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 October 28, 1995
[ ] 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 W 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 XX No
---- ----
The number of shares outstanding of Registrant's common stock, as of
December 5, 1995 was 966,069.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CROWLEY, MILNER AND COMPANY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
OCTOBER 28 OCTOBER 29 OCTOBER 28 OCTOBER 29
1995 1994 1995 1994
----------- ----------- ----------- -----------
Net Sales $69,920,344 $74,913,609 $24,963,823 $27,486,754
Cost of merchandise
and services sold 48,659,151 51,874,702 16,738,507 19,488,352
----------- ----------- ----------- -----------
21,261,193 23,038,907 8,225,316 8,038,402
Operating, selling
general and admin-
istrative expenses 23,919,408 24,560,317 8,494,102 8,706,967
----------- ----------- ----------- -----------
(2,658,215) (1,521,410) (268,786) (668,565)
Other charges (credits):
Interest expense 1,308,498 1,196,378 492,459 412,965
Investment Income (73,323) (46,344) (24,889) (15,934)
Other (157,493) (82,356) (1,635) (22,406)
----------- ----------- ----------- -----------
Loss before
income taxes (3,735,897) (2,589,088) (734,721) (1,043,190)
Income tax credit - - - -
----------- ----------- ----------- -----------
Net loss $(3,735,897) $(2,589,088) $ (734,721) $(1,043,190)
=========== =========== =========== ===========
Net loss per share $(3.87) $(2.54) $ (.76) $(1.02)
====== ====== ====== ======
Dividends per share $ .00 $ .00 $ .00 $ .00
====== ====== ====== ======
Average number of
Common equivalent
shares outstanding for
earnings per share 966,069 1,018,300 966,069 1,018,300
=========== =========== =========== ===========
CROWLEY, MILNER AND COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
OCTOBER 28 JANUARY 28 OCTOBER 29
1995 1995 1994
---------- ---------- ----------
ASSETS
Current assets
Cash and cash equivalents
(cash equivalents at
10/28/95-$449,802
1/28/95-$213,678 and
10/29/94-$332,759) $ 251,021 $ 38,724 $ 119,278
Accounts receivable(less:
allowances at 10/29/95
$83,854 1/28/95-$63,887
and 10/29/94-$173,424 833,649 1,042,660 1,474,286
Inventories at FIFO cost 28,327,560 21,824,142 29,137,500
Reduction to LIFO cost (4,015,537) (3,830,672) (4,760,733)
----------- ----------- -----------
Inventories at LIFO cost 24,312,023 17,993,470 24,376,767
Other current assets 1,816,419 2,330,447 1,933,737
----------- ----------- -----------
Total current assets 27,213,112 21,405,301 27,904,068
Other assets 3,191,881 3,270,274 2,719,501
Property, plant and equipment 25,101,801 24,874,953 27,006,781
Less: Allowance for
depreciation and
amortization 15,283,443 14,302,929 16,362,500
----------- ----------- -----------
9,818,358 10,572,024 10,644,281
----------- ----------- -----------
TOTAL ASSETS $40,223,351 $35,247,599 $41,267,850
=========== =========== ===========
CROWLEY, MILNER AND COMPANY
CONDENSED BALANCE SHEETS (UNAUDITED)
OCTOBER 28 JANUARY 28 OCTOBER 29
1995 1995 1994
---------- ---------- ----------
LIABILITIES AND SHAREHOLDER'S
EQUITY
Current Liabilities
Accounts payable $10,579,600 $ 5,813,423 $12,720,736
Short term borrowings 10,008,372 3,906,517 6,984,416
Compensation and Amounts
withheld therefrom 728,837 717,015 646,872
Taxes other than income
taxes 1,208,570 2,113,053 1,305,024
Income taxes 34,495 37,043 37,043
Current maturities of long
term debt 485,000 485,000 450,000
Capital lease obligations
- current 183,543 190,509 214,528
----------- ----------- -----------
Total Current Liabilities 23,228,417 13,262,560 22,358,619
Long Term Liabilities
Long term debt 5,850,000 5,850,000 6,335,000
Capital lease obligations 3,795,321 3,916,137 3,978,767
Other 1,595,780 1,634,647 1,752,721
----------- ----------- -----------
11,241,101 11,400,784 12,066,488
Shareholder's Equity
Common Stock, authorized
4,000,000 shares,
outstanding 966,069
shares 966,069 1,048,300 1,018,300
Other Capital 1,199,156 2,211,450 2,241,450
Retained Earnings 3,588,608 7,324,505 3,582,993
----------- ----------- -----------
5,753,833 10,584,255 6,842,743
----------- ----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $40,223,351 $35,247,599 $41,267,850
=========== =========== ===========
CROWLEY, MILNER AND COMPANY
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
OCTOBER 28 OCTOBER 29
1995 1994
---------- ----------
OPERATING ACTIVITIES
Net Loss $(3,735,897) $(2,589,088)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 986,219 1,310,920
Amortization of restricted stock award 79,720 -
Changes in Operating Assets and Liabilities:
Decrease in net accounts receivable 209,011 643,039
Increase in inventories (6,318,553) (7,478,691)
Decrease in prepaid expenses
and other assets 592,421 1,102,614
Increase in accounts payable 4,766,177 5,483,061
Decrease in accrued compensation
and other liabilities (934,076) (669,737)
----------- ----------
NET CASH USED IN OPERATING ACTIVITIES (4,354,977) (2,197,882)
INVESTMENT ACTIVITIES
Purchase of Properties (232,554) (210,192)
----------- ----------
NET CASH USED IN INVESTMENT ACTIVITIES (232,554) (210,192)
FINANCING ACTIVITIES
Proceeds from revolving line of credit 83,444,226 83,792,841
Principal payments on revolving line
of credit (77,342,371) (81,582,040)
Principal payments on capital lease
obligations (127,782) (258,966)
Purchase of common stock and stock options (1,228,212) -
Proceeds from sale of common stock 53,967 -
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 4,799,828 1,951,835
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 212,297 (456,239)
Cash and cash equivalents at beginning of
year 38,724 575,517
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 251,021 $ 119,278
=========== ===========
NOTES TO CONDENSED FINANCIAL STATEMENTS
October 28, 1995
Note A - Basis of Presentation
The accompanying unaudited 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. Accordingly, they 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 (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the thirteen week period ended October 28, 1995 are
not necessarily indicative of the results that may be expected for the
year ending February 3, 1996, due to the seasonal nature of the retail
department store business. For further information, refer to the
financial statements and footnotes thereto included in the Company's
Annual Report on Form 10-K for the year ended January 28, 1995.
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANICAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net and comparable store sales for the third quarter ended October 28,
1995 decreased 9.2% to $25.0 million from the $27.5 million recorded for
the third quarter ended October 29, 1994. Sales for the quarter were
adversely affected by a newspaper strike at the two major Detroit daily
papers. Sales results for the first two months of the strike (August and
September) were off more than 11%. A change in advertising to more
direct mail, as well as additional radio, resulted in a 2.7% sales
increase in October. Additionally less spring and summer clearance
merchandise contributed to the lower sales for the quarter. Sales and
comparable store sales for the nine month period ended October 28, 1995
were down 6.7% to $69.9 million from $74.9 million for the same period
last year.
For the quarter ended October 28, 1995 a net loss of $735,000, or $.76
per share, was recorded compared to a net loss of $1,043,000, or $1.02
per share, for last year's third quarter. A net loss of $3,736,000, or
$3.87 per share was recorded for the nine months ended October 28, 1995
compared with a net loss of $2,589,000, or $2.54 per share, for the same
period last year.
The following table sets forth, for the periods indicated, operating data
from the Company's Condensed Statements of Income (unaudited) stated as a
percentage of net sales:
Nine Months Third Quarter
1995 1994 1995 1994
---- ---- ---- ----
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of merchandise and
services sold 69.6 69.2 67.1 70.8
Gross margin 30.4 30.8 32.9 29.2
Operating,selling, general and
administrative expenses 34.2 32.8 34.0 31.7
Operating loss (3.8) (2.0) (1.1) (2.5)
Interest expense 1.8 1.6 2.0 1.5
Other income (expense), net 0.3 0.2 0.1 0.2
----- ----- ----- -----
Net loss (5.3) (3.1) (3.0) (3.8)
===== ===== ===== =====
Gross margins, both in terms of dollars and as a percent of sales,
increased in the third quarter ended October 28, 1995 when compared with
last years third quarter. Margin dollars increased $186,914, or 2.3%,
for the quarter. Margins as a percent of sales for the third quarter
were 32.9% compared with 29.2% last year. Lower markdowns for the
quarter was the primary factor contributing to the improved margins. For
the nine months gross margin dollars were down $1,777,000, or 7.7%.
Margins as a percent of sales, for the nine month period were 30.4%
compared with 30.8% last year.
Operating expenses for the quarter decreased $212,865, or 2.4%, with
$200,000 of the decrease attributable to real estate tax refunds arising
from appeals at two store locations. Operating expenses, as a percent of
sales, for the quarter were 34.0% compared with 31.7% for last year's
third quarter. The higher expense ratio for the quarter was due to the
decrease in sales. For the nine months ended October 28, 1995 operating
expenses have declined $640,909, or 2.6%. As a percent of sales,
operating expenses for the nine months were 34.2% compared with 32.8% for
the same period last year. Real estate related costs, depreciation
charges, and equipment rental costs were the principal expense categories
that accounted for the year to date decrease in operating expenses as of
October 28, 1995.
Interest expense charges for the quarter and nine month periods are
greater than the comparable period last year due to increased borrowings
on the Company's line of credit.
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 years third quarter and nine month periods, thus pre-tax
and after-tax results are the same.
Financial Condition
Net cash used in operating activities amounted to $4,355,000 for the nine
months ended October 28, 1995 compared with $2,198,000 for the nine
months ended October 29, 1994. The increase was primarily attributable
to the increased loss for the nine month period, offset in part by lower
depreciation charges.
The increase in capital expenditures to $233,000 for the current year
from $210,000 last year accounted for the increase in cash used in
investment activities.
Net cash provided by financing activities increased significantly at
October 28, 1995 compared with October 29, 1994. The increase was due
primarily to increased outstandings on the Company's line of credit
during the quarter.
Working capital amounted to $3,985,000, $8,143,000, and $5,545,000 at
October 28, 1995, January 28, 1995, and October 29, 1994, respectively.
Other Developments
On November 20, 1995 the Company announced that it had entered into an
Agreement and Plan of Reorganization, dated as of November 17, 1995, to
acquire department stores currently operated by Steinbach Stores, Inc.,
of Columbus, Ohio. The stores are located in the states of New York,
Connecticut, Vermont, New Jersey and New Hampshire. The Company believes
that the acquisition will more than double its existing sales. The
acquisition will take the form of an exchange of all the outstanding
stock of Steinbach Stores for shares of Common Stock of Crowley's. The
number of shares to be issued by Crowley's will be up to 45% of the total
shares outstanding and will be based on the net book value of Steinbach
Stores at December 30, 1995.
The acquisition is subject to, among other things, approval of the
Company's shareholders at a special meeting (which is expected to be held
in March, 1996); the completion by each party of its investigation into
the business and operations of the other party; the recept by the Company
of an independent investment banker's opinion as to the fairness of the
transaction to the Company's shareholders, from a financial point of
view; the submission of notices to the U.S. Department of Justice and the
Federal Trade Comission under the federal antitrust laws and the
expiration of the required waiting periods under those laws; and the
receipt of consents from the Company's lender and certain landlords of
the Steinbach Stores. The Company anticipates that the acquisition can
be closed during the first quarter of fiscal 1996.
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) Exhibits
------------
10.14 Agreement and Plan of Reorganization, dated November
17, 1995, between the Shareholders of Steinbach Stores
Inc., and the Company.
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 12, 1995 By /S/ Mark A. VandenBerg
Mark A. VandenBerg
Vice President-Finance and Chief
Financial Officer
(principal financial and
accounting officer) and a
duly authorized Officer of
the Registrant