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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended October 31, 2003
--------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to _______________________
Commission File Number 0-12188
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DEB SHOPS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1913593
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9401 Blue Grass Road, Philadelphia, Pennsylvania 19114
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(Address of principal executive offices) (Zip Code)
(215) 676-6000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name and 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 _____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes__X__ No _____
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Stock, Par Value $.01 13,684,900
- ---------------------------- ------------------------------------
(Class) (Outstanding at December 5, 2003)
DEB SHOPS, INC. AND SUBSIDIARIES
I N D E X
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Page
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PART I. Financial Information:
Item 1. Financial statements (Unaudited)
Consolidated Balance Sheets - 1
October 31, 2003 and January 31, 2003
Consolidated Statements of Operations - Three Months 2
and Nine Months Ended October 31, 2003 and 2002
Consolidated Statements of Cash Flows - 3
Nine Months Ended October 31, 2003 and October 31, 2002
Notes to Consolidated Financial Statements - 4
October 31, 2003
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 - 10
Item 3. Quantitative and Qualitative Disclosure About 10
Market Risk
Item 4. Controls and Procedures 11
PART II. Other Information 11
DEB SHOPS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
October 31, January 31,
2003 2003
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 149,049,074 $ 152,617,355
Merchandise inventories 21,925,548 29,911,290
Prepaid expenses and other 4,173,834 2,692,479
Deferred income taxes 1,453,227 1,453,227
------------- ------------
Total Current Assets 176,601,683 186,674,351
------------- ------------
PROPERTY, PLANT AND EQUIPMENT, at cost
Land 150,000 150,000
Buildings 2,365,697 2,365,697
Leasehold improvements 40,890,476 42,135,335
Furniture and equipment 16,658,836 17,619,473
------------- ------------
60,065,009 62,270,505
Less accumulated depreciation
and amortization 41,717,108 42,409,030
------------- ------------
18,347,901 19,861,475
------------- ------------
OTHER ASSETS
Deferred income taxes 4,892,273 4,892,273
Other 1,962,223 1,962,223
------------- ------------
Total Other Assets 6,854,496 6,854,496
------------- ------------
$ 201,804,080 $ 213,390,322
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $15,224,246 $21,616,666
Accrued expenses and other 9,556,938 9,864,161
Income taxes payable 332,412 3,871,945
------------- ------------
Total Current Liabilities 25,113,596 35,352,772
------------- ------------
Shareholders' Equity
Series A Preferred Stock, par value $1.00 per share: Authorized - 5,000,000
shares Issued and outstanding - 460 shares,
liquidation value $460,000 460 460
Common Stock, par value $.01 per share:
Authorized - 50,000,000 shares
Issued - 15,688,290 shares 156,883 156,883
Additional paid in capital 5,864,790 5,864,790
Retained earnings 183,093,071 184,440,137
------------- ------------
189,115,204 190,462,270
Less 2,003,390 common treasury shares, at cost 12,424,720 12,424,720
------------- ------------
176,690,484 178,037,550
------------- ------------
$ 201,804,080 $ 213,390,322
============= =============
See notes to consolidated financial statements.
-1-
DEB SHOPS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended October 31, Nine Months Ended October 31,
-------------------------------------------------------------------------------------
2003 2002 2003 2002
---- ---- ---- ----
Revenues
Net sales $ 74,809,540 $ 81,231,521 $ 217,989,763 $ 234,878,505
------------ ------------ ------------- -------------
Costs and expenses
Cost of sales, including
buying and occupancy costs 55,296,087 58,572,362 157,959,988 162,007,445
Selling and administrative 17,078,746 16,976,288 51,537,640 49,480,329
Depreciation and amortization 1,035,799 957,922 3,117,576 2,811,972
------------ ------------ ------------- -------------
73,410,632 76,506,572 212,615,204 214,299,746
------------ ------------ ------------- -------------
Operating income 1,398,908 4,724,949 5,374,559 20,578,759
Other income, principally interest 326,783 479,610 1,137,736 1,508,225
------------ ------------ ------------- -------------
Income before income taxes 1,725,691 5,204,559 6,512,295 22,086,984
Income taxes 543,000 1,950,000 2,344,000 8,280,000
------------ ------------ ------------- -------------
Net income $ 1,182,691 $ 3,254,559 $ 4,168,295 $ 13,806,984
============ ============ ============= =============
Net income per common share
Basic $ 0.09 $ 0.24 $ 0.30 $ 1.01
============ ============ ============= =============
Diluted $ 0.09 $ 0.24 $ 0.30 $ 0.99
============ ============ ============= =============
Cash dividends declared
per common share $ 0.125 $ 0.100 $ 0.400 $ 0.325
============ ============ ============= =============
Weighted average number of
common shares outstanding
Basic 13,684,900 13,684,900 13,684,900 13,667,798
============ ============ ============= =============
Diluted 13,684,900 13,778,395 13,684,900 13,858,446
============ ============ ============= =============
See notes to consolidated financial statements.
-2-
DEB SHOPS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended October 31,
----------------------------------------------------
2003 2002
---- ----
Cash flows provided by operating activities:
Net income $ 4,168,295 $ 13,806,984
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,117,576 2,811,972
Deferred income tax (benefit) - (441,000)
Loss on retirement of property, plant and equipment 90,012 83,369
Change in operating assets and liabilities:
Decrease in merchandise inventories 7,985,742 8,803,870
Increase in prepaid expenses and other (1,481,355) (2,103,103)
Decrease in trade accounts payable (6,392,420) (6,196,154)
Decrease in accrued expenses and other (649,346) (279,014)
Decrease in income taxes payable (3,539,533) (4,344,448)
------------- -------------
Net cash provided by operating activities 3,298,971 12,142,476
------------- -------------
Cash flows used in investing activities:
Purchase of property, plant and equipment, net (1,694,014) (3,675,875)
------------- -------------
Net cash used in investing activities (1,694,014) (3,675,875)
------------- -------------
Cash flows used in financing activities:
Preferred stock cash dividends paid (41,400) (41,400)
Common stock cash dividends paid (5,131,838) (4,100,972)
Proceeds from exercise of stock options - 420,000
Principal payments under capital lease obligations - (301,117)
------------- -------------
Net cash used in financing activities (5,173,238) (4,023,489)
------------- -------------
(Decrease) increase in cash and cash equivalents (3,568,281) 4,445,112
Cash and cash equivalents at beginning of period 152,617,355 135,251,663
------------- -------------
Cash and cash equivalents at end of period $ 149,049,074 $ 139,696,775
============= =============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes, net $ 7,429,966 $ 14,617,352
============= =============
See notes to consolidated financial statements.
-3-
DEB SHOPS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 31, 2003
NOTE A - ORGANIZATION / BASIS OF PRESENTATION
Deb Shops, Inc. (the "Company") sells popularly priced fashion apparel
for junior and plus-sized females and males through 333 stores. The Company's
stores are located in regional malls and strip shopping centers principally
located in the East and Midwest regions of the United States.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements. In
the first and third quarters, cost of goods sold and inventories are estimated
based on the use of the gross profit method. 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 three and
nine-month periods ended October 31, 2003 are not necessarily indicative of the
results that may be expected for the fiscal year ending January 31, 2004. The
Consolidated Balance Sheet at January 31, 2003 has been derived from the audited
financial statements at that date. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2003.
The preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
NOTE B - NET INCOME PER SHARE
The table below sets forth the reconciliation of the numerators and
denominators of the basic and diluted net income per common share computations.
Three Months Ended October 31, Nine Months Ended October 31,
------------------------------------------------------------------------------------
2003 2002 2003 2002
------------------------------------------------------------------------------------
Net income $ 1,182,691 $ 3,254,559 $ 4,168,295 $13,806,984
Dividends on preferred stock (13,800) (13,800) (41,400) (41,400)
------------------------------------------------------------------------------------
Income available to
common shareholders $ 1,168,891 $ 3,240,759 $ 4,126,895 $13,765,584
====================================================================================
Basic weighted average
number of common
shares outstanding 13,684,900 13,684,900 13,684,900 13,667,798
Effect of dilutive stock options - 93,495 - 190,648
------------------------------------------------------------------------------------
Diluted weighted average
number of common
shares outstanding 13,684,900 13,778,395 13,684,900 13,858,446
====================================================================================
-4-
In February 2002, the Company granted options to purchase 1,426,500
shares of common stock, at a weighted average exercise price of $23.77 per
share. The effect of these options on the diluted weighted average number of
common shares outstanding for the three and nine-month periods ended October 31,
2002 are reflected in the preceding table.
Options to purchase an average of 1,371,000 and 1,378,000 shares of
common stock, at a weighted average exercise price of $23.77 per share, were
outstanding during the three and nine-month periods ended October 31, 2003.
Included in these amounts are 45,000 options that were granted in October 2003
at an exercise price of $23.75 per share. These options were not included in the
computation of diluted earnings per share because the exercise price was greater
than the average market price of the common stock during the periods and,
therefore, the effect would have been antidilutive.
NOTE C - INCOME TAXES
The Company's effective tax rate differs from the federal statutory
rate due primarily to state income taxes, offset by tax-exempt interest
earnings. Due to the decline in year over year earnings, current year tax-exempt
interest earnings represent a greater percentage of net income. As a result, the
Company reduced its full-year estimated effective tax rate to 36.0%. The effect
of that reduction was recognized in the quarter ended October 31, 2003 resulting
in an effective rate for the quarter of approximately 31.5%.
NOTE D - STOCK RELATED COMPENSATION
The Company has a stock option plan whereby options may be granted to
employees or non-employee directors on the basis of contributions to the
operations of the Company. Details concerning the plan are described in Note F
to the financial statements included in the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 2003. The Company continues to use the
accounting method under Accounting Principles Board Opinion No. 25 ("APB No.
25"), "Accounting for Stock Issued to Employees," and related interpretations
for these plans. Under APB No. 25, generally, when the exercise price of the
Company's stock options equals the market price of the underlying stock on the
date of the grant, no compensation expense is recognized.
-5-
Had the Company recognized compensation cost for the stock option plan
consistent with the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," net income and basic and diluted net income per share would have
been adjusted to the following pro forma amounts.
Three Months Ended October 31, Nine Months Ended October 31,
----------------------------------------------------------------------------------------
2003 2002 2003 2002
----------------------------------------------------------------------------------------
Net income as reported $ 1,182,691 $ 3,254,559 $ 4,168,295 $ 13,806,984
Stock-based employee
compensation cost 481,275 1,129,239 1,698,695 3,048,944
---------------------------------------- ------------------------------------------
Pro forma net income 701,416 2,125,320 2,469,600 10,758,040
Dividends on preferred stock 13,800 13,800 41,400 41,400
---------------------------------------- ------------------------------------------
Net income available to
common shareholders $ 687,616 $ 2,111,520 $ 2,428,200 $ 10,716,640
======================================== ==========================================
Basic net income per common
share, as reported $ 0.09 $ 0.24 $ 0.30 $ 1.01
======================================== ==========================================
Pro forma basic net income
per common share $ 0.05 $ 0.15 $ 0.18 $ 0.78
======================================== ==========================================
Diluted net income per
common share, as reported $ 0.09 $ 0.24 $ 0.30 $ 0.99
======================================== ==========================================
Pro forma diluted net
income per common share $ 0.05 $ 0.15 $ 0.18 $ 0.78
======================================== ==========================================
-6-
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Deb Shops, Inc. (the "Company") has made in this report, and from time
to time may otherwise make, "forward-looking statements" (as that term is
defined under federal securities laws) concerning the Company's future
operations, performance, profitability, revenues, expenses, earnings and
financial condition. Such forward-looking statements are subject to various
risks and uncertainties. Actual results could differ materially from those
currently anticipated due to a number of factors. Such factors may include, but
are not limited to, the Company's ability to improve or maintain sales and
margins, respond to changes in fashion, find suitable retail locations and the
Company's ability to attract and retain key management personnel. Such factors
may also include other risks and uncertainties detailed in the Company's other
filings with the Securities and Exchange Commission, including the Company's
Annual Report on Form 10-K for the fiscal year ended January 31, 2003 (the "2003
10-K"). The Company assumes no obligation to update or revise its
forward-looking statements even if experience or future changes make it clear
that any projected results expressed or implied therein will not be realized.
Critical Accounting Policies
The Company's critical accounting policies are discussed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations and notes accompanying the consolidated financial statements that
appear in the 2003 10-K. Except as otherwise disclosed in the financial
statements and accompanying notes included in this report, there were no
material changes subsequent to the filing of the 2003 10-K in the Company's
critical accounting policies or in the assumptions or estimates used to prepare
the financial information appearing in this report.
Overview
The Company operates 327 women's specialty apparel retail stores
offering popularly priced, fashionable, coordinated sportswear, dresses, coats,
lingerie, accessories, shoes and novelty items to the junior and plus-sized
fashion-conscious female. Stores are located in 41 states, principally in the
East and Midwest portions of the United States. The Company also operates six
Tops `N Bottoms stores which sell moderately priced men's and women's apparel.
Results of Operations
Net sales decreased 7.2% during the nine-months ended October 31, 2003
(the "Current Year-to-Date Period") to $217,990,000 from $234,879,000 during the
nine-months ended October 31, 2002 (the "Comparable Year-to-Date Period"). For
the quarter ended October 31, 2003 (the "Current Quarter"), net sales decreased
7.9% to $74,810,000 from $81,232,000 for the quarter ended October 31, 2002 (the
"Comparable Quarter"). The sales decrease in the Current Year-to-Date Period was
attributable to economic softness in the Company's core markets, principally the
East and Midwest portions of the United States. Additional factors contributing
to the decrease during this period were higher gas prices, unfavorable weather
conditions during the first four months of the Current Year-to-Date Period and
the subsequent merchandising challenges created by those conditions. During the
Current Quarter, the sales decrease was due to the continuation of merchandising
challenges and weakness in mall traffic that began in the spring, as well as an
unseasonably warm September.
-7-
The following table sets forth certain store information:
Three Months Ended Nine Months Ended
October 31,(1) October 31,(1)
---------------------------------------------------
2003 2002 2003 2002
---- ---- ---- ----
Stores open at end of the period 333 324 333 324
Average number in operation during the period 334 322 332 322
Average net sales per store (in thousands) $224 $252 $657 $739
Average operating income per store
(in thousands) $ 4 $ 15 $ 16 $ 65
Comparable Store Sales(2)- Percent Change (11.3)% (1.6)% (11.3)% 2.9%
Cost of sales, including buying and occupancy costs, decreased 2.5%
during the Current Year-to-Date Period to $157,960,000 from $162,007,000 during
the Comparable Year-to-Date Period. As a percentage of net sales, these costs
increased to 72.5% from 69.0% in the Comparable Year-to-Date Period. During the
Current Quarter, cost of sales, including buying and occupancy costs, decreased
5.6% to $55,296,000 from $58,572,000 in the Comparable Quarter while increasing
to 73.9% of sales from 72.1% of sales in the Comparable Quarter. The increase as
a percentage of sales for both comparable periods was due to increased markdowns
taken to stimulate sales as well as the de-leveraging of buying and occupancy
costs as a result of the comparable store sales decrease.
Selling and administrative expenses increased 4.2% during the Current
Year-to-Date Period to $51,538,000 from $49,480,000 during the Comparable
Year-to-Date Period. As a percentage of net sales, these costs increased to
23.6% from 21.1% in the Comparable Year-to-Date Period. The $2,058,000 increase
was due primarily to costs associated with operating an average of 10 additional
stores. As a percentage of sales, the increase was due to the inability to
leverage infrastructure expenses as a result of the decrease in comparable store
sales. During the Current Quarter, selling and administrative expenses increased
0.6% to $17,079,000 from $16,976,000 in the Comparable Quarter while increasing
to 22.8% of net sales from 20.9% of net sales in the Comparable Quarter. The
$103,000 increase was due to costs associated with operating an average of 12
additional stores, offset by the results of overall cost containment efforts. As
a percentage of sales, the increase was due to the inability to leverage
infrastructure expenses as a result of the decrease in comparable store sales.
Depreciation expense increased $306,000 or 10.9% to $3,118,000 in the
Current Year-to-Date Period from $2,812,000 in the Comparable Year-to-Date
Period. For the Current Quarter, depreciation expense increased $78,000 or 8.1%
to $1,036,000 from $958,000 in the Comparable Quarter. The increases during both
periods were due to the depreciation of capital items acquired for new store
openings and remodeling of existing stores.
Other income, principally interest, decreased $370,000 or 24.6% to
$1,138,000 in the Current Year-to-Date Period from $1,508,000 in the Comparable
Year-to-Date Period. For the Current Quarter, other income, principally
interest, decreased $153,000 or 32% to $327,000 in the Current Quarter from
$480,000 in the Comparable Quarter. The decreases during both periods were the
result of declining interest rates, partially offset by higher cash balances.
- --------------------
(1) Includes Tops `N Bottoms stores.
(2) Comparable store sales include stores open for both periods in the current
format and location. A store is added to the comparable store base in its
13th month of operation.
-8-
Income taxes decreased to $2,344,000 or 36.0% of income before income
taxes in the Current Year-to-Date Period from $8,280,000 or 37.5% of income
before income taxes in the Comparable Year-to-Date Period. For the Current
Quarter, income taxes decreased to $543,000 or 31.5% of income before income
taxes from $1,950,000 or 37.5% during the Comparable Quarter. The lower
effective income tax rate during both periods resulted from a decline in year
over year pre-tax income and tax-exempt interest earnings representing a higher
percentage of pre-tax income.
As a result of the foregoing, net income for the Current Year-to-Date
Period was $4,168,000 or $0.30 per diluted share versus $13,807,000 or $0.99 per
diluted share in the Comparable Year-to-Date Period. For the Current Quarter,
net income was $1,183,000 or $0.09 per diluted share versus $3,255,000 or $0.24
per diluted share in the Comparable Quarter.
Liquidity and Capital Resources
The Company has funded all of its operating needs internally, including
capital expenditures for the opening of new stores and the remodeling of
existing stores. For the Current Year-to-Date Period, cash provided by operating
activities was $3,299,000. These funds were provided by net income and the
non-cash charges for depreciation and amortization as well as from the seasonal
decrease in merchandise inventories. Offsetting these items were uses of cash
relating to the seasonal decrease in trade accounts payable, income tax and
accrued liability payments and an increase in prepaid expenses. For the
Comparable Year-to-Date Period, cash provided by operating activities was
$12,142,000. These funds were provided by net income, the seasonal decrease in
merchandise inventories and non-cash charges for depreciation and amortization,
partially offset by the seasonal decrease in trade accounts payable, income tax
and accrued liability payments and an increase in prepaid expenses. The
inventory turnover rates were approximately 2.0 and 2.2 times during the Current
and Comparable Year-to-Date Periods, respectively.
Net cash used in investing activities was $1,694,000 and $3,676,000 for
the Current and Comparable Year-to-Date Periods, respectively. During both
periods, these funds were used for the opening of new stores and the remodeling
of existing stores.
For the Current Year-to-Date Period, net cash used in financing
activities was $5,173,000. These funds were used for the payment of dividends on
preferred and common stock. During the Comparable Year-to-Date Period, cash used
in financing activities was $4,023,000. These funds were used for the payment of
dividends on preferred and common stock and for principal payments on a capital
lease obligation, partially offset by proceeds from the exercise of stock
options.
As of October 31, 2003, the Company had cash and cash equivalents of
$149,049,000 compared with $139,697,000 at October 31, 2002.
On May 29, 2003, the Company announced a special dividend of $0.05 per
share on its common stock, and an increase to its existing quarterly dividend
from $0.10 to $0.125 per share on its common stock. The new rate and special
dividend was incorporated into the Company's dividend payment on August 19,
2003, which was payable to shareholders of record as of July 31, 2003. The
Company declared its regular quarterly dividend of $0.125 per share on October
1, 2003. The dividend was paid on November 18, 2003 to shareholders of record on
October 31, 2003.
-9-
The Company believes that its existing cash and cash equivalents and
internally generated funds will be sufficient to meet its anticipated capital
expenditures, none of which are material, and current operating needs. The
Company had an unsecured and uncommitted line of credit in the amount of
$20,000,000 as of October 31, 2003. Of this amount, $1,927,000 was outstanding
as letters of credit for the purchase of inventory. The Company leases its
retail apparel stores, warehouse and office building for periods ranging from
one to 20 years. Following is a summary of the Company's contractual obligations
for minimum rental payments on its non-cancelable operating leases and minimum
payments on its other commitments as of October 31, 2003.
Payments Due by Period
Within 1 1 - 3 4 - 5 After 5
Total Year years years years
---------------------------------------------------------------------------------------------------
Operating
leases $ 144,538,000 $ 24,175,000 $ 42,413,000 $ 31,093,000 $ 46,857,000
Other
commitments 1,927,000 1,927,000 -- -- --
---------------------------------------------------------------------------------------------------
Total $ 146,465,000 $ 26,102,000 $ 42,413,000 $ 31,093,000 $ 46,857,000
===================================================================================================
Other Matters
Seasonality and Quarterly Results
The Company's operating results are subject to seasonal fluctuations.
Highest sales levels have historically occurred during the five-month period
from August 1 to December 31 of each year, which is when back-to-school and
holiday periods occur. Sales generated during these periods have traditionally
had a significant impact on the Company's results of operations. Any decreases
in sales for these periods or in the availability of working capital needed in
the months preceding these periods could have a material adverse effect on the
Company's results of operations. Results of operations in any one fiscal quarter
are not necessarily indicative of the results of operations that can be expected
for any other fiscal quarter or for the full fiscal year.
The Company's results of operations may also fluctuate from quarter to
quarter as a result of the amount and timing of expenses incurred in connection
with, and sales contributed by, new stores, store remodels and the integration
of new stores into the operations of the Company.
Item 3.
- -------
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
As of October 31, 2003, the Company had cash and cash equivalents of
$149,049,000 compared to $139,697,000 as of October 31, 2002. These funds are
invested primarily in money market mutual funds and short-term municipal bonds,
all of which are fully insured or guaranteed by letters-of-credit. The Company
does not invest for trading purposes. Accordingly, the Company does not believe
it has significant exposure to market risk with respect to its investments.
-10-
Item 4.
- -------
CONTROLS AND PROCEDURES
The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the Company's disclosure controls and procedures as of the end of the period
covered by this report. Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures are functioning effectively to provide reasonable assurance that
information required to be disclosed by the Company in reports filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms. There has been
no change in the Company's internal control over financial reporting during the
Company's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART II. OTHER INFORMATION
Items 1 - 5. NOT APPLICABLE
- -----------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ------ --------------------------------
(a) Exhibits
Exhibit 31.1 Section 302 Certification by President
and Chief Executive Officer
Exhibit 31.2 Section 302 Certification by Chief
Financial Officer
Exhibit 32.1 Certification of Periodic Report by
President and Chief Executive Officer
Exhibit 32.2 Certification of Periodic Report by Chief
Financial Officer
(b) Reports on Form 8-K
The following reports on Form 8-K were furnished by
the Company to the Securities and Exchange Commission
during the third quarter of 2003:
1. Report on Form 8-K, filed August 11, 2003, included
the press release dated August 7, 2003 discussing
sales results for the month of July, 2003 and the
Company's fiscal second quarter and year-to-date
periods ended July 31, 2003.
2. Report on Form 8-K, filed August 28, 2003, included
the press release dated August 28, 2003 discussing
the Company's financial results for the fiscal
second quarter and year-to-date periods ended July
31, 2003.
-11-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DEB SHOPS, INC.
DATE: December 10, 2003 By: Marvin Rounick
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Marvin Rounick
President and Chief
Executive Officer
DATE: December 10, 2003 By: Barry J. Susson
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Barry J. Susson, CPA
Chief Financial Officer