT
Long-term debt at year end consisted of the following:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CHARMING SHOPPES INC. AND SUBSIDIARIES Year Ended January 29, 1994
The mortgages are collateralized by buildings with a net book value of $8,893,000.
During the fiscal years ended January 29, 1994, January 30, 1993, and February 1, 1992 the Company made interest payments of $2,687,500, $3,094,900, and $3,319,300, respectively.
The carrying amount of the Company's variable rate debt approximates their fair value.
The fair value of the Company's $21,428,000 9.3% Note payable is estimated to be $23,285,000 using discounted cash flow analysis based on an estimate of the Company's current rate for similar borrowing arrangements.
Aggregate maturities of long-term debt during the next five fiscal years are:
STOCKHOLDERS' EQUITY
The Company's authorized capital consists of 1,000,000 shares of Series Participating Preferred Stock, $1.00 par value, of which 300,000 shares of Participating Series A Junior Preferred Stock, $1.00 par value have been authorized; and 300,000,000 shares of Common Stock, $.10 par value.
STOCK OPTION AND STOCK INCENTIVE PLANS
Effective April 1, 1993, and approved by shareholders at the 1993 annual meeting, the 1993 Employee's Stock Incentive Plan was adopted. The number of shares of common stock available for issuance under the Plan are 9,000,000 plus 9% of shares issued by the Company after the effective date of the plan and any shares available but unissued under the 1990 Plan described below. The form of the grants and exercise price where applicable, are at the discretion of the Stock Option Committee of the Board of Directors.
The Company's 1990 Employees' Stock Incentive Plan provides for the grant of options to purchase common stock to key employees of the Company. The exercise price of such options may not be less than the fair market value at the date of the grant. As a result of the adoption of the 1993 Employees' Stock Incentive Plan, the Company no longer intends to issue shares under this Plan. As of January 29, 1994, 3,468,682 options were exercisable.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CHARMING SHOPPES, INC. AND SUBSIDIARIES Year Ended January 29, 1994
The Company's 1989 Non-Employee Director Stock Option Plan provides for the grant of options to purchase up to 30,000 shares of common stock to each member of the Board of Directors who are non-employees of the Company. The exercise price of such options shall be equal to the fair market value of the stock on the date that the option is granted. As of January 29, 1994, 60,000 options were exercisable.
The Company's 1988 Key Employee Stock Option Plan provides for the grant of options to purchase up to 3,000,000 shares of common stock to key employees of the Company. The exercise price of options granted under this plan is $1.00 per share. As of January 29, 1994, 534,102 options were exercisable.
The table below summarizes the activity in all Stock Option Plans:
At January 29, 1994, 8,072,457 shares were available for future grant under the 1988 Key Employee Stock Option, and the 1993 Employees' Stock Incentive plans.
The Company's Non-Employee Directors Restricted Stock Plan provides for a one time grant of 5,000 shares of restricted stock to each member of the Board of Directors who are non-employees of the Company at the time of the inception of this plan and a pro-rata grant to each non- employee Director who is elected thereafter. Directors will pay no cash consideration for the restricted stock granted to them. 40,000 shares of the Company's common stock have been reserved for issuance under this plan of which 3,250, 4,084 and 15,000 shares were issued during the fiscal years ended January 29, 1994, January 30, 1993 and February 1, 1992 respectively.
The Company's Managers' Stock Incentive Program provides for the grant to purchase Common Stock for $.10 per share to store managers. During the fiscal years ended February 1, 1992, the Company issued 122,358 to store managers under the program. The Company no longer intends to issue shares under this program.
The shares issued and options granted under the above plans are subject to forfeiture if the employees do not remain in the employ of the Company for a specified period of time, or, in the case of the 1989 Non-Employee Director Stock Option Plan, if the individual ceased to remain a Director of the Company.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CHARMING SHOPPES, INC. AND SUBSIDIARIES Year Ended January 29, 1994
SHAREHOLDER RIGHTS PLAN
In April 1989, the Board of Directors adopted a Shareholder Rights Plan and declared a dividend of one Right for each outstanding share of Common Stock. In connection with the Company's two-for-one stock split which was effected on December 7, 1992, the number of Rights associated with each outstanding share of Common Stock was adjusted from one Right per share of Common Stock to one-half of a Right per share of Common Stock. Such Rights only become exercisable or transferable apart from the Common Stock, ten days after a person or group (Acquiring Person) acquires beneficial ownership of, or commences a tender or exchange offer for twenty percent (20%) or more of the Company's outstanding common shares. Each Right then may be exercised to acquire one three-hundredth of a share of newly created Series A Junior Participating Preferred Stock or a combination of securities and assets of equivalent value at a price of $70, subject to adjustment.
Upon the occurrence of certain events (for example, if the Company is a surviving corporation in a merger with an Acquiring Person), the Rights entitle holders other than the Acquiring Person to acquire Common Stock having a value of twice the exercised price of the Rights, or, upon the occurrence of certain other events (for example, if the Company is acquired in a merger or other business combination transaction in which the Company is not the surviving corporation), to acquire Common Stock of the Acquiring Person having a value twice the exercise price of the Rights. The Rights may be redeemed by the Company at $.01 per Right at any time until the tenth day following public announcement that a twenty percent (20%) position has been acquired. The Rights will expire on April 26, 1999.
EMPLOYEE RETIREMENT BENEFIT PLAN
The Company provides a comprehensive retirement benefit program for its employees.
The Plan provides for a noncontributory profit sharing contribution which covers substantially all full-time employees who meet age and service requirements. The contribution is completely discretionary and is determined by the Board of Directors on an annual basis.
The Plan also provides an employee savings provision (401(k) plan) whereby eligible participating employees may elect to contribute up to 15% of their compensation to an investment trust. The Company contributes an amount equal to 30% of the participant's elective contribution, up to 6% of the participant's compensation.
The total expense for the above plan amounted to $3,323,000, $3,039,000, and $2,739,000 for the years ended January 29, 1994, January 30, 1993, and February 1, 1992, respectively.
LEASES
The Company leases all of its stores under noncancelable lease agreements. Generally, these leases have initial periods of 5 to 20 years and contain provisions for renewal options, additional rentals based on a percentage of sales and payment of certain real estate taxes.
In November 1991, the Company completed a sale and leaseback agreement for $21.0 million of point-of-sale equipment. Under the terms of this agreement, the Company has agreed to leaseback this equipment under a three-year lease with a two-year option for $4.0 million per year.
The Company also leases certain other buildings and equipment.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CHARMING SHOPPES, INC. AND SUBSIDIARIES Year Ended January 29, 1994
LEASES
Minimum annual rental commitments for all noncancelable leases for the next five fiscal years and thereafter are:
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
ITEM 9
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are no matters which are required to be reported under this Item 9.
PART III
ITEM 10
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding Directors of the Company is set forth under the caption "Election of Directors" of the Company's definitive proxy statement which is incorporated herein by reference. Information regarding Executive Officers is set forth herein under Item 4A. "Executive Officers of the Registrant", in Part I hereof.
ITEM 11
ITEM 11 EXECUTIVE COMPENSATION
Information regarding executive compensation is set forth under the captions "Management Compensation" and "Report of the Compensation and Stock Option Committees of the Board of Directors on Executive Compensation" of the Company's definitive proxy statement which is incorporated herein by reference.
ITEM 12
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding the security ownership of certain beneficial owners and management is set forth under the caption "Principal Shareholders and Management Ownership" of the Company's definitive proxy statement which is incorporated herein by reference.
ITEM 13
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is set forth under the caption "Certain Relationships and Related Transactions" of the Company's definitive proxy statement which is incorporated herein by reference.
PART IV
ITEM 14
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The following Consolidated Financial Statements of Charming Shoppes, Inc. and its subsidiaries are included in Part II, Item 8:
(a) (2) FINANCIAL STATEMENT SCHEDULES
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
REPORTS ON FORM 8-K: No reports required to be filed
EXHIBITS, INCLUDING THOSE INCORPORATED BY REFERENCE
The following is a list of Exhibits filed as part of this annual report on Form 10-K. 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 indicated in parenthesis. The page numbers listed refer to the page numbers where such Exhibits are located using the sequential numbering system specified by Rules 0-3 and 403:
ARTICLES OF INCORPORATION AND BY-LAWS
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
4.1 Shareholders' Rights Plan, incorporated by reference to Form 8-K, filed on May 23, 1989.
MATERIAL CONTRACTS
10.1.1 Note Agreement between the Registrant and Various Insurance Companies for $30,000,000 dated June 1, 1988 and incorporated by reference to Form 10-K of the Registrant for the year ended January 28, 1989. (Exhibit 10-1, Pg. 63).
10.1.2 Sale and Purchase Agreement between Fashion Service Corp. and BancOhio National Bank dated July 27, 1988 and incorporated by reference to Form 10-K of the Registrant for the year ended January 28, 1989. (Exhibit 10-1, Pg. 96).
10.1.3 Receivables Purchase Agreement between Fashion Service Corp. and Mellon Bank, N.A. dated April 4, 1989 and incorporated by reference to Form 10-K of the Registrant for the year ended January 28, 1989 (Exhibit 10-1, Pg. 114).
10.1.4 Amended and restated Receivables Purchase Agreement among Spirit of America National Bank as Seller, Fashion Service Corp. and Charming Shoppes, Inc. as Guarantors and Mellon Bank, N.A., as Buyer dated November 14, 1991, and incorporated by reference to Form 10-K of the Registrant for the year ended February 1, 1992 (Exhibit 10-1, Pg. 38).
10.1.5 Participation Agreement between the Registrant, Charming Shoppes of Delaware, Inc., and various financial services companies for Lease Financing of Point-of-Sale Equipment dated October 31, 1991, and incorporated by reference to Form 10-K of the Registrant for the year ended February 1, 1992 (Exhibit 10-1, Pg. 161).
10.1.6 Agreement and Lease between Charming Shoppes of Delaware, Inc., as Lessee and Mellon Financial Services Corporation as Lessor dated October 31, 1991 and incorporated by reference to Form 10-K of the Registrant for the year ended February 1, 1992 (Exhibit 10-1, Pg. 214).
10.1.7 Pooling and Servicing Agreement between Spirit of America National Bank as Seller and Servicer and Fidelity Bank, N.A., as Trustee for Spirit of America Master Trust, dated December 24, 1992 and incorporated by reference to Form 10-K of the Registrant for the year ended January 30, 1993 (Exhibit 10-1, Pg. 62).
10.1.8 Receivables Purchase Agreement among Fidelity Bank, N.A., as Trustee for Spirit of America Master Trust, as Seller, Fashion SPC, Inc., as Subordinated Purchaser, Spirit of America National Bank, as Owner and Servicer, Ciesco L.P., Corporate Asset Funding Company, Inc., and Corporate Receivables Corporation, as Purchasers and Citicorp North America, Inc., as Agent, dated December 24, 1992 and incorporated by reference to Form 10-K of the registrant for the year ended January 30, 1993 (Exhibit 10-1, Pg. 184).
10.1.9 Parallel Purchase Commitment among Fidelity Bank, N.A., as Trustee, Spirit of America Master Trust, as Seller, Fashion SPC, Inc., as Subordinated Purchaser, Spirit of America National Bank, as Owner and Servicer, Citibank, N.A., and Citicorp North America, Inc., as Agent, dated December 24, 1992 and incorporated by reference to Form 10-K of the registrant for the year ended January 30, 1993 (Exhibit 10-1, Pg. 404).
*10.1.10 Amendment Agreement, dated September 20, 1993 to Receivables Purchase Agreement dated December 24, 1992 (Referenced in Exhibit 10.1.8)
10.1.11 Amendment Agreement, dated September 20, 1993 to Parallel Purchase Agreement dated December 24, 1992 (Referenced in Exhibit 10.1.9)
*10.1.12 Sale and Purchase Agreement between National City Bank, Columbus, N.A. and Fashion Service Corp., dated September 30, 1993
EMPLOYEE BENEFIT PLANS AND AGREEMENTS
10.2.1 Key Employee Stock Incentive Program, filed September 13, 1984 under Amendment No. 1 to Registration Statement #2-92795 and incorporated herein by reference.
10.2.2 The 1986 Employees' Stock Option Plan of Charming Shoppes, Inc., and incorporated by reference to Form 10-K of the Registrant for the year ended February 1, 1992 (Exhibit 10.2.2, pg. 240)
10.2.3 The 1988 Key Employee Stock Option Plan of Charming Shoppes, Inc., as amended incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1993 (Exhibit 10.2.3, pg. 486)
10.2.4 The 1990 Employees' Stock Incentive Plan of Charming Shoppes, Inc., as amended incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1993 (Exhibit 10.2.4, pg. 492)
10.2.5 The 1989 Non-Employee Director Stock Option Plan of Charming Shoppes, Inc., as amended incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1993 (Exhibit 10.2.5, pg. 499)
10.2.6 Non Employee Director Restricted Stock Plan as amended incorporated by reference to Form 10-K of the Registrant for the fiscal year ended January 30, 1993 (Exhibit 10.2.6, pg. 503)
10.2.7 Consulting Agreement with Ellis Wachs, dated as of March 2, 1990, effective April 27, 1991, incorporated by reference to From 10-K of the Registrant for the fiscal year ended February 3, 1990 (Exhibit 10.2.8)
10.2.8 Employment Agreement with Colin D. Stern dated as of October 3, 1989, incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 1, 1992 (Exhibit 10.2.12, Pg. 245)
10.2.9 Subplan and Summary Description of the Annual Incentive Plan of Charming Shoppes, Inc., incorporated by reference to Form 10-K of the Registrant for the fiscal year ended February 1, 1992 (Exhibit 10.2.13, Pg. 251)
10.2.10 The 1993 Employees' Stock Incentive Plan of Charming Shoppes, Inc.
10.2.11 The 1993 Employees' Stock Incentive Plan Stock Option Agreement (regular vesting schedule) of Charming Shoppes, Inc.
10.2.12 The 1993 Employees' Stock Incentive Plan Stock Option Agreement (accelerated vesting schedule) of Charming Shoppes, Inc.
Exhibit 22 - Subsidiaries of Registrant . . . . . . . . . . . . . . . . . . .
Exhibit 23 - Consent of independent auditors . . . . . . . . . . . . . . . .
*Portions of this exhibit have been omitted and filed separately with Secretary of the Commission pursuant to the Registrants' Application Requesting Confidential Treatment.
All other schedules are omitted because they are not applicable or not required, or because the required information is included in the consolidated financial statements or notes thereto.
CHARMING SHOPPES, INC. AND SUBSIDIARIES SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS
CHARMING SHOPPES, INC. AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(1) During the fiscal year ended February 1, 1992, Mr. Savadove resigned his position with the Company and as such is no longer a related party. The note was paid when due on 06/30/93.
CHARMING SHOPPES, INC. AND SUBSIDIARIES SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(1) $12,495,000 of this amount represents the cost of point-of-sale equipment exchanged for new equipment during fiscal 1992. The Company received a $3,998,000 reduction in the purchase price of the new equipment in exchange for equipment with a book value of $2,195,000. The resulting gain of $1,803,000 will be amortized over the life of the equipment.
(2) During fiscal 1992, the Company entered into a sale and leaseback transaction for point-of-sale equipment with a cost of $15,021,000.
CHARMING SHOPPES, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
(1). $10,300,000 of this amount represents the accumulated depreciation on point-of-sale equipment exchanged for new equipment during Fiscal 1992.
CHARMING SHOPPES, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(1) Represents uncollected accounts written off, net of recoveries.
(2) Represents reserve established at the date of purchase of the related accounts receivable (February and October, 1991).
(3) Accounts receivable net of reserve sold December 24, 1992.
CHARMING SHOPPES, INC. AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Other costs are not presented as such amounts are less than one percent of total sales and revenues.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Charming Shoppes, Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CHARMING SHOPPES, INC.
Date: March 30, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: