Item 1. Business
General
Deb Shops, Inc. (the "Company") operates 285 women's specialty apparel retail stores ("DEB") offering moderately priced, fashionable, coordinated women's sportswear, dresses, coats, lingerie, accessories and shoes for junior and plus sizes. DEB merchandise consists of clothing and accessories appealing primarily to the fashion-conscious junior and plus sized female consumers between the ages of 13 and 18. In addition to 268 stores operating under the name "DEB" the Company operates five plus size stores under the name "DEB PLUS" and four outlet stores under the name "CSO." The outlet stores offer the same merchandise as DEB and DEB PLUS at reduced prices and serve as clearance stores for slow-moving inventory. Fifty three of the DEB stores contain plus size departments.
The Company operates an additional eight apparel retail stores under the name Tops 'N Bottoms. Tops 'N Bottoms sells moderately priced men's and women's apparel. Seventeen of the DEB stores contain Tops 'N Bottoms departments.
The Company also operates 17 retail book stores trading as "Atlantic Book Warehouse" and "Atlantic Book Shops." The Company operates 11 locations as "Atlantic Book Shops," which are small, limited selection book stores, generally open seasonally in Delaware, Maryland, New Jersey and Pennsylvania resort towns. The Company also operates six "Atlantic Book Warehouses" which carry a full line of best sellers, new titles and magazines in addition to remainder books. The Atlantic Book Warehouse stores are located in Delaware, Maryland, Minnesota, New Jersey and Pennsylvania.
Merchandising and Marketing
DEB specializes in junior-sized merchandise and offers an extensive selection of colors and styles. The merchandise is attractively presented in groups coordinated by color and style to assist customers in locating items of their choice and creating outfits of their own.
The DEB PLUS division caters to the plus size customer between the ages of 13 to 18. The merchandise is young looking and the fit is adjusted to the plus size customer. Prices are affordable and very competitive.
Tops 'N Bottoms caters primarily to young men and junior-sized women. Much of the merchandise is brand named and unisex.
The Company purchases merchandise in volume, sells at popular prices, and has a policy of early markdowns of slow-moving inventory. A special effort is made to select and present coordinated outfits on a rotating basis and featured merchandise is changed approximately twice a week.
A computerized point-of-sale merchandise data system provides detailed daily information regarding sales and inventory levels by style, color, class and department, thereby permitting the Company to analyze market trends and changing store needs. Since merchandise control statistics are available on a daily basis, the Company can identify slow-moving merchandise and respond to customer buying trends when making repurchase decisions and markdown adjustments. This permits the Company to maintain current and fresh merchandise in its stores.
The Company experiences the normal seasonal pattern of the retail apparel industry with its peak sales occurring during the Christmas, Back-to-School and Easter periods. To keep merchandise fresh and fashionable, slow-moving merchandise is marked down throughout the year. End-of-season sales are conducted twice per year (in the second and fourth quarters), in keeping with the Company's policy of carrying a minimal amount of seasonal merchandise over from one year to another. At the end of the season, any unsold, merchandise is transferred to the Company's CSO stores.
Stores
During the fiscal year ended January 31, 2000, the Company opened 17 stores (while closing four stores). Five of the new stores and three of the closed stores had Plus Departments. The Company also closed one Tops `N Bottoms store and closed one Tops `N Bottoms department. At the present time, the Company currently plans to open 10-20 new stores in fiscal 2001. The current plans include the opening of three to six Plus departments in the new stores. The Company is currently scheduled to close two stores in the first half of fiscal 2001. The Company plans to continue to evaluate carefully the profitability of individual stores and close those stores that it believes cannot become profitable or maintain profitability.
The following table shows apparel store openings and closings for the last five fiscal years.
The following table shows the states in which the Company's 285 existing apparel stores are located:
DEB stores, which average 6,000 square feet, are located primarily in enclosed regional malls and selected strip shopping centers. DEB stores with Tops 'N Bottoms or DEB PLUS departments average 8,000 square feet and are located primarily in enclosed regional malls. Tops 'N Bottoms stores are all located in enclosed regional malls and range in
size from 2,700 to 3,400 square feet. New stores are opened in existing malls, existing mall expansions, new malls and occasionally strip shopping centers (although the Company generally is not currently seeking strip shopping center locations). Factors considered in opening new stores include the availability of suitable locations and satisfactory lease terms, both of which are considered essential to successful operations. Key considerations in selecting sites for new stores include the geographic location of the center, the demographics of the surrounding area, the principal specialty and "anchor" stores within the center, expected customer traffic within the center, and the location of the Company's store within the center itself.
Stores are distinctively designed for customer identification and are remodeled periodically as necessary. The stores are open during mall operating hours, which are generally from 10:00 A.M. to 9:30 P.M., Monday through Saturday, and from Noon to 5:00 P.M. on Sunday.
Operations
Payments for most of the Company's sales are made in cash or check, with the balance made with MasterCard, Visa or Discover credit cards. For customer convenience, the Company provides lay-away plans. The Company's policy is to permit returns of merchandise for exchange or for a full cash or credit refund, at the customer's preference.
The Company purchases its merchandise from a number of suppliers, both domestic and foreign, and is not materially dependent on any one supplier. All merchandise is shipped directly from vendors to the Company's central distribution facility, where it is inspected and price-marked before being shipped to the individual stores. The Company distributes its inventory by common carrier and leased trucks.
The responsibility for managing the Company's stores rests with the Director of Store Operations and a staff of 35 employees consisting of an Assistant Director of Store Operations and Regional and District Managers. A Regional Manager is responsible for an average of six districts. A District Manager is responsible for an average of 10 stores, each of which is staffed by a Store Manager and two Assistant Store Managers. The District and Regional Managers visit the stores regularly to review merchandise levels, content and presentation, staff training and other personnel issues, store security and cleanliness and adherence to standard operating procedures.
The merchandising department consists of 38 employees, including the Senior Vice President, Merchandising; Vice President, Merchandising; Merchandise Managers and Buyers. The department is responsible for purchasing, pricing (including markdowns), inventory planning and allocating merchandise among the stores. The merchandising department's staff is organized in the following apparel categories: sportswear, dresses, coats, lingerie, hosiery, shoes, accessories and plus sizes.
At January 31, 2000, the Company had approximately 3,200 employees, 60% of whom were employed on a part-time basis. The Company has a collective bargaining agreement with the United Paperworkers International Union, Philadelphia Local 286 (UPIU) which expires on December 31, 2001. The UPIU represents the Company's warehouse employees. The collective bargaining agreement covers approximately 70 employees. The Company considers its employee relations to be good.
Competition
The retail sale of apparel is an extremely competitive business with numerous individual and chain store competitors, including specialty shops as well as regional and national department store chains. Many of the Company's competitors are considerably larger than the Company and have substantially greater financial and other resources.
The primary elements of competition are merchandise style, selection, quality, display and price, as well as store location and design. The Company believes that its strategy for the DEB stores of specializing in the junior and plus size sportswear market and its ability to effect volume purchases are important elements in its operations. Brand name merchandise is not a significant factor in the Company's sales.
Atlantic Books
The Atlantic Books chain, which was acquired on October 20, 1995, now consists of 17 stores including six full-service warehouse stores located in Delaware, Maryland, Minnesota, New Jersey and Pennsylvania. Atlantic Books emphasizes convenience, selection and value. The Company considers the warehouse format to be positioned to capitalize on today's consumers' demands for these features. Atlantic Books' main concentration is in bargain books that are sold at significant discounts from publishers' original retail prices. Atlantic Books also offers an extensive selection of best sellers and other hard cover and paperback books and magazines. Each warehouse store is conducive to browsing and shopping; including the availability of supermarket-style shopping carts for the customer who wants to purchase multiple selections.
Atlantic Books competes with both national super-store chains as well as local book stores. Atlantic Books offers selections similar to the national super-stores, in a no-frills atmosphere and at larger discounts.
The chain trades as Atlantic Book Shops and Atlantic Book Warehouse. The 11 non-warehouse stores are located in resort areas in Delaware, Maryland and New Jersey. These resort stores range in size from 1,000 to 4,600 square feet. The warehouse stores range in size from 12,000 to 24,000 square feet. The warehouse store in Montgomeryville, PA includes the offices for the chain.
The resort stores sell primarily remainder books and some new titles. The warehouse stores carry a full line of bestsellers, new titles, and magazines in addition to the remainder books.
The Company intends to expand the book chain principally through the addition of warehouse stores and the addition of resort stores when appropriate. The current focus is on stand-alone sites and strip shopping centers for the new stores. Where appropriate, mall locations will also be considered. The current plans include the opening of one warehouse book store in fiscal 2000.
Item 2.
Item 2. Properties
The Company leases all of its apparel stores and all but one of its book stores. The internal layout and fixtures of each store are designed and constructed under contracts with third parties.
Under most leases, the Company is required to pay, in addition to fixed minimum rental payments, charges for real estate taxes, common area maintenance fees, utility charges, insurance premiums, mall association charges and contingent rentals based upon a percentage of sales in excess of specified amounts.
The following table shows the earliest years that executed apparel store leases, existing at January 31, 2000, can be terminated. In many cases, the Company has renewal options.
Calendar Years Number of Leases Expiring -------------- -------------------------
2000 - 2001...................... 73 2002 - 2003...................... 61 2004 - 2005...................... 76 2006 - 2007...................... 16 2008 - 2009...................... 27 2010 - 2011...................... 20 2012 and thereafter.............. 12 --- Total............ 285 ===
The Company leases its warehouse, distribution and office space, aggregating 280,000 square feet, pursuant to a twenty-year lease which commenced June 15, 1982. On January 3, 1999, the lease was amended to extend the term for an additional five years. This facility is a modern, one story industrial building situated on approximately 20 acres in the northeast section of Philadelphia, Pennsylvania. See Item 13. Certain Relationships and Related Transactions.
With respect to the locations of present stores, see Item 1. Business - Stores.
Item 3.
Item 3. Legal Proceedings
The Company is subject to legal proceedings, employment issues and claims that arise in the ordinary course of its business. Management, after consultation with outside legal counsel, does not believe that the ultimate disposition of such proceedings will have a materially adverse effect on the Company's consolidated financial position or results of operations.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the following list is included as an unnumbered Item in Part I of this Report in lieu of being included in the Definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 17, 2000.
The executive officers of the Company, each of whom serves at the discretion of the Board of Directors, are as follows:
Marvin Rounick has been employed by the Company since 1961. Since 1979, he has served as President and Chief Executive Officer. Prior to that time, he served as Vice President, Operations and General Merchandise Manager.
Warren Weiner was employed by the Company from 1965 until 1975. He rejoined the Company in January 1982, as Executive Vice President, Secretary and Treasurer.
Allan Laufgraben has been employed by the Company since December 1995, as Senior Vice President, Merchandising. For more than five years, prior to joining the Company he was with Petrie Stores Corporation as Executive Vice President and with Petrie Retail, Inc. as President and Chief Executive Officer. Petrie Retail, Inc. filed a petition under the federal bankruptcy laws on October 12, 1995.
Barry Vesotsky has been employed by the Company since 1970. Since 1981, he has served as Vice President, Merchandising. From 1978 to 1981, he was a Buyer and Merchandise Manager with the Company.
Stanley A. Uhr has been employed by the Company since 1987, first as Director of Real Estate and Corporate Counsel and, from March 31, 1988, as Vice President, Real Estate and Corporate Counsel.
Lewis Lyons has been employed by the Company since 1990, first as Director of Taxes; from May 20, 1992, as Vice President, Finance; and from May 26, 1993, as Vice President, Finance and Chief Financial Officer and from October 2, 1995, as Assistant Secretary.
Stephen P. Smith has been employed by the Company since 1985. From 1985 to 1994 as a programmer and systems analyst; from 1994 to 1995 as Manager - Information Systems; from 1995 to 1998 as Director - Information Systems and from May 27, 1998 as Vice President - Information Systems.
Joan M. Nolan has been employed by the Company since November 2, 1998 as Controller. From July 1997 to July 1998 she was an accounting manager with Innovest Group, Inc., and from May 1975 to July 1996, she was Assistant to the Treasurer for Strawbridge & Clothier.
-PART II
Item 5.
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
Market Information
The Company's Common Stock is traded on the NASDAQ National Market under the symbol: DEBS.
The following table sets forth quarterly high and low sales prices for the two most recent fiscal years.
2000 High Low - ---- ---- ---
First Quarter $14.0000 $10.0000 Second Quarter 22.3125 12.1250 Third Quarter 21.2500 13.7500 Fourth Quarter 24.5000 14.5000
1999 High Low - ---- ---- ---
First Quarter $ 8.750 $ 5.875 Second Quarter 11.000 7.000 Third Quarter 10.000 6.750 Fourth Quarter 15.750 8.375
Holders
As of March 31, 2000, there were 247 record holders and approximately 1,442 beneficial holders of the Company's Common Stock.
Dividends
The Company paid regular quarterly dividends for each of the two most recent fiscal years. During this time period, the per-share amount of these dividends on Common Stock was $.05 for each such fiscal quarter. The Company currently intends to follow a policy of regular quarterly cash dividends, subject to earnings, capital requirements and the operating and financial condition of the Company, among other factors.
Item 6.
Item 6. Selected Financial Data
The following selected financial data is derived from the consolidated financial statements of the Company. The data should be read in conjunction with the consolidated financial statements, related notes, and other financial information included herein.
Deb Shops, Inc. and Subsidiaries Consolidated Financial Highlights
Not covered by report of Independent Auditors.
Item 7.
Item 7.
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 and financial condition. This report includes, in particular, forward-looking statements regarding store openings, closings and other matters. 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 margins, respond to changes in fashion, find suitable retail locations 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.
Overview
The Company operates women's specialty retail apparel stores offering popularly priced, fashionable, coordinated sportswear, dresses, coats, lingerie, accessories and shoes for junior and plus-sized women. The Company also operates Tops `N Bottoms stores which sell moderately priced men's and women's apparel.
The Company also operates Atlantic Books, a chain of retail bookstores consisting of 17 locations. Six of the stores, trading as Atlantic Book Warehouse, carry a full line of bestsellers, new titles and magazines in addition to remainder books. The remaining 11 stores, trading as Atlantic Book Shops, are limited-selection book stores, generally open seasonally.
Results of the Company's operations for the fiscal years ended January 31, 2000 and 1999, are presented on a consolidated and divisional basis to provide relevant information concerning the Company's retail apparel store business, which is the Company's principal line of business, and the retail book business.
Results of Operations - Consolidated
Consolidated net sales increased $35,308,000 (15.0%) to $270,032,000 in fiscal 2000 from $234,724,000 in fiscal 1999, and increased $29,658,000 (14.5%) in fiscal 1999 over fiscal 1998. The increases in fiscal 2000 and 1999 were primarily the result of increased comparable store sales in the apparel division and, to a lesser extent, increased sales in the book division.
The changes in net sales, cost of sales, selling and administrative expenses and net income (loss) are more fully described in the sections on "Apparel Business" and "Book Business" that follow.
Other income, principally interest, increased $613,000 (20.5%) to $3,596,000 in fiscal 2000 from $2,984,000 in fiscal 1999, and increased $889,000 (42.4%) in fiscal 1999 over fiscal 1998. Other income is offset by losses on disposition of fixed assets. The increases in fiscal 2000 and 1999 are the result of earnings on higher cash balances and decreased write-offs from the disposition of fixed assets.
Income before income taxes increased $14,866,000 (61.2%) to $39,162,000 in fiscal 2000 from $24,296,000 in fiscal 1999, and increased $14,059,000 (137.3%) in fiscal 1999 over fiscal 1998. The improvement in fiscal 2000 is comprised of an increase in the operating results of the apparel business offset by a decrease in the operating results of the book business. The improvement from fiscal 1998 to fiscal 1999 is comprised of an increase in the operating results of the apparel business and to a lesser extent by the increase in the operating results of the book business. The effective income tax provision rate was 37.5% for fiscal 2000, 36.2% for fiscal 1999 and 35.2% for fiscal 1998. The effective income tax provision rates for fiscal 2000, fiscal 1999 and fiscal 1998 are greater than the statutory rate, primarily as the result of state income tax expense.
Results of Operations - Apparel Business
Net sales increased $35,084,000 (16.1%) to $252,679,000 in fiscal 2000 from $217,595,000 in fiscal 1999, and increased $27,106,000 (14.2%) in fiscal 1999 over fiscal 1998. The increase in fiscal 2000 and fiscal 1999 resulted primarily from increased customer acceptance of the Company's products, which is attributed to the Company's continual refining of its focus on its younger customers, in addition to continuing efforts to improve visual merchandising. These improvements are evidenced by increases in comparable store sales of 13.0% in fiscal 2000 and 10.1% in fiscal 1999. Management continues to adjust the product mix, pricing and visual merchandising to further stimulate sales.
The following table sets forth certain store information:
- ------------- (1) Includes Tops 'N Bottoms stores (2) Comparable store sales includes stores opened for both periods, in the current format and location. A store is added to the comparable store base in its 13th month of operation.
Cost of sales, including buying and occupancy costs, increased $12,707,000 (8.3%) to $164,892,000 in fiscal 2000 from $152,185,000 in fiscal 1999, and increased $9,981,000 (7.0%) in fiscal 1999 over fiscal 1998. The fiscal 2000 and fiscal 1999 increases in cost of sales, including buying and occupancy costs, are principally due to the increases in net sales partially offset by increasing margins. As a percentage of net sales, these costs were 65.3% for fiscal 2000, 69.9% for fiscal 1999 and 74.7% for fiscal 1998. For fiscal 2000 and fiscal 1999, the decreased cost of sales percentages are the result of increased net sales and increased margins. Buying and occupancy costs were 15.4%, 16.6% and 17.3% of net sales for the fiscal years 2000, 1999 and 1998, respectively. The percentage decrease in fiscal 2000 as compared to fiscal 1999, and in fiscal 1999 as compared to fiscal 1998, is principally a result of increased sales during these years.
Selling and administrative expenses increased $7,092,000 (17.0%) to $48,739,000 in fiscal 2000 from $41,647,000 in fiscal 1999, and increased $4,483,000 (12.1%) in fiscal 1999 over fiscal 1998. The increases in these expenses for fiscal 2000 and fiscal 1999 are mainly due to increased costs of personnel and benefits, partially resulting from an increase in the number of stores and an increase in average sales per store. As a percentage of net sales, these expenses were 19.3%, 19.1% and 19.5% during fiscal 2000, 1999 and 1998, respectively.
Depreciation expense increased $312,000 to $3,623,000 in fiscal 2000 from $3,311,000 in fiscal 1999, and decreased ($449,000) in fiscal 1999 over fiscal 1998. The increase from fiscal 1999 to fiscal 2000 is principally attributable to the accelerated write-off of leasehold improvements. The decrease from fiscal 1998 to fiscal 1999 is principally attributable to an increase in the amount of fully depreciated assets.
Operating income increased $14,973,000 (73.2%) to $35,425,000 in fiscal 2000 from $20,452,000 in fiscal 1999, and increased $13,091,000 (177.8%) in fiscal 1999 over fiscal 1998. As a percentage of net sales, operating income was 14.0% in fiscal 2000, 9.4% in fiscal 1999 and 3.9% in fiscal 1998. In fiscal 2000 and fiscal 1999, the increases in operating income are primarily the result of an increase in margins as discussed above.
Results of Operations - Book Business
Net sales increased $224,000 (1.3%) to $17,353,000 in fiscal 2000 from $17,129,000 in fiscal 1999, and increased $2,552,000 (17.5%) in fiscal 1999 over fiscal 1998. The increase in net sales in fiscal 2000 was impacted by increased competition. The increase in net sales in fiscal 1999 resulted primarily from the opening of new stores and the expansion of existing stores.
The following table sets forth certain store information:
Cost of sales, including buying and occupancy costs, increased $676,000 (5.6%) to $12,685,000 in fiscal 2000 from $12,009,000 in fiscal 1999, and increased $1,690,000 (16.4%) in fiscal 1999 over fiscal 1998. The fiscal 2000 increase in cost of sales, including buying and occupancy costs, was principally due to decreased margins partially offset by increased sales during the period. The fiscal 1999 increase in cost of sales, including buying and occupancy costs, was principally due to the increase in net sales during these periods. As a percentage of net sales, these costs were 73.1%, 70.1% and 70.8% for fiscal 2000, 1999 and 1998, respectively. For fiscal 2000 the increased cost of sales, including buying and occupancy cost, percentage resulted from decreased margins as a result of increased competition and changing product mix. For fiscal 1999 the decreased cost of sales, including buying and occupancy costs, percentage resulted from increased sales and improved margins. Buying and occupancy costs were 15.3%, 14.5% and 14.6% of net sales during fiscal 2000, 1999 and 1998, respectively.
Selling and administrative expenses increased $252,000 (6.4%) to $4,188,000 in fiscal 2000 from $3,936,000 in fiscal 1999, and increased $755,000 (23.7%) in fiscal 1999 over fiscal 1998. The fiscal 2000 increases in selling and administrative expenses were principally due to the increased cost of personnel and benefits. The fiscal 1999 increases in selling and administrative expenses were principally due to the increase in the number of stores. As a percentage of net sales, these expenses were 24.1%, 23.0% and
- -------------------------------------- 1 Comparable store sales include stores opened for both periods in the current format and location. A store is added to the comparable store base in its 13th month of operation.
21.8% for fiscal 2000, 1999 and 1998, respectively. For fiscal 2000 and fiscal 1999, the increased selling and administrative percentage resulted from increased personnel and warehousing costs partially resulting from an increase in the number of stores, the expansion of stores and increased sales volume.
Depreciation and amortization expense increased $15,000 to $458,000 in fiscal 2000 from $443,000 in fiscal 1999 and increased $28,000 in fiscal 1999 over fiscal 1998. The increases are principally attributable to the opening of new stores and expansion of existing stores.
Operating income decreased ($719,000) (97.1%) to $22,000 in fiscal 2000 from $741,000 in fiscal 1999, and increased $79,000 (12.0%) in fiscal 1999 from fiscal 1998. In fiscal 2000, the decrease in operating income was primarily the result of decreasing margins caused by increased competition, changing product mix and increased expenses due to new store openings and expansions. In fiscal 1999 the increase in operating income was primarily the result of increased sales and margins partially offset by increased selling and administrative expenses. As a percentage of net sales, operating income was 0.1%, 4.3% and 4.5% in fiscal 2000, 1999 and 1998, respectively.
Liquidity and Capital Resources - Consolidated
As of January 31, 2000, the Company had cash and cash equivalents of $90,307,000 compared to $70,228,000 as of January 31, 1999, and $57,913,000 as of January 31, 1998. These funds are invested principally 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.
During the past three fiscal years, the Company internally funded all of its operating needs, including capital expenditures for the opening of new apparel and book stores and the remodeling of existing apparel and book stores. Total cash provided by operating activities, for fiscal years ended January 31, 2000, 1999 and 1998, was $29,693,000, $17,831,000 and $17,904,000, respectively. For fiscal 2000, cash provided by operating activities was the result of the fiscal 2000 net income increased by noncash charges for depreciation and amortization and changes in operating assets and liabilities, including an increase in trade accounts payable, accrued expenses and income taxes payable offset by increases in merchandise inventories and prepaid expenses. For fiscal 1999, cash provided by operating activities was the result of the fiscal 1999 net income increased by noncash charges for depreciation and amortization and changes in operating assets and liabilities, including an increase in accrued expenses and income taxes payable offset by an increase in merchandise inventories. The inventory turnover rate for the apparel business was approximately 3.6, 3.4 and 3.1 times for the fiscal years ended January 31, 2000, 1999 and 1998, respectively. The inventory turnover rate for the book business was approximately 1.3, 1.5 and 1.3 times for the fiscal years ended January 31, 2000, 1999 and 1998, respectively.
Net cash used in investing activities was $7,520,000, $3,910,000 and $2,023,000 for the fiscal years ended January 31, 2000, 1999 and 1998, respectively. During these fiscal years, these funds were principally used in the purchase of property, plant and equipment additions to open new apparel and book stores and to remodel and/or expand existing stores.
Net cash used in financing activities was $2,094,000, $1,606,000 and $2,819,000 for the fiscal years ended January 31, 2000, 1999 and 1998, respectively. For fiscal 2000 and fiscal 1999, these funds were principally used for the payment of dividends on preferred and common stock, partially offset by the proceeds from the exercise of stock options. During fiscal 1998, these funds were principally used for the payment of dividends on preferred and common stock.
In February 1998, the Company purchased nine stores from Petrie Retail, Inc. and subsidiaries, for $720,000. These locations were made available as a result of Petrie's ongoing bankruptcy proceedings. The stores are located in regional malls and were opened in the first quarter of fiscal 1999.
The Company's present intention is to expand the book store business, principally by opening additional warehouse stores. Opening a warehouse bookstore is capital-intensive because of the leasehold improvements and initial inventory required. The Company anticipates that the funds to finance this expansion will come from cash and cash equivalents on hand. During fiscal 2000, the Company opened one warehouse store closed one warehouse store and one resort store.
The Company believes that internally generated funds will be sufficient to meet its anticipated capital expenditures, none of which are material, and current operating needs.
Year 2000 Readiness Disclosure
The Company has not experienced any material Year 2000 compliance problems to date and, to the Company's knowledge, none of its significant vendors or service providers have suffered material problems related to Year 2000 compliance that the Company believes are likely to materially adversely affect the Company. The Company continues to monitor its Year 2000 program for unexpected issues that could possibly still develop. The Year 2000 program has many aspects and potential consequences, some of which are not reasonably foreseeable, and there can be no assurance that unforeseen consequences will not arise.
Seasonal Nature of Operations
Approximately 53% and 62% of the Company's net sales and net income, respectively, for fiscal 2000 occurred during the last six months, as compared to 54% and 73%, respectively, in the prior fiscal year. The last six months include the Back-to-School and Christmas selling seasons. See "Quarterly Financial Information (Unaudited)," and the preceding discussion on "Results of Operations."
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The required information, with respect to Market Risk, is contained in Item 7 in the section on Liquidity and Capital Resources.
Item 8.
Item 8. Financial Statements and Supplementary Data
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors of Deb Shops, Inc.
We have audited the accompanying consolidated balance sheets of Deb Shops, Inc. and subsidiaries as of January 31, 2000 and 1999, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the two years in the period ended January 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 2000 and 1999 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Deb Shops, Inc. and subsidiaries as of January 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the two years in the period ended January 31, 2000, in conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania March 7, 2000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Deb Shops, Inc.:
We have audited the accompanying consolidated statements of operations, shareholders' equity and cash flows of Deb Shops, Inc. (a Pennsylvania corporation) and subsidiaries for the year ended January 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit 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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides, a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Deb Shops, Inc. and subsidiaries for the year ended January 31, 1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN, LLP
Philadelphia, Pennsylvania February 27, 1998
DEB SHOPS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
See notes to consolidated financial statements.
DEB SHOPS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
See notes to consolidated financial statements.
DEB SHOPS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
See notes to consolidated financial statements.
DEB SHOPS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
See notes to consolidated financial statements.
DEB SHOPS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The consolidated financial statements of Deb Shops, Inc. ("the Company") include the accounts of the Company and its subsidiaries, after elimination of all inter-company transactions and accounts.
Background: The Company retails popularly priced fashion apparel for junior and plus-sized females and males through 285 stores. The Company's stores are located in regional malls and strip shopping centers principally located in the east and mid-western regions of the country. The Company also operates a chain of 17 bookstores located in Delaware, Maryland, Minnesota, New Jersey and Pennsylvania.
Management Estimates: The preparation of the consolidated financial statements in conformity with generally accepted accounting principles 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.
Revenue Recognition: Revenues from merchandise sales are net of returns and allowances and exclude sales tax.
Inventories: All apparel merchandise inventories are stated at the lower of cost (first-in, first-out method) or market, as determined by the retail inventory method. Book inventories are stated at the lower of cost (first-in, first-out method) or market.
Property, Plant and Equipment: The provisions for depreciation and amortization are computed using the straight-line method based upon estimated useful lives of the assets. Leasehold improvements are amortized over the initial term of the lease. Furniture and equipment is depreciated over seven years or the lease term, whichever is less. Gain or loss on disposition of property, plant and equipment is included in other income. Depreciation expense, which includes depreciation on a capitalized lease asset, for the years ended January 31, 2000, 1999 and 1998 was $3,927,000, $3,600,000 and $4,021,000, respectively.
Cost in Excess of Net Assets Acquired (Goodwill): The Company amortizes costs in excess of fair market value of net assets of businesses acquired using the straight-line method over a period of 15 years. The Company evaluates whether changes have occurred that would require revision of the remaining estimated useful life of goodwill or render the goodwill not recoverable.
Statements of Cash Flows: The Company considers all highly liquid investments with an original maturity of less than three months to be cash equivalents. Included in cash and cash equivalents at January 31, 2000 is $83,296,000 of investments in money market mutual funds and short-term municipal bonds. They are carried at cost, which approximates market.
- - B - EARNINGS 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.
As of January 31, 2000 and 1999, all common stock options were included in the computation of diluted earnings per common share. As of January 31, 1998, 165,000 common stock options were outstanding but were not included in the computation of diluted net income per common share because the exercise price was greater than the average market price of the Company's common shares during the year.
- - C - INCOME TAXES
Income tax provision consists of the following components:
A reconciliation of the Company's effective income tax rate with the statutory federal rate follows:
Deferred income taxes reflect the future tax consequences of differences between the tax bases of assets and liabilities and their financial reporting amounts. The components of deferred tax assets and liabilities are as follows:
- - D - LEASES
The Company leases all of its retail apparel stores and all but one of its book stores for periods ranging from one to 25 years, including renewal options. In most instances, the Company pays real estate taxes, insurance and maintenance costs on the leased properties and contingent rentals based upon a percentage of sales. The warehouse and office building occupied by the Company is leased from a partnership whose partners include three of the Company's directors including the President and Executive Vice President. The warehouse bookstore in Montgomeryville, Pennsylvania is leased from a partnership whose partners are Mark Simon, an employee and officer of the book subsidiary, and Martin Simon, a consultant to the book subsidiary.
Under the terms of the warehouse and office building lease, the Company is required to pay annual rentals as reflected under "Capital Lease" in the lease table below. The lease term is 20 years and requires the Company to pay all real estate taxes, utilities and maintenance costs. The warehouse and office building lease has a net book value of $298,000 at January 31, 2000 and is accounted for as a capital lease. Asset amounts are included in buildings and improvements and are depreciated over 20 years. The lease was originally scheduled to expire on June 14, 2002, however, the Company has entered into an amendment which extends the lease for a period of five years through June 14, 2007. This extension will be accounted for as an operating lease upon the expiration of the initial term of the existing lease.
Interest expense related to the capital lease obligation amounted to $257,000, $312,000 and $355,000 for the years ended January 31, 2000, 1999 and 1998, respectively, and is included in selling and administrative expenses.
In February 1998, the Company purchased nine stores from Petrie Retail, Inc. and subsidiaries for $720,000. These locations were made available as a result of Petrie's ongoing bankruptcy proceedings. These stores are located in regional malls and opened in the first quarter of fiscal 1999. The future minimum rental commitment for these stores was approximately $7,400,000 at the date of purchase.
Future minimum rental commitments for all noncancelable leases at January 31, 2000 are as follows: Capital Operating Lease Leases - ----------------------------------------------------------------------------- Fiscal Year Ending January 31, 2001.................................... $550,000 $ 18,999,000 2002.................................... 550,000 16,673,000 2003.................................... 230,000 13,947,000 2004.................................... --- 12,106,000 2005.................................... --- 9,310,000 Thereafter.............................. --- 30,928,000 --------- ------------
Total minimum rental commitments........ 1,330,000 $101,963,000 ============
Imputed interest........................ ( 230,701) ----------
Present value of net minimum lease payments........................ $1,099,299 ==========
Total rental expense under operating leases amounted to $21,624,000, $19,824,000 and $17,450,000 in fiscal 2000, 1999 and 1998, respectively. Such amounts include contingent rentals based upon a percentage of sales of $2,729,000, $2,992,000 and $2,026,000 in fiscal 2000, 1999 and 1998, respectively.
- - E- STOCK OPTION PLAN
Effective October 1995, the Company adopted an Incentive Stock Option Plan ("the Plan"). A Stock Option Committee designated by the Board of Directors administers the Plan. Under the Plan, a maximum of 2,000,000 shares of the Company's common stock, par value $.01 per share, may be issued by the Company and sold to selected key employees on the basis of contribution to the operations of the Company. The price payable for the shares of common stock under each stock option will be fixed by the Committee at the time of grant, but will be no less than 100% of the fair market value of the Company's common stock at the time the stock option is granted. Options are exercisable commencing one year after the date of grant, subject to such vesting requirements as the Committee may specify. The granted options expire through January 2004. There were 1,150,000 shares reserved for future grant under the plan.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and the related interpretations in accounting for its stock option plan. In 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 established a fair value based method of accounting for stock-based compensation plans.
Option valuation models use highly subjective assumptions to determine the fair value of traded options with no vesting or trading restrictions. Because options granted under the Company's Stock Option Plan have vesting requirements and cannot be traded, and because changes in assumptions can materially affect the fair value estimate, in management's opinion, the existing valuation models do not necessarily provide a reliable measure of the fair value of its employee stock options.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The model uses the following assumptions: risk-free interest rates ranging from 4.2% to 6.0%, a volatility factor of 41.7% to 52.8%, expected dividend yield of 2.9% to 6.2%, and an expected life of four years for the options.
For purposes of pro forma disclosure, the estimated fair value of the options ($2.34 and $2.41 for the 1999 and 1998 grants, respectively) is amortized to expense over the options assumed vesting period. SFAS No. 123 requires only that the income effects of options granted beginning in fiscal 1996 be included in the pro forma disclosure. Since a portion of the Company's stock options vest over several years and additional options may be granted each year, the pro forma effect on net income reported below is not representative of the effect of fair value stock option expense on future years' pro forma net income.
Had the Company recognized compensation cost for its stock option plan consistent with the provisions of SFAS No. 123, the Company's net income and basic and diluted net income per common share would have been adjusted to the following pro forma amounts:
- - F - RESTRICTED STOCK INCENTIVE PLAN
Effective June 1, 1990, the Company adopted a Restricted Stock Incentive Plan (RSIP) administered by the Company's Stock Option Committee. Under the RSIP, a maximum 300,000 shares of the Company's Common Stock may be awarded as bonuses to key employees. No more than 100,000 shares may be issued under this plan during any calendar year. Upon grant, the shares shall be registered in the name of the recipient who shall have the right to vote the shares and receive cash dividends. The right to receive the certificates and retain the shares does not vest until the grantee has remained in the employ of the Company for a period determined by the Stock Option Committee. At the time of the vesting, a portion of the shares may be withheld to cover withholding taxes due on the compensation income resulting from the grant.
In fiscal 2000, 1999 and 1998, no shares were granted under the RSIP. At January 31, 2000, there were 206,000 shares reserved for future grant. The RSIP expires May 31, 2000.
- - G- COMMITMENTS AND CONTINGENCIES
The Company has an unsecured line of credit in the amount of $20,000,000 at January 31, 2000. Of this amount, $2,400,000 was outstanding as letters of credit for the purchase of inventory.
The Company entered into an employment agreement with a key employee during fiscal 1996, which was modified and extended in fiscal 1999 and provides for a base salary plus a bonus of 4% of the improvement in the operating results of the apparel business. The bonus is applicable through fiscal year 2002. The Company also entered into a bonus agreement with a key employee during fiscal 1996 which provides for a bonus of 2% of the improvement in operating results of the apparel business. No payment was required in fiscal 1997 under either agreement. In fiscal 1998, 1999 and 2000, bonuses of $450,000, in the aggregate, for each year, were earned under the agreements. The amount is included in accrued expenses on the accompanying consolidated balance sheet as of January 31, 2000 and 1999.
The Company is subject to legal proceedings, employment issues and claims that arise in the ordinary course of its business. In the opinion of management, after consultation with outside legal counsel, the ultimate disposition of such proceedings will not have a materially adverse effect on the Company's consolidated financial position or results of operations.
Deb Shops, Inc. Quarterly Financial Information (Unaudited)
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None, except for change in accountants previously reported on Form 8-K filed on June 12, 1998.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The required information with respect to each director is contained in the Company's Definitive Proxy Statement in connection with its Annual Meeting to be held on May 17, 2000 which is incorporated in this Annual Report on Form 10-K by reference.
The required information with respect to each executive officer is contained at the end of Part I of this Annual Report on Form 10-K.
Item 11.
Item 11. Executive Compensation
The required information with respect to executive compensation is contained in the Company's Definitive Proxy Statement in connection with its Annual Meeting to be held on May 17, 2000, which is incorporated in this Annual Report on Form 10-K by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The required information with respect to security ownership of certain beneficial owners and management is contained in the Company's Definitive Proxy Statement in connection with its Annual Meeting to be held on May 17, 2000, which is incorporated in this Annual Report on Form 10-K by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions
The required information with respect to certain relationships and related transactions is contained in the Company's Definitive Proxy Statement in connection with its Annual Meeting to be held on May 17, 2000, which is incorporated in this Annual Report on Form 10-K by reference.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Financial Statements and Financial Statement Schedules
Document Page(s) -------- -------
Reports of independent auditors............................. 17 - 18
Consolidated statements of operations for the years ended January 31, 2000, 1999 and 1998............. 19
Consolidated balance sheets as of January 31, 2000 and 1999............................................... 20
Consolidated statements of shareholders' equity for the years ended January 31, 2000, 1999 and 1998............................................... 21
Consolidated statements of cash flows for the years ended January 31, 2000, 1999 and 1998................. 22
Notes to consolidated financial statements.................. 23 - 30
Selected quarterly financial information (unaudited) for the years ended January 31, 2000 and 1999............... 31
All 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.
EXHIBITS
The following exhibits have been filed with the Securities and Exchange Commission pursuant to the requirements of the Acts administered by the Commission. Each such exhibit is identified by the reference following the listing of such exhibit, and each is incorporated herein by such reference.
Exhibits identified with an asterisk below comprise executive compensation plans and arrangements.
Exhibit No. Description of Document - ----------- -----------------------
3-1 Restated Articles of Incorporation of the Company, as amended through May 29, 1984 (1992 Form 10-K, Exhibit 3-1)
3-2 By-Laws of the Company, as amended through July 19, 1990 (1993 Form 10-K, Exhibit 3-2)
4-1 * Deb Shops, Inc. Restated Savings and Protection Plan (1992 Form 10-K, Exhibit 4-1)
4-1.1 * Amendment No. I to Deb Shops, Inc. Restated Savings and Protection Plan (1992 Form 10-K, Exhibit 4-1.1)
4-1.2 * Amendment No. II to Deb Shops, Inc. Restated Savings and Protection Plan (1992 Form 10-K, Exhibit 4-1.2)
4-1.3 * Amendment No. III to Deb Shops, Inc. Restated Savings and Protection Plan (1992 Form 10-K, Exhibit 4-1.3)
4-1.4 * Amendment No. IV to Deb Shops, Inc. Restated Savings and Protection Plan (1992 Form 10-K, Exhibit 4-1.4)
4-1.5 * Amendment No. V to Deb Shops, Inc. Restated Savings and Protection Plan (1994 Form 10-K Exhibit 4-1.5)
4-1.6 * Amendment No. VI to Deb Shops, Inc. Restated Savings and Protection Plan (1994 Form 10-K, Exhibit 4-1.6)
4-1.7 * Amendment No. VII to Deb Shops, Inc. Restated Savings and Protection Plan. (1997 Form 10-K Exhibit 4-1.7)
4-2 * Employee Savings and Protection Trust Agreement (Registration No. 2-99124, Exhibit 4-5)
Exhibit No. Description of Document - ----------- -----------------------
4-2.1 * Amendment No. I to Employee Savings and Protection Trust Agreement (Form 10-Q for quarter ended July 31, 1992)
10-1 Lease Agreement for property located at 9401 Blue Grass Road, Philadelphia, Pennsylvania, 19114 (Registration No. 2-82222, Exhibit 10-1)
10-1.1 Amendment of Lease Agreement dated January 3, 1999 for property Located at 9401 Blue Grass Road, Philadelphia, Pennsylvania, 19114 (1999 Form 10-K, Exhibit 10-1.1)
10-14.1 * Insurance Policy for Marvin Rounick and Judy Rounick (1993 Form 10-K, Exhibit 10-14.1)
10-14.2 * Split Dollar Insurance Agreement dated July 31, 1987 between the Company and Jack A. Rounick and Stuart Savett, Trustees under the Rounick Family Irrevocable Insurance Trust dated October 27, 1986 (1993 Form 10-K, Exhibit 10-14.2)
10-14.3 * Collateral Assignment dated July 31, 1987 from Jack A. Rounick and Stuart Savett, Trustees under the Rounick Family Irrevocable Insurance Trust dated October 27, 1986, as assignor, and the Company, as assignee (1993 Form 10-K, Exhibit 10-14.3)
10-14.4 * Agreement of Settlement and General Release dated May 5, 1998 Between Jack A. Rounick and Stuart Savett, Trustees under the Rounick Family Irrevocable Insurance Trust dated October 27, 1986 and the Manufacturers Life Insurance Company (Form 10-Q for the quarter ended October 31, 1998)
10-14.5 * Amended and Restated Split Dollar Insurance Agreement dated July 31, 1998 between the Company and Jack A. Rounick and Stuart Savett, Trustees under the Rounick Family Irrevocable Insurance Trust dated October 27, 1986 (Form 10-Q for the quarter ended October 31, 1998)
10-14.6 * Amended and Restated Collateral Assignment dated July 31, 1998 from Jack A. Rounick and Stuart Savett, Trustees under the Rounick Family Irrevocable Insurance Trust dated October 27, 1986 (Form 10-Q for the quarter ended October 31, 1998)
10-15.1 * Life Insurance Policy for Warren Weiner and Penny Weiner (1993 Form 10-K, Exhibit 10-15.1)
Exhibit No. Description of Document - ----------- -----------------------
10-15.2 * Split Dollar Insurance Agreement dated July 31, 1987 between the Company and Barry H. Frank and Robert Shein, Trustees under the Weiner Family Irrevocable Insurance Trust dated October 27, 1986 (1993 Form 10-K, Exhibit 10-15.2)
10-15.3 * Collateral Assignment dated July 31, 1987 from Barry H. Frank and Robert Shein, Trustees under the Weiner Family Irrevocable Insurance Trust dated October 27, 1986, as assignor, and the Company, as assignee (1993 Form 10-K, Exhibit 10-15.3)
10-15.4 * Agreement of Settlement and General Release dated May 5, 1998 between Barry H. Frank and Robert Shein, Trustees under the Weiner Family Irrevocable Insurance Trust dated October 27, 1986 and the Manufacturers Life Insurance Company (Form 10-Q for the quarter ended October 31, 1998)
10-15.5 * Amended and Restated Split Dollar Insurance Agreement dated July 31, 1998 between the Company and Barry H. Frank and Robert Shein, Trustees under the Weiner Family Irrevocable Insurance Trust dated October 27, 1986 (Form 10-Q for the quarter ended October 31, 1998)
10-15.6 * Amended and Restated Collateral Assignment dated July 31, 1998 from Barry H. Frank and Robert Shein, Trustees under the Weiner Family Irrevocable Insurance Trust dated October 27, 1986 (Form 10-Q for the quarter ended October 31, 1998)
10-17 * Restricted Stock Incentive Plan as amended (1995 Form 10-K, Exhibit 10-17)
Exhibit No. Description of Document - ----------- -----------------------
10-19 * Deb Shops, Inc. Premium Conversion Plan (1996 Form 10-K, Exhibit 10-19)
10-19.1 * Amendment No. I to Deb Shops, Inc. Premium Conversion Plan (1997 Form 10-K, Exhibit 10-19.1)
10-20.1 * Amended and Restated Deb Shops, Inc. 1995 Incentive Stock Option Plan (Form 10-Q for the quarter ended July 31, 1999)
10-21.1 * Employment Agreement dated August 1, 1998 between the Company and Allan Laufgraben (1999 Form 10-K, Exhibit 10-21.1)
21 Subsidiaries of the Company
23-1 Consent of Ernst & Young LLP
23-2 Consent of Arthur Andersen LLP
27 Financial Data Schedule
Reports on Form 8-K - -------------------
There were no reports on Form 8-K for the quarter ended January 31, 2000.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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 in the City and County of Philadelphia, Commonwealth of Pennsylvania, on April 28, 2000.
DEB SHOPS, INC. (Registrant)
By: /s/ Marvin Rounick ----------------------------- Marvin Rounick, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons in the capacities and on the dates indicated.
/s/ Marvin Rounick April 28, 2000 - -------------------------------------------------------------- Marvin Rounick, President, Chief Executive Officer and Director (Principal Executive Officer)
/s/ Warren Weiner April 28, 2000 - -------------------------------------------------------------- Warren Weiner, Executive Vice President, Secretary, Treasurer and Director
/s/ Jack Rounick April 28, 2000 - -------------------------------------------------------------- Jack A. Rounick, Assistant Secretary and Director
/s/ Paul Bachow April 28, 2000 - -------------------------------------------------------------- Paul S. Bachow, Director
/s/ Barry H. Feinberg April 28, 2000 - -------------------------------------------------------------- Barry H. Feinberg, Director
/s/ Barry H. Frank April 28, 2000 - -------------------------------------------------------------- Barry H. Frank, Esq., Director
/s/ Lewis Lyons April 28, 2000 - -------------------------------------------------------------- Lewis Lyons, Vice President, Finance, Chief Financial Officer and Assistant Secretary
/s/ Joan M. Nolan April 28, 2000 - -------------------------------------------------------------- Joan M. Nolan Controller